10-Q

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 December 31, 2007

OR

[     ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Indicate by check mark whether the registrants (1) have 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) and (2) have been subject to such filing requirements for the past 90 days.

Yes [ X ] No [     ]

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

The Laclede Group, Inc.:	Large accelerated filer	[     ]	Accelerated filer	[ X ]	Non-accelerated filer	[     ]
Laclede Gas Company:	Large accelerated filer	[     ]	Accelerated filer	[     ]	Non-accelerated filer	[ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

The Laclede Group, Inc.:	Yes	[     ]	No	[ X ]
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	January 31, 2008
The Laclede Group, Inc.:	Common Stock ($1.00 Par Value)	21,788,966
Laclede Gas Company:	Common Stock ($1.00 Par Value)	10,337  *

* 100% owned by The Laclede Group, Inc.

TABLE OF CONTENTS			Page No.
PART 1.  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
		Statements of Comprehensive Income	Ex. 99.1, p. 2
		Balance Sheets	Ex. 99.1, p. 3-4
		Statements of Cash Flows	Ex. 99.1, p. 5
		Notes to Financial Statements	Ex. 99.1, p. 6-11
Item 2	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations (The Laclede Group, Inc.)	19-28
	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations (Laclede Gas Company)	Ex. 99.1, p. 12-19
Item 3	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4	Controls and Procedures		29
PART II.  OTHER INFORMATION
Item 1	Legal Proceedings		30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 6	Exhibits		30
SIGNATURES – The Laclede Group, Inc.			31
SIGNATURES – Laclede Gas Company			32
INDEX TO EXHIBITS

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).

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 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, 2007.

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Item 1. Financial Statements

 THE LACLEDE GROUP, INC.

 STATEMENTS OF CONSOLIDATED INCOME

  (UNAUDITED)

	Three Months Ended
	December 31,
(Thousands, Except Per Share Amounts)	2007		2006
Operating Revenues:
Regulated
Gas distribution	$	320,892	$	348,488
Non-Regulated
Services		37,362		36,429
Gas marketing		181,798		153,467
Other		1,299		1,177
Total Operating Revenues		541,351		539,561
Operating Expenses:
Regulated
Natural and propane gas		222,841		251,523
Other operation expenses		35,213		33,680
Maintenance		6,235		5,598
Depreciation and amortization		8,713		8,497
Taxes, other than income taxes		16,681		18,759
Total Regulated Operating Expenses		289,683		318,057
Non-Regulated
Services		37,699		36,361
Gas marketing		172,872		147,668
Other		1,051		1,077
Total Operating Expenses		501,305		503,163
Operating Income		40,046		36,398
Other Income and (Income Deductions) – Net		2,650		3,303
Interest Charges:
Interest on long-term debt		5,126		5,626
Interest on long-term debt to unconsolidated affiliate trust		893		893
Other interest charges		4,163		3,434
Total Interest Charges		10,182		9,953
Income Before Income Taxes and Dividends on
Redeemable Preferred Stock – Laclede Gas		32,514		29,748
Income Tax Expense		11,601		10,649
Dividends on Redeemable Preferred Stock – Laclede Gas		10		12
Net Income	$	20,903	$	19,087
Average Number of Common Shares Outstanding		21,554		21,381
Basic Earnings Per Share of Common Stock	$	0.97	$	0.89
Diluted Earnings Per Share of Common Stock	$	0.97	$	0.89
Dividends Declared Per Share of Common Stock	$	0.375	$	0.365

See Notes to Consolidated Financial Statements.

4

THE LACLEDE GROUP, INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(UNAUDITED)
	Three Months Ended
	December 31,
(Thousands)	2007			2006
Net Income	$	20,903		$	19,087
Other Comprehensive Income (Loss), Before Tax:
Net gains (losses) on cash flow hedging derivative instruments:
Net hedging gain arising during the period		144			1,035
Reclassification adjustment for gains included in net income		(2,734	)		(580	)
Net unrealized gains (losses) on cash flow hedging derivative instruments		(2,590	)		455
Amortization of actuarial loss included in net periodic pension cost		43			—
Other Comprehensive Income (Loss), Before Tax		(2,547	)		455
Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income		(984	)		176
Other Comprehensive Income (Loss), Net of Tax		(1,563	)		279
Comprehensive Income	$	19,340		$	19,366

See Notes to Consolidated Financial Statements.

