SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2005
OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

-------------------------------------------------------------------------------------------------------
Commission File    Exact Name of Registrant as            State of              I.R.S.
Number             Specified in its Charter and           Incorporation         Employer
                   Principal Office Address and                                 Identification Number
                   Telephone Number
-------------------------------------------------------------------------------------------------------
1-16681            The Laclede Group, Inc.                Missouri              74-2976504
                   720 Olive Street
                   St. Louis, MO 63101
                   314-342-0500
-------------------------------------------------------------------------------------------------------
1-1822             Laclede Gas Company                    Missouri              43-0368139
                   720 Olive Street
                   St. Louis, MO 63101
                   314-342-0500
-------------------------------------------------------------------------------------------------------

Indicate by check mark whether the registrant:

(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report),

The Laclede Group, Inc.:          Yes X        No
                                      ---         ---

Laclede Gas Company:              Yes X        No
                                      ---         ---

and (2) has been subject to such filing requirements for the past 90 days:

The Laclede Group, Inc.:          Yes X        No
                                      ---         ---

Laclede Gas Company:              Yes X        No
                                      ---         ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act):

The Laclede Group, Inc.           Yes X        No
                                      ---         ---

Laclede Gas Company:              Yes          No X
                                      ---         ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:

                                                                                   Shares Outstanding At
Registrant                             Description of Common Stock                    April 29, 2005
----------                             ---------------------------                    --------------
The Laclede Group, Inc.                Common Stock ($1.00 Par Value)                    21,113,155
Laclede Gas Company                    Common Stock ($1.00 Par Value)                        10,031*

*100% owned by The Laclede Group, Inc.


TABLE OF CONTENTS                                                                 Page No.
                                                                                  --------
PART I.  FINANCIAL INFORMATION

Item 1   Financial Statements

         The Laclede Group, Inc.:
                  Statements of Consolidated Income                                4
                  Statements of Consolidated Comprehensive Income                  5
                  Consolidated Balance Sheets                                      6-7
                  Statements of Consolidated Cash Flows                            8
                  Notes to Consolidated Financial Statements                       9-18

         Laclede Gas Company:
                  Statements of Income                                        Ex. 99.1, p. 1
                  Balance Sheets                                              Ex. 99.1, pp. 2-3
                  Statements of Cash Flows                                    Ex. 99.1, p. 4
                  Notes to Financial Statements                               Ex. 99.1, pp. 5-10


Item 2   Management's Discussion and Analysis of Financial Condition and
                  Results of Operations (The Laclede Group, Inc.)                 19-31
         Management's Discussion and Analysis of Financial Condition and
                  Results of Operations (Laclede Gas Company)                 Ex. 99.1, pp. 11-21

Item 3   Quantitative and Qualitative Disclosures About Market Risk               32

Item 4   Controls and Procedures                                                  32

PART II. OTHER INFORMATION

Item 1   Legal Proceedings                                                        33

Item 2   Unregistered Sales of Equity Securities and Use of Proceeds              33

Item 4   Submission of Matters to a Vote of Security Holders                      33

Item 6   Exhibits                                                                 33

SIGNATURES - The Laclede Group, Inc.                                              34

SIGNATURES - Laclede Gas Company                                                  35

INDEX TO EXHIBITS                                                                 36

Filing Format
This Quarterly Report on Form 10-Q is a combined report being filed by two separate registrants: The Laclede Group, Inc. (Laclede Group or the Company) and Laclede Gas Company (Laclede Gas or the Utility).

2

PART I
FINANCIAL INFORMATION

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K for the fiscal year ended September 30, 2004.

3

Item 1. Financial Statements

                                                  THE LACLEDE GROUP, INC.
                                             STATEMENTS OF CONSOLIDATED INCOME
                                                        (UNAUDITED)

(Thousands, Except Per Share Amounts)


                                                       Three Months Ended                Six Months Ended
                                                            March 31,                        March 31,
                                                   ----------------------------    ------------------------------
                                                         2005           2004              2005            2004
                                                         ----           ----              ----            ----
Operating Revenues:
 Regulated
    Gas distribution                                  $ 434,996      $ 396,898        $  726,249       $ 658,248
  Non-Regulated
     Services                                            23,806         15,250            51,792          34,798
     Gas marketing                                      116,607         61,480           234,786         112,463
     Other                                                1,146          1,327             6,213           2,083
                                                   ----------------------------    ------------------------------
      Total Operating Revenues                          576,555        474,955         1,019,040         807,592
                                                   ----------------------------    ------------------------------
Operating Expenses:
  Regulated

    Natural and propane gas                             321,228        288,284           527,652         463,559
    Other operation expenses                             34,675         32,808            65,600          62,291
    Maintenance                                           4,680          4,641             8,894           9,070
    Depreciation and amortization                         5,667          5,711            10,972          11,369
    Taxes, other than income taxes                       26,477         24,897            42,300          39,729
                                                   ----------------------------    ------------------------------
      Total regulated operating expenses                392,727        356,341           655,418         586,018
  Non-Regulated

    Services                                             26,303         19,538            53,175          39,849
    Gas marketing                                       113,705         59,813           229,491         110,101
    Other                                                   846            804             6,017           1,771
                                                   ----------------------------    ------------------------------
      Total Operating Expenses                          533,581        436,496           944,101         737,739
                                                   ----------------------------    ------------------------------
Operating Income                                         42,974         38,459            74,939          69,853
                                                   ----------------------------    ------------------------------
Other Income and (Income Deductions) - Net                  (94)         1,931             1,480           3,390
                                                   ----------------------------    ------------------------------
Interest Charges:

  Interest on long-term debt                              5,643          4,815            11,551           9,629
  Interest on long-term debt to unconsolidated
    affiliate trust                                         893            893             1,786           1,786
  Other interest charges                                  1,318            999             2,288           2,084
                                                   ----------------------------    ------------------------------
      Total Interest Charges                              7,854          6,707            15,625          13,499
                                                   ----------------------------    ------------------------------
Income Before Income Taxes                               35,026         33,683            60,794          59,744
Income Tax Expense                                       12,568         12,128            21,704          21,582
                                                   ----------------------------    ------------------------------
Net Income                                               22,458         21,555            39,090          38,162
Dividends on Redeemable Preferred Stock -
  Laclede Gas                                                15             15                30              31
                                                   ----------------------------    ------------------------------
Net Income Applicable to Common Stock                 $  22,443      $  21,540        $   39,060       $  38,131
                                                   ============================    ==============================

Average Number of Common Shares
   Outstanding                                           21,060         19,167            21,038          19,142

Basic Earnings Per Share of Common Stock                  $1.07          $1.12             $1.86           $1.99

Diluted Earnings Per Share of Common Stock                $1.06          $1.12             $1.85           $1.99

Dividends Declared Per Share of Common
   Stock                                                  $.345          $.340             $.685           $.675

See notes to consolidated financial statements.

4

                                                  THE LACLEDE GROUP, INC.
                                      STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
                                                        (UNAUDITED)

(Thousands)


                                                              Three Months Ended              Six Months Ended
                                                                  March 31,                      March 31,
                                                          ---------------------------    ---------------------------
                                                                2005          2004              2005         2004
                                                                ----          ----              ----         ----
Net Income Applicable to Common Stock                         $ 22,443      $ 21,540          $ 39,060     $ 38,131
                                                          ---------------------------    ---------------------------
Other Comprehensive Loss, Before Tax:
  Net losses on cash flow hedging derivative
     instruments:
     Net hedging loss arising during period                     (3,938)       (1,626)           (3,182)      (2,143)
     Reclassification adjustment for (gains) losses
       included in net income                                     (439)          294             2,012         (943)
                                                          ---------------------------    ---------------------------
     Net unrealized losses on cash flow hedging
       derivative instruments                                   (4,377)       (1,332)           (1,170)      (3,086)
                                                          ---------------------------    ---------------------------
Other Comprehensive Loss, Before Tax                            (4,377)       (1,332)           (1,170)      (3,086)
Income Tax Benefit Related to Items of Other
  Comprehensive Loss                                            (1,691)         (515)             (452)      (1,192)
                                                          ---------------------------    ---------------------------
Other Comprehensive Loss, Net of Tax                            (2,686)         (817)             (718)      (1,894)
                                                          ---------------------------    ---------------------------
Comprehensive Income                                          $ 19,757      $ 20,723          $ 38,342     $ 36,237
                                                          ===========================    ===========================





See notes to consolidated financial statements.

5

                                                  THE LACLEDE GROUP, INC.
                                                CONSOLIDATED BALANCE SHEETS
                                                        (UNAUDITED)

                                                                 Mar. 31,            Sept. 30,        Mar. 31,
                                                                   2005                2004             2004
                                                                   ----                ----             ----
(Thousands)

                          ASSETS
Utility Plant                                                   $1,093,093          $1,070,522       $1,050,823
  Less: Accumulated depreciation and amortization                  431,568             423,647          416,767
                                                             --------------     --------------    -------------
      Net Utility Plant                                            661,525             646,875          634,056
                                                             --------------     --------------    -------------
Goodwill                                                            28,124              28,124           28,124
                                                             --------------     --------------    -------------
Other Property and Investments                                      47,865              46,082           45,805
                                                             --------------     --------------    -------------
Current Assets:
  Cash and cash equivalents                                         17,812              13,854           25,173
  Accounts receivable:
       Gas Customers - billed and unbilled                         148,776              76,223          127,261
       Other                                                       107,644              51,822           75,710
       Allowances for doubtful accounts                            (11,309)            (10,362)          (8,117)
    Delayed customer billings                                       26,867                   -           36,141
  Inventories:
       Natural gas stored underground at LIFO cost                  32,691             131,773           29,422
       Propane gas at FIFO cost                                     19,982              15,808           12,914
       Materials, supplies, and merchandise at avg. cost             4,874               4,714            4,686
  Derivative instrument assets                                       9,048              16,857            7,841
  Unamortized purchased gas adjustments                              7,724              19,618                -
  Deferred income taxes                                              6,897               1,321            5,694
  Prepayments and other                                             13,032              16,008            7,375
                                                             --------------     --------------    -------------
      Total Current Assets                                         384,038             337,636          324,100
                                                             --------------     --------------    -------------
Deferred Charges:
  Prepaid pension cost                                              87,292              92,026          104,790
  Regulatory assets                                                104,293             104,703           98,313
  Other                                                              7,037               9,849            9,389
                                                             --------------     --------------    -------------
      Total Deferred Charges                                       198,622             206,578          212,492
                                                             --------------     --------------    -------------
Total Assets                                                    $1,320,174          $1,265,295       $1,244,577
                                                             ==============     ==============    =============




See notes to consolidated financial statements.


                                     6

                                                  THE LACLEDE GROUP, INC.
                                          CONSOLIDATED BALANCE SHEETS (Continued)
                                                        (UNAUDITED)


                                                                         Mar. 31,           Sept. 30,        Mar. 31,
                                                                           2005               2004             2004
                                                                           ----               ----             ----
(Thousands, except share amounts)
                  CAPITALIZATION AND LIABILITIES
Capitalization:
  Common stock (70,000,000 shares authorized, 21,082,442,
    20,981,165 and 19,187,777 shares issued, respectively)             $   21,082        $   20,981        $   19,188
  Paid-in capital                                                         118,755           116,058            71,157
  Retained earnings                                                       245,121           220,483           236,814
  Accumulated other comprehensive loss                                     (2,325)           (1,607)           (1,974)
                                                                     -------------    --------------     -------------
      Total common stock equity                                           382,633           355,915           325,185
  Redeemable preferred stock (less current sinking fund
    requirements) - Laclede Gas                                               948             1,108             1,108
  Long-term debt to unconsolidated affiliate trust                         46,400            46,400            46,400
  Long-term debt (less current portion) - Laclede Gas                     333,985           333,936           234,661
                                                                     -------------    --------------     -------------
      Total Capitalization                                                763,966           737,359           607,354
                                                                     -------------    --------------     -------------
Current Liabilities:
  Notes payable                                                            86,230            71,380           191,415
  Accounts payable                                                        128,529            68,366            88,541
  Advance customer billings                                                     -            23,620                 -
  Current portion of long-term debt and preferred stock                        95            25,145            25,150
  Wages and compensation accrued                                           15,727            15,596            14,558
  Dividends payable                                                         7,367             7,214             6,601
  Customer deposits                                                        11,220            10,661             7,799
  Interest accrued                                                         10,133            10,920             7,350
  Taxes accrued                                                            32,840            16,725            29,103
  Unamortized purchased gas adjustment                                          -                 -             1,458
  Other                                                                    12,485            13,003            13,035
                                                                     -------------    --------------     -------------
    Total Current Liabilities                                             304,626           262,630           385,010
                                                                     -------------    --------------     -------------

Deferred Credits and Other Liabilities:
  Deferred income taxes                                                   190,228           189,626           185,748
  Unamortized investment tax credits                                        4,844             5,010             5,163
  Pension and postretirement benefit costs                                 20,242            20,484            24,635
  Regulatory liabilities                                                   14,544            28,210            13,878
  Other                                                                    21,724            21,976            22,789
                                                                     -------------    --------------     -------------
      Total Deferred Credits and Other Liabilities                        251,582           265,306           252,213
                                                                     -------------    --------------     -------------
Total Capitalization and Liabilities                                   $1,320,174        $1,265,295        $1,244,577
                                                                     =============    ==============     =============



See notes to consolidated financial statements.

7

                                                  THE LACLEDE GROUP, INC.
                                           STATEMENTS OF CONSOLIDATED CASH FLOWS
                                                        (UNAUDITED)

                                                                                      Six Months Ended
                                                                                          March 31,
                                                                             ------------------------------------
                                                                                      2005                2004
                                                                                      ----                ----
(Thousands)
Operating Activities:
  Net Income                                                                        $ 39,090           $  38,162
  Adjustments to reconcile net income
   to net cash provided by (used in) operating activities:
    Depreciation and amortization                                                     12,684              13,174
    Deferred income taxes and investment
      tax credits                                                                     (1,336)              2,506
    Other - net                                                                          421                 110
    Changes in assets and liabilities:
      Accounts receivable - net                                                     (127,428)            (90,520)
      Unamortized purchased gas adjustments                                           11,894              (4,407)
      Deferred purchased gas costs                                                   (14,690)             26,911
      Delayed customer billings - net                                                (50,487)            (51,502)
      Accounts payable                                                                60,163              22,540
      Taxes accrued                                                                   16,115              15,892
      Natural gas stored underground                                                  99,082              87,809
      Other assets and liabilities                                                     8,962              19,984
                                                                             ----------------    ----------------
          Net cash provided by operating activities                                 $ 54,470           $  80,659
                                                                             ----------------    ----------------

Investing Activities:
  Construction expenditures                                                          (28,454)            (25,133)
  Net investment in trusts                                                            (1,149)             (1,702)
  Other investments                                                                      966                 858
                                                                             ----------------    ----------------
         Net cash used in investing activities                                      $(28,637)          $ (25,977)
                                                                             ----------------    ----------------

Financing Activities:
  Maturity of first mortgage bonds                                                   (25,000)                  -
  Issuance (repayment) of short-term debt - net                                       14,850             (26,785)
  Dividends paid                                                                     (14,312)            (12,818)
  Issuance of common stock                                                             2,797               2,803
  Preferred stock reacquired                                                            (210)                  -
                                                                             ----------------    ----------------
          Net cash used in financing activities                                     $(21,875)          $ (36,800)
                                                                             ----------------    ----------------

Net Increase in Cash and Cash Equivalents                                           $  3,958           $  17,882
Cash and Cash Equivalents at Beginning of Period                                      13,854               7,291
                                                                             ----------------    ----------------
Cash and Cash Equivalents at End of Period                                          $ 17,812           $  25,173
                                                                             ================    ================


Supplemental Disclosure of Cash Paid During the Period for:
    Interest                                                                        $ 16,021           $  13,163
    Income taxes                                                                       4,213                 274

See notes to consolidated financial statements.

8

THE LACLEDE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These notes are an integral part of the accompanying consolidated financial statements of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries. In the opinion of Laclede Group, this interim report includes all adjustments (consisting of only normal recurring accruals) necessary for the fair presentation of the results of operations for the periods presented. Certain prior-period amounts have been reclassified to conform to current-period presentation. This Form 10-Q should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company's Fiscal Year 2004 Form 10-K.
The consolidated financial position, results of operations and cash flows of Laclede Group are comprised primarily from the consolidated financial position, results of operations and cash flows of Laclede Gas Company (Laclede Gas or the Utility). Laclede Gas is a regulated natural gas distribution utility having a material seasonal cycle. As a result, these interim statements of income for Laclede Group are not necessarily indicative of annual results or representative of the succeeding quarters of the fiscal year. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season. The Utility typically experiences losses during the non-heating season. The seasonal effect of the Utility's earnings on Laclede Group is generally expected to be tempered somewhat by the results of SM&P Utility Resources, Inc. (SM&P), a non-regulated underground facility locating and marking service business, whose operations tend to be counter-seasonal to those of Laclede Gas.
The consolidated financial statements include the accounts of Laclede Group and its subsidiary companies. All subsidiaries are wholly owned. Laclede Gas and other subsidiaries of Laclede Group may engage in related party transactions during the ordinary course of business. All significant intercompany balances have been eliminated from the consolidated financial statements of Laclede Group except that certain intercompany transactions with Laclede Gas are not eliminated in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Those types of transactions include sales of natural gas from Laclede Gas to Laclede Energy Resources, Inc. (LER), services performed by SM&P to locate and mark underground facilities for Laclede Gas, sales of natural gas from LER to Laclede Gas, and sales of propane by Laclede Pipeline Company to Laclede Gas. These revenues are shown on the Intersegment revenues lines in the table included in Note 7 under Regulated Gas Distribution, Non-Regulated Services, Non-Regulated Gas Marketing, and Non-Regulated Other columns respectively.
Investment in Unconsolidated Affiliate Trust -Laclede Group formed a wholly owned trust, Laclede Capital Trust I (Trust) for the sole purpose of issuing preferred securities and lending the gross proceeds to its parent, Laclede Group. The sole assets of the Trust are debentures of Laclede Group.
UTILITY PLANT, DEPRECIATION AND AMORTIZATION - In January 2005, the Missouri Public Service Commission (MoPSC or Commission) issued an Order effective January 21, 2005 in the Utility's 1999 rate case relative to the calculation of its depreciation rates. In accordance with the provisions of the Order, Laclede Gas increased certain of its depreciation rates effective February 1, 2005 resulting in higher annual depreciation expense totaling $2.3 million. That same Order also required that operating expenses related to actual removal costs, which the Utility began expensing as incurred during fiscal 2002 pursuant to a previous Commission Order, be reduced by $2.3 million annually. As such, the Order had no immediate effect on income or the recovery of depreciation expenses.
REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on a monthly cycle billing basis. The Utility records its regulated gas distribution revenues from gas sales and transportation service on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed. The amount of accrued unbilled revenues at March 31, 2005 and 2004, for the Utility, were $26.2 million and $22.3 million, respectively. After accrual of related gas cost expense, the accrued pre-tax net revenues at March 31, 2005 and 2004 were $7.9 million and $6.9 million, respectively. The amount of accrued unbilled revenue at September 30, 2004 was $8.8 million.
STOCK-BASED COMPENSATION - The Laclede Group Equity Incentive Plan was approved at the annual meeting of shareholders of Laclede Group on January 30, 2003. The purpose of the Equity Incentive Plan is to provide a competitive compensation program and to attract and retain those executive and other key employees essential to achieve the Company's strategic objectives. To accomplish this purpose, the Compensation Committee of the board of directors may grant awards under the Equity Incentive Plan that may be earned by achieving performance objectives and/or other criteria as determined by the Compensation Committee. Under the terms of the Equity Incentive Plan, key employees of the Company and its subsidiaries, as determined at the sole discretion of the administrator, will be eligible to receive (a) restricted shares of common stock, (b) performance awards, (c) stock options exercisable into shares of common stock, (d) stock appreciation rights, and (e) stock units, as well as any other stock-based awards not inconsistent with the Equity Incentive Plan. Each award under the Equity Incentive Plan shall

9

have a minimum vesting period of at least one year. The total number of shares that may be issued pursuant to awards under the Equity Incentive Plan may not exceed 1,250,000.
During the six months ended March 31, 2005, the Company granted 234,000 non-qualified stock options to employees at an exercise price of $30.95 per share (none of these options were granted during the quarter ended March 31, 2005). The stock options vest one-fourth each year for four years after the date of the grant beginning November 4, 2005. The Company accounts for the Equity Incentive Plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No compensation expense has been recognized in net income, as all options granted under the Equity Incentive Plan had an exercise price equal to the market value of the Company's stock on the date of the grant.

Stock option activity for the quarter ended March 31, 2005 is presented below:

                                                              Weighted Average
                                                 Shares        Exercise Price
                                              ------------  --------------------
Outstanding at December 31, 2004                 616,000          $28.17

Granted                                               -              -
Exercised                                         24,125          $25.09
Forfeited                                             -              -

Outstanding at March 31, 2005                    591,875          $28.29

Exercisable at March 31, 2005                     89,875          $26.01

Exercise prices of options outstanding at March 31, 2005 range from $23.27 to $30.95. The weighted-average contractual life of these options is 8.8 years. The closing price of the Company's common stock was $29.20 at March 31, 2005.
If compensation expense had been determined based on the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the amounts shown in the following table. The weighted-average fair value of options granted during the six months ended March 31, 2005 is $6.73 per option. The estimated fair value of options would be amortized to expense over the options' vesting period and restricted stock would be expensed on the grant date.

                                                        Three Months Ended             Six Months Ended
                                                            March 31,                      March 31,
                                                   ---------------------------     --------------------------
                                                          2005         2004             2005          2004
                                                          ----         ----             ----          ----
(Thousands, Except Per Share Amounts)
Net income applicable to
   common stock, as reported                             $22,443     $ 21,540          $39,060      $ 38,131

Deduct:  Total stock-based employee
   compensation expense determined
   under the fair value based method
   for all awards, net of tax effects                        144           84              266           176
                                                   ---------------------------     --------------------------

Pro forma net income applicable
   to common stock                                       $22,299     $ 21,456          $38,794      $ 37,955
                                                   ===========================     ==========================

Earnings per share:

Basic - as reported                                        $1.07        $1.12            $1.86         $1.99
Diluted - as reported                                      $1.06        $1.12            $1.85         $1.99
Basic - pro forma                                          $1.06        $1.12            $1.84         $1.98
Diluted - pro forma                                        $1.06        $1.12            $1.84         $1.98

10

The fair value of the options granted during the six months ended March 31, 2005 was estimated at the date of grant using a binomial option pricing model with the following assumptions:

                                                  Six Months Ended
                                                   March 31, 2005
                                                ---------------------
Risk free interest rate                                4.10%
Expected dividend yield of stock                       4.40%
Expected volatility of stock                          25.00%
Expected life of option                              96 months

NEW ACCOUNTING STANDARDS - In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs." This Statement amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The provisions of this statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect adoption of this statement to have a material effect on the financial position or results of operations of the Company.
In December 2004, the FASB issued SFAS No. 123 (revised 2004) (123(R)), "Accounting for Stock-Based Compensation." This Statement is a revision to SFAS No. 123, and establishes standards for the accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. The Company currently accounts for its Equity Incentive Plan in accordance with APB Opinion No. 25, and provides pro forma disclosures in the Notes to Consolidated Financial Statements regarding the effect on net income and earnings as if compensation expense had been determined based on the fair value recognition provisions of SFAS No. 123. SFAS No. 123(R) was to be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, in April 2005, the Securities and Exchange Commission (SEC) amended the compliance date to allow companies to implement SFAS No. 123(R) at the beginning of their next fiscal year. The Company is currently evaluating the provisions of this Statement, which it plans to adopt effective October 1, 2005.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets." This Statement is an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this Statement will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect adoption of this Statement to have a material effect on the financial position or results of operations of the Company.
In March 2005, the FASB issued Interpretation No. 47 (FIN 47), "Accounting for Conditional Asset Retirement Obligations." FIN 47 clarifies the manner in which uncertainties concerning the timing and method of settlement of an asset retirement obligation, as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," should be accounted for. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company is currently evaluating the provisions of this Interpretation.

2. EARNINGS PER SHARE

SFAS No. 128, "Earnings Per Share," requires dual presentation of basic and diluted earnings per share (EPS). Basic EPS does not include potentially dilutive securities and is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS assumes the issuance of common shares pursuant to the Company's stock-based compensation plans and the vesting of non-vested stock awards at the beginning of each respective period. For the quarter ended March 31, 2005, 234,000 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive.

11

                                                          Three Months Ended          Six Months Ended
                                                               March 31,                  March 31,
                                                        ------------------------   ------------------------
(Thousands, Except Per Share Amounts)                       2005         2004           2005        2004
                                                            ----         ----           ----        ----
Basic EPS:
Net Income Applicable to Common Stock                     $ 22,443     $ 21,540       $ 39,060    $ 38,131
Weighted-Average Shares Outstanding                         21,060       19,167         21,038      19,142
Earnings Per Share of Common Stock                           $1.07        $1.12          $1.86       $1.99

Diluted EPS:
Net Income Applicable to Common Stock                     $ 22,443     $ 21,540       $ 39,060    $ 38,131

Weighted-Average Shares Outstanding                         21,060       19,167         21,038      19,142
Dilutive Effect of Stock Options, Restricted Stock              36           30             36          27
                                                        ------------------------   ------------------------
Weighted-Average Diluted Shares                             21,096       19,197         21,074      19,169
                                                        ========================   ========================

Earnings Per Share of Common Stock                           $1.06        $1.12          $1.85       $1.99

3. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Laclede Gas has non-contributory defined benefit, trusteed forms of pension plans covering substantially all employees over the age of twenty-one. Benefits are based on years of service and the employee's compensation during the last three years of employment.
The funding policy of Laclede Gas is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.
Pension costs for the quarters ending March 31, 2005 and 2004 were $1.1 million. Pension costs for the six months ended March 31, 2005 were $2.3 million compared with $2.2 million for the same period last year. These costs include amounts capitalized with construction activities.

The net periodic pension costs include the following components:

                                                 Three Months Ended           Six Months Ended
                                                     March 31,                    March 31,
                                               -----------------------     ------------------------
(Thousands)                                         2005        2004            2005        2004
                                                    ----        ----            ----        ----
Service cost - benefits earned
   during the period                              $ 2,799     $ 2,777        $  5,598     $  5,554
Interest cost on projected
   benefit obligation                               3,994       4,058           7,988        8,115
Expected return on plan assets                     (5,291)     (5,625)        (10,582)     (11,249)
Amortization of prior service cost                    308         331             617          662
Amortization of actuarial loss                        730         951           1,460        1,901
Regulatory adjustment                              (1,408)     (1,368)         (2,817)      (2,737)
                                               -----------------------     ------------------------
Net pension cost                                  $ 1,132     $ 1,124        $  2,264     $  2,246
                                               =======================     ========================

Pursuant to the Commission's Order in Laclede Gas' 2002 rate case, the return on plan assets is based on market-related value of plan assets implemented prospectively over a four-year period. Unrecognized gains or losses are amortized only to the extent that such gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Also in the 2002 rate case, the Commission ordered that the recovery in rates for the Utility's qualified pension plans is based on the ERISA minimum contribution of zero effective October 1, 2002, and on the ERISA minimum contribution of zero plus $3.4 million annually effective July 1, 2003. The difference between this amount

12

on a pro-rata basis and pension expense as calculated pursuant to the above and included in the Statements of Consolidated Income and Consolidated Comprehensive Income is deferred as a regulatory asset or liability.
Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump sum cash payments. Pursuant to MoPSC Order, lump sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. No lump sum payments were recognized as settlements during the six months ended March 31, 2005 or the six months ended March 31, 2004.
SM&P maintains a defined benefit plan for selected employees. The plan is a non-qualified plan and therefore has no assets held in trust. Net pension cost related to the plan is not material.
Laclede Gas also provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65.
Missouri state law provides for the recovery in rates of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (OPEB), accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established the Voluntary Employees' Beneficiary Association (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi trusts assets consist primarily of money market securities and mutual funds invested in stocks and bonds.
Postretirement benefit costs for quarters ending March 31, 2005 and 2004 were $2.0 million. Postretirement benefit costs for the six months ended March 31, 2005 and 2004 were $4.0 million. These costs include amounts capitalized with construction activities.

Net periodic postretirement benefit costs consisted of the following components:

                                                 Three Months Ended          Six Months Ended
                                                      March 31,                 March 31,
                                               ------------------------    ---------------------
(Thousands)                                           2005       2004          2005       2004
                                                      ----       ----          ----       ----
Service cost - benefits earned
  during the period                                 $   844    $   794       $ 1,689    $ 1,587
Interest cost on accumulated
  postretirement benefit obligation                     826        801         1,652      1,601
Expected return on plan assets                         (318)      (209)         (637)      (418)
Amortization of transition obligation                   144        265           289        530
Amortization of prior service cost                       (8)        (8)          (16)       (16)
Amortization of actuarial loss                          217        174           434        349
Regulatory adjustment                                   295        164           590        329
                                               ------------------------    ---------------------
Net postretirement benefit cost                     $ 2,000    $ 1,981       $ 4,001    $ 3,962
                                               ========================    =====================

Pursuant to the Commission's Order in the Utility's 2002 rate case, the return on plan assets is based on market-related value of plan assets implemented prospectively over a four-year period. Unrecognized gains and losses are amortized only to the extent that such gains or losses exceed 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Also in the 2002 rate case, the Commission ordered that the recovery in rates for the postretirement benefit costs be based on the accounting methodology as ordered in the 1999 rate case. The difference between this amount and postretirement benefit expense as calculated pursuant to the above is deferred as a regulatory asset or liability.

4. FINANCIAL INSTRUMENTS

In the course of its business, Laclede Energy Resources (LER) enters into fixed price commitments associated with the purchase or sale of natural gas. LER manages the price risk associated with these commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of exchange-traded futures contracts to lock in margins. At March 31, 2005, LER's open positions were not material to Laclede Group's financial position or results of operations.

13

Settled and open futures positions were as follows at March 31, 2005:

                                                                                   Average
                                                                       MMBtu      Price per
                                                  Position Month    (millions)      MMBtu
                                                  --------------    ----------      -----
Settled net long and short futures positions        April 2005         1.04         $6.17

Open short futures positions                         May 2005          1.16         $6.30
                                                    June 2005           .04         $6.57
                                                    July 2005           .13         $7.15
                                                   August 2005          .22         $6.87
                                                  September 2005        .04         $6.60
                                                   October 2005         .37         $6.88
                                                  December 2005         .20         $7.35
                                                   January 2006         .25         $7.26
                                                  February 2006         .04         $7.23

Open long futures positions                          May 2005           .04         $6.24
                                                  September 2005        .14         $5.05
                                                   October 2005         .30         $6.39

The above futures contracts are derivative instruments and management has designated these items as cash flow hedges of forecasted transactions. The fair values of the instruments are recognized on the Consolidated Balance Sheets. The change in the fair value of the effective portion of these hedge instruments is recorded, net of tax, in Other Comprehensive Income, a component of Common Stock Equity. These amounts will reduce or be charged to Non-Regulated Gas Marketing Operating Revenues or Expenses in the Statements of Consolidated Income as the transactions occur. It is expected that approximately $2.5 million of pre-tax net unrealized losses on cash flow hedging derivative instruments at March 31, 2005 will be reclassified into the Consolidated Statement of Income during fiscal 2005. The remainder, approximately $0.7 million pre-tax net unrealized losses, will be reclassified during fiscal 2006. The ineffective portions of these hedge instruments were not material for the periods presented, and such amounts are charged to Non-Regulated Gas Marketing Operating Revenues or Expenses. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Statements of Consolidated Cash Flows.

5. INCOME TAXES

Net provision for income taxes was as follows during the periods set forth below:

                                               Three Months Ended           Six Months Ended
                                                   March 31,                   March 31,
                                             -----------------------    -------------------------
(Thousands)                                       2005        2004           2005         2004
                                                  ----        ----           ----         ----
Federal
  Current                                       $10,969     $ 9,441        $19,795       $16,373
  Deferred                                         (291)      1,025         (1,221)        2,186
State and Local
  Current                                         1,756       1,515          3,245         2,703
  Deferred                                          134         147           (115)          320
                                             -----------------------    -------------------------
      Total                                     $12,568     $12,128        $21,704       $21,582
                                             =======================    =========================

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6. OTHER INCOME AND INCOME DEDUCTIONS - NET

                                                      Three Months Ended         Six Months Ended
                                                          March 31,                 March 31,
                                                    -----------------------    ---------------------
(Thousands)                                                2005      2004          2005       2004
                                                           ----      ----          ----       ----
Investment gains                                          $   -    $ 1,947       $     -    $ 1,947
Allowance for funds used during construction                (24)       (29)          (49)       (61)
Other income                                                528        335         1,093        891
Other income deductions                                    (598)      (322)          436        613
                                                    -----------------------    ---------------------
Other income and (income deductions) - net                $ (94)   $ 1,931       $ 1,480    $ 3,390
                                                    =======================    =====================

Laclede Gas recorded the receipt of proceeds totaling $1.9 million during the quarter ended March 31, 2004 related to its interest, as a policyholder, in the sale of a mutual insurance company. This represented an initial distribution relating to certain policies held by the Utility. Subsequent distributions are not expected to have a material impact on the consolidated financial position or results of operations of the Company.

7. INFORMATION BY OPERATING SEGMENT

The Regulated Gas Distribution segment consists of the regulated operations of Laclede Gas and is the core business segment of Laclede Group. The Non-Regulated Services segment includes the results of SM&P, an underground facility locating and marking business operating in the midwestern states, a wholly owned subsidiary of Laclede Group. The underground facility locating industry remains competitive with many contracts subject to termination on as little as 30 days' notice. Also, SM&P's customers are primarily in the utility and telecommunication sector and, as such, SM&P's results are influenced by construction seasonality and trends. The Non-Regulated Gas Marketing segment includes the results of LER, a wholly owned subsidiary of Laclede Group. Non-Regulated Other includes the transportation of liquid propane, real estate development, the compression of natural gas, and financial investments in other enterprises. These operations are conducted through five wholly owned subsidiaries. Certain intersegment revenues with Laclede Gas are not eliminated in accordance with the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation." Those types of transactions include sales of natural gas from Laclede Gas to LER, services performed by SM&P to locate and mark underground facilities for Laclede Gas, sales of natural gas from LER to Laclede Gas, and sales of propane by Laclede Pipeline Company to Laclede Gas. These revenues are shown on the Intersegment revenues lines in the table under Regulated Gas Distribution, Non-Regulated Services, Non-Regulated Gas Marketing, and Non-Regulated Other columns respectively.