5

THE LACLEDE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
	Dec. 31,			Sept. 30,			Dec. 31,
(Thousands)	2007			2007			2006
ASSETS
Utility Plant	$	1,195,431		$	1,187,828		$	1,158,480
Less:  Accumulated depreciation and amortization		395,447			394,034			389,433
Net Utility Plant		799,984			793,794			769,047
Goodwill		33,595			33,595			33,595
Non-utility property		10,654			11,270			12,276
Other investments		47,103			45,436			44,358
Other Property and Investments		57,757			56,706			56,634
Current Assets:
Cash and cash equivalents		66,930			52,746			51,918
Accounts receivable:
Gas customers – billed and unbilled		199,067			102,224			176,181
Other		110,173			86,713			126,579
Allowances for doubtful accounts		(8,680	)		(11,268	)		(9,401	)
Inventories:
Natural gas stored underground at LIFO cost		132,059			138,256			135,275
Propane gas at FIFO cost		19,913			19,950			20,325
Materials, supplies, and merchandise at average cost		5,041			4,990			6,028
Derivative instrument assets		15,953			31,057			15,976
Unamortized purchased gas adjustments		8,613			12,813			34,538
Prepayments and other		13,344			29,854			16,815
Total Current Assets		562,413			467,335			574,234
Deferred Charges:
Prepaid pension cost		—			—			62,472
Regulatory assets		288,868			285,054			178,334
Other		5,068			4,669			6,835
Total Deferred Charges		293,936			289,723			247,641
Total Assets	$	1,747,685		$	1,641,153		$	1,681,151

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THE LACLEDE GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(UNAUDITED)
	Dec. 31,		Sept. 30,		Dec. 31,
(Thousands, except share amounts)	2007		2007		2006
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock (70,000,000 shares authorized, 21,761,629,     21,645,637, and 21,542,117 shares issued, respectively)	$	21,762	$	21,646	$	21,542
Paid-in capital		137,903		136,061		131,308
Retained earnings		280,438		268,761		261,747
Accumulated other comprehensive income		294		1,857		3,934
Total Common Stock Equity		440,397		428,325		418,531
Redeemable preferred stock (less current sinking fund     requirements) – Laclede Gas		627		627		787
Long-term debt to unconsolidated affiliate trust		46,400		46,400		46,400
Long-term debt (less current portion) – Laclede Gas		309,138		309,122		309,062
Total Capitalization		796,562		784,474		774,780
Current Liabilities:
Notes payable		294,450		211,400		257,150
Accounts payable		145,581		106,829		149,969
Advance customer billings		27,382		25,440		19,583
Current portion of long-term debt and preferred stock		160		40,160		40,159
Wages and compensation accrued		17,789		15,482		16,883
Dividends payable		8,247		7,970		7,923
Customer deposits		15,128		15,899		16,600
Interest accrued		6,371		11,103		6,270
Taxes accrued		17,994		20,183		27,100
Deferred income taxes current		1,525		2,644		4,413
Other		17,585		16,555		16,289
Total Current Liabilities		552,212		473,665		562,339
Deferred Credits and Other Liabilities:
Deferred income taxes		232,417		225,068		234,670
Unamortized investment tax credits		4,143		4,200		4,377
Pension and postretirement benefit costs		67,648		63,678		20,385
Asset retirement obligations		26,517		26,125		26,409
Regulatory liabilities		39,687		39,589		34,137
Other		28,499		24,354		24,054
Total Deferred Credits and Other Liabilities		398,911		383,014		344,032
Total Capitalization and Liabilities	$	1,747,685	$	1,641,153	$	1,681,151

See Notes to Consolidated Financial Statements.

7

THE LACLEDE GROUP, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
	Three Months Ended
	December 31,
(Thousands)	2007			2006
Operating Activities:
Net Income	$	20,903		$	19,087
Adjustments to reconcile net income to net cash provided by (used in)       operating activities:
Depreciation, amortization, and accretion		9,672			9,606
Deferred income taxes and investment tax credits		1,884			(6,560	)
Other – net		630			627
Changes in assets and liabilities:
Accounts receivable – net		(122,891	)		(130,217	)
Unamortized purchased gas adjustments		4,200			9,843
Deferred purchased gas costs		1,943			14,796
Accounts payable		38,752			46,695
Advance customer billings		1,942			(11,860	)
Taxes accrued		(2,189	)		12,074
Natural gas stored underground		6,197			2,201
Other assets and liabilities		31,238			2,017
Net cash used in operating activities		(7,719	)		(31,691	)
Investing Activities:
Capital expenditures		(13,369	)		(11,920	)
Other investments		(1,194	)		(1,174	)
Net cash used in investing activities		(14,563	)		(13,094	)
Financing Activities:
Maturity of first mortgage bonds		(40,000	)		—
Issuance of short-term debt – net		83,050			49,850
Issuance of common stock		1,305			3,599
Dividends paid		(7,897	)		(7,580	)
Other		8			56
Net cash provided by financing activities		36,466			45,925
Net Increase in Cash and Cash Equivalents		14,184			1,140
Cash and Cash Equivalents at Beginning of Period		52,746			50,778
Cash and Cash Equivalents at End of Period	$	66,930		$	51,918
Supplemental Disclosure of Cash Paid During the Period for:
Interest	$	15,226		$	14,204
Income taxes		5,931			24

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. This Form 10-Q should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company’s Fiscal Year 2007 Form 10-K.

The consolidated financial position, results of operations, and cash flows of Laclede Group are comprised primarily from the financial position, results of operations, and cash flowsof 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 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. SM&P Utility Resources, Inc. (SM&P) is a non-regulated underground facility locating and marking service business. SM&P’s results can be influenced by seasonality and trends in the construction sector.

REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on monthly cycles. The Utility records its regulated gas distribution revenues from gas sales and transportation services 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 amounts of accrued unbilled revenues at December 31, 2007 and 2006, for the Utility, were $50.7 million and $41.4 million, respectively. The amount of accrued unbilled revenue at September 30, 2007 was $11.9 million.

INCOME TAXES - Laclede Group and its subsidiaries have elected, for tax purposes only, various accelerated depreciation provisions of the Internal Revenue Code. In addition, certain other costs are expensed currently for tax purposes while being deferred for book purposes. Effective October 1, 2007, generally accepted accounting principles require that tax benefits be recognized in the financial statements as determined by new recognition and measurement provisions. These provisions permit the benefit from a tax position to be recognized only if, and to the extent that, it is more likely than not that the tax position will be sustained upon examination by the taxing authority, based on the technical merits of the position. Unrecognized tax benefits and related interest and penalties, if any, are recorded as liabilities. Laclede Group companies record 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 in the financial statements, and the related tax basis. 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.

Laclede Gas’ investment tax credits utilized prior to 1986 have been deferred and are being amortized in accordance with regulatory treatment over the useful life of the related property.

GROSS RECEIPTS TAXES - Gross receipts taxes associated with Laclede Gas’ natural gas utility service are imposed on the Utility and billed to its customers. These amounts are recorded gross in the Statements of Consolidated Income. Amounts recorded in Regulated Gas Distribution Operating Revenues for the quarters ended December 31, 2007 and 2006 were $13.0 million, and $14.7 million, respectively. Gross receipts taxes are expensed by the Utility and included in the Taxes Other Than Income line.

STOCK-BASED COMPENSATION – Awards of stock-based compensation are made pursuant to The Laclede Group 2006 Equity Incentive Plan and the Restricted Stock Plan for Non-Employee Directors. Refer to Note 1 of the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2007 for descriptions of these plans.

During the quarter ended December 31, 2007, the Company awarded 74,100 shares of performance-contingent restricted stock to executive officers. This number of shares represents the maximum shares that can be earned pursuant to the terms of the awards. The shares have a performance period ending in September 2010, during which participants are entitled to receive full dividends and voting rights on 49,400 of these shares based on the target level of performance. The number of shares that will ultimately vest is dependent upon the attainment of certain levels of earnings and dividend growth performance goals; further, under the terms of the award, the Compensation Committee (Committee) of the Board of Directors may reduce by up to 50% the number of shares that vest if the Company’s total shareholder return (TSR) during the performance period ranks in the bottom quartile relative to a comparator group of companies. This TSR provision is considered a market condition under generally accepted accounting principles and is discussed further below.

9

During the quarter ended December 31, 2007, the Company made a separate award of 15,000 shares of performance-contingent restricted stock to an executive officer. This number of shares represents the maximum shares that can be earned pursuant to the terms of the award. The shares have a performance period ending in September 2009, during which the participant is entitled to receive full dividends and voting rights on 10,000 of these shares based on the target level of performance. The number of shares that will ultimately vest is dependent upon the attainment of certain business development performance metrics and succession management objectives and is not subject to the aforementioned TSR provision.

For performance-contingent restricted shares that do not pay dividends during the performance period, the estimate of fair value is reduced by the present value of the dividends expected to be paid on the Company’s common stock during the performance period, discounted using an appropriate U.S. Treasury yield. Initial accruals of compensation cost for performance-contingent restricted stock awards are based upon the probable outcome of the performance conditions. For shares that do not vest or are not expected to vest due to the outcome of the performance conditions, no compensation cost is recognized and any previously recognized compensation cost is reversed. For shares subject to the TSR provision, the estimated impact of this market condition is reflected in the grant date fair value per share of the awards. Accordingly, compensation cost is not reversed to reflect any actual reductions in the awards that may result from the TSR provision. However, if the Company’s TSR during the performance period ranks in the bottom quartile relative to a comparator group of companies and the Committee elects not to reduce the award (or reduce by a lesser amount), this election would be accounted for as a modification of the original award and additional compensation cost would be recognized at that time. The grant date fair value per share of the awards subject to the TSR provision awarded during the quarter ended December 31, 2007 was valued by a model that assessed the probabilities of various TSR outcomes. Performance-contingent restricted stock awards without a TSR provision are valued at the closing price of the Company’s stock on the date of the grant.