15

                                                                    Non-
                                      Regulated        Non-       Regulated       Non-
                                         Gas         Regulated       Gas        Regulated
(Thousands)                          Distribution    Services     Marketing       Other      Eliminations   Consolidated
-------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2005
--------------
Revenues from external
  customers                            $  426,583      $ 23,732     $ 110,807      $    733      $      -     $  561,855
Intersegment revenues                       8,413            74         5,800           413             -         14,700
                                     ------------------------------------------------------------------------------------
Total operating revenues                  434,996        23,806       116,607         1,146             -        576,555
Net income (loss) applicable to
  common stock                             22,529        (2,062)        1,786           190             -         22,443
Total assets                            1,195,499        54,693        55,969        42,684       (28,671)     1,320,174

Six Months Ended
March 31, 2005
--------------
Revenues from external
  customers                            $  714,880      $ 51,655     $ 220,805      $  1,437      $      -     $  988,777
Intersegment revenues                      11,369           137        13,981         4,776             -         30,263
                                     ------------------------------------------------------------------------------------
Total operating revenues                  726,249        51,792       234,786         6,213             -      1,019,040
Net income (loss) applicable to
  common stock                             37,616        (1,919)        3,220           143             -         39,060
Total assets                            1,195,499        54,693        55,969        42,684       (28,671)     1,320,174

Three Months Ended
March 31, 2004
--------------
Revenues from external
  customers                            $  396,465      $ 15,183     $  56,023      $    935      $      -     $  468,606
Intersegment revenues                         433            67         5,457           392             -          6,349
                                     ------------------------------------------------------------------------------------
Total operating revenues                  396,898        15,250        61,480         1,327             -        474,955
Net income (loss) applicable to
  common stock                             23,359        (3,173)        1,016           338             -         21,540
Total assets                            1,137,824        48,456        40,946        36,699       (19,348)     1,244,577

Six Months Ended
March 31, 2004
--------------
Revenues from external
  customers                            $  657,007      $ 34,666     $ 102,503      $  1,744      $      -     $  795,920
Intersegment revenues                       1,241           132         9,960           339             -         11,672
                                     ------------------------------------------------------------------------------------
Total operating revenues                  658,248        34,798       112,463         2,083             -        807,592
Net income (loss) applicable to
  common stock                             40,683        (4,198)        1,427           219             -         38,131
Total assets                            1,137,824        48,456        40,946        36,699       (19,348)     1,244,577

8. COMMITMENTS AND CONTINGENCIES

Laclede Gas owns and operates natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company's or Laclede Gas' financial position and results of operations. As environmental laws, regulations, and their interpretations evolve, however, Laclede Gas may be required to incur additional costs.
With regard to a former manufactured gas plant site located in Shrewsbury, Missouri, Laclede Gas and state and federal environmental regulators have agreed upon certain remedial actions and those actions are essentially complete. Laclede Gas currently estimates the overall costs of these actions will be approximately $2.4 million. As of March 31, 2005, Laclede Gas has paid or reserved for these actions. If regulators require additional remedial actions or assert additional claims, Laclede Gas will incur additional costs.

16

Laclede Gas enrolled a second former manufactured gas plant site into the Missouri Voluntary Cleanup Program (VCP). The VCP provides opportunities to minimize the scope and cost of site cleanup while maximizing possibilities for site development. This site is located in, and is presently owned by, the City of St. Louis, Missouri. Laclede Gas continues to evaluate options concerning this site, including, but not limited to, the submission of its own Remedial Action Plan (RAP) to the VCP. Laclede Gas currently estimates that the cost of site investigations, agency oversight and related legal and engineering consulting may be approximately $650,000. Currently, Laclede Gas has paid or reserved for these actions. Laclede Gas has requested that other former site owners and operators share in these costs and one party has agreed to participate and has reimbursed Laclede Gas to date for $190,000. Laclede Gas anticipates additional reimbursement from this party. Laclede Gas plans to seek proportionate reimbursement of all costs relative to this site from other potentially responsible parties to the extent practicable.
Laclede Gas has been advised that a third former manufactured gas plant site may require remediation. Laclede Gas does not own, and for many years has not owned, this site. At this time, it is not known whether Laclede Gas will incur any costs in connection with environmental investigations of or remediation at the site, and if it does incur any such costs, what the amount of those costs would be.
Costs incurred are charged to expense or capitalized in accordance with generally accepted accounting principles. A predetermined level of expense is recovered through Laclede Gas' rates. While the scope of future costs relative to the actions Laclede Gas has taken at the Shrewsbury site pursuant to the current agreement with state and federal regulators may not be significant, the scope of costs relative to future remedial actions regulators may require at the Shrewsbury site and to the other sites is unknown and may be material.
Laclede Gas has notified its insurers of past and future claims associated with investigation of and remediation at these three manufactured gas plant sites. In response, the majority of insurers have reserved their rights. While some of the insurers have denied coverage, Laclede Gas continues to pursue claims against them. With regard to costs incurred under current agreement regarding the Shrewsbury site, denials of coverage are not expected to have a material impact on the financial position and results of operations of Laclede Gas or the Company. With regard to the other two sites and with regard to any future actions that might be required at the Shrewsbury site, since the scope of costs are unknown and may be significant, denials of coverage may have a material impact on the financial position and results of operations of Laclede Gas or the Company. Such costs, if incurred, have typically been subject to recovery in rates.
On June 28, 2002, the Staff of the MoPSC filed its recommendation in a proceeding established to review Laclede Gas' gas costs for fiscal 2001. In its recommendation, the Staff proposed to disallow approximately $4.9 million in pre-tax gains achieved by Laclede Gas in its incentive-based Price Stabilization Program. This Program was discontinued at the end of the 2001-2002 heating season. Laclede Gas vigorously opposed the adjustment in proceedings before the MoPSC, including a formal hearing that was held on this matter in February 2003. Nevertheless, on April 29, 2003, the MoPSC decided by a 3-2 vote to disallow the $4.9 million in pre-tax gains achieved by Laclede Gas, and directed Laclede Gas to flow through such amount to its customers in its November 2003 PGA filing. On June 19, 2003, Laclede Gas appealed the MoPSC's decision to the Circuit Court of Cole County, Missouri. On October 10, 2003, the Circuit Court issued an Order staying the MoPSC's decision requiring Laclede Gas to flow through the $4.9 million to customers. Pursuant to the Stay Order, Laclede Gas paid $4.9 million into the Court's registry pending a final judicial determination of Laclede Gas' entitlement to such amounts. On November 5, 2003, the Circuit Court issued its Order and Judgment vacating and setting aside the Commission's decision on the grounds that it was unlawful and not supported by competent and substantial evidence on the record. On December 5, 2003, the MoPSC appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 1, 2005, the Court of Appeals affirmed the decision of the Cole County Circuit Court, finding that the plain language of the Company's tariff permitted Laclede Gas to retain the pre-tax gains. The Court of Appeals remanded the case to the Cole County Circuit Court, with instructions to remand the case to the MoPSC for further proceedings consistent with the Court of Appeals' opinion. The MoPSC did not file for rehearing or an appeal of the Court of Appeals' opinion. On April 4, 2005, the Cole County Circuit Court remitted to Laclede Gas the $4.9 million previously paid into the Court's registry. On April 7, 2005, the Commission issued its Order on Remand in which it reversed its April 29, 2003 decision and directed that Laclede Gas be permitted to retain the $4.9 million consistent with the Court of Appeals opinion. The Commission's Order on Remand is now final and unappealable. The return of the pre-tax gains, however, was previously recorded as income in the 2002 fiscal year, so the decision will have no effect on the future financial position or results of operations of the Company.
SM&P has been the subject of certain employment-related claims arising out of a practice of SM&P that predated Laclede Group's acquisition. The claims involve whether certain pre- and post-work activities and commuting time for non-supervisory field employees constitute hours worked for purposes of federal and state wage and hour laws. These claims have been asserted in various proceedings, including one "opt-in" collective action filed in March 2003 in Federal District Court for the Eastern District of Texas. As a result of a ruling on February 27, 2004 in that proceeding, approximately 3,500 present and former field employees who worked for SM&P at times since February 27, 2001, were given notice of the lawsuit and the opportunity, until June 7, 2004, to join the lawsuit and assert claims for additional overtime compensation for the three-year period immediately preceding the date that they joined the lawsuit. Of the employees to whom notice was sent, 966 joined this lawsuit within the opt-in deadline

17

established by the court. The substantial majority of the plaintiffs are former employees. A limited number of individuals have attempted to opt-in after the court's deadline, while simultaneously, a limited number of plaintiffs have withdrawn from participation after having opted into the lawsuit. SM&P is vigorously contesting these claims, including opposition to this case ultimately proceeding as a collective action. While the results of the claims cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the consolidated financial position and results of operations of the Company.
Laclede Group and its subsidiaries are involved in other litigation, claims and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
On March 11, 2005, Laclede Gas Company signed a 15-year service agreement with Cellnet Technology, Inc., to install and operate an automated meter reading (AMR) system. Upon implementation, the Utility will pay Cellnet monthly for successful billing reads. AMR is designed to eliminate the need for Laclede, which has nearly 40 percent of its approximately 650,000 meters indoors, to gain physical access to meters in order to obtain monthly meter readings. Under the terms of the agreement, Cellnet will install and own the system as well as handle data collection, meter data delivery, and network operation and maintenance services. Installation of equipment on customer meters is scheduled to begin in July 2005 and will take approximately two years to complete. The Cellnet AMR system employs a wireless fixed network with read devices that will be attached to existing Laclede Gas customer meters. Reads from each meter are transmitted to local network receivers and transferred to Laclede's customer billing system, resulting in the production of a timely, accurate bill.
Laclede Group had guarantees totaling $11 million for performance and payment of certain wholesale gas supply purchases by Laclede Energy Resources, Inc. (the Company's non-utility marketing affiliate), as of March 31, 2005.
SM&P has several operating leases, the aggregate annual cost of which is approximately $6 million, consisting primarily of 12-month operating leases, with renewal options, for vehicles used in its business. Laclede Group has parental guarantees of certain of those vehicle leases and anticipates that the maximum guarantees, including renewals and new leases, will not exceed $20 million. No amounts have been recorded for these guarantees in the financial statements.

Laclede Gas Company's Financial Statements and Notes to Financial Statements are included in Exhibit 99.1 to this report.

18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Laclede Group, Inc.

This management's discussion analyzes the financial condition and results of operations of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries. It includes management's view of factors that affect its business, explanations of past financial results including changes in earnings and costs from the prior year periods, and their effects on overall financial condition and liquidity.

Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "seek," and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:

o weather conditions and catastrophic events;
o economic, competitive, political and regulatory conditions;
o legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting
o allowed rates of return
o incentive regulation
o industry structure
o purchased gas adjustment provisions
o rate design structure and implementation
o franchise renewals
o environmental or safety matters
o taxes
o accounting standards;
o the results of litigation;
o retention, ability to attract, ability to collect from and conservation efforts of customers;
o capital and energy commodity market conditions including the ability to obtain funds for necessary capital expenditures and the terms and conditions imposed for obtaining sufficient gas supply;
o discovery of material weakness in internal controls; and
o employee workforce issues.

Readers are urged to consider the risks, uncertainties and other factors that could affect our business as described in this report. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement in light of future events.

The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto.

19

THE LACLEDE GROUP, INC.

RESULTS OF OPERATIONS

The Laclede Group, Inc.'s (Laclede Group or the Company) earnings are primarily derived from the regulated activities of its largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri's largest natural gas distribution company. Laclede Gas is regulated by the Missouri Public Service Commission (MoPSC or Commission) and serves the metropolitan St. Louis area and several other counties in eastern Missouri. Laclede Gas delivers natural gas to retail customers at rates, and in accordance with tariffs, authorized by the MoPSC. The Utility's earnings are generated primarily by the sale of heating energy, which historically has been heavily influenced by the weather. However, as part of the 2002 rate case settlement, the Utility initiated, effective November 9, 2002, an innovative weather mitigation rate design that lessens the impact of weather volatility on Laclede Gas customers during cold winters and stabilizes the Utility's earnings by recovering fixed costs more evenly during the heating season. The weather mitigation rate design minimizes the impact of weather volatility during the peak cold months of December through March and reduces the impact of weather volatility, to a lesser extent, during the months of November and April. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season. The Utility typically experiences losses during the non-heating season. Due to the material seasonal cycle of Laclede Gas, the accompanying interim statements of income for Laclede Group are not necessarily indicative of annual results or representative of the succeeding quarters of the fiscal year. The seasonal effect of the Utility's earnings on Laclede Group is generally expected to be tempered somewhat by the results of SM&P Utility Resources, Inc. (SM&P), a non-regulated underground facility locating and marking service business wholly owned by Laclede Group, whose operations tend to be counter-seasonal to those of Laclede Gas. Laclede Energy Resources, Inc. (LER), a wholly owned subsidiary, is engaged in non-regulated efforts to market natural gas and related activities. Other non-regulated subsidiaries provide less than 10% of consolidated revenues.

Laclede Group's strategy continues to include efforts to stabilize and improve the performance of its core Utility, while developing non-regulated businesses and taking a measured approach in the pursuit of additional growth opportunities that complement the Utility business.

As for the Utility, mitigating the impact of weather fluctuations on Laclede Gas customers while improving the ability to recover its authorized distribution costs and return continues to be a fundamental component of the Laclede Group strategy. The Utility's distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 15,000-mile natural gas distribution system and related storage facilities. In addition, Laclede Gas is working to continually improve its ability to provide reliable natural gas service at a reasonable cost, while maintaining and building a secure and dependable infrastructure. The Utility's income from off-system sales remains subject to fluctuations in market conditions. Some of the factors impacting the level of off-system sales include the availability and cost of its natural gas supply, the weather in the Utility's service area, and the weather in other markets. When Laclede Gas' service area experiences warmer-than-normal weather while other markets experience colder weather or supply constraints, some of the Utility's natural gas supply is available for off-system sales and there may be a demand for such supply in other markets.

Laclede Group continues to develop its non-regulated subsidiaries. SM&P is working to further the logical expansion of its geographic footprint into new markets, having already made notable gains by adding business in several key markets. LER continues to focus on growing its markets on a long-term and sustainable basis by providing both on-system Utility transportation customers and customers outside of Laclede Gas' traditional service area with another choice in unregulated natural gas suppliers. Nevertheless, income from LER's operations is subject to fluctuations in market conditions.

Quarter Ended March 31, 2005
------------------------------------------

Overview - Net Income (Loss) by Operating Segment                  Quarter Ended
                                                                     March 31,
                                                              -------------------------
(millions, after-tax)                                             2005           2004
                                                                  ----           ----

Regulated Gas Distribution                                        $22.5       $23.4
Non-Regulated Services                                             (2.1)       (3.2)
Non-Regulated Gas Marketing                                         1.8         1.0
Non-Regulated Other                                                  .2          .3
                                                              ----------    -----------
Net Income Applicable to Common Stock                             $22.4       $21.5
                                                              ==========    ===========

20

Laclede Group's net income applicable to common stock was $22.4 million for the quarter ended March 31, 2005, compared with $21.5 million for the quarter ended March 31, 2004. Basic and diluted earnings per share were $1.07 and $1.06, respectively, for the quarter ended March 31, 2005, compared with basic and diluted earnings per share of $1.12 reported for the same quarter last year. The decrease in earnings per share was due to an increase in the number of average shares outstanding this year, primarily due to the sale of 1.725 million shares of common stock in May 2004. Variations in net income were primarily attributable to the factors described below.

Utility earnings decreased by $0.9 million for the quarter ended March 31, 2005 compared with the quarter ended March 31, 2004. The decrease in the Utility's earnings for the quarter was primarily attributable to the following factors, quantified on a pre-tax basis:

o non-operating income that decreased $1.9 million, primarily due to the proceeds recorded during the quarter ended March 31, 2004 related to the Company's interest, as a policyholder, in the sale of a mutual insurance company totaling $1.9 million;
o higher interest charges totaling $1.1 million, primarily due to the issuance of additional long-term debt;
o increases in operation and maintenance expenses of $1.0 million; and,
o a higher provision for uncollectible accounts totaling $0.9 million.

These factors were partially offset by:

o higher income this year from off-system sales and capacity release totaling $2.5 million; and,
o the recovery of eligible costs incurred to build and maintain the Utility's distribution system through the implementation of Infrastructure System Replacement Surcharges effective June 10, 2004 and January 20, 2005 totaling $1.2 million.

SM&P recorded a loss of $2.1 million during the quarter ended March 31, 2005 compared with a loss for the same period last year totaling $3.2 million. SM&P's improved results were primarily due to the return of a substantial portion of business from two large customers and the attainment of additional business in both new and existing markets. SM&P's improvement over the same period last year was also attributable in part to charges recorded last year associated with the employment-related litigation described in Note 8 to the Consolidated Financial Statements.

LER's income increased $0.8 million primarily due to higher sales volumes.

Regulated Operating Revenues and Operating Expenses

Laclede Gas passes on to Utility customers (subject to prudence review) increases and decreases in the wholesale cost of natural gas in accordance with its Purchased Gas Adjustment (PGA) clause. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes have no direct effect on net income.

Regulated operating revenues for the quarter ended March 31, 2005 were $435.0 million, or $38.1 million greater than the same period last year. Temperatures experienced in the Utility's service area during the quarter were 10% warmer than normal and 3% warmer than the same period last year. Total therms sold and transported were 510.7 million, an increase of 2.7 million, or 0.5%, above the quarter ended March 31, 2004. The increase in regulated operating revenues was primarily attributable to the following factors:

                                                                                      Millions
                                                                                    -------------
Higher wholesale gas costs (passed on to Utility customers subject to
  prudence review by the MoPSC)                                                       $   29.4
Lower system sales volumes resulting from warmer weather and other variations            (21.7)
Higher off-system sales volumes, reflecting more favorable market
  conditions as described in greater detail in the Results of Operations                  18.5
Higher prices charged for off-system sales                                                10.7
Partial-year effect of the Infrastructure System Replacement Surcharges (ISRS)             1.2
                                                                                    -------------
     Total Variation                                                                  $   38.1
                                                                                    =============

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Regulated operating expenses for the quarter ended March 31, 2005 increased $36.4 million from the same quarter last year. Natural and propane gas expense increased $32.9 million from last year's level primarily attributable to higher rates charged by our suppliers and increased off-system gas expense, partially offset by lower volumes purchased for sendout. Other operation and maintenance expenses increased $1.9 million, or 5.1%, primarily due to a higher provision for uncollectible accounts, increased insurance premiums and higher wage rates. These factors were partially offset by decreased distribution charges, lower pension costs and decreased group insurance charges. Taxes, other than income, increased $1.6 million, or 6.3%, primarily due to higher gross receipts taxes (reflecting increased revenues).

Non-Regulated Services Operating Revenues and Operating Expenses

Laclede Group's non-regulated services operating revenue for this quarter increased $8.6 million reflecting the return to SM&P of a substantial portion of business from two large customers and the attainment of additional business in both new and existing markets. The increase in non-regulated services operating expenses, totaling $6.8 million, was primarily attributable to charges associated with the new business, partially offset by charges recorded during the same quarter last year attributable to the employment-related litigation, described in Note 8 to the Consolidated Financial Statements on page 17 of this report. The underground facility locating industry remains competitive with many contracts subject to termination on as little as 30 days' notice. SM&P's customers are primarily in the utility and telecommunication sector and, as such SM&P's results are influenced by construction seasonality and trends.

Non-Regulated Gas Marketing Operating Revenues and Operating Expenses

Non-regulated gas marketing operating revenues increased $55.1 million primarily due to increased sales volumes and higher sales prices by LER. The increase in non-regulated gas marketing operating expenses, totaling $53.9 million, was primarily associated with increased gas expense related to increased volumes purchased and higher prices.

Other Income and (Income Deductions) - Net

The $2.0 million decrease in other income and income deductions - net was primarily attributable to the Utility's recognition of the receipt of proceeds totaling $1.9 million related to its interest, as a policyholder, in the sale of a mutual insurance company during the quarter ended March 31, 2004.

Interest Charges

The $1.1 million increase in interest charges was primarily due to higher interest on long-term debt due to the April 2004 issuance of $50 million principal amount of 5 1/2% First Mortgage Bonds and $100 million principal amount of 6% First Mortgage Bonds, partially offset by the early redemption in June 2004 of $50 million principal amount of 6 5/8% First Mortgage Bonds and the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Income Taxes

The increase in income taxes was primarily attributable to higher pre-tax income.

Six Months Ended March 31, 2005
------------------------------------------

Overview - Net Income (Loss) by Operating Segment                 Six Months Ended
                                                                     March 31,
                                                              -------------------------
(millions, after-tax)                                             2005           2004
                                                                  ----           ----
Regulated Gas Distribution                                        $37.6          $40.7
Non-Regulated Services                                             (1.9)          (4.2)
Non-Regulated Gas Marketing                                         3.2            1.4
Non-Regulated Other                                                  .2             .2
                                                              ----------    -----------
Net Income Applicable to Common Stock                             $39.1          $38.1
                                                              ==========    ===========

Laclede Group's net income applicable to common stock was $39.1 million for the six months ended March 31, 2005, compared with $38.1 million for the six months ended March 31, 2004. Basic and diluted earnings per share were $1.86 and $1.85, respectively, for the six months ended March 31, 2005, compared with basic and diluted earnings per

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share of $1.99 reported for the same period last year. The decrease in earnings per share was due to the aforementioned increase in the number of average shares outstanding this year. Variations in net income were primarily attributable to the factors described below.

Utility earnings decreased by $3.1 million for the six months ended March 31, 2005 compared with the same period last year. The decrease in the Utility's earnings for the six-month period were primarily attributable to the following factors, quantified on a pre-tax basis:

o higher interest charges totaling $2.1 million, primarily due to the issuance of additional long-term debt;
o non-operating income that decreased $1.9 million, primarily due to the proceeds recorded during the quarter ended March 31, 2004 related to the Company's interest, as a policyholder, in the sale of a mutual insurance company totaling $1.9 million;
o the net effect of lower system gas sales volumes totaling $1.8 million, primarily due to an unseasonably warm weather pattern in November;
o increases in operation and maintenance expenses totaling $1.7 million; and,
o a higher provision for uncollectible accounts totaling $1.4 million.

These factors were partially offset by:

o the recovery of eligible costs incurred to build and maintain the Utility's distribution system through the implementation of Infrastructure System Replacement Surcharges effective June 10, 2004 and January 20, 2005 totaling $2.1 million; and
o higher income this year from off-system sales and capacity release totaling $1.2 million.

SM&P recorded a loss of $1.9 million during the six months ended March 31, 2005 compared with a loss for the same period last year totaling $4.2 million. SM&P's improved results were primarily due to the return of a substantial portion of business from two large customers and the attainment of additional business in both new and existing markets. SM&P's improvement over the same period last year was also attributable in part to charges recorded last year associated with the employment-related litigation described in Note 8 to the Consolidated Financial Statements.

LER's income increased $1.8 million primarily due to higher sales volumes and increased margins.

Regulated Operating Revenues and Operating Expenses

Regulated operating revenues for the six months ended March 31, 2005 were $726.2 million, or $68.0 million greater than the same period last year. Temperatures experienced in the Utility's service area during the six months ended March 31, 2005 were 12% warmer than normal and essentially equal to the same period last year. Total therms sold and transported were 834.3 million, a decrease of 27.8 million, or 3.2%, below the six months ended March 31, 2004. The increase in regulated operating revenues was primarily attributable to the following factors:

                                                                                    Millions
                                                                                 -------------
Higher wholesale gas costs (passed on to Utility customers subject to
  prudence review by the MoPSC)                                                        $ 67.2
Lower system sales volumes resulting from warmer weather and other variations           (25.0)
Higher prices charged for off-system sales                                               18.3
Higher off-system sales volumes, reflecting more favorable market
  conditions as described in greater detail in the Results of Operations                  5.4
Partial-year effect of the ISRS                                                           2.1
                                                                                 -------------
     Total Variation                                                                   $ 68.0
                                                                                 =============

Regulated operating expenses for the six months ended March 31, 2005 increased $69.4 million from the same period last year. Natural and propane gas expense increased $64.1 million above last year's level primarily attributable to higher rates charged by our suppliers and increased off-system gas expense, partially offset by lower volumes purchased for sendout. Other operation and maintenance expenses increased $3.1 million, or 4.4%, primarily due to a higher provision for uncollectible accounts, increased insurance premiums, and higher wage rates. These factors were partially offset by lower pension costs and decreased group insurance charges. Taxes, other than income, increased $2.6 million, or 6.5%, primarily due to higher gross receipts taxes (attributable to the increased revenues).

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Non-Regulated Services Operating Revenues and Operating Expenses

Laclede Group's non-regulated services operating revenue for the six months ended March 31, 2005 increased $17.0 million primarily due to SM&P's attainment of new business in both new and existing markets. The increase in non-regulated services operating expenses totaling $13.3 million was primarily attributable to charges associated with the new business, partially offset by charges recorded during the same period last year attributable to the employment-related litigation, described in Note 8 to the Consolidated Financial Statements on page 17 of this report.

Non-Regulated Gas Marketing Operating Revenues and Operating Expenses

Non-regulated gas marketing operating revenues increased $122.3 million primarily due to higher volumes and increased sales prices by LER. The increase in non-regulated gas marketing operating expenses was primarily associated with increased gas expense related to higher volumes purchased and increased prices totaling $119.4 million.

Non-Regulated Other Operating Revenues and Operating Expenses

Non-regulated other operating revenues increased $4.1 million primarily due to higher sales levels recorded by Laclede Pipeline Company. Non-regulated other operating expenses increased $4.2 million primarily due to higher expenses associated with increased sales levels recorded by Laclede Pipeline Company.

Other Income and (Income Deductions) - Net

The $1.9 million decrease in other income and income deductions - net was primarily attributable to the Utility's recognition of the receipt of proceeds totaling $1.9 million related to its interest, as a policyholder, in the sale of a mutual insurance company last year.

Interest Charges

The $2.1 million increase in interest charges was primarily due to higher interest on long-term debt due to the April 2004 issuance of $50 million principal amount of 5 1/2% First Mortgage Bonds and $100 million principal amount of 6% First Mortgage Bonds, partially offset by the early redemption in June 2004 of $50 million principal amount of 6 5/8% First Mortgage Bonds and the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Regulatory Matters

Laclede Gas previously appealed the MoPSC's decision in its 1999 rate case relative to the calculation of its depreciation rates. The Circuit Court remanded the decision to the MoPSC based on inadequate findings of fact. The MoPSC upheld its previous Order and Laclede Gas appealed this second Order to the Circuit Court. In 2002, the Circuit Court ruled that the MoPSC's second Order was lawful and reasonable, and Laclede Gas appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 4, 2003 the Court of Appeals issued an opinion remanding the decision to the MoPSC based on the MoPSC's failure to support and explain its decision with adequate findings of fact. In May 2003, the Court of Appeals rejected the MoPSC's request that the Court reconsider its opinion or transfer this matter to the Missouri Supreme Court. On January 11, 2005, the Commission issued an Order ruling in favor of Laclede Gas on the depreciation issue. As a direct result of the Commission's Order ruling in favor of the Utility's position, Laclede Gas increased certain of its depreciation rates effective February 1, 2005 resulting in higher annual depreciation expense totaling $2.3 million, as it originally requested. That same Order also required that operating expenses related to actual removal costs, which the Utility began expensing as incurred during fiscal 2002 pursuant to a previous Commission Order, be reduced by $2.3 million annually. As such, there was no effect on net income, and the Commission's decision had no immediate effect on the Utility's recovery of depreciation expenses. However, the Utility expects that the Commission's confirmation of Laclede Gas' position on the proper method for calculating depreciation rates will result in increased cash flows from capital recovery in future rate cases.

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On June 28, 2002, the Staff of the MoPSC filed its recommendation in a proceeding established to review Laclede Gas' gas costs for fiscal 2001. In its recommendation, the Staff proposed to disallow approximately $4.9 million in pre-tax gains achieved by Laclede Gas in its incentive-based Price Stabilization Program. This Program was discontinued at the end of the 2001-2002 heating season. Laclede Gas vigorously opposed the adjustment in proceedings before the MoPSC, including a formal hearing that was held on this matter in February 2003. Nevertheless, on April 29, 2003, the MoPSC decided by a 3-2 vote to disallow the $4.9 million in pre-tax gains achieved by Laclede Gas, and directed Laclede Gas to flow through such amount to its customers in its November 2003 PGA filing. On June 19, 2003, Laclede Gas appealed the MoPSC's decision to the Circuit Court of Cole County, Missouri. On October 10, 2003, the Circuit Court issued an Order staying the MoPSC's decision requiring Laclede Gas to flow through the $4.9 million to customers. Pursuant to the Stay Order, Laclede Gas paid $4.9 million into the Court's registry pending a final judicial determination of Laclede Gas' entitlement to such amounts. On November 5, 2003, the Circuit Court issued its Order and Judgment vacating and setting aside the Commission's decision on the grounds that it was unlawful and not supported by competent and substantial evidence on the record. On December 5, 2003, the MoPSC appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 1, 2005, the Court of Appeals affirmed the decision of the Cole County Circuit Court, finding that the plain language of the Company's tariff permitted Laclede Gas to retain the pre-tax gains. The Court of Appeals remanded the case to the Cole County Circuit Court, with instructions to remand the case to the MoPSC for further proceedings consistent with the Court of Appeals' opinion. The MoPSC did not file for rehearing or an appeal of the Court of Appeals' opinion. On April 4, 2005, the Cole County Circuit Court remitted to Laclede Gas the $4.9 million previously paid into the Court's registry. On April 7, 2005, the Commission issued its Order on Remand in which it reversed its April 29, 2003 decision and directed that Laclede Gas be permitted to retain the $4.9 million consistent with the Court of Appeals opinion. The Commission's Order on Remand is now final and unappealable. The return of the pre-tax gains, however, was previously recorded as income in the 2002 fiscal year, so the decision will have no effect on the future financial position or results of operations of the Company.

Laclede Gas filed its first Infrastructure System Replacement Surcharge (ISRS) filing with the MoPSC on March 1, 2004 to increase revenues by approximately $3.86 million annually. The filing was made pursuant to a Missouri law, enacted in 2003, that allows gas utilities to adjust their rates up to twice a year to recover certain facility-related expenditures that are made to comply with state and federal safety requirements or to relocate facilities in connection with public improvement projects. On June 1, 2004, the MoPSC approved a Stipulation and Agreement ("S&A") between Laclede Gas and the Staff of the Commission that provided for a $3.56 million annual surcharge effective June 10, 2004. Laclede Gas made its second ISRS filing on October 28, 2004 to increase revenues by approximately an additional $1.6 million annually. On January 4, 2005, the MoPSC approved a S&A between Laclede Gas and the Staff of the Commission that provided for a $1.42 million annual increase in ISRS revenues effective January 20, 2005. Laclede Gas made its third ISRS filing on April 4, 2005 to increase revenues by approximately an additional $1.3 million annually. The MoPSC has not yet acted on the Company's latest request.

On February 18, 2005, Laclede Gas filed tariff sheets with the MoPSC requesting a general rate increase of approximately $34 million. If granted, customers' bills would increase by an average of 4.1%. Although the filing requests an annual increase of $39.0 million, $5.0 million of that amount is already being billed to customers through the current ISRS, which would cease upon the effective date of new rate schedules approved by the MoPSC. The Company's filing also includes a proposal to modify the Company's gas supply incentive plan. On February 28, 2005, the MoPSC suspended implementation of the Company's proposed rates until January 2006. Historically, the MoPSC has not granted Laclede Gas' rate increase requests in full.

Critical Accounting Policies

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Generally accepted accounting principles require that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our consolidated financial statements:

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Allowances for doubtful accounts - Estimates of the collectibility of trade accounts receivable are based on historical trends, age of receivables, economic conditions, credit risk of specific customers, and other factors.

Employee benefits and postretirement obligations - Pension and postretirement obligations are calculated by actuarial consultants that utilize several statistical factors and other assumptions related to future events, such as discount rates, returns on plan assets, compensation increases, and mortality rates. The amount of expense recognized by the Utility is dependent on the regulatory treatment provided for such costs. Certain liabilities related to group medical benefits and workers' compensation claims, portions of which are self-insured and/or contain "stop-loss" coverage with third-party insurers to limit exposure, are established based on historical trends.

Goodwill valuation - In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is required to be tested for impairment annually or whenever events or circumstances occur that may reduce the value of goodwill. In performing impairment tests, valuation techniques require the use of estimates with regard to discounted future cash flows of operations, involving judgments based on a broad range of information and historical results. If the test indicates impairment has occurred, goodwill would be reduced, adversely impacting earnings.

Laclede Gas accounts for its regulated operations in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This statement sets forth the application of accounting principles generally accepted in the United States of America for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of SFAS No. 71 require, among other things, that financial statements of a regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). Management believes that the current regulatory environment supports the continued use of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory process. We believe the following represent the more significant items recorded through the application of SFAS No. 71:

The Utility's Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies, including the costs, cost reductions and related carrying costs associated with the Utility's use of natural gas financial instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and costs recovered through the application of the PGA are recorded as regulatory assets and liabilities that are recovered or refunded in a subsequent period.

The Company records deferred tax liabilities and assets measured by enacted tax rates for the net tax effect of all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax purposes. Changes in enacted tax rates, if any, and certain property basis differences will be reflected by entries to regulatory asset or liability accounts for regulated companies, and will be reflected as income or loss for non-regulated companies. Also, pursuant to the direction of the MoPSC, Laclede Gas' provision for income tax expense for financial reporting purposes reflects an open-ended method of tax depreciation. This method is consistent with the regulatory treatment prescribed by the MoPSC to depreciate the Utility's assets.

For further discussion of significant accounting policies, see the Notes to the Consolidated Financial Statements included in the Company's Form 10-K for the fiscal year ended September 30, 2004.

Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs." This Statement amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The provisions of this statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect adoption of this statement to have a material effect on the financial position or results of operations of the Company.

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In December 2004, the FASB issued SFAS No. 123 (revised 2004) (123(R)), "Accounting for Stock-Based Compensation." This Statement is a revision to SFAS No. 123, and establishes standards for the accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. The Company currently accounts for its Equity Incentive Plan in accordance with APB Opinion No. 25, and provides pro forma disclosures in the Notes to Consolidated Financial Statements regarding the effect on net income and earnings as if compensation expense had been determined based on the fair value recognition provisions of SFAS No. 123. SFAS No. 123(R) was to be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, in April 2005, the Securities and Exchange Commission (SEC) amended the compliance date to allow companies to implement SFAS No. 123(R) at the beginning of their next fiscal year. The Company is currently evaluating the provisions of this Statement, which it plans to adopt effective October 1, 2005.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets." This Statement is an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this Statement will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect adoption of this Statement to have a material effect on the financial position or results of operations of the Company.

In March 2005, the FASB issued Interpretation No. 47 (FIN 47), "Accounting for Conditional Asset Retirement Obligations." FIN 47 clarifies the manner in which uncertainties concerning the timing and method of settlement of an asset retirement obligation, as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," should be accounted for. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company is currently evaluating the provisions of this Interpretation.

FINANCIAL CONDITION

Credit Ratings

As of March 31, 2005, credit ratings for outstanding securities for Laclede Group and Laclede Gas issues were as follows:

Type of Facility                            S&P            Moody's          Fitch
--------------------------------------------------------------------------------------------
Laclede Group Corporate Rating              A
Laclede Gas First Mortgage Bonds            A              A3               A+
Laclede Gas Commercial Paper                A-1            P-2
Trust Preferred Securities                  A-             Baa3             BBB+

The Company has investment grade ratings, and believes that it will have adequate access to the financial markets to meet its capital requirements. These ratings remain subject to review and change by the rating agencies.

Cash Flows

The Company's short-term borrowing requirements typically peak during colder months when Laclede Gas borrows money to cover the gap between when it purchases its natural gas and when its customers pay for that gas. Changes in the wholesale cost of natural gas, variations in the timing of collections of gas cost under the Utility's PGA Clause, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year, and can cause significant variations in the Utility's cash provided by or used in operating activities.

Net cash provided by operating activities for the six months ended March 31, 2005 was $54.5 million, a $26.2 million decrease, compared with the same period last year. The decrease in cash provided by operating activities was

27

primarily attributable to the net effects of changes in wholesale gas prices, increased sales volumes by LER and higher Utility off-system sales on accounts receivable, accounts payable, and deferred purchased gas costs.

Net cash used in investing activities for the six months ended March 31, 2005 was $28.6 million compared with $26.0 million for the six months ended March 31, 2004. Cash used in investing activities primarily reflected Utility construction expenditures in both periods.

Net cash used in financing activities was $21.9 million for the six months ended March 31, 2005 compared with $36.8 million for the six months ended March 31, 2004. The variation primarily reflects the issuance of additional short-term debt this year, partially offset by the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Liquidity and Capital Resources

As indicated above, the Company's short-term borrowing requirements typically peak during colder months. These short-term cash requirements have traditionally been met through the sale of commercial paper supported by lines of credit with banks.

Laclede Gas currently has lines of credit in place of $300 million, with $15 million expiring in April 2006 and $285 million expiring in September 2009. Short-term commercial paper borrowings outstanding at March 31, 2005 were $86.2 million at a weighted average interest rate of 2.8% per annum. Based on short-term borrowings at March 31, 2005, a change in interest rates of 100 basis points would increase or decrease Laclede Gas' pre-tax earnings and cash flows by approximately $.9 million on an annual basis.

Most of Laclede Gas' lines of credit include covenants limiting total debt, including short-term debt, to no more than 70% of total capitalization and requiring earnings before interest, taxes, depreciation and amortization (EBITDA) for a trailing twelve-month period to be at least 2.25 times interest expense. On March 31, 2005, total debt was 54% of total capitalization. For the twelve-months ending March 31, 2005, EBITDA was 3.4 times interest expense.

Laclede Gas has on file a shelf registration on Form S-3. Of the $350 million of securities originally registered under this Form S-3, $120 million of debt securities remained registered and unissued as of March 31, 2005. The original MoPSC authorization for issuing securities registered on this Form S-3 expired in September 2003. In response to an application filed by the Utility, the MoPSC extended this authorization to issue debt and equity securities and receive capital contributions through October 31, 2006. The remaining MoPSC authorization is $64.4 million, reflecting capital contributions that have been made by Laclede Group to Laclede Gas under this authority through March 2005. The amount, timing and type of additional financing to be issued under this shelf registration will depend on cash requirements and market conditions.

In April 2004, Laclede Gas issued $50 million principal amount of First Mortgage Bonds, 5 1/2% Series due May 1, 2019 and $100 million principal amount of First Mortgage Bonds, 6% Series, due May 1, 2034. The net proceeds of approximately $147.9 million from this issuance were used to repay short-term debt and to call at par the $50 million principal amount of 6 5/8% Series First Mortgage Bonds in June 2004. The proceeds were also used to pay at maturity $25 million principal amount of 8 1/2% First Mortgage Bonds in November 2004. At March 31, 2005, Laclede Gas had fixed-rate long-term debt totaling $335 million. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if Laclede Gas were to reacquire any of these issues in the open market prior to maturity.

Laclede Group has on file a shelf registration on Form S-3, which allows for the issuance of equity securities, other than preferred stock, and debt securities. Of the $500 million of securities originally registered under this Form S-3, $362.4 million remain registered and unissued as of March 31, 2005. Laclede Group issued 1.725 million shares of common stock in May 2004 under this registration. The net proceeds of approximately $44.7 million from this sale were used to make a capital contribution to Laclede Gas. Laclede Gas used the contribution to reduce short-term borrowings and for general corporate purposes. The amount, timing and type of additional financing to be issued under this shelf registration will depend on cash requirements and market conditions.

Short-term cash requirements outside of Laclede Gas have generally been met with internally-generated funds. However, Laclede Group has a $20 million working capital line of credit obtained from U.S. Bank National Association, expiring in June 2005, to meet the short-term liquidity needs of its subsidiaries. This line of credit has a

28

covenant limiting the total debt of Laclede Gas Company to no more than 70% of the Utility's total capitalization (as noted above, this ratio stood at 54% on March 31, 2005). This line has been used to provide letters of credit of $1.5 million on behalf of SM&P, which have not been drawn, and to provide for seasonal funding needs of the various subsidiaries from time to time. There were no borrowings under this line in the quarter ending March 31, 2005.

SM&P has several operating leases, the aggregate annual cost of which is approximately $6 million, consisting primarily of 12-month operating leases, with renewal options, for vehicles used in its business. Laclede Group has parental guarantees of certain of those vehicle leases and anticipates that the maximum guarantees, including renewals and new leases, will not exceed $20 million. No amounts have been recorded for these guarantees in the financial statements.

Laclede Group had guarantees totaling $11 million for performance and payment of certain wholesale gas supply purchases by LER, as of March 31, 2005.

Utility construction expenditures were $25.6 million for the six months ended March 31, 2005, compared with $24.7 million for the same period last year. Non-utility construction expenditures were $2.8 million for the six months ended March 31, 2005, compared with $0.4 million for the same period last year.

Consolidated capitalization at March 31, 2005, excluding current obligations of preferred stock, consisted of 50.1% Laclede Group common stock equity, 0.1% Laclede Gas preferred stock equity, 6.1% long-term debt to unconsolidated affiliate trust and 43.7% Laclede Gas long-term debt.

It is management's view that the Company has adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements.

The seasonal nature of Laclede Gas' sales affects the comparison of certain balance sheet items at March 31, 2005 and at September 30, 2004, such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable, Accounts Payable, Regulatory Assets and Liabilities, and Delayed and Advance Customer Billings. The Consolidated Balance Sheet at March 31, 2004 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

Contractual Obligations

As of March 31, 2005, Laclede Group had contractual obligations with payments due as summarized below (in millions):

                                                                      Payments due by period
                                                    ------------------------------------------------------------
                                                       Remaining        Fiscal       Fiscal      Fiscal Years
                                                      Fiscal Year       Years        Years         2010 and
      Contractual Obligations             Total           2005        2006-2007    2008-2009      thereafter
----------------------------------------------------------------------------------------------------------------
Long-Term Debt (a)                        $  837.7          $ 13.1       $ 88.9       $ 80.9             $654.8
Capital Leases                                   -               -            -            -                  -
Operating Leases (b)                          18.6             5.1          7.1          4.0                2.4
Purchase Obligations - Natural Gas (c)       433.9           282.4        138.3          6.9                6.3
Purchase Obligations - Other (d)             130.0             4.1         16.3         18.4               91.2
Other Long-Term Liabilities                      -               -            -            -                  -
                                       -------------------------------------------------------------------------
Total  (e)                                $1,420.2          $304.7       $250.6       $110.2             $754.7
                                       =========================================================================

(a)      Long-term debt obligations reflect principal maturities and
         interest payments.
(b)      Operating lease obligations are primarily for office space,
         vehicles, and power operated equipment in the gas distribution and
         non-regulated services segments. Additional payments will be
         incurred if renewal options are exercised under the provisions of
         certain agreements.
(c)      These purchase obligations represent the minimum payments required
         under existing natural gas transportation and storage contracts and
         natural gas supply agreements in the utility gas distribution and
         non-regulated gas marketing segments. These amounts reflect fixed
         obligations as well as obligations to purchase natural gas at
         future market prices, calculated using March 31, 2005 NYMEX futures
         prices. Laclede Gas recovers the costs related to its purchases,
         transportation, and storage of natural gas through the operation of
         its Purchased Gas Adjustment Clause, subject to prudence review;
         however, variations in the timing of collections of gas costs from
         customers affect short-term cash requirements. Additional
         contractual commitments may be entered into during the heating
         season.

                                     29

(d)      These purchase obligations reflect miscellaneous agreements for the
         purchase of materials and the procurement of services necessary for
         normal operations.
(e)      Commitments related to pension and postretirement benefit plans
         have been excluded from the table above. The Company does not
         expect to make any contributions to its qualified, trusteed pension
         plans in fiscal 2005. It anticipates Laclede Gas will make a $0.1
         million contribution relative to its non-qualified pension plans
         during the remainder of fiscal 2005. With regard to the
         postretirement benefits, the Company anticipates Laclede Gas will
         contribute $3.8 million to the qualified trusts and $0.2 million
         directly to participants from Laclede Gas' funds during the rest of
         fiscal 2005. For further discussion of the Company's pension and
         postretirement benefit plans, refer to Note 3, Pensions and Other
         PostRetirement Benefits, of the Notes to Consolidated Financial
         Statements.

Market Risk

Laclede Gas adopted a risk management policy that provides for the purchase of natural gas financial instruments with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. Costs and cost reductions, including carrying costs, associated with the Utility's use of natural gas financial instruments are allowed to be passed on to the Utility's customers through the operation of its Purchased Gas Adjustment Clause, through which the MoPSC allows the Utility to recover gas supply costs. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these financial instruments. At March 31, 2005, the Utility held approximately 5.9 million MMBtu of futures contracts at an average price of $7.68 per MMBtu. Additionally, approximately 9.5 million MMBtu of other price risk mitigation was in place through the use of option-based strategies. These positions have various expiration dates, the longest of which extends through March 2006.

In the course of its business, Laclede Group's non-regulated marketing affiliate, Laclede Energy Resources, Inc. (LER), enters into fixed price commitments associated with the purchase or sale of natural gas. LER manages the price risk associated with these commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of exchange-traded futures contracts to lock in margins. At March 31, 2005, LER's open positions were not material to Laclede Group's financial position or results of operations.

Environmental Matters

Laclede Gas owns and operates natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company's or Laclede Gas' financial position and results of operations. As environmental laws, regulations, and their interpretations evolve, however, Laclede Gas may be required to incur additional costs.

With regard to a former manufactured gas plant site located in Shrewsbury, Missouri, Laclede Gas and state and federal environmental regulators have agreed upon certain remedial actions and those actions are essentially complete. Laclede Gas currently estimates the overall costs of these actions will be approximately $2.4 million. As of March 31, 2005, Laclede Gas has paid or reserved for these actions. If regulators require additional remedial actions or assert additional claims, Laclede Gas will incur additional costs.

Laclede Gas enrolled a second former manufactured gas plant site into the Missouri Voluntary Cleanup Program (VCP). The VCP provides opportunities to minimize the scope and cost of site cleanup while maximizing possibilities for site development. This site is located in, and is presently owned by, the City of St. Louis, Missouri. Laclede Gas continues to evaluate options concerning this site, including, but not limited to, the submission of its own Remedial Action Plan (RAP) to the VCP. Laclede Gas currently estimates that the cost of site investigations, agency oversight and related legal and engineering consulting may be approximately $650,000. Currently, Laclede Gas has paid or reserved for these actions. Laclede Gas has requested that other former site owners and operators share in these costs and one party has agreed to participate and has reimbursed Laclede Gas to date for $190,000. Laclede Gas anticipates additional reimbursement from this party. Laclede Gas plans to seek proportionate reimbursement of all costs relative to this site from other potentially responsible parties to the extent practicable.

30

Laclede Gas has been advised that a third former manufactured gas plant site may require remediation. Laclede Gas does not own, and for many years has not owned, this site. At this time, it is not known whether Laclede Gas will incur any costs in connection with environmental investigations of or remediation at the site, and if it does incur any such costs, what the amount of those costs would be.

Costs incurred are charged to expense or capitalized in accordance with generally accepted accounting principles. A predetermined level of expense is recovered through Laclede Gas' rates. While the scope of future costs relative to the actions Laclede Gas has taken at the Shrewsbury site pursuant to the current agreement with state and federal regulators may not be significant, the scope of costs relative to future remedial actions regulators may require at the Shrewsbury site and to the other sites is unknown and may be material.

Laclede Gas has notified its insurers of past and future claims associated with investigation of and remediation at these three manufactured gas plant sites. In response, the majority of insurers have reserved their rights. While some of the insurers have denied coverage, Laclede Gas continues to pursue claims against them. With regard to costs incurred under current agreement regarding the Shrewsbury site, denials of coverage are not expected to have a material impact on the financial position and results of operations of Laclede Gas or the Company. With regard to the other two sites and with regard to any future actions that might be required at the Shrewsbury site, since the scope of costs are unknown and may be significant, denials of coverage may have a material impact on the financial position and results of operations of Laclede Gas or the Company. Such costs, if incurred, have typically been subject to recovery in rates.

OFF-BALANCE SHEET ARRANGEMENTS

Laclede Group has no off-balance sheet arrangements.

Laclede Gas Company's Management's Discussion and Analysis of Financial Condition is included in Exhibit 99.1 of this report.

31

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For this discussion, see the "Market Risk" subsection in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 30 of this report.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting that occurred during our second fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of environmental matters and legal proceedings, see Note 8 to the Consolidated Financial Statements on page 16. For a description of SM&P's employment-related litigation, see Note 8 to the Consolidated Financial Statements on page 17. For a description of pending regulatory matters of Laclede Gas, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters, page 24 of this report.

Laclede Group and its subsidiaries are involved in other litigation, claims and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2005, the Board of Directors of Laclede Gas desired to sell shares to its sole shareholder, Laclede Group, at a price per share equal to book value. However, Laclede Gas is prohibited from issuing fractional shares, so the Board first authorized a stock dividend of ninety-nine shares of its common stock, par value $1.00 per share, on each outstanding share of its common stock to be paid on January 21, 2005 to increase its outstanding shares from 100 to 10,000. The retroactive effect of this stock dividend has been presented in the Balance Sheet. As such, $9,900 was transferred to common stock and paid-in capital from retained earnings, representing the aggregate par value of the shares issued under the stock dividend. All references to the number of shares have been restated from 100 shares to 10,000 shares to give retroactive effect to the stock dividend for all periods presented.

The Board also approved, subsequent to the stock dividend, the sale of 31 shares of Laclede Gas common stock to Laclede Group at a price per share equal to the book value at December 31, 2004, as adjusted for the effect of the stock dividend described above. The proceeds from the sale, totaling approximately $1.1 million, were used to reduce short-term borrowings. Exemption from registration was claimed under Section 4(2) of the Securities Act of 1933.

Item 4. Submission of Matters to a Vote of Security Holders:

The annual meeting of shareholders of The Laclede Group was held on January 27, 2005, for the purpose of electing three directors to the board of directors and ratifying the appointment of independent auditors. Management's three nominees for directors listed in the proxy statement were unopposed and were elected upon the following votes:

DIRECTOR NOMINEE              FOR               WITHHELD
----------------              ----              --------
Edward L. Glotzbach        17,293,859           234,080
W. Stephen Maritz          17,298,940           228,999
John P. Stupp, Jr.         17,319,551           208,388

The proposal to ratify the appointment of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, to audit the accounts of the Company for the fiscal year ending September 30, 2005 was passed upon the following vote:

    FOR             AGAINST          ABSTAIN
    ---             -------          -------
17,310,919          127,241          89,779

Item 6. Exhibits

(a) See Exhibit Index

33

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

The Laclede Group, Inc.

                                        By: /s/ Barry C. Cooper
                                           --------------------------
Dated:  April 26, 2005                     Barry C. Cooper
        ---------------------              Chief Financial Officer
                                           (Authorized Signatory and
                                           Chief Financial Officer)

34

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

Laclede Gas Company

                                        By: /s/ Barry C. Cooper
                                           --------------------------
Dated:  April 26, 2005                     Barry C. Cooper
        ---------------------              Chief Financial Officer
                                           (Authorized Signatory and
                                           Chief Financial Officer)

35

INDEX TO EXHIBITS

Exhibit
  No.
-------

10.1     -   Automated Meter Reading Services Agreement executed March 11,
             2005. Confidential portions of this exhibit have been omitted
             and filed separately with the SEC pursuant to a request for
             confidential treatment.

12       -   Ratio of Earnings to Fixed Charges.

31       -   Certificates under Rule 13a-14(a) of the CEO and CFO of The
             Laclede Group, Inc. and Laclede Gas Company.

32       -   Section 1350 Certifications under Rule 13a-14(b) of the CEO and
             CFO of The Laclede Group, Inc. and Laclede Gas Company.

99.1     -   Laclede Gas Company - Management's Discussion and Analysis of
             Financial Condition and Results of Operations, Financial
             Statements and Notes to Financial Statements.

36

Exhibit 10.1

AUTOMATED METER READING SERVICES AGREEMENT

This Automated Meter Reading Services Agreement ("Agreement") is entered into this 11th day of March, 2005, and is by and between Cellnet Technology, Inc., a Delaware corporation ("Cellnet"), and Laclede Gas Company, a Missouri corporation ("Laclede"). All capitalized terms not otherwise defined herein have the respective meaning set forth in Appendix A hereto.

RECITALS

WHEREAS, Laclede desires to introduce new automated gas meter reading, data acquisition and data management services to its service area that efficiently provide accurate information for billing, distribution, operations, customer care and customer marketing purposes;

WHEREAS, Laclede has selected a radio frequency fixed network application as the system that can best provide basic services while permitting maximum flexibility of information for expansion into other functional uses;

WHEREAS, Laclede desires Cellnet to establish, where it has not already been established, and maintain a Fixed Network consisting of MIUs installed on Laclede Gas Meters, MCC sites on towers and/or other appropriate structures, the network operations center ("NOC"), the communication link between the MCCs and the NOC, all other equipment necessary for Cellnet to provide automated gas meter reading, data acquisition and data management services to Laclede and the operation, care and maintenance of all installed equipment;

WHEREAS, Laclede desires for Cellnet to provide all of the equipment and labor and take all of the actions necessary to perform automated reads of Laclede Gas Meters within St. Louis City, St. Louis County and St. Charles County and selected portions of other counties in Laclede's service area as set forth on Exhibit 1 (collectively, "Fixed Network Area") and to make available such readings to Laclede (i.e., Laclede desires to acquire from Cellnet turnkey meter readings) and for Cellnet to provide data acquisition and management services; and

WHEREAS, Cellnet has the expertise, experience and skill to provide such turnkey automated meter reading, data acquisition and data management services and desires to provide the same to Laclede on the terms and conditions set forth herein.

NOW, THEREFORE, the Parties agree as follows:

ARTICLE 1

INITIAL FIXED NETWORK DEPLOYMENT PHASE

1.1 Overview. Immediately upon the execution of this Agreement, the Parties shall commence to integrate their respective systems in accordance with this Article (the "Initial Fixed Network Deployment Phase") and shall test their respective systems' ability to access, exchange and deliver MIU installation data and Laclede Gas Data. The Initial Fixed Network Deployment Phase will be conducted in accordance with the

project timeline attached to this Agreement as Exhibit 2. The Parties shall complete the Initial Fixed Network Deployment Phase within six (6) months of the Effective Date; provided, however, that without limiting a Party's other remedies hereunder, if a Party suffers a delay in meeting any of its objectives on the project timeline, the deadlines thereon for the other Party shall be moved back by an equivalent number of days. To the extent that any of the obligations or rights of either Party set forth in Article 1 do not specifically pertain to only the Initial Fixed Network Deployment Phase but are necessary for the performance of the rest of this Agreement, then such obligations and rights shall continue throughout the Term.

1.2 Laclede's Responsibilities.

(a) Sample Meter Population. Laclede has previously provided to Cellnet an initial data file that details all Laclede Gas Data, including addresses, Laclede's projected monthly meter reading schedule and all other pertinent Laclede customer information for approximately 500 meters ("Test Meters") on which Cellnet has installed MIUs.

(b) Interface Implementation. Attached hereto as Exhibit 3 are Cellnet's specifications for its standard interface (the "Standard Interface Specifications"). Laclede shall, in accordance with the time period set forth in Exhibit 2, develop, at its own expense, a complete, integration tested and fully operational interface for the Laclede systems impacted by this Agreement (the "Laclede Interface"). The Laclede Interface must have the capacity to (i) collect the MIU installation database and the Laclede Gas Data from Cellnet, (ii) transmit the post MIU installation and any ongoing Laclede database maintenance files to Cellnet, and (iii) collect the Fixed Network Data posted by Cellnet on the FTP Server.

(c) Internal Computer Hardware and Software. Laclede is responsible for, and shall establish and maintain at Laclede's expense, all of its internal computer software, hardware, systems, and any and all telecommunication connections and charges (including hardware fees, set-up, and on-going fees) required to collect the Fixed Network Data from the FTP Server and then store, query and manipulate such data.

(d) Additional Services. In addition to the services described in Section 1.3(b) below, which shall be provided at Cellnet's expense, Laclede may request, and Cellnet, in its discretion, may provide, services to assist Laclede with system integration and other programming issues from time to time during the Term. Such services shall be provided to Laclede at rates to be agreed upon by the Parties.

1.3 Cellnet's Obligations.

(a) Fixed Network and Data Management Network. During the Initial Fixed Network Deployment Phase, Cellnet will conduct a propagation study of the portion of Laclede's service area to be covered by the Fixed Network Area.

2

Based on the results of the study, Cellnet will provide, install and maintain all equipment, supplies and services necessary to establish and operate the Fixed Network that collects automated daily meter reads and provides meter readings in accordance with this Agreement. Cellnet shall provide, and install new, or enable existing, Fixed Network infrastructure required to support the Fixed Network Area, including, without limitation, software, hardware and peripherals for the NOC. Additionally, Cellnet shall establish Laclede as a customer in Cellnet's data management network.

(b) Interface Implementation Support. During the Initial Fixed Network Deployment Phase, Cellnet, at no additional charge to Laclede, shall consult with and advise Laclede in its development and testing of the Laclede Interface. Cellnet shall have no obligation to write software code in connection with such consulting and advice; provided, however, that additional services shall be provided in accordance with Section 1.2(d) above.

(c) Provision of MIUs and Installation Resources. Cellnet shall provide the resources necessary for installation of the MIUs, including the required MIUs and the employees or subcontractors necessary to install the MIUs (each a "MIU Installer"), as well as a competent project manager for the Initial Fixed Network Deployment Phase. All of the MIU Installers shall be qualified and trained as described in
Section 2.1(d)(ii).

(d) Configure the NOC. Cellnet shall establish and configure the necessary hardware, NOC Software and Meter Database to provide the AMR Services.

(e) Automated Meter Readings. Upon completion of the installation of the MIUs on the Laclede Gas Meters and Laclede's performance of its responsibilities under
Section 1.2, Cellnet shall perform and transmit to Laclede daily automated meter reads in hundreds of cubic feet in accordance with Article 2.

(f) Handheld Devices. During the Initial Fixed Network Deployment Phase, Cellnet shall provide Laclede two (2) handheld units for reading and programming MIUs and train Laclede personnel on the proper use of these units.

(g) Plant Tour. During the Initial Fixed Network Deployment Phase, at Laclede's request, Cellnet shall schedule a trip for Laclede to visit Cellnet's manufacturing facilities, Cellnet's corporate headquarters and/or Cellnet's NOC facilities, at Laclede's expense. Within fifteen (15) days after completion of any of the above trips, Laclede may notify Cellnet in writing that Laclede has concerns regarding any of the following characteristics of any of such Cellnet facilities:

(i) Work environment;
(ii) Safety;
(iii) Degree and sophistication of automation; and
(iv) Quality control.

3

Cellnet shall investigate any such concerns, and (1) explain why the issue is not reasonably likely, in Cellnet's reasonable discretion, to have a material adverse impact on the AMR Services, or (2) provide a reasonable plan and timeline to address these concerns or issues in a manner reasonably acceptable to Parties.

1.4 Initial Fixed Network Deployment Phase Testing.

(a) Comparison of Reads. During the Initial Fixed Network Deployment Phase, Laclede will obtain and compare the manual reads from the Test Meters to the automated meter reads provided by Cellnet pursuant to Section 1.3(e) above. Any deviations between the manual and automated readings will be investigated by both Parties in good faith and resolved within two (2) Business Days.

(b) Substitute Meters. Any residence with access issues, meter problems or other circumstances that interfere with the Initial Fixed Network Deployment Phase will be dealt with on a case-by-case basis. An alternate address within the coverage area described in Section 1.2(a) may be substituted for the remainder of the Initial Fixed Network Deployment Phase, or, in the alternative, the MIU will be subtracted from the sample population, at Laclede's discretion.

(c) Network Coverage. Cellnet will be responsible for Fixed Network infrastructure coverage issues and will use commercially reasonable efforts to resolve any Fixed Network infrastructure coverage issues promptly, as necessary, to perform the AMR Services.

1.5 Initial Fixed Network Deployment Phase Performance Standards.

(a) Summary of Readings. During the Initial Fixed Network Deployment Phase, Cellnet shall provide Laclede: (i) daily automated meter reads in hundreds of cubic feet; and (ii) a monthly summary of MIU performance, by address. The individual meter readings will be maintained by Cellnet daily and delivered to Laclede on the next Business Day. Daily and monthly overall performance indicators should be included in the summary.

(b) Areas of Emphasis. Close scrutiny will be given to Cellnet's performance in the following areas:

(i) Project Management;
(ii) Integration Support Services
(iii) Data Acquisition and Delivery;
(iv) Operations and Maintenance;
(v) Customer Service;
(vi) Technology; and
(vii) Data Center Operations.

At any time during the Initial Fixed Network Deployment Phase, Laclede may notify Cellnet in writing that Laclede has concerns regarding any of the foregoing areas, and

4

Cellnet shall investigate any such concerns, and (1) explain why the concerns are not reasonably likely, in Cellnet's reasonable discretion, to have a material adverse impact on the AMR Services, or (2) provide a reasonable plan and timeline to address these concerns in a manner reasonably acceptable to the Parties.

(c) MIU Validation. During the Initial Fixed Network Deployment Phase, the Test Meters will be automatically read every day to determine accuracy, network deliverability, and ability to transfer data between the Parties' systems based on the Standard Interface Specifications. During the Initial Fixed Network Deployment Phase, the Parties will work together to validate and correct promptly any errors in the following areas:

(i) Fixed Network reading does not correlate with visual index reading. This deviation will take into account rounding errors and time differences. Cellnet must correct programming errors on a MIU.

(ii) Fixed Network reading was not available through the network during the scheduled reading period. This failure takes into account MIUs that fail to communicate to the Fixed Network due to device problems.

(iii) MIU is found to be in an alarm state and the appropriate flag was not returned.

(iv) MIU is found to be sending inconsistent readings when other MIUs in the area are responding correctly.

(v) The meter installation data and the Laclede Gas Data transferred between Laclede and Cellnet shall be validated and consistent with the Standard Interface Specifications for use within the respective Parties' systems. In the event that the data is not in the correct format, the non-complying Party shall make the correction at its own expense.

ARTICLE 2
OBLIGATIONS OF THE PARTIES

2.1 Establishment and Installation of the AMR Services. The AMR Services to be provided to Laclede by Cellnet shall include data acquisition, data management, data presentation and access, implementation, implementation expertise, provision and installation of MIUs and operation of the Fixed Network and the NOC. Cellnet shall read Activated Meters in the Fixed Network Area during the Term of this Agreement in accordance with this Article 2.

(a) Establishment of the Fixed Network. Cellnet shall establish a Fixed Network that will:

(i) collect automated meter readings from Activated Meters within the Fixed Network Area; and

5

(ii) make available to Laclede, via the Cellnet Standard Interface, meter readings.

(b) Components of AMR Services System. The Fixed Network shall include the following components, together with any and all other components and equipment necessary for Cellnet to perform its obligations under this Agreement:

(i) MIUs installed on each Accessible Meter within the Fixed Network Area;

(ii) MCCs to be installed on structures, poles and/or towers;

(iii) The NOC to collect Fixed Network Data;

(iv) The disaster recovery NOC, which is described in
Section 2.2(g), shall be located in a separate facility from the NOC as specified in Section 2.2(g); and

(v) The software to manage the Fixed Network Data.

(c) Installation of the AMR Services System and Components.

(i) AMR Services System. During the Deployment Period, Cellnet shall install, and/or contract with subcontractors for the installation of, the Fixed Network and the various components thereof. Cellnet shall, or cause its subcontractors to, deploy an adequate number of field supervisors at all times to ensure that installers have ready access to supervisors as and when needed to address issues and receive information in a timely manner. The Cellnet program manager and the Laclede AMR program manager will establish introduction meetings and regularly scheduled project review meetings. A pre-installation meeting will be held among Cellnet, the MIU Installer, and Laclede for the purpose of reviewing all matters of mutual concern to ensure that the installation plan will be met.

(ii) MIUs. Cellnet and Laclede will develop and agree

upon the various Routes and schedules for installation of the MIUs on existing Laclede Gas Meters at residences and businesses within the Fixed Network Area. Installers shall work during normal working hours of 8:00 a.m. to 5:30 p.m. Monday through Saturday, which hours shall be adjusted to accommodate extended daylight hours. Additionally, it shall be acceptable for installers to install MIUs outside these hours pursuant to previously made appointments with customers. Cellnet shall not be required to install a MIU on a meter unless the meter can be retrofitted to accept the MIU. The Parties agree that all of the meters listed on Exhibit 5-A can be retrofitted to accept a MIU; provided that access to the meter is not obstructed or the physical condition of the meter is such that it does not prevent such retrofitting without requiring major repair. The

6

Parties shall cooperate in good faith to determine whether the meters listed on Exhibit 5-B can be retrofitted to accept a MIU. Cellnet

will manage all installation functions necessary to establish and maintain a fully functional Fixed Network, which shall include, without limitation, installing the MIUs and successful transmission of automated meter readings or alarms to the NOC indicating that the MIU has been successfully installed on a Laclede Gas Meter. Cellnet shall transfer such data regularly to Laclede. During the Deployment Period, Laclede shall provide to Cellnet Laclede's projected monthly meter reading schedule at least ninety
(90) days in advance of each respective Billing Window. The following steps and procedures will be followed for installation of the MIUs:

(A) Cellnet Appointments. Prior to installation of MIUs on a Route, Laclede will promptly notify the customers on the Route (by flyers, radio or TV announcements or other reasonable means) of the planned installation of MIUs on meters servicing their residence or business. Cellnet or the MIU Installer shall contact the occupants of each affected property to make the necessary appointments and arrangements to install the MIUs. For meters that require entry into the property, the MIU Installer shall attempt to contact the occupant of the property by telephone, letter or door hanger and in person, on six (6) separate occasions (at least two (2) of which occasions must be personal visits to the property) and shall offer the occupant a choice of reasonable appointment times (i.e., specific appointment times or small time windows). The MIU Installer shall time its various attempts to contact an occupant via telephone, letter and in person so as to have the greatest probability of successfully contacting the occupant and installing the MIU. For purposes of clarity, an unanswered telephone call constitutes an attempt.

(B) Laclede Appointments. If the MIU Installer is unable to gain the necessary access to a meter after the six (6) occasions specified in Section 2.1(c)(ii)(A), Cellnet will so advise Laclede in writing as soon as reasonably practicable. After receiving such written advisement, Laclede will attempt to contact the occupant and/or owner of the property and work with Cellnet to arrange an appointment for Cellnet to install a MIU. If the occupant and/or owner miss a scheduled appointment or the meter is not an Accessible Meter for any other reason, Laclede will attempt to once again make contact with the occupant and/or owner and work with Cellnet to reschedule the appointment.

If the MIU Installer is not able to
install a MIU on the second or
subsequent appointment made by Laclede,
then Laclede shall reimburse Cellnet for
its actual direct expenses without
mark-up for the visit, not to exceed
Twenty-Five Dollars ($25.00).

7

(iii) Additional MIUs.

(A) Cellnet shall from time to time during the Term, at no additional cost to Laclede (including, but not limited to, shipping fees and the manufacturers' cost to handle and install a MIU on a meter, which costs will be paid by Cellnet; provided, however, that all such shipping costs and manufacturers' costs shall be actual direct costs without mark-up by Laclede), make MIUs available to the manufacturers supplying meters to Laclede at a time and in a volume and manner that will allow the manufacturers to install the MIUs on the meters during assembly at the manufacturers' facilities. Laclede shall provide Cellnet at least 120 days' prior written notice with regard to what number of, to what manufacturers and when MIUs are to be provided. Cellnet shall throughout the Term provide to the respective manufacturers MIUs for the types of meters listed on Exhibit 5-C. Additionally, Laclede and Cellnet will cooperate with regard to the coordination of meter model changes in an effort to ensure availability of MIUs for various meter models.