During the quarter ended December 31, 2007, the Company awarded 23,250 shares of time-vested restricted stock to executives and key employees. These shares vest in December 2010. In the interim, participants receive full dividends and voting rights. Time-vested restricted stock awards are valued at the closing price of the Company’s stock on the date of the grant.

No stock options were granted during the quarter ended December 31, 2007. The weighted average fair value of stock options granted during the quarter ended December 31, 2006 was $8.07 per option.

Stock option activity for the quarter ended December 31, 2007 is presented below:

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
			Exercise		Term	Value
	Shares		Price		(Years)	($000)
Outstanding at September 30, 2007	617,100		$	30.04
Granted	—		$	—
Exercised	(11,000	)	$	28.07
Forfeited	(11,875	)	$	30.86
Expired	(7,750	)	$	31.14
Outstanding at December 31, 2007	586,475		$	30.04	6.9	$	2,536
Fully Vested and Expected to Vest   at December 31, 2007	573,612		$	29.99	6.8	$	2,511
Exercisable at December 31, 2007	402,725		$	28.90	6.4	$	2,171

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The closing price of the Company’s common stock was $34.24 at December 31, 2007.

The amounts of compensation cost recognized for share-based compensation arrangements for the quarters ended December 31, 2007 and 2006 are presented below:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Total compensation cost	$	656		$	540
Compensation cost capitalized		(135	)		(118	)
Compensation cost recognized in net income		521			422
Income tax benefit recognized in net income		(201	)		(163	)
Compensation cost recognized in net income, net of income tax	$	320		$	259

As of December 31, 2007, there was approximately $5.5 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements (options and restricted stock). That cost is expected to be recognized over a weighted average period of approximately 2.4 years.

NEW ACCOUNTING STANDARDS – In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” Under FIN 48, the Company may recognize the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company adopted the provisions of FIN 48 as of October 1, 2007. For details regarding the cumulative effect of adoption and other pertinent information, see Note 5, Income Taxes.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement applies to fair value measurements required under other accounting guidance that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. The guidance in this Statement does not apply to the Company’s stock-based compensation plans accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” This Statement will be effective for the Company as of the beginning of fiscal year 2009. The Company is currently evaluating the provisions of this Statement.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” As discussed in Note 2 to the Consolidated Financial Statements included in the Company’s Fiscal Year 2007 Form 10-K, Laclede Group adopted the recognition and disclosure provisions of this Statement effective September 30, 2007. The Statement also requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial position. This requirement is effective for the Company as of the end of fiscal year 2009. In conjunction with adoption of this provision of SFAS No. 158, the Company will be required to change its valuation date for its pension and other postretirement plans from June 30 to September 30. The Company is currently evaluating the impact of adoption of the change in measurement date on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted to choose, at specified election dates, to measure eligible items at fair value (fair value option). Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting date. The decision about whether to elect the fair value option is applied instrument by instrument with few exceptions. The decision is also irrevocable (unless a new election date occurs) and must be applied to entire instruments and not to portions of instruments. SFAS No. 159 requires that cash flows related to items measured at fair value be classified in the statement of cash flows according to their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows” (as amended). SFAS No. 159 is effective for the Company as of the beginning of fiscal year 2009. The Company is currently evaluating the provisions of this Statement.

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In June 2007, the FASB ratified the consensus reached in Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” This Issue addresses how an entity should recognize the tax benefit received on dividends that are (a) paid to employees holding equity-classified nonvested shares, equity-classified nonvested share units, or equity-classified outstanding share options and (b) charged to retained earnings under SFAS No. 123(R). The Task Force reached a consensus that such tax benefits should be recognized as an increase in additional paid-in capital. This EITF Issue also addresses how the accounting for these tax benefits is affected if an entity’s estimate of forfeitures changes in subsequent periods. This EITF Issue is effective for Laclede Group as of the beginning of fiscal year 2009. The Company is currently evaluating the provisions of this EITF Issue.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” This Statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS No. 160 clarifies that noncontrolling interests should be separately reported as equity in the balance sheet. Additionally, SFAS No. 160 requires certain changes in presentation to income statements. SFAS No. 160 also addresses accounting for changes in the parent’s ownership interest of a subsidiary, accounting for the deconsolidation of a subsidiary, and disclosure requirements. This Statement is effective for Laclede Group as of the beginning of fiscal year 2010. Currently, all of Laclede Group’s consolidated subsidiaries are wholly owned and therefore adoption of this Statement is not expected to have any effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (141(R)), “Business Combinations.” This Statement revises SFAS No. 141 but retains the fundamental requirements in SFAS No. 141 that the acquisition method (formerly known as purchase method) of accounting be used for all business combinations. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. SFAS 141(R) requires acquisition-related costs to be accounted for separately instead of being allocated to the assets acquired and liabilities assumed. SFAS No. 141(R) also amends the guidance related to the recognition of certain assets acquired and liabilities assumed that relate to contingencies, research and development assets acquired that have no alternative future use, and negative goodwill arising from a bargain purchase. Laclede Group is required to adopt SFAS No. 141(R) prospectively to business combinations with acquisition dates on or after October 1, 2009 (fiscal 2010). Because this Statement is only applicable to future business combinations, existing amounts reported on the Company’s consolidated financial statements will not be impacted by adoption of this Statement.

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 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 at the beginning of each respective period, or at the date of grant or award, if later. Shares attributable to stock options and time-vested restricted stock are excluded from the calculation of diluted earnings per share if the effect would be antidilutive. For the quarters ended December 31, 2007 and 2006, 105,500 and 115,500 shares, respectively, attributable to antidilutive outstanding stock options were excluded from the calculation of diluted earnings per share. Performance-contingent restricted stock awards are only included in the calculation of diluted earnings per share to the extent the underlying performance conditions are satisfied (a) prior to the end of the reporting period or (b) would be satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. For the quarters ended December 31, 2007 and 2006, 191,100 and 110,000 shares, respectively, of nonvested performance-contingent restricted stock were excluded from the calculation of diluted earnings per share.

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	Three Months Ended
	December 31,
(Thousands, Except Per Share Amounts)		2007		2006
Basic EPS:
Net Income	$	20,903	$	19,087
Weighted Average Shares Outstanding		21,554		21,381
Earnings Per Share of Common Stock	$	0.97	$	0.89
Diluted EPS:
Net Income	$	20,903	$	19,087
Weighted Average Shares Outstanding		21,554		21,381
Dilutive Effect of Stock Options
and Restricted Stock		67		61
Weighted Average Diluted Shares		21,621		21,442
Earnings Per Share of Common Stock	$	0.97	$	0.89

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 highest three years of the last ten years of employment. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.

Pension costs for the quarters ending December 31, 2007 and 2006 were $1.5 million and $1.4 million, respectively, including amounts charged to construction.

The net periodic pension costs include the following components:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Service cost - benefits earned
during the period	$	3,242		$	3,106
Interest cost on projected
benefit obligation		4,670			4,482
Expected return on plan assets		(5,162	)		(5,074	)
Amortization of prior service cost		272			284
Amortization of actuarial loss		791			920
Sub-total		3,813			3,718
Regulatory adjustment		(2,280	)		(2,364	)
Net pension cost	$	1,533		$	1,354

Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service Commission (MoPSC or Commission) 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 three months ended December 31, 2007 or 2006.

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Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 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. The recovery in rates for the Utility’s qualified pension plans is based on an allowance of $4.1 million annually effective October 1, 2005 and $4.8 million annually effective August 1, 2007. The difference between this amount and pension expense as calculated pursuant to the above and that otherwise would be included in the Statements of Consolidated Income and Consolidated Comprehensive Income is deferred as a regulatory asset or regulatory liability.

SM&P maintains a non-qualified, defined benefit plan with four participants that was frozen to new participants in 2002. 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 provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs for the quarters ended December 31, 2007 and 2006 were $1.9 million and $2.0 million, respectively, including amounts charged to construction.

Net periodic postretirement benefit costs consisted of the following components:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Service cost – benefits earned during
the period	$	1,140		$	1,016
Interest cost on accumulated
postretirement benefit obligation		977			900
Expected return on plan assets		(510	)		(431	)
Amortization of transition obligation		34			34
Amortization of prior service cost		(582	)		(582	)
Amortization of actuarial loss		746			811
Sub-total		1,805			1,748
Regulatory adjustment		105			223
Net postretirement benefit cost	$	1,910		$	1,971

Missouri state law provides for the recovery in rates of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established 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.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 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. Previously, the recovery in rates for the postretirement benefit costs was based on an alternative methodology for amortization of unrecognized gains and losses as ordered by the MoPSC. The Commission ordered that the recovery in rates be based on an annual allowance of $7.6 million, effective August 1, 2007. The difference between this amount and postretirement benefit cost based on the above and that otherwise would be included in the Statements of Consolidated Income and Consolidated Comprehensive Income is deferred as a regulatory asset or regulatory liability.

4. FINANCIAL INSTRUMENTS

In the course of its business, Laclede Group’s non-regulated gas 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 December 31, 2007, LER’s unmatched positions were not material to Laclede Group’s financial position or results of operations.