(B) During the Deployment Period, Cellnet shall, at no additional charge to Laclede, make MIUs available to Laclede's meter manufacturers in the manner described above in this Section for installation on new meters that Laclede will use to replace certain of the meters within its system that cannot be retrofitted with a MIU.

(C) In addition to the foregoing MIUs, Cellnet shall from time to time, upon the request of Laclede, make available to Laclede MIUs for installation by Laclede on meters that Laclede has removed from customers' premises and is reconditioning in preparation for re-installation at customers' premises. The MIUs described in Subsection (B) above and this Subsection (C) are included in the approximately 650,000 MIUs to be provided by Cellnet during the Deployment Period.

(D) Notwithstanding the foregoing, Cellnet is not required to provide a MIU to a manufacturer or to Laclede directly unless Cellnet has an integrated MIU available for the meter on which the MIU is to be installed. At no additional cost to Laclede, Cellnet and Laclede shall work together in good faith to develop a MIU for the National meters of the types listed on Exhibit 5-B in Laclede's meter population that Cellnet cannot currently retrofit with a MIU.

(E) Cellnet shall provide additional MIUs and reading services to replace units retired and to serve additional customers subject to the terms and provisions of Exhibit 6, which is attached hereto and incorporated herein by reference.

(iv) Existing Remote Device Removal. Many of Laclede's existing meters currently have a remote-type device installed. Prior to any such device

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removal, Laclede shall provide any necessary training to Cellnet regarding device removal, including, without limitation, training regarding handling of wires and cables. After device removal, any attached wires and/or cables shall not be removed, but trimmed back to be unobtrusive. Any existing component on the exterior of the premise shall be left in place. One particular device, the American Meter TRACE unit, is both salvageable and redeployable. The MIU Installer will take reasonable care to return each TRACE device to Laclede in the same state it was in immediately prior to its removal. At Laclede's expense, Laclede will provide the proper containers and their transportation to and from the MIU Installer for packaging the returned devices. Any hazardous material component of the meter or module removed from the field by Cellnet or the MIU Installer during the installation of MIUs shall be deposited in a container provided by Laclede located at such MIU Installer's dock for proper disposal by Laclede.

(v) MCCs. Cellnet shall install any additional MCCs

in the Fixed Network Area and any communications links necessary to obtain automated meter readings from Activated Meters.

(d) Subcontracting, Training and Safety.

(i) Subcontractor's Hiring Processes. Cellnet intends to contract with MIU Installers to install the MIUs. Only qualified personnel, who have received proper training as described below, shall perform the MIU installations/replacements. Cellnet shall develop a Quality Assurance Plan that is reasonably acceptable to Laclede and shall perform, or require subcontractors to perform, all MIU installation activities in accordance with such plan. The Quality Assurance Plan shall be provided by Cellnet to Laclede within thirty
(30) calendar days after the Effective Date and shall include an audit feature that will track the performance of individual installers. Laclede shall have the right to approve the MIU Installer, which approval shall not be unreasonably withheld or delayed. Additionally, subject to applicable law, Laclede shall have the right to disqualify individuals employed or used by an MIU Installer based on observations by Laclede and/or reported customer complaints, interaction with customers or the public in general and/or security or safety violations. If Laclede wishes to disqualify an individual employed or used by such MIU Installer, it shall notify Cellnet and provide reasonable details regarding the grounds for such request. Cellnet shall investigate the request and notify Laclede of its determination promptly, but in all events within five (5) Business Days, during which such individual shall not work on the project.

(ii) Training. Prior to installation of any MIUs, Cellnet shall submit to Laclede for approval a training and certification program for all individuals, including Laclede employees, installing, repairing,

9

maintaining or otherwise working with the MIUs. The training program shall consist of both classroom and field training on the procedures and documentation for the MIU installation. During the Term, Cellnet shall train, or cause the MIU Installer to be trained in all of the technical and procedural aspects of the installation of the MIUs, including the professional and courteous manner in which they shall conduct themselves with regard to Laclede's customers. Only individuals (including Laclede employees) who successfully complete the training program shall install, replace, repair, maintain or otherwise work with the MIUs. An audit program shall be implemented by Cellnet to evaluate fieldwork performed. At a minimum, the training program must address:

(A) Meter safety and personal protective equipment issued to field personnel; (B) Proper procedures for dealing with Laclede's customers in the field;
(C) Meter configurations present in the service territory; (D) Meter reading; (E) Use of handheld work order routing devices; (F) Data to be recorded from each installation; (G) How to handle dog encounters and attacks; (H) Emergency procedures (gas leaks, medical, etc.); and
(I) Recognizing and reporting obvious "theft of service" cases.

(iii) Safety. Cellnet shall submit a Project Health & Safety Plan to Laclede for review and comment to help ensure compliance with all federal and state Occupational Safety and Health Administration (OSHA) requirements. Cellnet shall conduct and/or arrange for the safety training of all MIU Installer's personnel and other subcontractors (if any) utilized by Cellnet under this Agreement. The safety-training courses conducted by Cellnet or any of its subcontractors' safety professionals shall also be made available to Laclede personnel at Cellnet's or Laclede's premises in the Fixed Network Area. All required safety equipment and personal protective equipment (PPE) shall be provided by Cellnet or its subcontractors and maintained in proper working order by the party providing the same. Cellnet shall ensure that all of its employees and subcontractors installing, repairing, maintaining or otherwise working with the Fixed Network, including the MIUs, receive the six (6) hour National Safety Council's Defensive Driving Course (DDC6) or equivalent. Cellnet shall ensure that each of its employees and subcontractors is subject to drug and alcohol testing pursuant to Department of Transportation (DOT) Title 49 CFR

Part 40 - Procedures for Transportation Workplace
Drug and Alcohol Testing Programs.

(e) Uniforms and Logos. All individuals actually installing MIUs on behalf of the MIU Installer shall wear official company uniforms of the MIU Installer and display identification badges that identify the individual as an employee of the

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MIU Installer. Additionally, the vehicles used by such individuals shall display the MIU Installer's name and logo. If Laclede elects to have its name or logo displayed on the MIUs Installer's uniforms, identification badges and/or vehicles, and Cellnet consents to such proposal, such consent not to be unreasonably withheld or delayed, Laclede and Cellnet shall, at Laclede's sole cost and expense, work together to coordinate the same. In all events, the MIU Installer's uniforms, identification badges and vehicles shall not display Laclede's name or logo without Laclede's written consent.

(f) Programming Software. Within thirty (30) days after the Effective Date, Cellnet shall provide to Laclede, at no additional charge, Programming Software for reading and programming MIUs and train Laclede personnel on the proper use of this software. Cellnet shall install and configure the Programming Software for use by Laclede's operations personnel and use commercially reasonable effort to accommodate Laclede-specific configurations.

(g) Timeframe for Installation and Implementation.

(i) Meter Activation. Upon (1) the installation of MIUs on 90% of the Accessible Meters on a Route, (2) for which Cellnet is receiving designation and installation information via the Cellnet Standard Interface, and (3) Cellnet is utilizing the Fixed Network to gather and provide successful readings to Laclede, Cellnet will activate the Fixed Network with regard to this Route and commence electronically reading the meters on the Route. Cellnet will continue to attempt diligently to install MIUs on any Laclede Gas Meters on a Route which are not equipped with a MIU as of the date Cellnet activates the Route. Cellnet shall notify Laclede in advance of the date that the electronic reads will commence for a Route, and Laclede may, at its option, continue to read manually all meters that it then currently reads manually for one (1) full billing cycle after such date in order to verify the readings. For those meters that Laclede is not then currently obtaining manual reads (i.e., meters equipped with a TRACE device), Laclede shall use reasonable effort to obtain a manual reading of such meters for one (1) full billing cycle. If Laclede discovers any discrepancy between the manual reading and the reading rendered by the MIU, Laclede shall notify Cellnet, and Cellnet shall promptly repair, replace or reprogram the MIU if found to be defective upon investigation, and thereafter Cellnet shall manually read the meter or take whatever actions are necessary to verify that the MIU is functioning properly. Laclede's obligation to pay the monthly fee per meter described in
Section 2.3(a) shall commence on the date the electronic reads commence on a Route as described in the first sentence of this section. Cellnet shall provide manual monthly billing reads pursuant to Laclede's projected monthly meter reading schedule on Accessible Meters on an activated Route that are not equipped with a properly functioning MIU commencing the fortieth
(40th) day following the date such Route is

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activated. Cellnet shall not be required to provide manual readings for any meters on which Laclede instructed Cellnet not to install a MIU.

(ii) Entire System. MIUs shall be installed and operational on 99% of Accessible Meters within the Fixed Network Area within twenty-four (24) months after the Effective Date ("Deployment Deadline"). If Cellnet fails to perform its obligations under this Agreement relating to installation of the MIUs, and as a result the 99% threshold is not reached by the Deployment Deadline, then until such time as MIUs are installed and operational on 99% of Accessible Meters less Unavailable Meters within the Fixed Network Area (or this Agreement is terminated, if earlier), Cellnet shall provide monthly manual billing readings pursuant to Laclede's projected monthly meter reading schedule to Laclede on Accessible Meters that are not equipped with a MIU. Notwithstanding the foregoing, if, due solely to the failure of Cellnet to perform its obligations under this Agreement, MIUs are not installed and operational on 99% of Accessible Meters within the Fixed Network Area within six
(6) months after the Deployment Deadline, Cellnet shall be in default under this Agreement, and Laclede may avail itself of the remedies provided in this Agreement for default by Cellnet.

(h) Mandatory Provisions in Cellnet's Leases and/or Financing Documents. Cellnet shall use its commercially reasonable efforts to cause the senior lenders to Cellnet who are directly financing the build out of the Fixed Network, to include in the financing agreements therefor provisions providing that upon the occurrence, and during the continuation, of any default of Cellnet under such financing agreements, if the lenders under that financing agreement determine in their sole discretion that such action will not impair the Lender Group's ability to enforce the obligations of Cellnet under such financing agreements or realize upon the security collateral of the lenders under such financing agreements, such lenders shall engage in good faith negotiations with Laclede to permit Cellnet or a third party selected by the Lender Group to continue to perform Cellnet's obligations under this Agreement; provided, however, that the foregoing shall in no way prohibit such lenders from pursuing any of their rights or remedies under such financing agreements.

(i) St. Louis Office. During the Term, Cellnet shall maintain an office in the St. Louis metropolitan area staffed with a sufficient number of employees or contract employees to fulfill its obligations under this Agreement and a manager who is responsible for servicing Laclede under this Agreement.

2.2 Services to be Provided by Cellnet.

(a) Daily Meter Reads. Cellnet shall provide to Laclede daily automated meter reads in hundreds of cubic feet on Activated Meters.

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The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

(b) Reliability of Daily Consumption Readings. Cellnet shall provide daily automated meter reads in hundreds of cubic feet for at least [**]% of the Activated Meters on an averaged basis over the total number of calendar days of each month and a minimum of [**]% of the Activated Meters for each and every calendar day during any Contract Year during the Term of this Agreement. This reliability rate implies that the required percentage of the meters are read electronically through the Fixed Network.

(c) Reliability of Scheduled Consumption Readings for Monthly Billing. Cellnet shall provide to Laclede monthly meter reads in hundreds of cubic feet on each Activated Meter. These monthly meter readings shall be made available during each Fixed Network Meter's respective monthly Billing Window as established according to Laclede's projected monthly meter reading schedule (as such schedule may be adjusted by Laclede from time to time) at a reliability rate of [**]% of the Activated Meters for each month and a minimum of [**]% of the Activated Meters for each respective billing day within the month. If Cellnet is not able to achieve [**]% of such monthly reads electronically, Cellnet shall achieve the required percentage by providing Laclede manual reads of Activated Meters within the Fixed Network Area; provided that Cellnet shall provide to Laclede each month an electronic list of the meters for which Cellnet was not able to obtain an electronic read through the Fixed Network. Cellnet shall promptly research and, if practicable, correct any MIU that the Fixed Network is not able to read electronically. In the event Laclede changes or adjusts its billing cycle schedule during the Term, Cellnet shall make all changes necessary to accommodate such changes or adjustments within thirty (30) days after receiving written notice of such change or adjustment from Laclede; provided that if such changes or adjustments to a billing cycle occur during the Deployment Period, Laclede shall provide Cellnet 120 days prior written notice of such change or adjustment.

(d) Reliability Penalty.

(i) If Cellnet is not able to achieve the respective required average monthly reliability percentages for daily reads set forth in Section 2.2(b) above for any month during the Term, then Cellnet shall owe to Laclede a penalty (the "Daily Reliability Penalty") equal to [***************] Dollars ($[******]) for each [********] percent ([***]%) or portion thereof that Cellnet is below the applicable threshold. Furthermore, if Cellnet is not able to achieve the required daily minimum percentages set forth in Section 2.2(b) above on any day during the Term, then Cellnet shall owe to Laclede a penalty ("Minimum Daily Reliability Penalty") equal to [************] Dollars ($[*****]) for each [********] percent ([***]%) or portion thereof that Cellnet is below the applicable minimum. For purposes of calculating the Daily Reliability Penalty and the Minimum Daily Reliability Penalty, only Activated Meters on Routes that have been activated as described in Section 2.1(g)(i) above for ninety
(90) days or more shall be considered. Anything herein to the contrary notwithstanding, except for any rights that

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The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

may exist pursuant to Article 11 hereof, Laclede's sole remedy for Cellnet's failure to meet or exceed the foregoing performance metrics is set forth in this Section 2.2(d)(i).

(ii) The daily reliability performance percentages shall be equal to the sum of each day's number of successful automated daily meter readings which Cellnet makes available to Laclede during the calendar month, divided by the sum of each day's number of daily Activated Meters. This reliability rate implies that the required percentage of the meters are read electronically through the Fixed Network.

(iii) Commencing the first calendar month ninety (90) days after the Deployment Deadline, if Cellnet fails to provide to Laclede monthly meter reads in accordance with the reliability percentages described in Section 2.2(c) above, during any month, then Cellnet shall owe to Laclede a penalty (the "Monthly Reliability Penalty") equal to [****************] Dollars ($[******]) for each
[********] percent ([***]%), or portion thereof, by which Cellnet is below such
[**]% threshold. For example, if Cellnet is able to provide reads for only [**]% of the Activated Meters during a month, then the Monthly Reliability Penalty shall equal [***************] Dollars ($[******]). Additionally, Cellnet shall owe to Laclede a penalty ("Minimum Monthly Reliability Penalty") of [************] Dollars ($[*****]) for each [********] percent ([***]%) or portion thereof by which Cellnet is below the [**]% minimum on any billing day. Anything herein to the contrary notwithstanding except for any rights that may exist pursuant to Article 11 hereof, Laclede's sole remedy for Cellnet's failure to meet or exceed the foregoing performance metrics is set forth in this Section 2.2(d)(iii).

(iv) The monthly reliability performance shall be equal to the sum of each day's number of successful monthly meter readings which Cellnet makes available to Laclede during the calendar month, divided by the sum of each day's number of monthly Activated Meters.

(v) The Daily Reliability Penalty, Minimum Daily Reliability Penalty, Monthly Reliability Penalty and Minimum Monthly Reliability Penalty shall be referred to herein collectively as the "Reliability Penalty." Laclede shall have the right to deduct the Reliability Penalty amount from the Fee for each such month during which the daily and/or monthly reliability failures occur, or any subsequent month.

(e) Historical On-Request Meter Reads / Off-Cycle Meter Readings. Cellnet shall provide access to a Cellnet website via the Internet in order to obtain the thirty-five (35) most recent days of usage history information for each Activated Meter. Additionally, Cellnet shall provide Laclede with the ability to access the most recent thirteen (13) months of consumption readings for customer billing history information for each such meter over the Internet.

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(f) Special Conditions Applicable to Certain Laclede Gas Meters. The parties acknowledge that there are approximately 10,000 Laclede Gas Meters within the portion of the Fixed Network Area shown on Exhibit 7 ("MoNat Manual Area Meters") for which Cellnet will not initially be able to obtain reads utilizing the Fixed Network as a result of the absence of the necessary MCCs and other infrastructure. Notwithstanding the foregoing, Cellnet shall install MIUs on the MoNat Manual Area Meters if instructed to do so by Laclede and perform Manual Reads of these meters monthly within their respective Billing Windows. Such readings shall be transmitted to Laclede via the Cellnet Standard Interface. The MIUs installed on the MoNat Manual Area Meters shall be subject to the Monthly Reliability Penalty and Minimum Monthly Reliability Penalty described in Section 2.2(d) of this Agreement, but not the Daily Reliability Penalty and Minimum Daily Reliability Penalty described in Section 2.2(d). Except to the extent specifically provided herein, all of the MIUs installed on MoNat Manual Area Meters shall be subject to all of the other terms and conditions of this Agreement. Cellnet shall endeavor in good faith to install the necessary MCCs and other infrastructure necessary to enable Cellnet to read these MoNat Manual Area Meters through the Fixed Network as soon as is financially practicable.

(g) Disaster Recovery. Cellnet shall maintain a current disaster recovery plan for the primary NOC that at a minimum provides for recovery of all systems necessary to deliver the AMR Services within two (2) days of the declaration by Cellnet of a disaster at the primary NOC. Such plan shall include the activities that establish the AMR Services at a separate disaster recovery NOC facility, including, but not limited to, declaration of a disaster at the primary NOC, mobilization of staff for operation at the disaster recovery NOC, primary vendor notification and acquisition of the necessary computer hardware, retrieval of the tape back up Meter Database from off site, installing and configuring the hardware and NOC Software, recovery of Laclede Data from tape backup, reestablishing telecommunications links for Laclede retrieval of data and system testing. Cellnet shall make this plan available to Laclede within ten (10) days after the Effective Date, and from time to time thereafter upon Laclede's request, together with evidence that Cellnet tests such plan periodically in accordance with industry standards and the results of the most recent such test. Additionally, Cellnet and Laclede shall work together to develop, and revise as necessary, procedures that will apply in the event that a disaster occurs at the primary NOC. A disaster shall be declared at the NOC when an event occurs that results in Cellnet not being able to deliver Fixed Network Data for a period of time exceeding forty-eight (48) hours. Subject to the time requirements set forth in the first sentence of this Section 2.2(g), upon the occurrence of a disaster, Cellnet shall place a priority status on restoration of the AMR Services that is at least equal to, if not higher than, any other Cellnet customer within the Fixed Network Area

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The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

2.3 Obligations of Laclede.

(a) Fees. Except as otherwise specifically provided herein, as

sole consideration for the performance by Cellnet of its obligations under this Agreement, including, without limitation, the performance of the AMR Services, Laclede shall pay to Cellnet [**********************************] ("Per Read Fee") per month during the Term for each Activated Meter on Routes that have been activated pursuant to Section 2.1(g), for each meter that Laclede installs that is already equipped with a MIU, provided Laclede successfully receives a monthly automated Actual Read from Cellnet during the respective Billing Window for each such meter, and for each meter that Laclede receives a manual read from Cellnet (the "Fee"). The Per Read Fee shall consist of the components set forth on Exhibit 8. The number of days in a Billing Window may not be decreased during the Term without the prior written agreement of Cellnet. Except as set forth on Exhibit 8, Laclede shall have no obligation to pay any charge for any Laclede Gas Meter for which Laclede does not receive an automated Actual Read or Cellnet manual read during the respective Billing Window. The Monthly MIU Asset Fee as set forth on Exhibit 8 ("Asset Fee") shall also commence for non-Activated Meters where MIU installation is handled pursuant to Section 2.1(c)(iii) on the earlier of the 120th day after delivery of the assembled meter or MIU to Laclede or the 120th day after passage of title of the assembled meter or MIU to Laclede or its bank or other lender. Laclede may deduct from the Fee prior to payment that amount of any penalty being assessed against Cellnet pursuant to Section 2.2(d) above. The Fee shall be payable via check or electronic transfer at such place designated by Cellnet.

(i) Within five (5) Business Days after the end of each calendar month, Cellnet shall submit to Laclede (directed to the Laclede AMR program manager or such other individual or department specified by Laclede in writing) an invoice specifying the Fee due from Laclede for such calendar month. The invoice shall include (A) the number of automated Actual Reads received via the Fixed Network during such calendar month, (B) the number of Cellnet Manual Reads (categorized by reading method) during such calendar month, (C) the amount due and owing for the meter data provided from the Fixed Network during that month, (D) any reduction for the Reliability Penalty calculated pursuant to Section 2.2(d), and (E) the Asset Fees for such calendar month. The invoice shall include any such other documentation as Laclede may reasonably request.

(ii) Within thirty (30) calendar days after receipt of an invoice submitted by Cellnet in accordance with this Agreement, Laclede shall pay Cellnet the amount invoiced. If Laclede disputes any invoiced amount, Laclede shall so notify Cellnet in writing within fifteen (15) calendar days after receipt of the invoice and give full reasons for the dispute. The Parties shall act in good faith to settle such dispute within five (5) Business Days after Laclede provides such notice of dispute to Cellnet. If the Parties are not able to resolve such dispute prior to the due date of the invoice, then

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The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

Laclede shall be entitled to withhold one-half (1/2) of the disputed sum and shall pay the other one-half (1/2) to Cellnet at the time the undisputed portion of the invoice is due.

(iii) If Laclede disputes any invoiced amount, the provisions of Article 19 shall apply. Following resolution of the dispute: (A) any amount withheld by Laclede and agreed or determined to be payable shall be paid by Laclede within ten
(10) Business Days after such agreement or determination; and (B) any amount paid by Laclede and agreed or determined not to be payable shall be deducted by Laclede from the amount of the monthly invoice next due after such agreement or determination.

(iv) Should Laclede fail to make payment on or before the due date of any sum due and owing (other than any sum which is the subject of a bona fide dispute and any Reliability Penalty), interest on the amount unpaid shall accrue from the date such amount was due until the date of payment at a rate per annum during such period equal to the prime rate set forth in the Wall Street Journal most recently published on the date such payment was due plus one percent (1%). Interest shall also accrue at such rate on the amount withheld pursuant to Section 2.3(a)(ii) (or paid by Laclede pending resolution of the dispute) until the time of payment if it is ultimately determined that such amount was due and payable to Cellnet (or, in the case of payment of an amount pursuant to Section 2.3(a)(ii) which was not ultimately payable to Cellnet, refund of such amount to Laclede).

(b) Minimum Per Read Fee. The pricing in this Agreement is predicated upon a minimum installed base of [*******] MIUs. In the event that [*******] MIUs are not installed within twenty-four (24) months after the Effective Date, despite Cellnet's good faith efforts and compliance in all material respects with its obligations under this Agreement, then, from and after such twenty-four (24) month period, Cellnet shall have the right to invoice Laclede, and Laclede shall pay, monthly, in addition to the Fee, an amount equal to the Per Read Fee multiplied by the difference between [*******] and the actual number of MIUs that are installed on Laclede Gas Meters as of the last day of the then current billing period. As soon as more than [*******] MIUs have been installed on Laclede Gas Meters, Laclede shall no longer owe such additional amount to Cellnet.

(c) Access to Premises. Laclede hereby grants to Cellnet, its employees, agents and subcontractors the right of reasonable access to any Laclede Gas Meter, Fixed Network Meter and any other relevant assets and premises owned by it or in its control where such access is necessary in order for Cellnet to perform the AMR Services. Laclede shall, at its own expense, take all reasonable steps to obtain, in favor of Cellnet, its employees, agents and subcontractors all rights of reasonable access to all premises that are reasonably required to enable them to perform the AMR Services and other obligations under this Agreement. Cellnet shall not be in default under this Agreement if it is prevented from performing due to its

17

inability to access a meter or premises; provided Cellnet or the MIU Installer has attempted to gain access to the meter on six (6) separate occasions as more specifically described in Section 2.1(c)(ii)(A) hereof. Nothing herein shall prohibit Laclede from establishing reasonable restrictions on such access and rendering of services.

(d) Use of Laclede Facilities. Laclede will allow Cellnet the use of Laclede buildings, towers, land, transmission and distribution system locations for the positioning of the MCCs. Cellnet and Laclede shall jointly identify the relevant sites. Notwithstanding the foregoing, Laclede has the right to refuse the use of individual sites or to impose reasonable restrictions on Cellnet entry to such sites. Cellnet shall not compensate Laclede for the use of its property as described above; provided, that Cellnet shall reimburse Laclede for out-of-pocket expenses incurred by Laclede due to Cellnet's use of such properties.

(e) Multiple Index Large Industrial and Commercial Meters. If the multiple index meters used by Laclede require the development of a special interface in order to be read automatically, Cellnet and Laclede shall cooperate with each other with regard to Cellnet's development of a proposed price for the automated reading of these meters where appropriate.

(f) Installation of Additional MIUs. At Laclede's request, Cellnet shall install additional MIUs after the completion of the Deployment Period at a fee to be agreed upon by the Parties.

(g) Laclede Gas Data File. Laclede will prior to completion of the Initial Fixed Network Deployment Phase provide to Cellnet a data file that details all Laclede Gas Data, including addresses, the reading schedule and all other pertinent Laclede customer information for all Laclede Gas Meters within the Fixed Network Area. Laclede will update this file and furnish it to Cellnet as additional Laclede Gas Meters are added within the Fixed Network Area. Cellnet shall not be in default under this Agreement if it is prevented from performing its obligations hereunder to the extent caused by an error contained in any data file, including files containing Laclede Gas Data, provided to Cellnet by Laclede.

(h) New Laclede Gas Meters. From time to time during the Term, Laclede may replace Activated Meters with new Laclede Gas Meters or install new Laclede Gas Meters, each of which already has an installed MIU, in the Fixed Network Area. In the event that Laclede replaces any Activated Meter or installs a new Laclede Gas Meter, it must promptly (i) provide Cellnet with the designation and installation information of the removed Activated Meter and/or the designation and installation information of the new Laclede Gas Meter, electronically via the Cellnet Standard Interface; and (ii) update the data file that details all Laclede Gas Data, as more specifically described in Section 2.3(g). A newly installed Laclede Gas Meter shall not be deemed to be an Activated Meter until Cellnet receives (a) a successful meter reading; (b) the designation and installation information; and (c) the Laclede Gas Data. Laclede shall bear all costs related to the removal

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of any Activated Meters and the installation of all such newly installed Laclede Gas Meters. Under no circumstance shall Cellnet be responsible or have any liability related to (x) Laclede's failure to properly remove any Activated Meter, (y) Laclede's failure to properly install a new Laclede Gas Meter, or (z) Laclede's failure to provide Cellnet with accurate Laclede Gas Data or information related to the new Laclede Gas Meter.

2.4 Systems Integration. Cellnet and Laclede shall each be responsible for ensuring that its own respective systems perform in the manner that such Party has agreed its systems will perform in the specifications for the AMR Services and the implementation of the Standard Interface Specifications.

2.5 Interface Changes or New Interface Implementation. The Parties are not obligated to change or implement new interfaces once the Initial Fixed Network Deployment Phase is complete. If either Party decides to change, revise or create a new interface that is not in accordance with the Standard Interface Specifications, the Party shall submit a Change Order pursuant to Article 7. The Party requesting such change shall reimburse the other Party for the reasonable costs and expenses incurred by such non-requesting Party in connection with such change.

2.6 Exclusivity. Laclede acknowledges and agrees that Cellnet shall have the exclusive right to retrieve data from the MIUs installed on Laclede Gas Meters pursuant to this Agreement, and Laclede shall not, and shall not engage another person or entity to, read, attempt to read or intercept signals or communications from the MIUs. Further, during the Term, Cellnet shall be the exclusive provider to Laclede of the AMR Services and any tasks or services substantially similar to the AMR Services within the Fixed Network Area.

2.7 Initial Term. The initial term of this Agreement shall begin on the date first set forth above (the "Effective Date") and continue for fifteen (15) years ("Initial Term").

2.8 Term Extensions and Renewals. At the end of the Initial Term, Laclede and Cellnet may renew this Agreement upon mutually agreeable terms and conditions. The Parties agree to begin negotiations two (2) years prior to the end of the Initial Term.

ARTICLE 3
MAINTENANCE, GROWTH AND REPAIR
OF THE FIXED NETWORK

3.1 Maintenance of MIUs.

(a) Subject to this Section 3.1 and Section 3.4 hereof, Cellnet shall be responsible for all costs of repairing or replacing non-working or failed MIUs. Cellnet shall provide all support and maintenance required on the MIUs. Cellnet shall provide service visits free of charge to meters where the NOC fails to receive data from a Fixed Network Meter unless such failure clearly indicates a problem other than with the MIU or the Fixed Network. Notwithstanding the foregoing, if the Parties

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determine that a MIU is damaged by anyone other than Cellnet or the MIU Installer or is vandalized such that it cannot reasonably be made to function properly, the MIU will be considered to be a retired MIU and so treated pursuant to the mechanism set forth in Section 2.1(c)(iii)(E).

(b) Cellnet shall provide service visits free of charge to any Activated Meter upon the reasonable request of Laclede when Laclede deems a MIU to be stopped, programmed incorrectly by Cellnet or its subcontractor or reset and has provided documented history of such readings. If, upon such service visit, Cellnet discovers and documents that the MIU was programmed correctly and is operating properly, or if a MIU malfunction or incorrect programming by Laclede or its third party vendor or subcontractor was caused by (i) the Laclede Gas Meter, (ii) any Laclede personnel, or (iii) vandalism, and such findings are confirmed by Laclede, Cellnet shall deliver an invoice to Laclede, and Laclede shall reimburse Cellnet's reasonable expenses for such service visit not to exceed Fifty Dollars ($50), payable within thirty (30) calendar days of receipt of the invoice from Cellnet.

(c) If Laclede investigates a stopped meter report and determines that there has been a MIU failure, has replaced the MIU or battery, and delivered the MIU or battery to Cellnet, and the failure is confirmed by Cellnet, Laclede shall deliver an invoice to Cellnet, and Cellnet shall reimburse Laclede for its reasonable expenses for such a service visit not to exceed Fifty Dollars ($50), payable within thirty (30) calendar days of receipt of the invoice from Laclede.

(d) Notwithstanding the foregoing, if Cellnet cannot gain access to a MIU to verify whether it is functioning properly after making at least three (3) reasonable attempts to access the MIU, Cellnet's obligations under this Section 3.1 with respect to such MIU shall be suspended until such time as Cellnet gains access on its own or with the assistance of Laclede. During the period that Cellnet is not able to gain access to such MIU, the meter shall be deemed to be an Unavailable Meter, and Cellnet shall provide Laclede (directed to the attention of the Laclede AMR program manager at the address provided hereafter in this Agreement) prompt written notice of any MIU that appears to be malfunctioning to which Cellnet cannot gain access. Upon receipt of such notice, Laclede shall make reasonable efforts to assist Cellnet to gain access to the MIU in question.

3.2 Meter Change Outs. Change outs of Laclede Gas Meters will occur during the Term in accordance with Laclede's standard procedures for meter change outs; provided that Laclede shall de-initialize the MIU on each meter that is removed and initialize the new MIU that is part of the meter that is being installed. Upon completion of the change out, Laclede shall provide to Cellnet the information required by the Standard Interface Specifications. Upon receipt of the meter change out files via the Cellnet Standard Interface, Cellnet shall update the NOC to allow for proper acceptance of transmissions from the new MIU.

20

3.3 Battery Replacement. The MIU batteries will be replaced by Cellnet so that there is no interruption in the AMR Services due to battery failure. Cellnet shall be responsible for the cost of the battery and installing the battery. Any system-wide replacement of batteries shall be coordinated in advance with Laclede.

3.4 Vandalism. Cellnet will, within five (5) Business Days after the discovery of vandalism to a MIU, repair or replace the MIU, provided the meter is an Accessible Meter, and Laclede will be responsible for Cellnet's service visit in accordance with Section
3.1(b). Vandalism to a MIU requiring repair or replacement of the MIU shall be considered to be a Force Majeure Event and shall relieve Cellnet of its responsibilities relating to obtaining reads under this Agreement with respect to such MIU; provided that Cellnet promptly repairs or replaces such MIU upon discovery of such vandalism. Notwithstanding the foregoing, if Cellnet discovers that only the meter or both the meter and the MIU have been damaged, Cellnet will promptly notify Laclede of such damage in writing. Within seven (7) Business Days after receiving such written notice, Laclede shall, at its own expense, replace the damaged meter with a meter equipped with a MIU or remove such meter and disconnect gas service, provided such meter is accessible to Laclede. All vandalized MIUs that are replaced with a new MIU shall be retired in accordance with Section 3.1(a) of this Agreement.

ARTICLE 4
INTELLECTUAL PROPERTY, LICENSES AND USE OF
INTELLECTUAL PROPERTY

4.1 Intellectual Property. Notwithstanding any other provision in this Agreement to the contrary, (i) all Intellectual Property rights in the Fixed Network, the NOC, the Programming Software, the MIUs, the MCCs and the method of providing the AMR Services (the "Cellnet Intellectual Property") shall at all times remain the property of Cellnet, and nothing in this Agreement shall serve to pass ownership in any part of the Cellnet Intellectual Property to Laclede or any third party, and (ii) any developments, improvements, modifications, enhancements and/or adaptations of any kind created or developed by Laclede or by Cellnet, or jointly by the Parties, to any element or part of the Cellnet Intellectual Property shall at all times remain the property of Cellnet, and nothing in this Agreement shall serve to pass ownership in any part of the Cellnet Intellectual Property to Laclede or any third party. To the extent Cellnet updates or modifies the Programming Software for its other customers, Cellnet shall offer the same updates and/or modifications to Laclede at the same or lesser charge as it offers the same to other customers. Notwithstanding the foregoing, Cellnet shall provide to Laclede without charge any updates or modifications to the Programming Software that are required in order for Cellnet to perform and Laclede to utilize the AMR Services as contemplated under this Agreement.

4.2 License to the Programming Software. Subject to the terms and conditions of this Agreement, Cellnet shall grant Laclede pursuant to a license agreement in the form attached hereto as Exhibit 9 a non-transferable, non-exclusive, limited license to use the Programming Software solely to program the MIUs for use on Laclede Gas Meters. Should Laclede require the use of the Programming Software beyond the expiration or

21

termination of this Agreement and provided that Cellnet continues to support such software, Laclede shall have the right to enter into an appropriate license with Cellnet for such software in exchange for payment of a commercially reasonable royalty by Laclede.