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Settled and open futures positions were as follows at December 31, 2007:

	Position Month	MMBtu (millions)	Average Price per MMBtu
Settled short positions	January 2008	1.46	$	8.17
Settled long positions	January 2008	.14		7.29
Open short futures positions	February 2008	.11		8.90
	March 2008	.03		7.27
	April 2008	1.74		8.28
	May 2008	.03		7.36
	June 2008	.03		7.46
	July 2008	.03		7.55
	August 2008	.03		7.64
	September 2008	.03		7.67
	October 2008	.03		7.74
	November 2008	.14		8.67
	December 2008	.18		8.82
	January 2009	.15		8.87
	February 2009	.15		8.87
	March 2009	.11		8.83
	November 2009	.10		8.80
	December 2009	.15		8.83
	January 2010	.15		8.83
	February 2010	.15		8.83
	March 2010	.10		8.80
Open long futures positions	May 2008	.06		7.60
	June 2008	.06		7.60
	July 2008	.06		7.60
	August 2008	.06		7.60
	September 2008	.06		7.60
	October 2008	.06		7.60
	November 2008	.06		7.60
	December 2008	.06		7.60

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 hedged transactions occur. As of December 31, 2007, it is expected that approximately $3.1 million of pre-tax unrealized gains will be reclassified into the Consolidated Statement of Income during the next twelve months. The ineffective portions of these hedge instruments are charged or credited to Non-Regulated Gas Marketing Operating Revenues or Expenses. The net amount of pre-tax gains recognized in earnings for the ineffective portion of cash flow hedges was $0.3 million and $0.5 million for the quarters ended December 31, 2007 and 2006, respectively. 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

The Company adopted the provisions of FIN 48, “Accounting for the Uncertainty in Income Taxes,” as of October 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” Pursuant to FIN 48, the Company may recognize the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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Upon adoption of FIN 48, the Company recognized a reduction to beginning retained earnings for a cumulative-effect adjustment totaling $1.1 million, reclassified $2.5 million of income tax liabilities from current to non-current liabilities, and increased its liabilities for accrued interest and penalties. Total unrecognized tax benefits as of October 1, 2007 were $2.1 million, all of which would favorably impact the effective tax rate, if recognized. The Company recognizes potential accrued interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. Potential interest and penalties accrued (net of income tax benefit) associated with the Company’s uncertain tax positions were $1.5 million at October 1, 2007. Unrecognized tax benefits, accrued interest payable, and accrued penalties payable are included in the Other line of the Deferred Credits and Other Liabilities section of the Consolidated Balance Sheets. There have been no material changes in the Company’s unrecognized tax benefits since the date of adoption of FIN 48.

The Company is subject to U.S. federal income tax as well as income tax of state and city jurisdictions. The Company is no longer subject to examination for fiscal years prior to 2004. The Company cannot currently estimate the potential change in its unrecognized tax benefits within the next 12-month period because of current audit activity.

6. OTHER INCOME AND INCOME DEDUCTIONS – NET

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Allowance for funds used during construction	$	(9	)	$	(14	)
Interest income		1,773			1,945
Other income		537			323
Other income deductions		349			1,049
Other income and (income deductions) – net	$	2,650		$	3,303

The decrease in other income and income deductions – net for the quarter ended December 31, 2007, compared with the quarter ended December 31, 2006, was due to decreased income associated with changes in the cash surrender value of life insurance policies, lower income associated with carrying costs applied to under-recoveries of gas costs, and other minor variations. Such carrying costs are recovered through the Utility’s Purchased Gas Adjustment (PGA) Clause.

7. INFORMATION BY OPERATING SEGMENT

All of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution segment consists of the regulated operations of Laclede Gas and is the core business segment of Laclede Group. Laclede Gas is a public utility engaged in the retail distribution and sale of natural gas serving an area in eastern Missouri, with a population of approximately 2.1 million, including the City of St. Louis and parts of ten other counties in eastern Missouri. The Non-Regulated Services segment includes the results of SM&P, an underground facilities locating and marking business operating in ten Midwestern and Southwestern states. The underground facility locating industry remains competitive with many contracts subject to termination on short-term notice. Also, SM&P’s customers are concentrated primarily in the utility and telecommunications sectors. Additionally, SM&P’s results can be influenced by seasonality and trends in the construction sector. The Non-Regulated Gas Marketing segment includes the results of LER, a subsidiary engaged in the non-regulated marketing of natural gas and related activities. Other includes the transportation of liquid propane regulated by the Federal Energy Regulatory Commission (FERC) and other non-regulated activities, including real estate development, the compression of natural gas, and financial investments in other enterprises. These operations are conducted through five subsidiaries. Other also includes Laclede Gas’ non-regulated merchandise sales business. 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 transportation services provided 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 Other columns, respectively.