4.3 Rights in Fixed Network. Cellnet shall hold all rights to the Fixed Network, and Laclede shall have no right or interest in any part of the Fixed Network, except as expressly provided under this Agreement.

4.4 Assignments by Laclede. All developments, improvements, modifications, enhancements and/or adaptations to the Cellnet Intellectual Property created or developed by Cellnet, by Laclede, or jointly by the Parties shall be considered to be Cellnet Intellectual Property. If by operation of law any such Intellectual Property is not owned in its entirety by Cellnet automatically upon creation or development, then Laclede agrees to transfer and assign, and hereby transfers and assigns, to Cellnet the entire right, title and interest, if any, throughout the world in and to all such Intellectual Property, including any Intellectual Property rights in same, and shall cooperate with Cellnet in obtaining for Cellnet's benefit, and at Cellnet's sole expense, appropriate legal protection for such Intellectual Property, including, but not limited to, testifying in any legal proceedings, signing all lawful papers, making all rightful oaths and executing applications, assignments and other instruments, all at Cellnet's sole expense.

4.5 Assignments by Cellnet. All Intellectual Property that is owned by Laclede, including, without limitation, Laclede Gas Data, the Fixed Network Data, and documentation and reports produced by Laclede in connection with the AMR Services (except to the extent such documentation and reports incorporate Cellnet Intellectual Property or Confidential Information), will belong exclusively to Laclede. If by operation of law any such Intellectual Property is not owned in its entirety by Laclede automatically upon creation or development, then Cellnet agrees to transfer and assign, and hereby transfers and assigns to Laclede the entire right, title and interest, if any, throughout the world in and to all such Intellectual Property, including copyrights in same, and shall cooperate with Laclede in obtaining for Laclede's benefit, and at Laclede's expense, appropriate legal protection of such Intellectual Property transferred and assigned, and to be transferred and assigned, hereunder to Laclede, including but not limited to testifying in any legal proceedings, signing all lawful papers, making all rightful oaths and executing all applications, assignments and other instruments, all at Laclede's sole expense.

ARTICLE 5
OWNERSHIP OF INFORMATION

5.1 Ownership by Laclede. All Fixed Network Data, any documentation or reports of any kind produced by Cellnet utilizing Laclede's customer data or readings or any other information provided in any form by Laclede or Laclede's customers to, or obtained from Laclede Gas Meters by, Cellnet in connection with this Agreement are, and shall continue to be, owned solely by Laclede, and Laclede shall comply with all reasonable requests by Cellnet for access to all such data, documentation, reports and other information to the extent required for Cellnet to perform its obligations under this Agreement. Cellnet may use extracts or summaries of the Fixed Network Data only for its internal purposes and

22

for the purpose of promoting the sale of its services to others as long as such extracts or summaries do not contain any information identifiable to Laclede or to any particular customer of Laclede.

ARTICLE 6
TRAINING

6.1 Training Plan. Within twenty (20) Business Days after the date of this Agreement, Cellnet shall provide to Laclede a written plan describing the training that Cellnet shall provide to Laclede personnel (the "Training Plan"). Such plan shall be subject to Laclede's approval, which shall not be unreasonably withheld or delayed. Unless otherwise approved by Laclede, all training shall be conducted in St. Louis at facilities owned by Laclede. All training shall be conducted at times and places mutually agreeable to the Parties. Cellnet will provide sufficient training on MIU installation, such that Laclede can train the trainers. The Training Plan will also include instruction on accessing Fixed Network Data via the Internet. In the event that training is not conducted at a Laclede facility, or is conducted outside of the St. Louis area, Laclede shall bear the costs and expenses related to such training.

ARTICLE 7
CHANGE ORDERS

7.1 Changes. The Parties may mutually agree to modify the scope of the AMR Services at any time during the Term (a "Change"). If, however, such modifications would require the Party not requesting the Change to provide services materially different from the AMR Services specified in this Agreement, or materially extend or shorten the time needed to complete the AMR Services (a "Material Change"), the Parties shall follow the Change Order Procedure set forth in Section 7.2 below.

7.2 Change Order Procedure.

(a) To request a Material Change, a Party (the "Requesting Party") shall submit to the other Party (the "Responding Party") a written request describing the change that such Party desires ("Change Order"). The Responding Party shall respond to the Change Order within fifteen (15) Business Days of receipt with a written statement (i) offering to perform the AMR Services in a manner consistent with the Change Order, (ii) offering to perform the Change Order but proposing modifications to it, or (iii) rejecting the Change Order. If the Responding Party responds in accordance with either (i) or (ii) in the preceding sentence, the Responding Party shall include detailed information as to the availability of the Responding Party's personnel and resources to perform the Change Order and the impact, if any, on timing of the completion of the affected AMR Services or the additional or reduced cost of the AMR Services. The Responding Party will use commercially reasonable efforts to minimize any adverse impact on the AMR Services created by the Change Order or any increase in cost or expense that is to be imposed on the Requesting Party. This process will continue until the Parties agree in writing upon the changes to be made, the impact on the timing of the

23

completion of the affected AMR Services and any additional costs or expenses associated therewith. If the Requesting Party desires to implement the Change Order, it will notify the Responding Party so in writing and the Responding Party will promptly proceed with the implementation of the applicable changes, as mutually agreed upon by the Parties.

(b) For any Change Order, Laclede shall pay Cellnet the additional charges, costs and expense agreed upon by the Parties pursuant to the terms of Section 2.3(a). If the Change Order results in a reduction in the anticipated charges, costs or expenses, Laclede shall receive a credit for such reduction against the fees otherwise owed by Laclede under this Agreement.

ARTICLE 8
SUBCONTRACTS

8.1 Subcontracts. Cellnet anticipates entering into certain contracts for equipment and services, including, without limitation, installation of MIUs and installation and maintenance of MCCs. Laclede shall have the right to approve the parties with whom Cellnet contracts for the installation of MIUs as set forth in
Section 2.1(d)(i). Laclede has provided to Cellnet general guidelines for subcontractors to assist Cellnet to select subcontractors that will be acceptable to Laclede. No subcontracting or delegation of duties by Cellnet to third parties shall relieve Cellnet of any obligations of Cellnet under this Agreement.

ARTICLE 9
CONFIDENTIALITY

9.1 Confidential Information. "Confidential Information" means any information or data disclosed in writing or orally by a Party (the "Disclosing Party") to the other Party (the "Recipient") under or in contemplation of this Agreement, whether delivered or obtained before or after the date hereof, and which (a) if in tangible form or other media that can be converted to readable form, is clearly marked as proprietary, confidential, or private on disclosure; or
(b) if oral or visual, is identified as proprietary, confidential or private on disclosure and is summarized in writing so marked and delivered within thirty (30) days following such disclosure; or (c) the Recipient, considering the method of disclosure or discovery and the subject matter being disclosed or discovered, should reasonably conclude is considered confidential by the Disclosing Party. "Disclosing Party" and "Recipient" include each Party's Affiliates that disclose or receive Confidential Information. The rights and obligations of the Parties shall therefore also inure to such Affiliates and may be directly enforced by or against such Affiliates. For purposes of clarification, Laclede Gas Data and Fixed Network Data shall be deemed Confidential Information of Laclede.

9.2 Use of Confidential Information. The Recipient acknowledges the economic value of the Disclosing Party's Confidential Information. The Recipient shall: (a) use the Confidential Information only as required to perform its obligations under this

24

Agreement; (b) restrict disclosure of the Confidential Information to employees and advisors of the Recipient and its Affiliates who need to know the information in order for Recipient to perform its obligations under this Agreement; (c) not disclose it to any other person or entity without the prior written consent of the Disclosing Party; (d) advise those employees who access the Confidential Information of their obligations with respect thereto; and (e) copy the Confidential Information only as necessary for those employees who are entitled to receive it, and ensure that all confidentiality notices are reproduced in full on such copies.

9.3 Exclusions and Exceptions. The foregoing confidentiality obligations shall not apply to any Confidential Information that the Recipient can demonstrate: (a) is or becomes available to the public through no breach of this Agreement; (b) was previously known by the Recipient without any obligation to hold it in confidence; (c) is received from a third party free to disclose such information without restriction; (d) is independently developed by the Recipient without the use of Confidential Information; (e) is approved for release by written authorization of the Disclosing Party, but only to the extent of such authorization; (f) is required by PSC data request, law, regulation, administrative order or subpoena to be disclosed, but only to the extent and for the purposes of such required disclosure, and only if the Recipient first attempts to notify the Disclosing Party of the request, law, regulation, order or subpoena; or (g) is disclosed in response to a valid order of a court or other governmental body of the United States or any political subdivision thereof, but only to the extent of, and for the purposes of, such order, and only if the Recipient first attempts to notify the Disclosing Party of the order to permit the Disclosing Party to seek an appropriate protective order.

9.4 Unmarked Confidential Information. If the Disclosing Party inadvertently fails to mark as proprietary, confidential or private information for which it desires confidential treatment, it shall so inform the Recipient. The Recipient thereupon shall return the unmarked information to the Disclosing Party and the Disclosing Party shall substitute properly marked information. Nothing in this paragraph shall relieve Recipient of its obligations to protect Confidential Information that contains no restrictive marking that the Recipient, considering the method of disclosure or discovery and the subject matter being disclosed or discovered, should reasonably conclude is considered confidential by the Disclosing Party.

9.5 Ownership of Confidential Information. Confidential Information, including permitted copies, shall be deemed the property of the Disclosing Party. The Recipient shall, within thirty (30) days of a written request by the Disclosing Party, return all Confidential Information (or any designated portion thereof), including all written copies or electronic data containing the Confidential Information, to the Disclosing Party or, if so directed by the Disclosing Party, destroy all such Confidential Information. The Recipient shall also, within fifteen (15) days of a written request by the Disclosing Party, certify in writing that it has satisfied its obligations under this Agreement.

9.6 Specific Performance. The Parties agree that an impending or existing violation of this Article 9 would cause the Disclosing Party irreparable injury for which it would have no adequate remedy at law, and agree that the Disclosing Party shall be entitled to obtain

25

immediate injunctive relief prohibiting such violation, in addition to any other rights and remedies available to it.

9.7 Survival and Severability. All obligations undertaken respecting Confidential Information shall survive the expiration or earlier termination of this Agreement and shall continue for five (5) years from the date of the expiration or earlier termination of this Agreement.

ARTICLE 10
REPRESENTATIONS AND WARRANTIES

10.1     Representations and Warranties of Cellnet. Cellnet hereby
         -----------------------------------------
         represents and warrants the following to Laclede:

         (a)      Duly Authorized. Cellnet is a corporation duly organized
                  ---------------
                  and existing and is in good standing under the laws of
                  Delaware. Cellnet's execution, delivery and performance of
                  this Agreement has been duly authorized by all appropriate
                  action on the part of Cellnet, and this Agreement
                  constitutes the valid and binding obligation of Cellnet
                  and is enforceable against Cellnet in accordance with its
                  terms.

         (b)      No Conflict. Neither the execution and delivery of this
                  -----------
                  Agreement, nor any assignments or licenses made hereunder,
                  will conflict with or violate any other license,
                  instrument, contract, agreement, or other commitment or
                  arrangement to which Cellnet is bound.

         (c)      Consents. No approval, authorization, consent, permission,
                  --------
                  waiver, notice, filing or recording is necessary for
                  Cellnet's execution of this Agreement.

         (d)      Professional Standards. The AMR Services shall be
                  ----------------------
                  performed in a professional manner in accordance with the
                  prevailing standards of the industry.

         (e)      Ownership. Cellnet has or will obtain the ownership of, or
                  ---------
                  a leasehold, license or other interest in all elements of,
                  the Fixed Network so as to perform its obligations
                  hereunder.

         (f)      Non-Encumberance and Non-Infringement. To the best of
                  -------------------------------------
                  Cellnet's knowledge and belief, (i) neither the AMR
                  Services, nor any deliverables provided by Cellnet to
                  Laclede hereunder, have been or will be encumbered, except
                  as provided in the financing arrangements entered into by
                  Cellnet in connection with this Agreement and approved by
                  Laclede, and any subsequent renewals, extensions,
                  restructurings, modifications, or replacements of such
                  financing arrangements, in whole or in part (either as a
                  stand-alone financing in connection with this Agreement or
                  as part of Cellnet's general financing facilities), which
                  shall not require approval by Laclede but shall require
                  notice to Laclede thereof, and (ii) neither the AMR
                  Services, nor any deliverables provided by Cellnet to
                  Laclede hereunder, nor any system, apparatus, equipment,
                  components, method,

                                     26

                  process, information, data or design provided by Cellnet
                  to Laclede hereunder or used by Cellnet in providing the
                  AMR Services hereunder infringe any patents, copyrights,
                  trade secrets, or other proprietary rights of any third
                  party. Cellnet makes no representation or warranty with
                  respect to infringement claims arising from any system,
                  apparatus, equipment, component, method, process,
                  information, data or design provided by Laclede hereunder.

         (g)      Compliance with Laws. Cellnet shall comply with all
                  --------------------
                  applicable federal, state and local laws, regulations,
                  ordinances, and governmental restrictions in performing
                  the AMR Services under this Agreement.

         (h)      Services and Supplies. Cellnet warrants that the supplies
                  ---------------------
                  and services furnished under this Agreement will be free
                  from defects in material and workmanship and will conform,
                  in all material respects, to all requirements of this
                  Agreement.

         (i)      Required FCC and Regulatory Licenses. Cellnet shall obtain
                  ------------------------------------
                  and maintain during the Term, at Cellnet's expense, any
                  licenses and/or permits needed from the FCC, state or
                  local regulatory agencies, or any licenses from other
                  entities required to operate the Fixed Network in
                  Laclede's service area.

         (j)      Fixed Network Security. Cellnet shall keep in place
                  ----------------------
                  network security that will monitor and protect against
                  unauthorized access to Laclede Gas Data while such data
                  are on or within the Fixed Network. The Laclede Gas Data
                  will be stored in a separate partitioned area of the Meter
                  Database.

10.2     Representations and Warranties of Laclede. Laclede hereby
         -----------------------------------------
         represents and warrants to Cellnet:

         (a)      Duly Authorized. Laclede is a corporation duly
                  ---------------
                  incorporated and existing in good standing under the laws
                  of Missouri. Laclede's execution, delivery and performance
                  of this Agreement has been duly authorized by all
                  appropriate corporate action on the part of Laclede, and
                  this Agreement constitutes the valid and binding
                  obligation of Laclede and is enforceable against Laclede
                  in accordance with its terms.

         (b)      No Conflict. Neither the execution and delivery of this
                  -----------
                  Agreement nor any assignments or licenses made hereunder
                  will conflict with or violate any other license,
                  instrument, contract, agreement, or other commitment or
                  arrangement to which Laclede is bound.

         (c)      Ownership. Laclede has and will continue to have: (i) good
                  ---------
                  and clear title or (ii) valid and enforceable rights or
                  licenses to the Laclede Gas Meters and the Laclede gas
                  systems. Laclede will not subject any MIUs installed on
                  Laclede Gas Meters to any encumbrances, liens, mortgages,
                  securities or other defects in title.

27

         (d)      Consents. Except as specifically provided otherwise
                  --------
                  herein, no approval, authorization, consent, permission,
                  waiver, notice, filing or recording is necessary for
                  Laclede's execution of this Agreement.

         (e)      Non-Infringement. To the best of Laclede's knowledge and
                  ----------------
                  belief, neither Laclede's gas system nor any information,
                  data, data processes or designs supplied by Laclede that
                  will be integrated with the AMR Services infringes any
                  patents, copyrights, trade secrets or other proprietary
                  rights of any third party to the extent that said
                  infringement is based solely on said Laclede's gas system,
                  information, data, processes or designs, and Laclede has
                  no reason to believe that any such infringement or claims
                  thereof could be made by third parties. Laclede makes no
                  representation or warranty with respect to infringement
                  claims arising from AMR Services, or any system,
                  apparatus, equipment, component, method, process,
                  information, data or design provided by Cellnet hereunder.

         (f)      Compliance with Laws. Laclede shall comply with all
                  --------------------
                  applicable federal, state and local laws, regulations,
                  ordinances, and governmental restrictions in performing
                  its obligations under this Agreement.

10.3     DISCLAIMER OF WARRANTY. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS
         ----------------------
         AGREEMENT, NEITHER PARTY MAKES ANY OTHER WARRANTIES, EXPRESS OR
         IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
         FOR A PARTICULAR PURPOSE.

                                 ARTICLE 11
                          TERMINATION AND REMEDIES

11.1     Termination.
         -----------

         (a)      Termination by Either Party for Breach. Either Party may
                  --------------------------------------
                  terminate this Agreement in the event of a material breach
                  of this Agreement by the other Party, provided that the
                  breaching Party has not cured such material breach within
                  forty-five (45) Business Days after the date that the
                  Party seeking termination provides written notice of such
                  material breach to the breaching Party. Such notice shall
                  set forth the full details of the breach and state that
                  the failure to cure such breach may result in termination.
                  Either Party may terminate this Agreement if there exists
                  a series of non-material or persistent breaches by the
                  other Party, that, in the aggregate, have a material and
                  significant adverse impact on the non-breaching Party;
                  provided that the non-breaching Party provides the
                  breaching Party with prior written notice of its belief
                  that such series of non-material breaches have had, are
                  having, or are reasonably likely to have a material and
                  significant adverse impact on the non-breaching Party and
                  further provided that the non-breaching Party provides the
                  breaching Party with forty-five (45) Business Days, during
                  which such non-material breaches must be cured.

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The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

         (b)      Termination by Cellnet for Nonpayment. Cellnet may
                  -------------------------------------
                  terminate this Agreement in the event that Laclede, during
                  two (2) consecutive months or three (3) or more times
                  during any Contract Year, fails to pay any invoice for the
                  Fees when due, provided that Laclede has not cured any
                  such payment default within twenty (20) Business Days
                  after the date that Cellnet provides written notice to
                  Laclede of such payment default.

         (c)      Termination for MIU System Failure. It shall be deemed to
                  ----------------------------------
                  be a material breach of this Agreement by Cellnet, for
                  purposes of Section 11.1(a), if more than [***]
                  percent ([*]%) of either the first [*****] or
                  [******] MIUs installed on Activated Meters fail to
                  provide daily automated meter reads on an average basis
                  over the total number of calendar days of the first full
                  calendar month following the installation of such
                  [*****] or [******] MIUs, respectively, and such
                  failure is not cured during the following forty five (45)
                  Business Days. In the event of such a material breach by
                  Cellnet, Laclede may avail itself of the remedies
                  contained in this Article 11.

         (d)      Termination for Insolvency. Either Party may terminate
                  --------------------------
                  this Agreement on written notice to the other if the other
                  Party becomes an Insolvent Entity. In the event of the
                  bankruptcy of Cellnet pursuant to the Bankruptcy Code and
                  an attendant rejection of this Agreement or any license or
                  assignment granted hereunder pursuant to Section 365
                  thereof, the Parties intend that the provisions of the
                  Bankruptcy Code shall apply.

         (e)      Suspension of Performance. In addition to the foregoing,
                  -------------------------
                  after expiration of the applicable cure period described
                  in Section 11.1(a) or 11.1(b) above, a non-defaulting
                  Party may, without terminating this Agreement, suspend
                  performance of its obligations under this Agreement for
                  such period of time as the non-defaulting Party deems
                  appropriate in its sole discretion to give the defaulting
                  Party an additional opportunity to cure. The
                  non-defaulting Party may terminate this Agreement at any
                  time during such suspension by providing thirty (30)
                  Business Days written notice to the other Party.

11.2     Impaired Performance. If either Party fails to materially perform
         --------------------
         or observe any of its obligations set forth in this Agreement and
         fails to take corrective action within forty-five (45) Business
         Days after written notice by the other, the non-breaching Party
         may, as an alternative to its right to terminate this Agreement,
         accept such Party's impaired performance and recover its actual
         damages.

11.3     Effect of Termination.
         ---------------------

         (a)      Removal of MIUs. Unless otherwise agreed by the Parties,
                  ---------------
                  if this Agreement is terminated as a result of breach,
                  then in the event of a Laclede breach, Laclede shall be
                  responsible for the cost of removal of the MIUs installed
                  on Laclede property. In the event of a Cellnet breach,
                  Cellnet shall be responsible for the commercially
                  reasonable cost of removal of the MIUs; provided that if
                  the removal occurs in connection with deployment of any
                  replacement system, then

                                     29

                  Cellnet shall be responsible only for the commercially
                  reasonable incremental cost of removing the MIUs; and
                  further provided that if Laclede is not deploying a
                  replacement system and the removal is at the discretion of
                  Laclede and not required by any regulatory or governmental
                  authority, applicable law or the superior rights of a
                  third party, then Laclede shall be responsible for the
                  commercially reasonable cost of removal of the MIUs. If
                  this Agreement is terminated as a result of the default of
                  Laclede, then any removal of the MIUs shall have no impact
                  on Laclede's obligation to pay any Asset Fees (as
                  specified in Exhibit 8 hereto) related to such
                               ---------
                  MIUs unless and to the extent that any such MIUs are
                  returned to Cellnet by Laclede and redeployed by Cellnet.
                  If this Agreement is terminated as a result of the default
                  of Cellnet and Laclede does not continue to utilize the
                  Fixed Network, then Laclede's obligation to pay any Asset
                  Fees related to the MIUs shall cease; provided, that if
                  Laclede continues to utilize the Fixed Network, Laclede's
                  obligation to pay the Asset Fee shall continue only for
                  those MIUs that continue to function properly and deliver
                  automated meter reads to Laclede. In all events, Laclede's
                  obligation to pay any Asset Fee shall cease on the
                  fifteenth (15th) anniversary of the Effective Date. Upon
                  expiration of the Term or earlier termination of this
                  Agreement for breach by Laclede, Cellnet may, but shall
                  not be obligated to, remove the MIUs installed on Laclede
                  Gas Meters, at Cellnet's sole cost and expense.
                  Notwithstanding the foregoing, if Cellnet desires to
                  remove the MIUs installed on the Laclede Gas Meters upon
                  the termination of this Agreement, Cellnet shall notify
                  Laclede in writing within thirty (30) days after such
                  termination, and Cellnet and Laclede shall devise a
                  schedule and methodology for such removal that is
                  reasonably acceptable to both Parties.

         (b)      Return of Confidential Information, Trade Secrets and
                  -----------------------------------------------------
                  Cellnet Property. Upon the termination of this Agreement
                  ----------------
                  by either Party for any reason, each Party shall return to
                  the other any Confidential Information of the other Party
                  in its possession or, with the consent of the Disclosing
                  Party, shall destroy the same and certify such destruction
                  to the Disclosing Party. Additionally, upon the
                  termination of this Agreement, Laclede shall return to
                  Cellnet the handheld units provided during the Initial
                  Fixed Network Deployment Phase.

         (c)      Survival of Rights and Licenses. Upon termination of this
                  -------------------------------
                  Agreement by either Party, all rights and licenses granted
                  hereunder, except for those necessary to perform
                  Transition Services as specified in Section 11.3(d) below
                  or as specified elsewhere in this Agreement, shall
                  terminate.

(d) Transition Services.

(i) Transition Services. Upon expiration or earlier termination of this Agreement (except due to the termination by Cellnet pursuant to Section 11.1(a) or (b)), the Parties agree they will cooperate to assist in the orderly transfer of performance of the AMR Services to a new service provider selected by Laclede (the "Transition Services"). Without limiting the generality of the foregoing, Cellnet shall provide Laclede and its

30

The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

respective agents, contractors and consultants, as necessary, with the AMR Services contracted for hereunder, for a maximum of eighteen (18) months after such termination or expiration (the "Transition Period"). Such Transition Services shall be provided pursuant to the terms and conditions of this Agreement; provided that to the extent such Transition Services are provided after the expiration of the Term, then Laclede and Cellnet shall work together in good faith to amend the performance standards for the AMR Services and such other operational matters as may be relevant to the winding down of operations pursuant to the Transition Services, as appropriate.

(ii) Payment During Transition. Laclede and Cellnet shall negotiate in good faith to reach agreement on the fees for the AMR Services during the provision of Transition Services; provided that if the parties are not able to reach agreement, then Laclede shall pay Cellnet (A) the then-effective per-read fee for the AMR services as set forth in Section 2.3(a) for AMR Services rendered before the fifteenth (15) anniversary of the Effective Date, and/or (B) $[****] per read for the AMR Services as set forth in Section 2.3(a) for AMR Services rendered on or after the fifteenth anniversary of the Effective Date. If the Agreement was terminated for any reason other than Cellnet's default, Laclede shall pay Cellnet for the Transition Services in accordance with Cellnet's then current rates for professional services.

(iii) Assets for Transition Services. In the event of early termination of this Agreement for any reason other than breach by Laclede, then Laclede shall be entitled to contract with a new service provider for the provision of the AMR Services during the Transition Period and, in connection therewith, to the use of the MIUs and the non-exclusive use of the MCCs, NOC, Programming Software or other components of the Fixed Network owned, leased, or licensed by Cellnet and used by Cellnet in providing the AMR Services, subject to Cellnet's prior written consent, which consent shall not be unreasonably withheld or delayed.

(e) Laclede Termination Damages. In the event Laclede terminates this Agreement after a breach by Cellnet, Cellnet shall pay Laclede its actual damages.

(f) Cellnet Termination Damages. In the event Cellnet terminates this Agreement after a breach by Laclede, Laclede shall pay to Cellnet its actual damages.

31

ARTICLE 12
INDEMNIFICATION AND LIMITATION OF LIABILITY

12.1 Indemnification.

(a) Indemnity by Cellnet.

(i) Intellectual Property Indemnification. Cellnet, at its own expense, shall indemnify, defend and hold harmless, Laclede and its Affiliates, directors, officers, employees, agents, successors and assigns and defend any action brought against same with respect to any claim, demand, cause of action, debt, liability, damage, cost, loss or expense, including, without limitation, reasonable attorney's fees and expenses, arising out of any claim that any services, system, apparatus, equipment, component, method, process, information, data (other than Laclede Gas Data or Fixed Network Data) or design furnished by Cellnet and/or its subcontractors (collectively, "Cellnet Materials"), in connection with the provision of AMR Services hereunder by Cellnet, infringes or violates any patent, copyright, trade secret, license or other proprietary right of any third party.

At any time after Cellnet becomes aware of any such claim, Cellnet may, at its option and expense, (1) procure the right to furnish to Laclede the Cellnet Materials as provided in this Agreement, (2) modify the infringing Cellnet Materials without impairing in any material respect the functionality or performance of the AMR Services or any other services provided hereunder so that they are non-infringing, or (3) replace the Cellnet Materials with an equally suitable, non-infringing replacement that does not impair in any material respect the functionality or performance of the AMR Services or any other services provided hereunder. If Cellnet is not able to accomplish (1), (2) or (3) above within a reasonable period of time, Cellnet shall have the option to terminate this Agreement upon written notice to Laclede and Cellnet shall be deemed to be in breach under this Agreement, and Laclede shall have the right to avail itself of any remedies available to it under this Agreement or otherwise.

(ii) Personal Injury and Property Damage Indemnification. Cellnet agrees to take, and cause its employees, subcontractors, and agents to take, all commercially reasonable precautions to prevent injury to any persons (including, without limitation, employees, agents and customers of Laclede) or damage to property (including, without limitation, Laclede's property) and shall indemnify, hold harmless and defend Laclede and its Affiliates, directors, officers, employees, agents, successors and assigns from and against any and all suits, actions, damages, claims, fines, penalties, administrative or regulatory actions, costs, losses, expenses (including, without limitation, settlement awards and reasonable attorney's fees), and the liabilities, costs and/or expenses arising from or in connection with any claim of injuries to person or damage to property

32

arising out of any act, omission, or negligence on the part of Cellnet or its agents, subcontractors or employees in the performance or failure to perform any obligation under this Agreement.

(iii) Cellnet, at its own expense, shall indemnify, defend and hold Laclede harmless from and against any assessment, penalty or fee charged to or assessed against Laclede by the PSC or a court of competent jurisdiction to the extent that such assessment penalty or fee is a result of Cellnet's failure to provide AMR Services in accordance with the terms and conditions of this Agreement, and Laclede may setoff any such amount against amounts owed by Laclede to Cellnet under this Agreement.

(b) Indemnity by Laclede. Personal Injury and Property Damage Indemnification. Laclede agrees to take, and cause its employees and agents to take, all commercially reasonable precautions to prevent injury to any persons (including, without limitation, employees and agents of Cellnet) or damage to property (including, without limitation, Cellnet's property) and shall indemnify, hold harmless and defend Cellnet and its Affiliates, directors, officers, employees, agents, successors and assigns from and against any and all suits, actions, damages, claims, fines, penalties, administrative or regulatory actions, costs, losses, expenses (including, without limitation, settlement awards and reasonable attorney's fees), and the liabilities, costs and/or expenses arising from or in connection with any claim of injuries to person or damage to property resulting from or arising out of any act, omission, or negligence on the part of Laclede or its agents or employees in the performance or failure to perform any obligation under this Agreement.

(c) Procedures. In connection with any claim for indemnification, the Party seeking indemnification ("indemnitee") shall give prompt notice to the Party providing indemnification under this Section 12.1 ("indemnitor") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under this Article 12; provided that the failure to give such notice shall not affect the rights of such indemnitee except and only to the extent the indemnitor is prejudiced by such failure. In the event that any third party claim covered by this Article 12 is asserted, and the indemnitee notifies the indemnitor in accordance with this Section 12.1(c), the indemnitor will be entitled to participate therein and assume control of the defense thereof by notice to the indemnitee. The indemnitee may participate in the defense of such third party claim at its own expense. The indemnitee shall cooperate with the indemnitor in such defense. The indemnitor shall not be liable for any settlement of any claim, action or proceeding which is effected without the prior consent of the indemnitor, which consent shall not be unreasonably withheld. The indemnitor shall not settle any claim, action, or proceeding covered by this Article 12 in a manner which adversely affects the business operations of the indemnitee without the prior consent of the indemnitee, which consent shall not be unreasonably withheld.

33

The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

ARTICLE 13
LIABILITY

13.1     Liability. EXCEPT FOR LIABILITY ARISING UNDER ARTICLE 9 OR ARTICLE
         ---------
         12, IN NO EVENT WILL EITHER PARTY'S LIABILITY TO THE OTHER PARTY
         EXCEED [************************************] DOLLARS ($[**********])
         ["LIABILITY CAP"]. ON THE FIRST DAY OF EACH CONTRACT YEAR (EXCLUDING
         THE FIRST CONTRACT YEAR) DURING THE TERM, THE LIABILITY CAP SHALL
         AUTOMATICALLY INCREASE BY A PERCENTAGE THAT IS EQUAL TO THE PERCENTAGE
         INCREASE, IF ANY, IN THE CONSUMER PRICE INDEX (AS HEREINAFTER DEFINED)
         FROM THAT LAST PUBLISHED ON THE FIRST DAY OF THE IMMEDIATELY PRECEDING
         CONTRACT YEAR TO THAT LAST PUBLISHED ON THE FIRST DAY OF THE THEN-
         CURRENT CONTRACT YEAR. THE CONSUMER PRICE INDEX MEANS THE CONSUMER
         PRICE INDEX FOR ALL URBAN CONSUMERS-ST. LOUIS, MO-IL-ALL ITEMS
         (1982-84=100), PUBLISHED BY THE BUREAU OF LABOR STATISTICS OF THE
         UNITED STATES DEPARTMENT OF LABOR, OR IN THE EVENT OF
         DISCONTINUANCE OF THAT INDEX OR SUBSTANTIAL CHANGE IN THE FORMULA
         BY WHICH THAT INDEX IS DETERMINED, THEN THE PUBLISHED INDEX MOST
         CLOSELY APPROXIMATING THAT INDEX AS THAT INDEX IS DETERMINED AS OF
         THE DATE OF THIS AGREEMENT. IN NO EVENT SHALL THE AMOUNT OF THE
         LIABILITY CAP FOR ANY CONTRACT YEAR BE LESS THAN THE AMOUNT OF THE
         LIABILITY CAP FOR THE PREVIOUS CONTRACT YEAR.

13.2     Damages. EXCEPT FOR LIABILITY ARISING UNDER ARTICLE 9, THE PARTIES
         -------
         AGREE THAT IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
         INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR
         PUNITIVE DAMAGES (INCLUDING LOST PROFITS), DIRECTLY OR INDIRECTLY,
         RELATING TO OR ARISING OUT OF THIS AGREEMENT REGARDLESS OF THE FORM
         OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
         LIABILITY OR OTHERWISE, AND WHETHER OR NOT SUCH DAMAGES WERE
         FORESEEN OR UNFORESEEN.

ARTICLE 14
FINANCING

ARTICLE INTENTIONALLY OMITTED

ARTICLE 15
INDEPENDENT CONTRACTOR

15.1     Independent Contractor. Each Party to this Agreement is an
         ----------------------
         independent contractor; nothing in this Agreement shall be
         construed to create a partnership, joint venture or agency
         relationship between the Parties. Nothing in this Agreement shall
         be interpreted

                                     34

         or construed as creating or establishing the relationship of
         employer and employee between Laclede and either Cellnet or any
         employee, agent, subcontractor or consultant of Cellnet nor between
         Cellnet and either Laclede or any employee, agent, subcontractor or
         consultant of Laclede. Each Party will be solely responsible for
         payment of all compensation owed to its employees, as well as
         federal and state income tax withholding, Social Security taxes,
         and unemployment insurance applicable to such personnel as
         employees of the applicable Party.

ARTICLE 16
ASSIGNMENT

16.1     Assignment. This Agreement will be binding on the Parties and their
         ----------
         respective successors and permitted assigns. Except as provided in
         this Section 16.1, neither Party may, or will have the power to,
         assign this Agreement without the prior written consent of the
         other, which consent shall not be unreasonably withheld or delayed,
         except that either Party may assign its rights and obligations
         under this Agreement to an Affiliate that expressly assumes such
         Party's obligations and responsibilities hereunder, without the
         approval of the other Party. Anything herein to the contrary
         notwithstanding, Cellnet may assign this Agreement and its rights
         hereunder as collateral security to lenders to Cellnet or their
         successors and assigns. The assigning Party shall remain fully
         liable for, and shall not be relieved from the full performance of,
         all obligations under this Agreement. Any attempted assignment that
         does not comply with the terms of this Section 16.1 shall be null
         and void. If a Party assigns its rights or obligations to an
         Affiliate in accordance with this Agreement, such Party shall
         promptly provide written notice thereof to the other Party.

                                 ARTICLE 17
                                AUDIT RIGHTS

17.1     Books and Records. Each Party shall have the right to inspect and
         -----------------
         audit or have audited the books and records of the other Party
         relating to the amounts invoiced hereunder and the monies owed
         hereunder for the purpose of verifying the amounts due and payable
         hereunder, upon at least ten (10) Business Days notice to the
         audited Party. Such audit may cover up to, but no more than, the
         two (2) calendar years immediately preceding the date of the audit.
         The cost of such audit shall normally be at the requesting Party's
         expense; provided, however, that the audited Party will bear the
         cost of the audit if the audit reveals, in the case of Laclede, any
         overpayment, and in the case of Cellnet, any underpayment, greater
         than two percent (2%) of the amount that was actually due for any
         twelve-month period. Such audit shall be conducted with a minimum
         of disruption to the audited Party's daily operations and during
         normal business hours. The requesting Party shall not audit the
         audited Party more than once during any twelve-month period during
         the Term.

17.2     Subcontracting, Training and Safety. Laclede shall have the right
         -----------------------------------
         to audit Cellnet's compliance with the obligations set forth in
         Section 2.1(d) of this Agreement for the purpose of verifying that
         Cellnet is fully complying with all of its obligations with regard

                                     35

         to subcontracting, training and safety. Cellnet shall cooperate
         with Laclede during the course of such an audit and make all
         applicable documentation and materials available to Laclede within
         ten (10) Business Days of Laclede's request. Cellnet shall allow
         Laclede to perform field audits to the extent Laclede deems
         reasonably necessary to confirm Cellnet's compliance with Section
         2.1(d). Provided Laclede has not found Cellnet to be out of
         compliance with the obligations of Section 2.1(d) during the
         immediately preceding twenty-four (24) months, Laclede shall not
         audit Cellnet's compliance regarding subcontracting, training or
         safety more than once during any twelve-month period during the
         Term.

ARTICLE 18
INSURANCE

18.1     Insurance. Prior to the commencement of any work under this
         ---------
         Agreement, Cellnet will obtain, and maintain during the entire
         Term, insurance in the following minimum amounts and types:

         (a)      Commercial or Comprehensive General Liability Insurance
                  for bodily injury and property damage of not less than
                  Five Million Dollars ($5,000,000) for each occurrence and
                  Fifteen Million Dollars ($15,000,000) in the aggregate.

         (b)      Workers' Compensation Insurance that in all respects
                  complies with all applicable federal and state laws and
                  regulations. Cellnet covenants and agrees with Laclede
                  that Cellnet will carry workers' compensation insurance in
                  such amount and in such form, and containing such
                  provisions, as shall protect both Laclede and Cellnet from
                  all claims, demands, suits, actions, causes of action and
                  judgments of any actual or alleged agents or employees of
                  Cellnet resulting from or arising out of any work
                  performed under or by virtue of this Agreement.

         (c)      Employer Liability Insurance with limits of not less than
                  Five Million Dollars ($5,000,000) per occurrence.

         (d)      Business automobile liability insurance that applies to
                  all owned, non-owned, hired and leased vehicles used by
                  Cellnet and/or its employees, subcontractors or agents in
                  connection with this Agreement. Business automobile
                  liability insurance shall be provided with a minimum of
                  Three Million Dollars ($3,000,000) combined single limit
                  per occurrence.

         (e)      The policy limits set forth above may be met through an
                  umbrella liability insurance policy.

18.2     Intentionally Omitted.
         ---------------------

18.3     Subcontractors' Insurance. Cellnet shall cause each of its
         -------------------------
         subcontractors to obtain, and maintain at all times while
         performing work under this Agreement, insurance in the following

minimum amounts and types:

36

         (a)      Commercial or Comprehensive General Liability Insurance
                  for bodily injury and property damage of not less than
                  Five Million Dollars ($5,000,000) for each occurrence and
                  Fifteen Million Dollars ($15,000,000) in the aggregate.

         (b)      Workers' Compensation Insurance that in all respects
                  complies with all applicable federal and state laws and
                  regulations in such amount and in such form, and
                  containing such provisions, as shall protect Laclede,
                  Cellnet and Cellnet's subcontractor from all claims,
                  demands, suits, actions, causes of action and judgments of
                  any actual or alleged agents or employees of Cellnet's
                  subcontractor resulting from or arising out of any work
                  performed under or by virtue of this Agreement.

         (c)      Employer Liability Insurance with limits of not less than
                  Five Million Dollars ($5,000,000) per occurrence.

         (d)      Business automobile liability insurance that applies to
                  all owned, non-owned, hired and leased vehicles used by
                  Cellnet's subcontractor and/or its employees,
                  subcontractors or agents in connection with this
                  Agreement. Business automobile liability insurance shall
                  be provided with a minimum of Three Million Dollars
                  ($3,000,000) combined single limit per occurrence.

         (e)      The policy limits set forth above may be met through an
                  umbrella liability insurance policy.

18.4     Policy Provisions. All of the aforesaid insurance shall include
         -----------------
         Laclede as an additional insured (excluding the coverage described
         in Section 18.2), be endorsed to be primary and without right of
         contribution from any insurance that Laclede may have in effect and
         be written by one or more insurance companies that is or are (i)
         licensed and authorized to do business in the State of Missouri,
         and (ii) rated A - VIII or higher by A.M. Best Company. All
         policies shall contain a provision that the insurance company will
         provide Laclede with written notice of any cancellation of, or
         modification to, the policy. The consent of Laclede to the amount
         of insurance specified shall not be considered as a limitation of
         Cellnet's liability under this Agreement nor an agreement by
         Laclede to assume liability in excess of said amount or for risks
         not insured against. Cellnet shall provide proof of the
         above-described insurance to Laclede annually on or before the
         first day of each Contract Year.

18.5     Periodic Review of Policy Limits. On or about the fifth (5th) and
         --------------------------------
         tenth (10th) anniversaries of the Effective Date, Cellnet and
         Laclede shall review and discuss the continuing adequacy of the
         limits of the various insurance policies required by this Article
         18. In connection with this review, the parties shall consider,
         among other things, whether the policy limits are adequate in light
         of actual loss experience and/or whether the limits are equal to,
         or greater than, limits that are ordinary and customary in the
         automated meter reading industry. To the extent the limits are
         determined to be inadequate based on either of these factors, or
         any other factors deemed relevant in the reasonable judgment of the
         parties, Cellnet shall increase such policy limits accordingly;
         provided that Cellnet shall be required to obtain such increased
         coverage only to the

                                     37

         extent it is available on commercially reasonable terms. In no
         event shall the limits of the policies be reduced.

ARTICLE 19
DISPUTE RESOLUTION

19.1 Dispute Procedure.

(a) Any dispute between the Parties either with respect to the interpretation of any provision of this Agreement or with respect to the performance by Cellnet or by Laclede hereunder shall be resolved as specified in this Section 19.1.

(b) Upon the written request of either Party to the other Party ("Written Request"), a dispute shall be discussed by the Parties. The Parties shall meet as often as necessary to gather and furnish to each Party all information with respect to the matter at issue that is appropriate and germane in connection with its resolution. The Parties shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding relating thereto.

(c) If the dispute is not resolved within thirty (30) days after the date of the Written Request, then the dispute shall be escalated to a Vice President of Laclede and the Chief Operating Officer of Cellnet for their review within forty-five (45) days after the date of the Written Request.

(d) If the dispute is not resolved as described in (c) above within sixty (60) days after the date of the Written Request, the dispute will be referred to mandatory mediation with the American Arbitration Association ("AAA") or other organization mutually agreeable to the Parties, at a mutually agreed location in St. Louis, Missouri. The Parties will agree upon the selection of a particular mediator as soon as reasonably practical, but failing such agreement within thirty (30) days after the issue is referred for mediation, the mediator will be selected by AAA. Any mediator so selected shall have substantial experience in the area of information technology infrastructure outsourcing and the energy industry.

(e) With the exception of applications to courts of competent jurisdiction for injunctive relief or any dispute relating to intellectual property rights, the Parties stipulate that the submission of disputes to mediation as provided in this Section 19.1, and mediation pursuant thereto, shall be a condition precedent to any suit, action or proceeding instituted in any court or before any administrative tribunal with respect to such dispute. The mediation provisions hereof shall, with respect to any dispute arising out of this Agreement, survive the termination or expiration of this Agreement.

(f) The Parties shall use reasonable effort to set the date of the mediation within sixty (60) days after selection of the mediator but in no event shall the mediation be set

38

                  more than ninety (90) days after selection of the
                  mediator. Each Party shall bear its own mediation costs
                  and expenses and all other costs and expenses of the
                  mediation shall be divided equally between the Parties.

         (g)      Notwithstanding any other provision of this Section 19.1,
                  either Party may resort to court action for injunctive
                  relief at any time if the dispute relates to intellectual
                  property rights or the dispute resolution processes set
                  forth in this Section 19.1 would permit or cause
                  irreparable injury to such Party or any third party
                  claiming against such Party, due to delay arising out of
                  the dispute resolution process.

19.2     Continued Performance. So long as Laclede continues to pay Cellnet
         ---------------------
         the Fees for the AMR Services in accordance with the terms of this
         Agreement, the Parties agree to continue performing their
         respective obligations under this Agreement while the dispute is
         being resolved, unless and until such obligations are terminated or
         expire in accordance with the provisions of this Agreement.

ARTICLE 20
GENERAL PROVISIONS

20.1     Cooperation by Cellnet and Laclede. Both Cellnet and Laclede shall
         ----------------------------------
         cooperate with each other to facilitate performance of the AMR
         Services and Laclede's operations affected by Cellnet and shall
         each timely provide information to the other as required for each
         to perform its responsibilities regarding the AMR Services.

20.2     Meetings and Presentations. Cellnet shall, at Laclede's request, at
         --------------------------
         no additional charge: (a) accompany Laclede to any meetings with
         the PSC and/or Office of Public Counsel (OPC), or other regulatory
         agencies to explain the technology that is the subject of this
         Agreement and provide any written information that may be requested
         by these agencies in connection with these meetings or otherwise;
         and (b) demonstrate the technology that is the subject of this
         Agreement to the PSC and/or OPC or other regulatory agency;
         provided, however, that after the Deployment Deadline, Cellnet
         shall not, without its consent, be required to spend more than
         twenty (20) hours per annum performing these services.

20.3     No Solicitation of Employees. During the Term and for 12 months
         ----------------------------
         after the expiration or earlier termination of this Agreement,
         neither Party to this Agreement shall solicit or otherwise seek to
         hire, whether as an employee or consultant, any persons employed by
         the other Party. Notwithstanding the foregoing, either Party shall
         have the right to hire as an employee or consultant any such person
         who approaches such Party for employment or who responds to a
         general advertisement soliciting employees.

20.4     Governing Law. This Agreement and any and all claims and disputes
         -------------
         arising out of or in connection with or related to the
         relationships and arrangements between Laclede and Cellnet
         described in this Agreement shall be governed by and construed in
         accordance with the laws of the State of Missouri, without regard
         to its conflict of law principles. The prevailing Party in any suit
         brought to enforce or interpret this Agreement shall be

                                     39

         entitled to recover its reasonable attorney's fees and related
         disbursements in addition to any other relief awarded.

20.5     Publicity. Within four (4) days after the Effective Date, the
         ---------
         Parties shall prepare and release a mutually acceptable press
         release announcing this Agreement and/or the Parties' contemplated
         business relationship. As an obligation of this Agreement, each
         Party agrees that it will not, without the prior written consent of
         the other in each instance: (i) use the name, trade name,
         trademark, trade device, service mark, logo, symbol or any
         abbreviation, contraction or simulation thereof, owned by the other
         Party (the "Marks") in any advertising, marketing, promotional
         materials, publicity, press release, references, internet posting
         or otherwise, or (ii) represent, directly or indirectly, that any
         product or service offered by any Party has been approved or
         endorsed by the other. These obligations will survive the
         expiration or other termination of this Agreement.

20.6     Entire Agreement. This Agreement and the Exhibits referenced herein
         ----------------
         constitute the entire agreement of the Parties with regard to the
         services and matters addressed therein, and all prior agreements,
         letters, proposals, discussions and other documents regarding the
         services and the matters addressed in the Agreement are superseded
         and merged into this Agreement. Amendments and modifications to
         this Agreement may not be made orally, but shall only be made by a
         written document signed by an authorized representative of each
         Party. Any terms and conditions varying from this Agreement on
         any order or written notification from either Party shall not be
         effective or binding on the other Party.

20.7     Force Majeure. Neither Party shall be liable for any default or
         -------------
         delay in the performance of its obligations hereunder if and to the
         extent and while such default or delay is caused, directly or
         indirectly, by a Force Majeure Event. If a Force Majeure Event
         occurs, the non-performing Party will be excused from any further
         performance or observance of the obligation(s) so affected for as
         long as such circumstances prevail and such Party continues to use
         commercially reasonable efforts to recommence performance or
         observance whenever and to whatever extent possible without delay.
         Any Party so delayed in its performance will immediately notify the
         other by telephone and describe at a reasonable level of detail the
         circumstances causing such delay (to be confirmed in writing within
         twenty-four (24) hours after the inception of such delay). If any
         delay on the part of either Party resulting from a Force Majeure
         Event exceeds sixty (60) days, the other Party shall have the right
         to terminate this Agreement on notice to the delayed Party.

20.8     Waiver. No waiver of any breach of any provision of this Agreement
         ------
         shall constitute a waiver of any prior, concurrent or subsequent
         breach of the same or any other provisions hereof.

20.9     Severability. If any provision of this Agreement shall be held to
         ------------
         be invalid, illegal or unenforceable, the validity, legality and
         enforceability of the remaining provisions shall not in any way be
         affected or impaired thereby, and such provision shall be deemed to
         be restated to reflect the Parties' original intentions as nearly
         as possible in accordance with applicable law(s).

                                     40

20.10    Counterparts. This Agreement may be executed in counterparts. Each
         ------------
         such counterpart shall be an original and together shall constitute
         but one and the same document.

20.11    Notices. All notices required to be sent under this Agreement,
         -------
         including notices of address changes, shall be sent by registered
         or certified mail, return receipt requested, by nationally
         recognized overnight delivery service or courier, or by facsimile.
         Notice to each Party shall be sent to the contacts listed below or
         as otherwise identified by the Parties in writing pursuant to this
         Section:

         If to Laclede:         Laclede Gas Company
                                Attn: Laclede AMR Program Manager
                                720 Olive Street
                                12th Floor
                                St. Louis, MO 63101
                                Phone: (314) 342-0620
                                Fax: (314) 241-2296

         With a Copy to:        Laclede Gas Company
                                Attn: Vice President - Finance
                                720 Olive Street
                                Suite 1301
                                St. Louis, MO 63101
                                Phone: (314) 342-0755
                                Fax: (314) 241-2278

         With a Copy to:        Laclede Gas Company
                                Attn: General Counsel
                                720 Olive Street
                                Suite 1500
                                St. Louis, MO 63101
                                Phone: (314) 342-0520
                                Fax: (314) 421-1979

         If to Cellnet:         Cellnet Technology, Inc.
                                Attn: Program Manager
                                1918 Innerbelt Business Center Drive
                                Overland, Missouri  63114
                                Phone: (314) 264-2633
                                Fax: (314) 264-2601

41

         With a Copy to:        Cellnet Technology, Inc.
                                Attn: General Counsel
                                30000 Mill Creek Avenue
                                Suite 100
                                Alpharetta, Georgia  30022
                                Phone: (678) 258-1608
                                Fax: (678) 258-1686

20.12    No Third Party Beneficiaries. Except as expressly provided herein,
         ----------------------------
         the Parties do not intend, nor will any Section hereof be
         interpreted, to create any third party beneficiary rights with
         respect to either of the Parties.

20.13    Consents and Approvals. The Parties agree that in any instance
         ----------------------
         where a consent, approval, acceptance or agreement is required or
         contemplated of a Party under this Agreement in order for the other
         Party to perform under or comply with the terms and conditions of
         this Agreement, then such Party will, unless otherwise provided,
         not unreasonably withhold or delay such consent, approval,
         acceptance or agreement and where consent, approval or agreement
         cannot be provided, the Party shall notify the other Party in a
         timely manner. In addition, each Party agrees to act reasonably and
         in good faith in respect to all other matters relating to or
         arising out of this Agreement.

20.14    Taxes. Cellnet shall be solely responsible for all federal, state
         -----
         and local income taxes assessed in connection with the provision of
         the services described in this Agreement.

         Cellnet shall be responsible for all sales and use taxes imposed in
         connection with the use or provision of the AMR Services, as well
         as personal property or similar taxes imposed in connection with
         the MIUs.

20.15    Headings. All headings herein and the table of contents are not to
         --------
         be considered in the construction or interpretation of any
         provision of this Agreement. This Agreement was drafted with the
         joint participation of both Parties and shall be construed neither
         against nor in favor of either, but rather in accordance with the
         fair meaning thereof.

20.16    Survival. All provisions of this Agreement relating to liability,
         --------
         warranties, indemnities, confidentiality, or non-disclosure, and
         the provisions of Articles 5, 19 and 20 and Section 11.3 of this
         Agreement, shall survive the expiration or termination of this
         Agreement.

20.17    Time is of the Essence. Time is of the essence in this Agreement.
         ----------------------
         Both parties shall work diligently to perform their respective
         obligations under this Agreement in a timely and expedient manner.
         Subject to the occurrence of a Force Majeure Event and any
         applicable cure period specified herein, in cases in which time
         deadlines are established for the performance of specific
         activities, these deadlines shall be treated as outer time limits
         for the parties' performance and not as target dates for
         performance. In all cases, the parties shall use reasonable effort
         to complete activities as soon as practicable.

                                      42

         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement

to be executed and delivered by their duly authorized representatives, as of the date first written above.

LACLEDE GAS COMPANY                    CELLNET TECHNOLOGY, INC.


By: /s/ Barry C. Cooper                By: /s/ Mike Zito

Name: Barry C. Cooper                  Name: Mike Zito

Title: Chief Financial Officer         Title: CEO

Date: March 11, 2005                   Date: March 2, 2005

43

APPENDIX A

INDEX OF DEFINITIONS

The terms used herein shall have the following meanings.

1. Accessible Meter - is any Laclede Gas Meter (i) of a type listed on Exhibit 5-C; (ii) with respect to which the data provided to Cellnet pursuant to Section 2.3(g) does not preclude Cellnet from installing the MIU; (iii) not obstructed or blocked in a manner that prohibits reasonable access; (iv) the condition of which does not make installation of the MIU impractical in terms of time or expense; and (v) Cellnet or the MIU Installer has access to the premises and the Laclede Gas Meter. For purposes of clarity, a Laclede Gas Meter is not an Accessible Meter if Cellnet or the MIU Installer contacts the occupant on six occasions as required by
Section 2.1(c)(ii)(A) but is unable to install a MIU or schedule an appointment for MIU installation where access to the Laclede Gas Meter is not available without the cooperation of the occupant or owner of the premises.

2. Actual Read - Information relating to the actual measurement of gas usage received by the Fixed Network.

3. Activated Meter - is a Laclede Gas Meter that is on an activated Route, that has a MIU installed, on which Cellnet has received the designation and installation information via the Cellnet Standard Interface; and from which Cellnet has received a successful meter read. For purposes of this definition, a meter shall not be considered an Activated Meter if it is an Unavailable Meter.

4. Affiliate - With respect to a Party to this Agreement, any person or entity that controls, is controlled by, or is under common control with such Party.

5. Agreement - This Automated Meter Reading Services Agreement between

Cellnet Technology, Inc. and Laclede Gas Company.

6. Asset Fee - Defined in Section 2.3(a).

7. Automated Meter Reading Services ("AMR Services") - The services to be provided under this Agreement.

8. Bankruptcy Code - The United States Bankruptcy Code, as amended.

9. Billing Window - A five (5) day period of time prior to the scheduled billing day that a meter reading can be made available by Cellnet and entered into Laclede's billing system.

10. Business Day - Monday through Friday, excluding all federal and state holidays for which banks in the State of Missouri are not open for business, from the hours of 8 a.m. to 8 p.m. Unless specified as a Business Day, a day is defined as a calendar day.

11. Cellnet Intellectual Property - Defined in Section 4.1.

44

12. Cellnet Standard Interface - The format of the Fixed Network Data made available to Laclede via the FTP Server.

13. Change - Defined in Section 7.1.

14. Change Order - Defined in Section 7.2(a).

15. Confidential Information - Defined in the Section 9.1.

16. Contract Year - Each period of twelve (12) consecutive months with the first such year beginning on the Effective Date.

17. Daily Reliability Penalty - The monetary penalty assessed by Laclede against Cellnet for the failure by Cellnet to achieve the respective required daily reliability percentages set forth in
Section 2.2(d) of this Agreement.

18. Deployment Deadline - Twenty-four (24) months after the Effective

Date.

19. Deployment Period - The period during which Cellnet is installing the MIUs as described in Article 2.

20. Deployment Schedule - The timeline for the initial installation of the Fixed Network as determined by mutual agreement of the Parties.

21. Disclosing Party - Defined in Section 9.1.

22. Effective Date - Defined in Section 2.7.

23. Fee - Defined in Section 2.3(a).

24. Fixed Network - The network to be established and operated by Cellnet, which includes MIUs installed on Laclede Gas Meters, MCCs installed on structures, poles and/or towers, the NOC, the communication link between the MCCs and the NOC, and all other equipment necessary for the operation of the Fixed Network.

25. Fixed Network Area - Defined in the fourth Recital.

26. Fixed Network Data - All MIU consumption and tamper information collected or processed for Laclede through the Fixed Network.

27. Fixed Network Meter - Any Laclede Gas Meter within the Fixed Network Area with an installed MIU.

28. FTP Server - Means the file transfer protocol server on which Cellnet posts the Fixed Network Data for collection by Laclede.

29. Force Majeure Event - Any event or circumstance that is beyond the reasonable control of either Party and that results in or causes the failure of that Party to perform any of its

45

obligations under this Agreement, including, without limitation, an act of God, judicial or regulatory action or inaction, strike or lockout, war (declared or undeclared), threat of war, terrorist act, blockade, revolution, riot, insurrection, sabotage, vandalism, fire, storm, flood, earthquake, hurricane, tornado, explosion or failure of communications or power systems, or radio frequency interference caused by third parties. Lack of funds shall not be interpreted as an event beyond a Party's reasonable control. Nothing contained herein shall be construed to require either Party to avoid or settle a strike against its will or to avoid picketing at any location.

30. Initial Fixed Network Deployment Phase - Defined in Section 1.1.

31. Initial Term - Defined in Section 2.7.

32. Insolvent Entity - A Party that (a) institutes or has instituted against it proceedings to be adjudicated bankrupt or insolvent, unless with respect to the institution against it of such proceedings, such proceedings are dismissed within sixty (60) calendar days after the institution of such proceedings, (b) consents to the institution of bankruptcy or insolvency proceedings against it, (c) files a petition, answer or consent seeking reorganization or relief under federal or state bankruptcy laws,
(d) consents to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) with respect to itself for any substantial part of its property, (e) makes an assignment for the benefit of creditors, or (f) admits in writing its inability to pay its debts generally as they become due.

33. Intellectual Property - All copyrights, patents, utility models, trade marks, service marks, design rights (whether registered or unregistered), database rights, semiconductor topography rights, proprietary information rights, know-how and all other similar proprietary rights as may exist anywhere in the world.

34. Laclede Gas Data - All information relating to Laclede customers' gas usage, including, without limitation, customers' names, addresses and account numbers, volume and/or patterns of gas usage, MIU identification, meter number, number of pulses counted, index type, index drive factor, index pressure, index base pressure and tamper flag, and any other Laclede gas customer data or information collected and/or transmitted via the Fixed Network.

35. Laclede Gas Meters - All gas meters owned and/or operated by

Laclede.

36. Laclede Interface - Defined in Section 1.2(b).

37. Manual Reads. Any references to manual meter reads, the manual reading of meters, or similar language in this Agreement means either the actual physical reading of the meter or the reading of the meter/MIU utilizing Cellnet's park-n-read system or other mobile or drive-by method.

38. Marks - Defined in Section 20.5.

46

39. Material Change - Defined in Section 7.1.

40. Meter Database (MDB) - The repository of all meter data received by the NOC. The MDB will contain the Fixed Network Data and the Laclede Gas Data.

41. MCC - The radio transceiving device or devices that receives the

transmissions from the MIUs and relays the data by radio frequency to the NOC.

42. MIU - An electronic radio meter interface device that is installed

on Laclede Gas Meters and transmits meter reading information by radio frequency to the MCCs.

43. MIU Installer - Defined in Section 1.3(c).

44. Minimum Daily Reliability Penalty - The monetary penalty assessed by Laclede against Cellnet for the failure by Cellnet to achieve the respective minimum daily reliability percentages set forth in
Section 2.2(d) of this Agreement.

45. Minimum Monthly Reliability Penalty - The monetary penalty assessed by Laclede against Cellnet for the failure by cellnet to achieve the respective minimum reliability percentages for each billing day set forth in Section 2.2(d) of this Agreement.

46. Monthly Reliability Penalty - The monetary penalty assessed by Laclede against Cellnet for the failure by Cellnet to achieve the respective required monthly reliability percentages set forth in
Section 2.2(d) of this Agreement.

47. Network Operations Center ("NOC") - The combined hardware and software platform that receives and stores meter information from the MCCs.

48. Network Operations Center Software ("NOC Software") - The software necessary for the operation of the NOC.

49. Party or Parties - Means Cellnet and/or Laclede.

50. Per Read Fee - Defined in Section 2.3(a).

51. Programming Software - The GPrep MIU programming software, which is developed by or for Cellnet, as described in Section 2.1 (f).

52. Public Service Commission (PSC) - PSC or any successor agency with regulatory authority over Laclede in the State of Missouri.

53. Quality Assurance Plan - The procedures defined and used to ensure installation of MIUs are in compliance with the terms of this Agreement.

54. Recipient - Defined in Section 9.1.

47

55. Reliability Penalty - The collective reference for the Daily Reliability Penalty, Minimum Daily Reliability Penalty, Monthly Reliability Penalty and Minimum Monthly Reliability Penalty.

56. Requesting Party - Defined in Section 7.2(a).

57. Responding Party - Defined in Section 7.2(a).

58. Routes - The various geographical areas containing approximately 250 to 600 Laclede Gas Meters each agreed upon by Laclede and Cellnet into which Laclede's service territory will be divided for purposes of the initial installation of the MIUs.

59. Intentionally Omitted.

60. Standard Interface Specifications - Defined in Section 1.2(b).

61. Term - The Initial Term and all renewal terms, if any.

62. Test Meters - Defined in Section 1.2(a).

63. Training Plan - Defined in Section 6.1.

64. Transition Services - Defined in Section 11.3(d)(i).

65. Unavailable Meter - Means a Laclede Gas Meter (i) that is damaged or vandalized by any person other than Cellnet in such a way that prevents proper operation, including communication with the Fixed Network, of the MIU; (ii) on which a MIU is not functioning and/or not reporting and Cellnet has not been able to repair the MIU because (a) Laclede has not provided Cellnet with accurate and up-to-date customer information; or (b) physical access to the Laclede Gas Meter, after commercially reasonable efforts by Cellnet, is not available; or (iii) that is otherwise not functioning because of a cause unrelated to the MIU, which is outside of Cellnet's control.

66. Written Request - Defined in Section 19.1(b).

48

EXHIBIT 6

ADJUSTMENT TO MONTHLY MIU FEE

The Monthly MIU Fee shall be adjusted in accordance with this Exhibit 6.

(a) For purposes of this Exhibit 6, the following capitalized terms have the respective meanings set forth below:

"Number of MIUs Condemned", for a given Contract Year, equals the number of Laclede Gas Meters with MIUs removed from service in such Contract Year that Laclede is not able to reuse on other Laclede Gas Meters.

"Number of MIUs Reconditioned", for a given Contract Year, equals the number of MIUs (of the Number of MIUs Condemned) that Cellnet is able to recondition and reuse for other than Laclede Gas Meters in such Contract Year. The Number of MIUs Reconditioned includes MIUs that were retired in a previous Contract Year, held in inventory, and subsequently reconditioned and reused.

"Net Number of MIUs Retired", for a given Contract Year, equals the Number of MIUs Condemned minus the Number of MIUs Reconditioned in such Contract Year.

"Number of MIU Startups", for a given Contract Year, equals the number of MIUs provided by Cellnet for installation on Laclede Gas Meters in such Contract Year, excluding the number of MIUs Cellnet is required to replace under the terms of this Agreement.

"MIU Retirement Unit Cost", for a given Contract Year, equals the amount in the row so named for such Contract Year in the chart attached as Appendix A.

"MIU Startup Unit Cost", for a given Contract Year, equals the amount in the row so named for such Contract Year as shown on Appendix A.

"Number of Annual Reads" equals the actual number of MIU readings that were subject to the Per Read Fee in a given Contract Year.

"Total Annual Reconditioning Cost", for a given Contract Year, equals the Number of MIUs Reconditioned multiplied by $5.

"Total Annual Retirement Cost", for a given Contract Year, equals the Net Number of MIUs Retired multiplied by the MIU Retirement Unit Cost.

"Total Annual Startup Cost", for a given Contract Year, equals the Number of MIU Startups multiplied by the MIU Startup Unit Cost.

The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

"Total Actual Annual Cost", for a given Contract Year, equals the sum of (i) the Total Annual Reconditioning Cost for such Contract Year, (ii) the Total Annual Retirement Cost for such Contract Year, and (iii) the Total Annual Startup Cost for such Contract Year.

"Total Projected Annual Cost", for a given Contract Year, equals the amount in the row "Total Projected Cost" for such Contract Year in the chart attached as Appendix A.

"Annual Cost Differential", for a given Contract Year, equals the difference between the Total Actual Annual Cost for such Contract Year and the Total Projected Annual Cost for such Contract Year.

"Cumulative Actual Annual Cost" equals the sum of Total Actual Annual Costs for Contract Years that have not been included in a calculation that resulted in an increase or decrease in the Monthly MIU Fee pursuant to
Section (b) of this Exhibit 6.

"Cumulative Projected Annual Cost" equals the sum of Total Projected Annual Costs for Contract Years that have not been included in a calculation that resulted in an increase or decrease in the Monthly MIU Fee pursuant to
Section (b) of this Exhibit 6.

"Cumulative Annual Cost Differential" equals the Cumulative Actual Annual Cost less the Cumulative Projected Annual Cost.

"Reconditionable MIU", means a MIU that Laclede removes from a Laclede Gas Meter and is not able to reuse, but for which Cellnet has indicated in writing that it has another customer that has a gas meter or gas meters with which such a MIU is compatible and who is willing to accept reconditioned MIUs. Cellnet shall provide a list of meter types on which it can utilize a Reconditionable MIU within 30 days of the execution of this Agreement and update or confirm such list from time to time, but at least annually within 30 days after the first day of each Contract Year.

(b) If the Cumulative Annual Cost Differential is greater than $[*******], the Monthly MIU Fee shall be increased or decreased (as applicable) in accordance with the procedures set forth below. If the Cumulative Annual Cost Differential is less than or equal to $[*******], there shall be no increase or decrease in the Monthly MIU Fee pursuant to this Exhibit 6.

(c) If the Cumulative Actual Annual Cost exceeds the Cumulative Projected Annual Cost by more than $[*******], or if the Cumulative Projected Annual Cost exceeds the Cumulative Actual Annual Cost by more than $[*******], the Monthly MIU Fee for future reads shall be increased or decreased, as applicable, as follows:

(i) First, the Cumulative Annual Cost Differential shall be amortized over the remaining number of months of this Agreement at an annual interest rate of [*]% to determine a monthly payment amount. Such monthly payment amount will be multiplied by the number of months remaining on this Agreement to determine the "Future Value of the Cumulative Annual Cost Differential";

The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

(ii) Second, the "Total Number of Remaining Reads" shall be determined as follows. The Number of Annual Reads for the previous Contract Year (the "Base Year") will be used as a base-line and the number of reads for each subsequent Contract Year ("Number of Assumed Reads") will assume a [*]% increase over each immediately preceding Contract Year. For each Contract Year, the Number of Assumed Reads for such Contract Year shall equal the Number of Assumed Reads for the previous Contract Year multiplied by [****]. The "Total Number of Remaining Reads" shall be (A) the sum of the Number of Assumed Reads for each Contract Year (if any) subsequent to the Base Year, less (B) the product of a fraction whose numerator is an amount equal to the number of months in the first Contract Year subsequent to the Base Year prior to implementation of the increase or decrease to the Monthly MIU Fee and whose denominator is 12, multiplied by the Assumed Reads in such Contract Year;

(iii) Third, determine the "Read Cost Differential" by dividing the Future Value of the Cumulative Annual Cost Differential by the Total Number of Remaining Reads and rounding the result to tenths of a cent; and

(iv) Fourth,

(A) If the Cumulative Actual Annual Cost exceeds the Cumulative Projected Annual Cost by more than $[*******], the Monthly MIU Fee for future reads shall be increased by an amount equal to the Read Cost Differential, or

(B) If the Cumulative Projected Annual Cost exceeds the Cumulative Actual Annual Cost by more than $[*******], the Monthly MIU Fee for future reads shall be decreased by an amount equal to the Read Cost Differential.

(C) In the event the Monthly MIU Fee is increased or decreased as described above in this subsection (c)(iv), then the cumulative cost calculation described in this Exhibit 6 is started over at zero for the next Contract Year.

(v) Solely for purposes of reference, an example of the foregoing four-step calculation is attached as Appendix B.