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						Non-
	Regulated		Non-			Regulated				Adjustments
	Gas		Regulated			Gas				&
(Thousands)	Distribution		Services			Marketing		Other		Eliminations			Consolidated
Three Months Ended
December 31, 2007
Revenues from external
customers	$	319,674	$	37,260		$	178,660	$	1,039	$	—		$	536,633
Intersegment revenues		1,218		102			3,138		260		—			4,718
Total operating revenues		320,892		37,362			181,798		1,299		—			541,351
Net income (loss)		15,747		(727	)		5,654		229		—			20,903
Total assets		1,529,861		74,818			123,363		97,021		(77,378	)		1,747,685
Three Months Ended
December 31, 2006
Revenues from external
customers	$	340,456	$	36,337		$	137,688	$	917	$	—		$	515,398
Intersegment revenues		8,032		92			15,779		260		—			24,163
Total operating revenues		348,488		36,429			153,467		1,177		—			539,561
Net income (loss)		15,657		(504	)		3,795		139		—			19,087
Total assets		1,473,506		71,884			112,739		79,518		(56,496	)		1,681,151

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 change, however, Laclede Gas may be required to incur additional costs. See Note 14 to the Consolidated Financial Statements included in the Company’s Fiscal Year 2007 Form 10-K for information relative to environmental matters generally. There have been no significant changes relative to environmental matters in the first quarter of 2008.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. Laclede Gas believes that the remaining $1.7 million of the MoPSC Staff’s proposed disallowance lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC.

On December 31, 2007, the MoPSC Staff filed a memorandum with the Commission proposing a disallowance of $2.8 million related to the Company’s recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s Staff’s memorandum raised questions regarding whether certain sales and capacity release transactions subject to the FERC’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. The Company has commenced an internal review of the questions raised by the MoPSC Staff and has notified the FERC Staff that it has taken this action.

Laclede Group 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 consolidated financial position or results of operations of the Company.

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends through 2014. At December 31, 2007, the maximum guarantees under these leases are $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At December 31, 2007, the carrying value of the liability recognized for these guarantees was $0.3 million.

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SM&P has several operating leases, the aggregate annual cost of which is $8.3 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 $19.0 million. In the event Laclede Group would be required to make payments under these guarantees, it is expected that a significant portion of such payments would be recovered through proceeds from the liquidation of assets obtained under the terms of the leases. The fair market value of the vehicles being leased is estimated at $15.1 million. No amounts have been recorded for these guarantees in the financial statements.

Laclede Gas and LER have entered into various contracts, expiring on dates through 2017, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at December 31, 2007 are estimated at approximately $1.5 billion. Additional contracts are generally entered into prior to or during the heating season.

Laclede Group had guarantees totaling $48.8 million for performance and payment of certain wholesale gas supply purchases by LER, as of December 31, 2007. Since that date, total guarantees issued by Laclede Group on behalf of LER increased by $1.2 million bringing the total to $50.0 million in guarantees outstanding at January 30, 2008. 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.

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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 “may,” “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:

• weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;

• volatility in gas prices, particularly sudden and sustained spikes in natural gas prices;

• the impact of higher natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;

• changes in gas supply and pipeline availability; particularly those changes that impact supply for and access to our market area;

• legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting

• allowed rates of return

• incentive regulation

• industry structure

• purchased gas adjustment provisions

• rate design structure and implementation

• franchise renewals

• environmental or safety matters

• taxes

• pension and other postretirement benefit liabilities and funding obligations

• accounting standards;

• the results of litigation;

• retention of, ability to attract, ability to collect from and conservation efforts of customers;

• capital and energy commodity market conditions, including the ability to obtain funds for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;

• discovery of material weakness in internal controls; and

• 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.

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THE LACLEDE GROUP, INC.

RESULTS OF OPERATIONS

Laclede Group’s 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 City of St. Louis and parts of ten 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. The Utility’s innovative weather mitigation rate design 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. Due to the seasonal nature of the business of Laclede Gas, Laclede Group’s earnings are seasonal in nature and are typically concentrated in the November through April period, which generally corresponds with the heating season.

SM&P Utility Resources, Inc. (SM&P) is a non-regulated underground facility locating and marking service business. The underground locating industry remains competitive with many contracts subject to termination on short-term notice. SM&P’s customers are concentrated primarily in the utility and telecommunications sectors. Additionally, SM&P’s results can be influenced by seasonality and trends in the construction sector. During fiscal year 2007, the Company received unsolicited inquiries from various third parties regarding the Company’s interest in exploring strategic alternatives involving SM&P. While the Board has made no decision to engage in any strategic transaction involving SM&P, toward the end of fiscal 2007 it authorized the Company’s management to assess: (1) the market value of SM&P; and (2) the benefits to the Company and its shareholders of a potential sale of SM&P. No decision regarding SM&P has been made as of the date of filing of this report. Accordingly, a transaction may or may not ultimately result from this process.