(d) There shall be no adjustment under this Exhibit 6 for the first, second, or third Contract Year. The first adjustment to the Monthly MIU Fee described in this Exhibit 6 shall be calculated at the beginning of the fourth Contract Year (which will commence during 2008) using the third Contract Year as the Base Year and then again for every Contract Year thereafter, and if applicable, the Monthly MIU Fee for the next Contract Year will be increased or decreased, as applicable, from the Monthly MIU Fee for the Base Year, as such Monthly MIU Fee has been previously adjusted, if applicable, in accordance with this Exhibit 6.

(e) Notwithstanding anything contained in this Exhibit 6 or the Agreement to the contrary, if the Cumulative Annual Cost Differential is greater than $[*******], the Read Cost Differential shall be calculated assuming a Cumulative Annual Cost Differential of $[*******]. The excess Cumulative Annual Cost Differential over $[*******] shall be paid by Laclede to Cellnet (if the Cumulative Actual Annual Cost exceeds the Cumulative Projected Annual Cost),


or by Cellnet to Laclede (if the Cumulative Projected Annual Cost exceeds the Cumulative Actual Annual Cost) within 30 days after the final determination of the Cumulative Annual Cost Differential.

(f) During the term of the Agreement, not later than 30 days after the end of each month, Laclede shall send a statement to Cellnet showing the Number of MIUs Condemned in the previous month. Laclede shall, at its own cost and expense, ship all Reconditionable MIUs to Cellnet's facility in Laclede's service area.

(g) Not later than 45 days after the first day of each Contract Year (beginning in 2008), Cellnet shall deliver a certificate (the "Certificate") to Laclede setting forth the adjustment to the Monthly MIU Fee (if any) for such Contract Year, or stating that no adjustment is required, along with supporting calculations in reasonable detail. If, within 30 days after delivery of the Certificate, Laclede alleges that the Certificate has not been prepared in accordance with this Exhibit 6 or that the Certificate contains a mathematical mistake or other error, Laclede shall deliver to Cellnet within such period a written notice (a "Notice of Disagreement") specifying in reasonable detail all disputed items and the basis therefor, including reasonable detail. Subject to the rights described in Article 17, the failure by Laclede to provide a Notice of Disagreement to Cellnet within such 30-day period will constitute the acceptance by Laclede of the Certificate, and in such event the calculations and other determinations set forth in the Certificate shall be the final calculations and other determinations for the Contract Year in question. During the 15-day period following the delivery of any Notice of Disagreement or such longer period as Cellnet and Laclede shall mutually agree, representatives of Cellnet and Laclede shall meet and seek in good faith to resolve in writing any differences that Cellnet and Laclede may have with respect to the matters specified in such Notice of Disagreement. If, at the end of such 15-day period (or such longer period as mutually agreed), Cellnet and Laclede have not resolved such differences, the dispute shall be submitted to the dispute resolution procedure contained in Sections 19.1(d), (e), (f) and (g) of the Agreement.

(h) Notwithstanding the adjustments provide for in this Exhibit 6, the parties shall use commercially reasonable efforts to maximize the use of reconditioned MIUs.


The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

                                                             APPENDIX A


PROJECTED COST OF STARTUP AND RETIREMENT ACTIVITY

                                     YEAR 3        YEAR 4        YEAR 5        YEAR 6        YEAR 7        YEAR 8        YEAR 9
                                     ------        ------        ------        ------        ------        ------        ------
NET MIUS RECONDITIONED              [***]         [***]         [***]         [***]         [***]         [***]         [***]

MIU RECONDITIONING UNIT COST        $ [*]         $ [*]         $ [*]         $ [*]         $ [*]         $ [*]         $ [*]

MIU RECONDITIONING ANNUAL COST      $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]

NET MIUS RETIRED                    [*****]       [*****]       [*****]       [*****]       [*****]       [*****]       [*****]

MIU RETIREMENT UNIT COST            $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]

MIU RETIREMENT ANNUAL COST          $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [******]    $ [******]    $ [******]

MIU STARTUP UNITS                   [*****]       [*****]       [*****]       [*****]       [*****]       [*****]       [*****]

MIU STARTUP UNIT COST               $ [****]      $ [****]      $ [****]      $ [*****]     $ [*****]     $ [*****]     $ [*****]

MIU STARTUP ANNUAL COST             $ [*]         $ [*]         $ [*]         $ [*******]   $ [*******]   $ [*******]   $ [*******]
                                    ----------------------------------------------------------------------------------------------

TOTAL PROJECTED COST                $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [******]    $ [******]    $ [******]
                                    ==============================================================================================

                                    YEAR 10       YEAR 11       YEAR 12       YEAR 13       YEAR 14       YEAR 15
                                    -------       -------       -------       -------       -------       -------
NET MIUS RECONDITIONED              [***]         [***]         [***]         [***]         [***]         [***]

MIU RECONDITIONING UNIT COST        $ [*]         $ [*]         $ [*]         $ [*]         $ [*]         $ [*]

MIU RECONDITIONING ANNUAL COST      $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]

NET MIUS RETIRED                    [*****]       [*****]       [*****]       [*****]       [*****]       [*****]

MIU RETIREMENT UNIT COST            $ [*****]     $ [****]      $ [****]      $ [****]      $ [****]      $ [****]

MIU RETIREMENT ANNUAL COST          $ [******]    $ [*]         $ [*]         $ [*]         $ [*]         $ [*]

MIU STARTUP UNITS                   [*****]       [*****]       [*****]       [*****]       [*****]       [*****]

MIU STARTUP UNIT COST               $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]     $ [*****]

MIU STARTUP ANNUAL COST             $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [*******]
                                    --------------------------------------------------------------------------------

TOTAL PROJECTED COST                $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [*******]   $ [*******]
                                    ================================================================================


The information below marked by * and [] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.

EXHIBIT 8
PER READ FEE COMPONENTS

         Monthly MIU Asset Fee                       $[*****]/meter

         Base Cost Fee                               $[*****]/meter

TOTAL MONTHLY MIU FEE                                $[*****]/METER

         Monthly Service Fee                         $[*****]/meter

TOTAL MONTHLY FEE                                    $[*****]/METER


Exhibit 12

                                  THE LACLEDE GROUP, INC. AND SUBSIDIARY COMPANIES

                           SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                         -----------------------------------------------------------------


                                                                   Twelve Months Ended
                                     ---------------------------------------------------------------------------------
                                        March 31,                               September 30,
                                     ----------------    -------------------------------------------------------------
(Thousands of Dollars)                     2005               2004         2003        2002        2001        2000
                                           ----               ----         ----        ----        ----        ----
Income before interest
 charges and income taxes                    $87,371          $84,196     $80,270     $60,440      $73,742    $64,078
Add: One third of
   applicable rentals
   charged to operating
   expense (which
   approximates the
   interest factor)                            2,765            2,333       2,873       2,662          313        310
                                     ----------------    -------------------------------------------------------------
       Total Earnings                        $90,136          $86,529     $83,143     $63,102      $74,055    $64,388
                                     ================    =============================================================


Interest on long-term debt -
 Laclede Gas                                 $23,932          $22,010     $20,169     $20,820      $18,372    $15,164
Other interest                                 7,008            6,804       6,802       4,989       10,067      8,844
Add: One third of
   applicable rentals
   charged to operating
   expense (which
   approximates the
   interest factor)                            2,765            2,333       2,873       2,662          313        310
                                     ----------------    -------------------------------------------------------------
       Total Fixed Charges                   $33,705          $31,147     $29,844     $28,471      $28,752    $24,318
                                     ================    =============================================================


Ratio of Earnings to Fixed
 Charges                                        2.67             2.78        2.79        2.22         2.58       2.65

                                                LACLEDE GAS COMPANY

                           SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                         -----------------------------------------------------------------

                                                                   Twelve Months Ended
                                     ---------------------------------------------------------------------------------
                                        March 31,                               September 30,
                                     ----------------    -------------------------------------------------------------
(Thousands of Dollars)                     2005               2004         2003        2002        2001        2000
                                           ----               ----         ----        ----        ----        ----
Income before interest
 charges and income taxes                   $70,623         $73,956     $76,274      $56,154      $73,742     $64,078
Add: One third of
   applicable rentals
   charged to operating
   expense (which
   approximates the
   interest factor)                             769             538         457          315          313         310
                                     ----------------    -------------------------------------------------------------
       Total Earnings                       $71,392         $74,494     $76,731      $56,469      $74,055     $64,388
                                     ================    =============================================================

Interest on long-term debt                  $23,932         $22,010     $20,169      $20,820      $18,372     $15,164
Other interest                                3,382           3,192       3,752        4,285       10,067       8,844
Add: One third of
   applicable rentals
   charged to operating
   expense (which
   approximates the
   interest factor)                             769             538         457          315          313         310
                                     ----------------    -------------------------------------------------------------
       Total Fixed Charges                  $28,083         $25,740     $24,378      $25,420      $28,752     $24,318
                                     ================    =============================================================


Ratio of Earnings to Fixed
 Charges                                       2.54            2.89        3.15         2.22         2.58        2.65


Exhibit 31

CERTIFICATION

I, Douglas H. Yaeger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Laclede Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) THIS PARAGRAPH INTENTIONALLY OMITTED AS PERMITTED IN RELEASE NO. 34-47986.

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are
                           reasonably likely to adversely affect the
                           registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a
                           significant role in the registrant's internal
                           control over financial reporting.

Date:    April 26, 2005                 Signature:  /s/ Douglas H. Yaeger
     ----------------------           -------------------------------------
                                        Douglas H. Yaeger
                                        Chairman of the Board,
                                         President and Chief
                                         Executive Officer


CERTIFICATION

I, Barry C. Cooper, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Laclede Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) THIS PARAGRAPH INTENTIONALLY OMITTED AS PERMITTED IN RELEASE NO. 34-47986.

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are
                           reasonably likely to adversely affect the
                           registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a
                           significant role in the registrant's internal
                           control over financial reporting.

Date:    April 26, 2005                      Signature:  /s/ Barry C. Cooper
     ----------------------                 -----------------------------------
                                             Barry C. Cooper
                                             Chief Financial Officer


CERTIFICATION

I, Douglas H. Yaeger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Laclede Gas Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) THIS PARAGRAPH INTENTIONALLY OMITTED AS PERMITTED IN RELEASE NO. 34-47986.

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are
                           reasonably likely to adversely affect the
                           registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a
                           significant role in the registrant's internal
                           control over financial reporting.

Date:    April 26, 2005                     Signature:  /s/ Douglas H. Yaeger
     ----------------------                -------------------------------------
                                            Douglas H. Yaeger
                                            Chairman of the Board,
                                             President and Chief
                                             Executive Officer


CERTIFICATION

I, Barry C. Cooper, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Laclede Gas Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) THIS PARAGRAPH INTENTIONALLY OMITTED AS PERMITTED IN RELEASE NO. 34-47986.

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are
                           reasonably likely to adversely affect the
                           registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a
                           significant role in the registrant's internal
                           control over financial reporting.

Date:    April 26, 2005                      Signature: /s/ Barry C. Cooper
     ---------------------                  -----------------------------------
                                             Barry C. Cooper
                                             Chief Financial Officer


Exhibit 32

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief Executive Officer of The Laclede Group, Inc., hereby certify that

(a) To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(b) To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date: April 26, 2005

  /s/ Douglas H. Yaeger
------------------------------------
  Douglas H. Yaeger
  Chairman of the Board, President
  and Chief Executive Officer


Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Barry C. Cooper, Chief Financial Officer of The Laclede Group, Inc. hereby certify that

(a) To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(b) To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date:    April 26, 2005
     ------------------------
                                            /s/ Barry C. Cooper
                                           ----------------------------------
                                            Barry C. Cooper
                                            Chief Financial Officer


Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief Executive Officer of Laclede Gas Company, hereby certify that

(a) To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(b) To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of Laclede Gas Company.

Date     April 26, 2005
    ------------------------
                                           /s/ Douglas H. Yaeger
                                          ------------------------------------
                                           Douglas H. Yaeger
                                           Chairman of the Board, President
                                           and Chief Executive Officer


Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Barry C. Cooper, Chief Financial Officer of Laclede Gas Company, hereby certify that

(a) To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(b) To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of Laclede Gas Company.

Date:    April 26, 2005
     -----------------------
                                            /s/ Barry C. Cooper
                                           ---------------------------------
                                            Barry C. Cooper
                                            Chief Financial Officer


Exhibit 99.1

                                                   LACLEDE GAS COMPANY
                                                  STATEMENTS OF INCOME
                                                       (UNAUDITED)

(Thousands)


                                                     Three Months Ended            Six Months Ended
                                                          March 31,                    March 31,
                                                  -------------------------     -------------------------
                                                       2005         2004             2005         2004
                                                       ----         ----             ----         ----
Operating Revenues:
  Utility                                            $ 434,996    $ 396,898        $ 726,249    $ 658,248
  Other                                                    574          628            1,154        1,260
                                                  -------------------------     -------------------------
      Total Operating Revenues                         435,570      397,526          727,403      659,508
                                                  -------------------------     -------------------------
Operating Expenses:
  Utility
    Natural and propane gas                            321,228      288,284          527,652      463,559
    Other operation expenses                            34,675       32,808           65,600       62,291
    Maintenance                                          4,680        4,641            8,894        9,070
    Depreciation and amortization                        5,667        5,711           10,972       11,369
    Taxes, other than income taxes                      26,477       24,897           42,300       39,729
                                                  -------------------------     -------------------------
      Total utility operating expenses                 392,727      356,341          655,418      586,018
  Other                                                    618          619            1,198        1,224
                                                  -------------------------     -------------------------
      Total Operating Expenses                         393,345      356,960          656,616      587,242
                                                  -------------------------     -------------------------
Operating Income                                        42,225       40,566           70,787       72,266
                                                  -------------------------     -------------------------
Other Income and (Income Deductions) - Net                 (87)       1,857            1,423        3,277
                                                  -------------------------     -------------------------
Interest Charges:
  Interest on long-term debt                             5,643        4,815           11,551        9,629
  Other interest charges                                 1,302          987            2,259        2,069
                                                  -------------------------     -------------------------
      Total Interest Charges                             6,945        5,802           13,810       11,698
                                                  -------------------------     -------------------------
Income Before Income Taxes                              35,193       36,621           58,400       63,845
Income Tax Expense                                      12,676       13,241           20,781       23,109
                                                  -------------------------     -------------------------
Net Income                                              22,517       23,380           37,619       40,736
Dividends on Redeemable Preferred Stock                     15           15               30           31
                                                  -------------------------     -------------------------
Earnings Applicable to Common Stock                  $  22,502    $  23,365        $  37,589    $  40,705
                                                  =========================     =========================


See notes to financial statements.

1

                                              LACLEDE GAS COMPANY
                                                 BALANCE SHEETS
                                                  (UNAUDITED)

                                                                  Mar. 31,          Sept. 30,          Mar. 31,
                                                                    2005               2004              2004
                                                                    ----               ----              ----
(Thousands)

                          ASSETS

Utility Plant                                                    $1,093,093         $1,070,522         $1,050,823
  Less: Accumulated depreciation and amortization                   431,568            423,647            416,767
                                                             ---------------     --------------    ---------------
      Net Utility Plant                                             661,525            646,875            634,056
                                                             ---------------     --------------    ---------------
Other Property and Investments                                       30,497             29,664             29,190
                                                             ---------------     --------------    ---------------
Current Assets:
  Cash and cash equivalents                                           4,907              2,340              7,997
  Accounts receivable:
       Gas customers - billed and unbilled                          148,776             76,223            127,261
       Associated companies                                             439                300              2,679
       Other                                                         53,671             11,231             35,466
       Allowances for doubtful accounts                             (10,921)            (9,975)            (7,775)
  Delayed customer billings                                          26,867                  -             36,141
  Inventories:
    Natural gas stored underground at LIFO cost                      32,682            131,725             29,417
    Propane gas at FIFO cost                                         19,982             15,808             12,914
    Materials, supplies, and merchandise at avg. cost                 4,748              4,588              4,560
  Derivative instrument assets                                        8,034             15,196              7,098
  Unamortized purchased gas adjustments                               7,724             19,618                  -
  Deferred income taxes                                               6,897              1,321              5,694
  Prepayments and other                                               4,293              6,211              3,845
                                                             ---------------     --------------    ---------------
      Total Current Assets                                          308,099            274,586            265,297
                                                             ---------------     --------------    ---------------
Deferred Charges:
  Prepaid pension cost                                               87,292             92,026            104,790
  Regulatory assets                                                 104,293            104,703             98,313
  Other                                                               5,347              8,127              7,643
                                                             ---------------     --------------    ---------------
      Total Deferred Charges                                        196,932            204,856            210,746
                                                             ---------------     --------------    ---------------
Total Assets                                                     $1,197,053         $1,155,981         $1,139,289
                                                             ===============     ==============    ===============



See notes to financial statements.


                                     2

                                              LACLEDE GAS COMPANY
                                           BALANCE SHEETS (Continued)
                                                  (UNAUDITED)

                                                                    Mar. 31,          Sept. 30,          Mar. 31,
                                                                      2005               2004              2004
                                                                      ----               ----              ----
(Thousands, except share amounts)
                CAPITALIZATION AND LIABILITIES
Capitalization:
  Common stock and Paid-in capital (10,031, 10,000 and
  10,000 shares issued, respectively)                               $  138,117        $  136,052        $   89,539
  Retained earnings                                                    217,618           194,451           217,275
  Accumulated other comprehensive loss                                    (371)             (371)             (582)
                                                                 --------------    --------------    --------------
      Total common stock equity                                        355,364           330,132           306,232
  Redeemable preferred stock (less current sinking fund
    requirements)                                                          948             1,108             1,108
  Long-term debt (less current portion)                                333,985           333,936           234,661
                                                                 --------------    --------------    --------------
      Total Capitalization                                             690,297           665,176           542,001
                                                                 --------------    --------------    --------------
Current Liabilities:
  Notes payable                                                         86,230            71,380           191,415
  Accounts payable                                                      83,920            44,505            55,906
  Accounts payable - associated companies                                2,710               834             2,891
  Advance customer billings                                                  -            23,620                 -
  Current portion of long-term debt and preferred stock                     95            25,145            25,150
  Wages and compensation accrued                                        13,338            13,256            12,636
  Dividends payable                                                      7,366             7,214             6,601
  Customer deposits                                                     11,220            10,661             7,799
  Interest accrued                                                       9,835            10,623             7,059
  Taxes accrued                                                         37,872            17,669            31,193
  Unamortized purchased gas adjustment                                       -                 -             1,458
  Other                                                                  5,013             3,232             5,191
                                                                 --------------    --------------    --------------
      Total Current Liabilities                                        257,599           228,139           347,299
                                                                 --------------    --------------    --------------
Deferred Credits and Other Liabilities:
  Deferred income taxes                                                188,889           187,831           184,335
  Unamortized investment tax credits                                     4,844             5,010             5,163
  Pension and postretirement benefit costs                              20,242            20,484            24,635
  Regulatory liabilities                                                14,544            28,210            13,878
  Other                                                                 20,638            21,131            21,978
                                                                 --------------    --------------    --------------
      Total Deferred Credits and Other Liabilities                     249,157           262,666           249,989
                                                                 --------------    --------------    --------------
Total Capitalization and Liabilities                                $1,197,053        $1,155,981        $1,139,289
                                                                 ==============    ==============    ==============



See notes to financial statements.

3

                                               LACLEDE GAS COMPANY
                                            STATEMENTS OF CASH FLOWS
                                                  (UNAUDITED)

                                                                                 Six Months Ended
                                                                                     March 31,
                                                                          --------------------------------
                                                                                2005               2004
                                                                                ----               ----
(Thousands)
Operating Activities:
 Net Income                                                                   $  37,619          $ 40,736
 Adjustments to reconcile net income
  to net cash provided by (used in) operating activities:
    Depreciation and amortization                                                10,972            11,369
    Deferred income taxes and investment
      tax credits                                                                (1,328)            2,528
    Other - net                                                                     263               215
    Changes in assets and liabilities:
      Accounts receivable - net                                                (114,186)          (76,100)
      Unamortized purchased gas adjustments                                      11,894            (4,407)
      Deferred purchased gas costs                                              (14,690)           26,911
      Delayed customer billings - net                                           (50,487)          (51,502)
      Accounts payable                                                           41,291             6,556
      Taxes accrued                                                              20,203            14,906
      Natural gas stored underground                                             99,043            87,765
      Other assets and liabilities                                               11,035            15,968
                                                                          --------------     -------------
          Net cash provided by operating activities                           $  51,629          $ 74,945
                                                                          --------------     -------------

Investing Activities:
  Construction expenditures                                                     (25,645)          (24,719)
  Net investment in trusts                                                       (1,149)           (1,702)
  Other investments                                                                 339               759
                                                                          --------------     -------------
          Net cash used in investing activities                               $ (26,455)         $(25,662)
                                                                          --------------     -------------

Financing Activities:
  Maturity of first mortgage bonds                                              (25,000)                -
  Issuance (repayment) of short-term debt - net                                  14,850           (38,325)
  Dividends paid                                                                (14,312)          (12,818)
  Paid-in capital contributions from Laclede Group                                1,014             6,950
  Issuance of common stock to Laclede Group                                       1,051                 -
  Preferred stock reacquired                                                       (210)                -
                                                                          --------------     -------------
          Net cash used in financing activities                               $ (22,607)         $(44,193)
                                                                          --------------     -------------

Net Increase in Cash and Cash Equivalents                                     $   2,567          $  5,090
Cash and Cash Equivalents at Beginning of Period                                  2,340             2,907
                                                                          --------------     -------------
Cash and Cash Equivalents at End of Period                                    $   4,907          $  7,997
                                                                          ==============     =============

Supplemental Disclosure of Cash Paid (Refunded) During the Period
  for:
    Interest                                                                  $  14,289          $ 11,431
    Income taxes                                                                 (1,574)            2,077

See notes to financial statements.

4

LACLEDE GAS COMPANY
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These notes are an integral part of the accompanying financial statements of Laclede Gas Company (Laclede Gas or the Utility). In the opinion of Laclede Gas, this interim report includes all adjustments (consisting of only normal recurring accruals) necessary for the fair presentation of the results of operations for the periods presented. Certain prior-period amounts have been reclassified to conform to current-period presentation. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Laclede Gas' Fiscal Year 2004 Form 10-K.
Laclede Gas is a regulated natural gas distribution utility having a material seasonal cycle. As a result, these interim statements of income for Laclede Gas are not necessarily indicative of annual results or representative of the succeeding quarter of the fiscal year. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season. The Utility typically experiences losses during the non-heating season.
REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on a monthly cycle billing basis. The Utility records its regulated gas distribution revenues from gas sales and transportation service on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed. The amount of accrued unbilled revenues at March 31, 2005 and 2004, for the Utility, were $26.2 million and $22.3 million, respectively. After accrual of related gas cost expense, the accrued pre-tax net revenues at March 31, 2005 and 2004 were $7.9 million and $6.9 million, respectively. The amount of accrued unbilled revenue at September 30, 2004 was $8.8 million.
BASIS OF CONSOLIDATION - In compliance with generally accepted accounting principles, transactions between Laclede Gas and its affiliates as well as intercompany balances on Laclede Gas' balance sheet have not been eliminated from the Laclede Gas financial statements.
Laclede Gas provides administrative and general support to affiliates. All such costs, which are not material, are billed to the appropriate affiliates and are reflected in accounts receivable on Laclede Gas' Balance Sheet. At March 31, 2005, the Laclede Gas Balance Sheet reflected a total of $0.4 million of intercompany receivables and $1.8 million of intercompany payables. Laclede Gas may also, on occasion, borrow funds from, or lend funds to, affiliated companies as well as charge or reimburse certain tax obligations.
UTILITY PLANT, DEPRECIATION AND AMORTIZATION - In January 2005, the Missouri Public Service Commission (MoPSC or Commission) issued an Order effective January 21, 2005 in the Utility's 1999 rate case relative to the calculation of its depreciation rates. In accordance with the provisions of the Order, Laclede Gas increased certain of its depreciation rates effective February 1, 2005 resulting in higher annual depreciation expense totaling $2.3 million. That same Order also required that operating expenses related to actual removal costs, which the Utility began expensing as incurred during fiscal 2002 pursuant to a previous Commission Order, be reduced by $2.3 million annually. As such, the Order had no immediate effect on income or the recovery of depreciation expenses.
NEW ACCOUNTING STANDARDS - In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs." This Statement amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The provisions of this statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Laclede Gas does not expect adoption of this Statement to have a material effect on its financial position or results of operations.
In December 2004, the FASB issued SFAS No. 123 (revised 2004) (123(R)), "Accounting for Stock-Based Compensation." This Statement is a revision to SFAS No. 123, and establishes standards for the accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. Laclede Group currently accounts for its Equity Incentive Plan in accordance with APB Opinion No. 25, and provides pro forma disclosures in its Notes to Consolidated Financial Statements regarding the effect on net income and earnings as if compensation expense had been determined based on the fair value recognition provisions of SFAS No. 123. SFAS No. 123(R) was to be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, in April 2005, the Securities and

5

Exchange Commission (SEC) amended the compliance date to allow companies to implement SFAS No. 123(R) at the beginning of their next fiscal year. Laclede Gas is currently evaluating the provisions of this Statement, and its effect resulting from Laclede Group's planned adoption of this Statement effective October 1, 2005.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets." This Statement is an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this Statement will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Laclede Gas does not expect adoption of this Statement to have a material effect on its financial position or results of operations.
In March 2005, the FASB issued Interpretation No. 47 (FIN 47), "Accounting for Conditional Asset Retirement Obligations." FIN 47 clarifies the manner in which uncertainties concerning the timing and method of settlement of an asset retirement obligation, as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," should be accounted for. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Laclede Gas is currently evaluating the provisions of this Interpretation.

2. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Laclede Gas has non-contributory defined benefit, trusteed forms of pension plans covering substantially all employees over the age of twenty-one. Benefits are based on years of service and the employee's compensation during the last three years of employment.
The funding policy of Laclede Gas is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.
Pension costs for the quarters ending March 31, 2005 and 2004 were $1.1 million. Pension costs for the six months ended March 31, 2005 were $2.3 million compared with $2.2 million for the same period last year. These costs include amounts capitalized with construction activities.

The net periodic pension costs include the following components:

                                              Three Months Ended           Six Months Ended
                                                  March 31,                    March 31,
                                            -----------------------     ------------------------
(Thousands)                                      2005        2004            2005         2004
                                                 ----        ----            ----         ----
Service cost - benefits earned
   during the period                           $ 2,799     $ 2,777         $  5,598    $  5,554
Interest cost on projected
   benefit obligation                            3,994       4,058            7,988       8,115
Expected return on plan assets                  (5,291)     (5,625)         (10,582)    (11,249)
Amortization of prior service cost                 308         331              617         662
Amortization of actuarial loss                     730         951            1,460       1,901
Regulatory adjustment                           (1,408)     (1,368)          (2,817)     (2,737)
                                            -----------------------     ------------------------
Net pension cost                               $ 1,132     $ 1,124         $  2,264    $  2,246
                                            =======================     ========================

Pursuant to the Commission's Order in Laclede Gas' 2002 rate case, the return on plan assets is based on market-related value of plan assets implemented prospectively over a four-year period. Unrecognized gains or losses are amortized only to the extent that such gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Also in the 2002 rate case, the Commission ordered that the recovery in rates for the Utility's qualified pension plans is based on the ERISA minimum contribution of zero

6

effective October 1, 2002, and on the ERISA minimum contribution of zero plus $3.4 million annually effective July 1, 2003. The difference between this amount on a pro-rata basis and pension expense as calculated pursuant to the above and included in the Statements of Income and Comprehensive Income is deferred as a regulatory asset or liability.
Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump sum cash payments. Pursuant to MoPSC Order, lump sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. No lump sum payments were recognized as settlements during the six months ended March 31, 2005 or the six months ended March 31, 2004.
Laclede Gas also provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65.
Missouri state law provides for the recovery in rates of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (OPEB), accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established the Voluntary Employees' Beneficiary Association (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi trusts assets consist primarily of money market securities and mutual funds invested in stocks and bonds.
Postretirement benefit costs for quarters ending March 31, 2005 and 2004 were $2.0 million. Postretirement benefit costs for the six months ended March 31, 2005 and 2004 were $4.0 million. These costs include amounts capitalized with construction activities.

Net periodic postretirement benefit costs consisted of the following components:

                                              Three Months Ended            Six Months Ended
                                                   March 31,                    March 31,
                                            ------------------------     ------------------------
(Thousands)                                       2005        2004            2005         2004
                                                  ----        ----            ----         ----
Service cost - benefits earned
  during the period                             $   844     $   794         $ 1,689      $ 1,587
Interest cost on accumulated
  postretirement benefit obligation                 826         801           1,652        1,601
Expected return on plan assets                     (318)       (209)           (637)        (418)
Amortization of transition obligation               144         265             289          530
Amortization of prior service cost                   (8)         (8)            (16)         (16)
Amortization of actuarial loss                      217         174             434          349
Regulatory adjustment                               295         164             590          329
                                            ------------------------     ------------------------
Net postretirement benefit cost                 $ 2,000     $ 1,981         $ 4,001      $ 3,962
                                            ========================     ========================

Pursuant to the Commission's Order in the Utility's 2002 rate case, the return on plan assets is based on market-related value of plan assets implemented prospectively over a four-year period. Unrecognized gains and losses are amortized only to the extent that such gains or losses exceed 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Also in the 2002 rate case, the Commission ordered that the recovery in rates for the postretirement benefit costs be based on the accounting methodology as ordered in the 1999 rate case. The difference between this amount and postretirement benefit expense as calculated pursuant to the above is deferred as a regulatory asset or liability.

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3. INCOME TAXES

Net provision (benefit) for income taxes was as follows during the periods set forth below:

                              Three Months Ended          Six Months Ended
                                  March 31,                   March 31,
                            -----------------------    ------------------------
                                2005        2004           2005        2004
                                ----        ----           ----        ----
(Thousands)

Federal
  Current                      $11,076    $ 10,561        $19,032     $ 17,689
  Deferred                        (301)        863         (1,214)       2,205
State and Local
  Current                        1,769       1,698          3,077        2,892
  Deferred                         132         119           (114)         323
                            -----------------------    ------------------------
      Total                    $12,676    $ 13,241        $20,781     $ 23,109
                            =======================    ========================

4. OTHER INCOME AND INCOME DEDUCTIONS - NET

                                                      Three Months Ended           Six Months Ended
                                                          March 31,                   March 31,
                                                   -------------------------    -----------------------
(Thousands)                                               2005         2004           2005        2004
                                                          ----         ----           ----        ----
Investment gains                                        $     -     $ 1,947         $    -     $ 1,947
Allowance for funds used during construction                (24)        (29)           (49)        (61)
Other income                                                393         262            894         778
Other income deductions                                    (456)       (323)           578         613
                                                   -------------------------    -----------------------
Other income and income deductions - net                $   (87)    $ 1,857         $1,423     $ 3,277
                                                   ============= ===========    =========== ===========

Laclede Gas recorded the receipt of proceeds totaling $1.9 million during the quarter ended March 31, 2004 related to its interest, as a policyholder, in the sale of a mutual insurance company. This represented an initial distribution relating to certain policies held by the Utility. Subsequent distributions are not expected to have a material impact on the consolidated financial position or results of operations of the Company.

5. INFORMATION BY OPERATING SEGMENT

The Regulated Gas Distribution segment consists of the regulated operations of Laclede Gas. The Non-Regulated Other segment includes the retail sale of gas appliances. There are no material intersegment revenues.

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                               Regulated          Non-
                                  Gas          Regulated
(Thousands)                   Distribution       Other          Eliminations    Total
----------------------------------------------------------------------------------------
Three Months Ended
March 31, 2005
--------------
Operating revenues            $   434,996       $   574           $   -     $   435,570
Net income                         22,544           (27)              -          22,517
Total assets                    1,195,499         1,554               -       1,197,053

Six Months Ended
March 31, 2005
--------------
Operating revenues            $   726,249       $ 1,154           $   -     $   727,403
Net income                         37,646           (27)              -          37,619
Total assets                    1,195,499         1,554               -       1,197,053

Three Months Ended
March 31, 2004
--------------
Operating revenues            $   396,898       $   628           $   -     $   397,526
Net income                         23,374             6               -          23,380
Total assets                    1,137,824         1,465               -       1,139,289

Six Months Ended
March 31, 2004
--------------
Operating revenues            $   658,248       $ 1,260           $   -     $   659,508
Net income                         40,714            22               -          40,736
Total assets                    1,137,824         1,465               -       1,139,289

6. COMMITMENTS AND CONTINGENCIES

Laclede Gas owns and operates natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected Laclede Gas' financial position and results of operations. As environmental laws, regulations, and their interpretations evolve, however, Laclede Gas may be required to incur additional costs.
With regard to a former manufactured gas plant site located in Shrewsbury, Missouri, Laclede Gas and state and federal environmental regulators have agreed upon certain remedial actions and those actions are essentially complete. Laclede Gas currently estimates the overall costs of these actions will be approximately $2.4 million. As of March 31, 2005, Laclede Gas has paid or reserved for these actions. If regulators require additional remedial actions or assert additional claims, Laclede Gas will incur additional costs.
Laclede Gas enrolled a second former manufactured gas plant site into the Missouri Voluntary Cleanup Program (VCP). The VCP provides opportunities to minimize the scope and cost of site cleanup while maximizing possibilities for site development. This site is located in, and is presently owned by, the City of St. Louis, Missouri. Laclede Gas continues to evaluate options concerning this site, including, but not limited to, the submission of its own Remedial Action Plan (RAP) to the VCP. Laclede Gas currently estimates that the cost of site investigations, agency oversight and related legal and engineering consulting may be approximately $650,000. Currently, Laclede Gas has paid or reserved for these actions. Laclede Gas has requested that other former site owners and operators share in these costs and one party has agreed to participate and has reimbursed Laclede Gas to date for $190,000. Laclede Gas anticipates additional reimbursement from this party. Laclede Gas plans to seek proportionate reimbursement of all costs relative to this site from other potentially responsible parties to the extent practicable.
Laclede Gas has been advised that a third former manufactured gas plant site may require remediation. Laclede Gas does not own, and for many years has not owned, this site. At this time, it is not known whether Laclede Gas will incur any costs in connection with environmental investigations of or remediation at the site, and if it does incur any such costs, what the amount of those costs would be.

9

Costs incurred are charged to expense or capitalized in accordance with generally accepted accounting principles. A predetermined level of expense is recovered through Laclede Gas' rates. While the scope of future costs relative to the actions Laclede Gas has taken at the Shrewsbury site pursuant to the current agreement with state and federal regulators may not be significant, the scope of costs relative to future remedial actions regulators may require at the Shrewsbury site and to the other sites is unknown and may be material.
Laclede Gas has notified its insurers of past and future claims associated with investigation of and remediation at these three manufactured gas plant sites. In response, the majority of insurers have reserved their rights. While some of the insurers have denied coverage, Laclede Gas continues to pursue claims against them. With regard to costs incurred under current agreement regarding the Shrewsbury site, denials of coverage are not expected to have a material impact on the financial position and results of operations of Laclede Gas. With regard to the other two sites and with regard to any future actions that might be required at the Shrewsbury site, since the scope of costs are unknown and may be significant, denials of coverage may have a material impact on the financial position and results of operations of Laclede Gas. Such costs, if incurred, have typically been subject to recovery in rates.
On June 28, 2002, the Staff of the MoPSC filed its recommendation in a proceeding established to review Laclede Gas' gas costs for fiscal 2001. In its recommendation, the Staff proposed to disallow approximately $4.9 million in pre-tax gains achieved by Laclede Gas in its incentive-based Price Stabilization Program. This Program was discontinued at the end of the 2001-2002 heating season. Laclede Gas vigorously opposed the adjustment in proceedings before the MoPSC, including a formal hearing that was held on this matter in February 2003. Nevertheless, on April 29, 2003, the MoPSC decided by a 3-2 vote to disallow the $4.9 million in pre-tax gains achieved by Laclede Gas, and directed Laclede Gas to flow through such amount to its customers in its November 2003 PGA filing. On June 19, 2003, Laclede Gas appealed the MoPSC's decision to the Circuit Court of Cole County, Missouri. On October 10, 2003, the Circuit Court issued an Order staying the MoPSC's decision requiring Laclede Gas to flow through the $4.9 million to customers. Pursuant to the Stay Order, Laclede Gas paid $4.9 million into the Court's registry pending a final judicial determination of Laclede Gas' entitlement to such amounts. On November 5, 2003, the Circuit Court issued its Order and Judgment vacating and setting aside the Commission's decision on the grounds that it was unlawful and not supported by competent and substantial evidence on the record. On December 5, 2003, the MoPSC appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 1, 2005, the Court of Appeals affirmed the decision of the Cole County Circuit Court, finding that the plain language of the Utility's tariff permitted Laclede Gas to retain the pre-tax gains. The Court of Appeals remanded the case to the Cole County Circuit Court, with instructions to remand the case to the MoPSC for further proceedings consistent with the Court of Appeals' opinion. The MoPSC did not file for rehearing or an appeal of the Court of Appeals' opinion. On April 4, 2005, the Cole County Circuit Court remitted to Laclede Gas the $4.9 million previously paid into the Court's registry. On April 7, 2005, the Commission issued its Order on Remand in which it reversed its April 29, 2003 decision and directed that Laclede Gas be permitted to retain the $4.9 million consistent with the Court of Appeals opinion. The Commission's Order on Remand is now final and unappealable. The return of the pre-tax gains, however, was previously recorded as income in the 2002 fiscal year, so the decision will have no effect on the future financial position or results of operations of Laclede Gas.
Laclede Gas is involved in other litigation, claims and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the financial position or results of operation of the Utility.
On March 11, 2005, Laclede Gas Company signed a 15-year service agreement with Cellnet Technology, Inc., to install and operate an automated meter reading (AMR) system. Upon implementation, the Utility will pay Cellnet monthly for successful billing reads. AMR is designed to eliminate the need for Laclede, which has nearly 40 percent of its approximately 650,000 meters indoors, to gain physical access to meters in order to obtain monthly meter readings. Under the terms of the agreement, Cellnet will install and own the system as well as handle data collection, meter data delivery, and network operation and maintenance services. Installation of equipment on customer meters is scheduled to begin in July 2005 and will take approximately two years to complete. The Cellnet AMR system employs a wireless fixed network with read devices that will be attached to existing Laclede Gas customer meters. Reads from each meter are transmitted to local network receivers and transferred to Laclede's customer billing system, resulting in the production of a timely, accurate bill.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

LACLEDE GAS COMPANY

This management's discussion analyzes the financial condition and results of operations of Laclede Gas Company (Laclede Gas or the Utility). It includes management's view of factors that affect its business, explanations of past financial results including changes in earnings and costs from the prior year periods, and their effects on overall financial condition and liquidity.

Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "seek," and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:

o weather conditions and catastrophic events;
o economic, competitive, political and regulatory conditions;
o legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting
o allowed rates of return
o incentive regulation
o industry structure
o purchased gas adjustment provisions
o rate design structure and implementation
o franchise renewals
o environmental or safety matters
o taxes
o accounting standards;
o the results of litigation;
o retention, ability to attract, ability to collect from and conservation efforts of customers;
o capital and energy commodity market conditions including the ability to obtain funds for necessary capital expenditures and the terms and conditions imposed for obtaining sufficient gas supply;
o discovery of material weakness in internal controls; and
o employee workforce issues.

Readers are urged to consider the risks, uncertainties and other factors that could affect our business as described in this report. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement in light of future events.

The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Utility's Financial Statements and the notes thereto.

11

LACLEDE GAS COMPANY

RESULTS OF OPERATIONS

Laclede Gas Company (Laclede Gas or the Utility) is regulated by the Missouri Public Service Commission (MoPSC) and serves the metropolitan St. Louis area and several other counties in eastern Missouri. Laclede Gas delivers natural gas to retail customers at rates, and in accordance with tariffs, authorized by the MoPSC. The Utility's earnings are primarily generated by the sale of heating energy, which was historically heavily influenced by the weather. As part of the 2002 rate case settlement, the Utility initiated, effective November 9, 2002, an innovative weather mitigation rate design that lessens the impact of weather volatility on Laclede Gas customers during cold winters and stabilizes the Utility's earnings by recovering fixed costs more evenly during the heating season. The weather mitigation rate design minimizes the impact of weather volatility during the peak cold months of December through March and reduces the impact of weather volatility, to a lesser extent, during the months of November and April. Mitigating the impact of weather fluctuations on Laclede Gas customers while improving the ability to recover its authorized distribution costs and return has been a fundamental component of the Laclede Gas strategy. The Utility's distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 15,000-mile natural gas distribution system and related storage facilities. In addition, Laclede Gas is working to continually improve its ability to provide reliable natural gas service at a reasonable cost, while maintaining and building a secure and dependable infrastructure. The Utility's income from off-system sales remains subject to fluctuations in market conditions. Some of the factors impacting the level of off-system sales include the availability and cost of its natural gas supply, the weather in the Utility's service area, and the weather in other markets. When Laclede Gas' service area experiences warmer-than-normal weather while other markets experience colder weather or supply constraints, some of the Utility's natural gas supply is available for off-system sales and there may be a demand for such supply in other markets. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season. The Utility typically experiences losses during the non-heating season. Due to the material seasonal cycle of Laclede Gas, the accompanying interim statements of income for Laclede Gas are not necessarily indicative of annual results or representative of the succeeding quarters of the fiscal year.

Quarter Ended March 31, 2005

Laclede Gas' net income applicable to common stock for the quarter ended March 31, 2005 was $22.5 million, compared with net income of $23.4 million for the same quarter last year. The decrease in net income of $0.9 million is primarily attributable to the following factors, quantified on a pre-tax basis:

o non-operating income that decreased $1.9 million, primarily due to the proceeds recorded during the quarter ended March 31, 2004 related to the Company's interest, as a policyholder, in the sale of a mutual insurance company totaling $1.9 million;
o higher interest charges totaling $1.1 million, primarily due to the issuance of additional long-term debt;
o increases in operation and maintenance expenses of $1.0 million; and,
o a higher provision for uncollectible accounts totaling $0.9 million.

These factors were partially offset by:

o higher income this year from off-system sales and capacity release totaling $2.5 million; and,
o the recovery of eligible costs incurred to build and maintain the Utility's distribution system through the implementation of Infrastructure System Replacement Surcharges effective June 10, 2004 and January 20, 2005 totaling $1.2 million.

Regulated Operating Revenues and Operating Expenses

Laclede Gas passes on to Utility customers (subject to prudence review) increases and decreases in the wholesale cost of natural gas in accordance with its Purchased Gas Adjustment (PGA) clause. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among

12

other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes have no direct effect on net income.

Regulated operating revenues for the quarter ended March 31, 2005 were $435.0 million, or $38.1 million greater than the same period last year. Temperatures experienced in the Utility's service area during the quarter were 10% warmer than normal and 3% warmer than the same period last year. Total therms sold and transported were 510.7 million, an increase of 2.7 million, or 0.5%, above the quarter ended March 31, 2004. The increase in regulated operating revenues was primarily attributable to the following factors:

                                                                                     Millions
                                                                                   -------------
Higher wholesale gas costs (passed on to Utility customers subject to
  prudence review by the MoPSC)                                                          $ 29.4
Lower system sales volumes resulting from warmer weather and other variations             (21.7)
Higher off-system sales volumes, reflecting more favorable market
  conditions as described in greater detail in the Results of Operations                   18.5
Higher prices charged for off-system sales                                                 10.7
Partial-year effect of the Infrastructure System Replacement Surcharges (ISRS)              1.2
                                                                                   -------------
     Total Variation                                                                     $ 38.1
                                                                                   =============

Regulated operating expenses for the quarter ended March 31, 2005 increased $36.4 million from the same quarter last year. Natural and propane gas expense increased $32.9 million from last year's level primarily attributable to higher rates charged by our suppliers and increased off-system gas expense, partially offset by lower volumes purchased for sendout. Other operation and maintenance expenses increased $1.9 million, or 5.1%, primarily due to a higher provision for uncollectible accounts, increased insurance premiums and higher wage rates. These factors were partially offset by decreased distribution charges, lower pension costs and decreased group insurance charges. Taxes, other than income, increased $1.6 million, or 6.3%, primarily due to higher gross receipts taxes (reflecting increased revenues).

Other Income and (Income Deductions) - Net

The $1.9 million decrease in other income and income deductions - net was primarily attributable to the Utility's recognition of the receipt of proceeds totaling $1.9 million related to its interest, as a policyholder, in the sale of a mutual insurance company during the quarter ended March 31, 2004.

Interest Charges

The $1.1 million increase in interest charges was primarily due to higher interest on long-term debt due to the April 2004 issuance of $50 million principal amount of 5 1/2% First Mortgage Bonds and $100 million principal amount of 6% First Mortgage Bonds, partially offset by the early redemption in June 2004 of $50 million principal amount of 6 5/8% First Mortgage Bonds and the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Income Taxes

The decrease in income taxes was primarily attributable to lower pre-tax income.

Six Months Ended March 31, 2005

Laclede Gas' net income for the six months ended March 31, 2005 was $37.6 million, compared with $40.7 million reported for the same period last year. The year-to-year decrease net income of $3.1 million was primarily attributable to the following factors, quantified on a pre-tax basis.

o higher interest charges totaling $2.1 million, primarily due to the issuance of additional long-term debt;
o non-operating income decreased $1.9 million, essentially due to the proceeds recorded during the quarter ended March 31, 2004 related to the Company's interest, as a policyholder, in the sale of a mutual insurance company totaling $1.9 million;

13

o the net effect of lower system gas sales volumes totaling $1.8 million primarily due to an unseasonably warm weather pattern in November;
o other increases in operation and maintenance expenses totaling $1.7 million; and,
o a higher provision for uncollectible accounts totaling $1.4 million.

These factors were partially offset by:

o the recovery of eligible costs incurred to build and maintain the Utility's distribution system through the implementation of Infrastructure System Replacement Surcharges effective June 10, 2004 and January 20, 2005 totaling $2.1 million; and,
o higher income this year from off-system sales and capacity release totaling $1.2 million.

Regulated Operating Revenues and Operating Expenses

Regulated operating revenues for the six months ended March 31, 2005 were $726.2 million, or $68.0 million greater than the same period last year. Temperatures experienced in the Utility's service area during the six months ended March 31, 2005 were 12% warmer than normal and essentially equal to the same period last year. Total therms sold and transported were 834.3 million, a decrease of 27.8 million, or 3.2%, below the six months ended March 31, 2004. The increase in regulated operating revenues was primarily attributable to the following factors:

                                                                                 Millions
                                                                                -------------
Higher wholesale gas costs (passed on to Utility customers subject to
  prudence review by the MoPSC)                                                       $ 67.2
Lower system sales volumes resulting from warmer weather and other variations          (25.0)
Higher prices charged for off-system sales                                              18.3
Higher off-system sales volumes, reflecting more favorable market
  conditions as described in greater detail in the Results of Operations                 5.4
Partial-year effect of the ISRS                                                          2.1
                                                                                -------------
     Total Variation                                                                  $ 68.0
                                                                                =============

Regulated operating expenses for the six months ended March 31, 2005 increased $69.4 million from the same period last year. Natural and propane gas expense increased $64.1 million above last year's level primarily attributable to higher rates charged by our suppliers and increased off-system gas expense, partially offset by lower volumes purchased for sendout. Other operation and maintenance expenses increased $3.1 million, or 4.4%, primarily due to a higher provision for uncollectible accounts, increased insurance premiums, and higher wage rates. These factors were partially offset by lower pension costs and decreased group insurance charges. Taxes, other than income, increased $2.6 million, or 6.5%, primarily due to higher gross receipts taxes (attributable to the increased revenues).

Other Income and (Income Deductions) - Net

The $1.9 million decrease in other income and income deductions - net was primarily attributable to the Utility's recognition of the receipt of proceeds totaling $1.9 million related to its interest, as a policyholder, in the sale of a mutual insurance company last year.

Interest Charges

The $2.1 million increase in interest charges was primarily due to higher interest on long-term debt due to the April 2004 issuance of $50 million principal amount of 5 1/2% First Mortgage Bonds and $100 million principal amount of 6% First Mortgage Bonds, partially offset by the early redemption in June 2004 of $50 million principal amount of 6 5/8% First Mortgage Bonds and the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Income Taxes

The decrease in income taxes was primarily attributable to lower pre-tax income.

14

Regulatory Matters

Laclede Gas previously appealed the MoPSC's decision in its 1999 rate case relative to the calculation of its depreciation rates. The Circuit Court remanded the decision to the MoPSC based on inadequate findings of fact. The MoPSC upheld its previous Order and Laclede Gas appealed this second Order to the Circuit Court. In 2002, the Circuit Court ruled that the MoPSC's second Order was lawful and reasonable, and Laclede Gas appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 4, 2003 the Court of Appeals issued an opinion remanding the decision to the MoPSC based on the MoPSC's failure to support and explain its decision with adequate findings of fact. In May 2003, the Court of Appeals rejected the MoPSC's request that the Court reconsider its opinion or transfer this matter to the Missouri Supreme Court. On January 11, 2005, the Commission issued an Order ruling in favor of Laclede Gas on the depreciation issue. As a direct result of the Commission's Order ruling in favor of the Utility's position, Laclede Gas increased certain of its depreciation rates effective February 1, 2005 resulting in higher annual depreciation expense totaling $2.3 million, as it originally requested. That same Order also required that operating expenses related to actual removal costs, which the Utility began expensing as incurred during fiscal 2002 pursuant to a previous Commission Order be reduced by $2.3 million annually. As such, there was no effect on net income, and the Commission's decision had no immediate effect on the Utility's recovery of depreciation expenses. However, the Utility expects that the Commission's confirmation of Laclede Gas' position on the proper method for calculating depreciation rates will result in increased cash flows from capital recovery in future rate cases.

On June 28, 2002, the Staff of the MoPSC filed its recommendation in a proceeding established to review Laclede Gas' gas costs for fiscal 2001. In its recommendation, the Staff proposed to disallow approximately $4.9 million in pre-tax gains achieved by Laclede Gas in its incentive-based Price Stabilization Program. This Program was discontinued at the end of the 2001-2002 heating season. Laclede Gas vigorously opposed the adjustment in proceedings before the MoPSC, including a formal hearing that was held on this matter in February 2003. Nevertheless, on April 29, 2003, the MoPSC decided by a 3-2 vote to disallow the $4.9 million in pre-tax gains achieved by Laclede Gas, and directed Laclede Gas to flow through such amount to its customers in its November 2003 PGA filing. On June 19, 2003, Laclede Gas appealed the MoPSC's decision to the Circuit Court of Cole County, Missouri. On October 10, 2003, the Circuit Court issued an Order staying the MoPSC's decision requiring Laclede Gas to flow through the $4.9 million to customers. Pursuant to the Stay Order, Laclede Gas paid $4.9 million into the Court's registry pending a final judicial determination of Laclede Gas' entitlement to such amounts. On November 5, 2003, the Circuit Court issued its Order and Judgment vacating and setting aside the Commission's decision on the grounds that it was unlawful and not supported by competent and substantial evidence on the record. On December 5, 2003, the MoPSC appealed the Circuit Court's decision to the Missouri Court of Appeals for the Western District. On March 1, 2005, the Court of Appeals affirmed the decision of the Cole County Circuit Court, finding that the plain language of the Utility's tariff permitted Laclede Gas to retain the pre-tax gains. The Court of Appeals remanded the case to the Cole County Circuit Court, with instructions to remand the case to the MoPSC for further proceedings consistent with the Court of Appeals' opinion. The MoPSC did not file for rehearing or an appeal of the Court of Appeals' opinion. On April 4, 2005, the Cole County Circuit Court remitted to Laclede Gas the $4.9 million previously paid into the Court's registry. On April 7, 2005, the Commission issued its Order on Remand in which it reversed its April 29, 2003 decision and directed that Laclede Gas be permitted to retain the $4.9 million consistent with the Court of Appeals opinion. The Commission's Order on Remand is now final and unappealable. The return of the pre-tax gains, however, was previously recorded as income in the 2002 fiscal year, so the decision will have no effect on the future financial position or results of operations of Laclede Gas.

Laclede Gas filed its first Infrastructure System Replacement Surcharge (ISRS) filing with the MoPSC on March 1, 2004 to increase revenues by approximately $3.86 million annually. The filing was made pursuant to a Missouri law, enacted in 2003, that allows gas utilities to adjust their rates up to twice a year to recover certain facility-related expenditures that are made to comply with state and federal safety requirements or to relocate facilities in connection with public improvement projects. On June 1, 2004, the MoPSC approved a Stipulation and Agreement ("S&A") between Laclede Gas and the Staff of the Commission that provided for a $3.56 million annual surcharge effective June 10, 2004. Laclede Gas made its second ISRS filing on October 28, 2004 to increase revenues by approximately an additional $1.6 million annually. On

15

January 4, 2005, the MoPSC approved a S&A between Laclede Gas and the Staff of the Commission that provided for a $1.42 million annual increase in ISRS revenues effective January 20, 2005. Laclede Gas made its third ISRS filing on April 4, 2005 to increase revenues by approximately an additional $1.3 million annually. The MoPSC has not yet acted on the Company's latest request.

On February 18, 2005, Laclede Gas filed tariff sheets with the MoPSC requesting a general rate increase of approximately $34 million. If granted, customers' bills would increase by an average of 4.1%. Although the filing requests an annual increase of $39.0 million, $5.0 million of that amount is already being billed to customers through the current ISRS, which would cease upon the effective date of new rate schedules approved by the MoPSC. The Utility's filing also includes a proposal to modify the Utility's gas supply incentive plan. On February 28, 2005, the MoPSC suspended implementation of the Utility's proposed rates until January 2006. Historically, the MoPSC has not granted Laclede Gas' rate increase requests in full.

Critical Accounting Policies

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Generally accepted accounting principles require that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our financial statements:

Allowances for doubtful accounts - Estimates of the collectibility of trade accounts receivable are based on historical trends, age of receivables, economic conditions, credit risk of specific customers, and other factors.

Employee benefits and postretirement obligations - Pension and postretirement obligations are calculated by actuarial consultants that utilize several statistical factors and other assumptions related to future events, such as discount rates, returns on plan assets, compensation increases, and mortality rates. The amount of expense recognized by the Utility is dependent on the regulatory treatment provided for such costs. Certain liabilities related to group medical benefits and workers' compensation claims, portions of which are self-insured and/or contain "stop-loss" coverage with third-party insurers to limit exposure, are established based on historical trends.

Laclede Gas accounts for its regulated operations in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This statement sets forth the application of accounting principles generally accepted in the United States of America for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of SFAS No. 71 require, among other things, that financial statements of a regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). Management believes that the current regulatory environment supports the continued use of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory process. We believe the following represent the more significant items recorded through the application of SFAS No. 71:

The Utility's Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies, including the costs, cost reductions and related carrying costs associated with the Utility's use of natural gas financial

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instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and costs recovered through the application of the PGA are recorded as regulatory assets and liabilities that are recovered or refunded in a subsequent period.

Laclede Gas records deferred tax liabilities and assets measured by enacted tax rates for the net tax effect of all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax purposes. Changes in enacted tax rates, if any, and certain property basis differences will be reflected by entries to regulatory asset or liability accounts. Also, pursuant to the direction of the MoPSC, Laclede Gas' provision for income tax expense for financial reporting purposes reflects an open-ended method of tax depreciation. This method is consistent with the regulatory treatment prescribed by the MoPSC to depreciate the Utility's assets.

For further discussion of significant accounting policies, see the Notes to the Financial Statements included in Exhibit 99.1 of the Laclede Group's Form 10-K for the fiscal year ended September 30, 2004.

Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs." This Statement amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The provisions of this statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Laclede Gas does not expect adoption of this Statement to have a material effect on its financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123 (revised 2004) (123(R)), "Accounting for Stock-Based Compensation." This Statement is a revision to SFAS No. 123, and establishes standards for the accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. Laclede Group currently accounts for its Equity Incentive Plan in accordance with APB Opinion No. 25, and provides pro forma disclosures in its Notes to Consolidated Financial Statements regarding the effect on net income and earnings as if compensation expense had been determined based on the fair value recognition provisions of SFAS No. 123. SFAS No. 123(R) was to be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, in April 2005, the Securities and Exchange Commission (SEC) amended the compliance date to allow companies to implement SFAS No. 123(R) at the beginning of their next fiscal year. Laclede Gas is currently evaluating the provisions of this Statement, and its effect resulting from Laclede Group's planned adoption of this Statement effective October 1, 2005.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets." This Statement is an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." The guidance in APB Opinion No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this Statement will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Laclede Gas does not expect adoption of this statement to have a material effect on its financial position or results of operations.

In March 2005, the FASB issued Interpretation No. 47 (FIN 47), "Accounting for Conditional Asset Retirement Obligations." FIN 47 clarifies the manner in which uncertainties concerning the timing and method of settlement of an asset retirement obligation, as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," should be accounted for. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is

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effective no later than the end of fiscal years ending after December 15, 2005. Laclede Gas is currently evaluating the provisions of this Interpretation.

FINANCIAL CONDITION

Credit Ratings

As of March 31, 2005, credit ratings for outstanding securities for Laclede Gas issues were as follows:

Type of Facility                     S&P        Moody's     Fitch
------------------------------------------------------------------
Laclede Gas First Mortgage Bonds      A           A3          A+
Laclede Gas Commercial Paper         A-1         P-2

The Utility has investment grade ratings, and believes that it will have adequate access to the financial markets to meet its capital requirements. These ratings remain subject to review and change by the rating agencies.

Cash Flows

Laclede Gas' short-term borrowing requirements typically peak during colder months when Laclede Gas borrows money to cover the gap between when it purchases its natural gas and when its customers pay for that gas. Changes in the wholesale cost of natural gas, variations in the timing of collections of gas cost under the Utility's PGA Clause, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year, and can cause significant variations in the Utility's cash provided by or used in operating activities.

Net cash provided by operating activities for the six months ended March 31, 2005 was $51.6 million, a $23.3 million decrease, compared with the same period last year. The decrease in cash provided by operating activities was primarily attributable to the net effects of changes in wholesale gas prices and higher off-system sales on accounts receivable, accounts payable, and deferred purchased gas costs.

Net cash used in investing activities for the six months ended March 31, 2005 was $26.5 million compared with $25.7 million for the six months ended March 31, 2004. Cash used in investing activities primarily reflected Utility construction expenditures in both periods.

Net cash used in financing activities was $22.6 million for the six months ended March 31, 2005 compared with $44.2 million for the six months ended March 31, 2004. The variation primarily reflects the issuance of additional short-term debt this year, partially offset by the November 2004 maturity of $25 million principal amount of 8 1/2% First Mortgage Bonds.

Liquidity and Capital Resources

As indicated above, the Utility's short-term borrowing requirements typically peak during colder months. These short-term cash requirements have traditionally been met through the sale of commercial paper supported by lines of credit with banks.

Laclede Gas currently has lines of credit in place of $300 million, with $15 million expiring in April 2006 and $285 million expiring in September 2009. Short-term commercial paper borrowings outstanding at March 31, 2005 were $86.2 million at a weighted average interest rate of 2.8% per annum. Based on short-term borrowings at March 31, 2005, a change in interest rates of 100 basis points would increase or decrease Laclede Gas pre-tax earnings and cash flows by approximately $0.9 million on an annual basis.

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Most of Laclede Gas' lines of credit include covenants limiting total debt, including short-term debt, to no more than 70% of total capitalization and requiring earnings before interest, taxes, depreciation and amortization (EBITDA) for a trailing twelve-month period to be at least 2.25 times interest expense. On March 31, 2005, total debt was 54% of total capitalization. For the twelve months ending March 31, 2005, EBITDA was 3.4 times interest expense.

Laclede Gas has on file a shelf registration on Form S-3. Of the $350 million of securities originally registered under this Form S-3, $120 million of debt securities remained registered and unissued as of March 31, 2005. The original MoPSC authorization for issuing securities registered on this Form S-3 expired in September 2003. In response to an application filed by the Utility, the MoPSC extended this authorization to issue debt and equity securities and receive capital contributions through October 31, 2006. The remaining MoPSC authorization is $64.4 million, reflecting capital contributions that have been made by Laclede Group to Laclede Gas under this authority through March 2005. The amount, timing and type of additional financing to be issued under this shelf registration will depend on cash requirements and market conditions.

In April 2004, Laclede Gas issued $50 million principal amount of First Mortgage Bonds, 5 1/2% Series, due May 1, 2019, and $100 million principal amount of First Mortgage Bonds, 6% Series, due May 1, 2034. The net proceeds of approximately $147.9 million from this issuance were used to repay short-term debt and to call at par the $50 million principal amount of 6 5/8% Series First Mortgage Bonds in June 2004. The proceeds were also used to pay at maturity $25 million principal amount of 8 1/2% First Mortgage Bonds in November 2004. At March 31, 2005, Laclede Gas had fixed-rate long-term debt totaling $335 million. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if Laclede Gas were to reacquire any of these issues in the open market prior to maturity.

In January 2005, the Board of Directors of Laclede Gas desired to sell shares to its sole shareholder, Laclede Group, at a price per share equal to book value. However, Laclede Gas is prohibited from issuing fractional shares, so the Board first authorized a stock dividend of ninety-nine shares of its common stock on each outstanding share of its common stock to be paid on January 21, 2005 to increase its outstanding shares from 100 to 10,000. The Board subsequently approved the sale of 31 shares of Laclede Gas common stock to Laclede Group at a price per share equal to book value during the quarter ended March 31, 2005. The proceeds from this sale, totaling $1.1 million were used to reduce short-term borrowings.

Utility construction expenditures were $25.5 million for the six months ended March 31, 2005, compared with $24.7 million for the same period last year.

Capitalization at March 31, 2005, excluding current obligations of preferred stock, consisted of 51.5% common stock equity, 0.1% preferred stock equity and 48.4% long-term debt.

It is management's view that Laclede Gas has adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements.

The seasonal nature of Laclede Gas' sales affects the comparison of certain balance sheet items at March 31, 2005 and at September 30, 2004, such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable, Accounts Payable, Regulatory Assets and Liabilities, and Delayed and Advance Customer Billings. The Balance Sheet at March 31, 2004 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

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Contractual Obligations

As of March 31, 2005, Laclede Gas had contractual obligations with payments due as summarized below (in millions):

                                                                       Payments due by period
                                                  ---------------------------------------------------------------
                                                         Remaining    Fiscal       Fiscal           Fiscal Years
                                                        Fiscal Year    Years        Years             2010 and
Contractual Obligations                   Total            2005      2006-2007    2008-2009          thereafter
-----------------------------------------------------------------------------------------------------------------
Long-Term Debt (a)                      $  692.1          $ 11.3       $ 81.7       $ 73.7             $525.4
Capital Leases                                 -               -            -            -                  -
Operating Leases (b)                        10.2             1.5          5.1          3.2                 .4
Purchase Obligations - Natural Gas (c)     368.7           235.1        121.0          6.6                6.0
Purchase Obligations - Other (d)           130.0             4.1         16.3         18.4               91.2
Other Long-Term Liabilities                    -               -            -            -                  -
                                     ----------------------------------------------------------------------------
Total (e)                               $1,201.0          $252.0       $224.1       $101.9             $623.0
                                     ============================================================================

(a)      Long-term debt obligations reflect principal maturities and
         interest payments.
(b)      Operating lease obligations are primarily for office space,
         vehicles, and power operated equipment. Additional payments will be
         incurred if renewal options are exercised under the provisions of
         certain agreements.
(c)      These purchase obligations represent the minimum payments required
         under existing natural gas transportation and storage contracts and
         natural gas supply agreements. These amounts reflect fixed
         obligations as well as obligations to purchase natural gas at
         future market prices, calculated using March 31, 2005 NYMEX futures
         prices. Laclede Gas recovers the costs related to its purchases,
         transportation, and storage of natural gas through the operation of
         its Purchased Gas Adjustment Clause, subject to prudence review;
         however, variations in the timing of collections of gas costs from
         customers affect short-term cash requirements. Additional
         contractual commitments may be entered into during the heating
         season.
(d)      These purchase obligations reflect miscellaneous agreements for the
         purchase of materials and the procurement of services necessary for
         normal operations.
(e)      Commitments related to pension and postretirement benefit plans
         have been excluded from the table above. Laclede Gas does not
         expect to make any contributions to its qualified, trusteed pension
         plans in fiscal 2005. Laclede Gas anticipates it will make a $0.1
         million contribution relative to its non-qualified pension plans
         during the remainder of fiscal 2005. With regard to the
         postretirement benefits, the Utility anticipates it will contribute
         $3.8 million to the qualified trusts and $0.2 million directly to
         participants from Laclede Gas' funds during the rest of fiscal
         2005. For further discussion of the Utility's pension and
         postretirement benefit plans, refer to Note 2, Pensions and Other
         PostRetirement Benefits.

Market Risk

Laclede Gas adopted a risk management policy that provides for the purchase of natural gas financial instruments with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. Costs and cost reductions, including carrying costs, associated with the Utility's use of natural gas financial instruments are allowed to be passed on to the Utility's customers through the operation of its Purchased Gas Adjustment Clause, through which the MoPSC allows the Utility to recover gas supply costs. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these financial instruments. At March 31, 2005, the Utility held approximately 5.9 million MMBtu of futures contracts at an average price of $7.68 per MMBtu. Additionally, approximately 9.5 million MMBtu of other price risk mitigation was in place through the use of option-based strategies. These positions have various expiration dates, the longest of which extends through March 2006.

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Environmental Matters

Laclede Gas owns and operates natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected Laclede Gas' financial position and results of operations. As environmental laws, regulations, and their interpretations evolve, however, Laclede Gas may be required to incur additional costs.

With regard to a former manufactured gas plant site located in Shrewsbury, Missouri, Laclede Gas and state and federal environmental regulators have agreed upon certain remedial actions and those actions are essentially complete. Laclede Gas currently estimates the overall costs of these actions will be approximately $2.4 million. As of March 31, 2005, Laclede Gas has paid or reserved for these actions. If regulators require additional remedial actions or assert additional claims, Laclede Gas will incur additional costs.

Laclede Gas enrolled a second former manufactured gas plant site into the Missouri Voluntary Cleanup Program (VCP). The VCP provides opportunities to minimize the scope and cost of site cleanup while maximizing possibilities for site development. This site is located in, and is presently owned by, the City of St. Louis, Missouri. Laclede Gas continues to evaluate options concerning this site, including, but not limited to, the submission of its own Remedial Action Plan (RAP) to the VCP. Laclede Gas currently estimates that the cost of site investigations, agency oversight and related legal and engineering consulting may be approximately $650,000. Currently, Laclede Gas has paid or reserved for these actions. Laclede Gas has requested that other former site owners and operators share in these costs and one party has agreed to participate and has reimbursed Laclede Gas to date for $190,000. Laclede Gas anticipates additional reimbursement from this party. Laclede Gas plans to seek proportionate reimbursement of all costs relative to this site from other potentially responsible parties to the extent practicable.

Laclede Gas has been advised that a third former manufactured gas plant site may require remediation. Laclede Gas does not own, and for many years has not owned, this site. At this time, it is not known whether Laclede Gas will incur any costs in connection with environmental investigations of or remediation at the site, and if it does incur any such costs, what the amount of those costs would be.

Costs incurred are charged to expense or capitalized in accordance with generally accepted accounting principles. A predetermined level of expense is recovered through Laclede Gas' rates. While the scope of future costs relative to the actions Laclede Gas has taken at the Shrewsbury site pursuant to the current agreement with state and federal regulators may not be significant, the scope of costs relative to future remedial actions regulators may require at the Shrewsbury site and to the other sites is unknown and may be material.

Laclede Gas has notified its insurers of past and future claims associated with investigation of and remediation at these three manufactured gas plant sites. In response, the majority of insurers have reserved their rights. While some of the insurers have denied coverage, Laclede Gas continues to pursue claims against them. With regard to costs incurred under current agreement regarding the Shrewsbury site, denials of coverage are not expected to have a material impact on the financial position and results of operations of Laclede Gas. With regard to the other two sites and with regard to any future actions that might be required at the Shrewsbury site, since the scope of costs are unknown and may be significant, denials of coverage may have a material impact on the financial position and results of operations of Laclede Gas. Such costs, if incurred, have typically been subject to recovery in rates.

OFF-BALANCE SHEET ARRANGEMENTS

Laclede Gas has no off-balance sheet arrangements.

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