Laclede Energy Resources, Inc. (LER) is engaged in the non-regulated marketing of natural gas and related activities. LER markets natural gas to both on-system Utility transportation customers and customers outside of Laclede Gas’ traditional service territory, including large retail and wholesale customers. As such, LER’s operations and customer base are subject to fluctuations in market conditions.

Other 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 Laclede Group’s strategy. The Utility’s distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 16,000 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 settlement of the Utility’s 2007 rate case resulted in enhancements to the Utility’s weather mitigation rate design that better ensure the recovery of its fixed costs and margins despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage. The Utility’s income from off-system sales remains subject to fluctuations in market conditions. In conjunction with the settlement of the 2005 rate case, effective October 1, 2005, the Utility retained all pre-tax income from off-system sales and capacity release revenues up to $12 million annually. Pre-tax amounts in excess of $12 million were shared with customers, with the Utility retaining 50% of amounts exceeding that threshold. The Stipulation & Agreement approved by the MoPSC in the Utility’s 2007 rate case increases the portion of pre-tax income from off-system sales and capacity release revenues that is shared with customers. Effective October 1, 2007, the Utility is allowed to retain 15% to 25% of the first $6 million in annual income earned (depending on the level of income earned) and 30% of income exceeding $6 million annually. Some of the factors impacting the level of off-system sales include the availability and cost of the Utility’s natural gas supply, the weather in its 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.

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Laclede Gas continues to work actively to reduce the impact of higher costs associated with wholesale natural gas prices by strategically structuring its natural gas supply portfolio and through the use of financial instruments. Nevertheless, the cost of purchased gas remains high, relative to historical levels. 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 costs, cost reductions, and related carrying costs associated with the use of financial instruments to hedge the purchase price of natural gas, as well as gas inventory carrying costs. The Utility believes it will continue to be able to obtain sufficient gas supply. The generally higher price levels may continue to affect sales volumes (due to the conservation efforts of customers) and cash flows (associated with the timing of collection of gas costs and related accounts receivable from customers).

Laclede Group continues to develop its non-regulated subsidiaries. SM&P is working to further the logical expansion of its business in both new and existing 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 non-regulated natural gas suppliers. Nevertheless, income from LER’s operations is subject to fluctuations in market conditions.

Quarter Ended December 31, 2007

Earnings

Overview – Net Income (Loss) by Operating Segment	Quarter Ended
	December 31,
(millions, after-tax)		2007			2006
Regulated Gas Distribution	$	15.8		$	15.7
Non-Regulated Services		(0.7	)		(0.5	)
Non-Regulated Gas Marketing		5.6			3.8
Other		0.2			0.1
Net Income	$	20.9		$	19.1

Laclede Group’s net income was $20.9 million for the quarter ended December 31, 2007, compared with $19.1 million for the quarter ended December 31, 2006. Basic and diluted earnings per share for the quarter ended December 31, 2007 were $.97 compared with $.89 per share reported for the same quarter last year. Earnings per share increased compared to last year primarily due to improved results reported by Laclede Group’s non-regulated gas marketing segment. Earnings recorded by both Laclede Group’s regulated gas distribution and non-regulated services segments were essentially the same as last year. Variations in net income were primarily attributable to the factors described below.

Regulated Gas Distribution net income for the quarter ended December 31, 2007 was slightly better than the quarter ended December 31, 2006. The benefit of the general rate increase effective August 1, 2007, totaling $10.1 million, was largely offset by the following factors, quantified on a pre-tax basis:

• lower income from off-system sales and capacity release, totaling $3.4 million, primarily due to a reduction in the Utility’s share of such income (pursuant to the 2007 rate case);

• the net effect of lower system gas sales margins, primarily due to an unusually late start to the heating season, and other variations totaling $3.2 million; and,

• increases in operation and maintenance expenses totaling $2.2 million.

The Non-Regulated Services segment reported a loss of $0.7 million during the quarter ended December 31, 2007 compared with a loss of $0.5 million for the same period last year. The greater loss was primarily attributable to increases in SM&P’s operating costs, partially offset by increased revenues.

The Non-Regulated Gas Marketing segment reported an increase in earnings of $1.8 million compared with the same period last year, primarily due to higher margins on sales of natural gas by LER, and to a lesser extent, increased sales volumes.

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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 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 revenues and net income.

Regulated operating revenues for the quarter ended December 31, 2007 were $320.9 million, or $27.6 million less than the same period last year. Temperatures experienced in the Utility’s service area during the quarter were 8.5% warmer than normal and essentially the same as the comparable period last year. Total system therms sold and transported were 0.27 billion for the quarter ended December 31, 2007 compared with 0.28 billion for the same period last year. Total off-system therms sold and transported were 0.05 billion for the quarter ended December 31, 2007 compared with 0.07 billion for the same period last year. The decrease in regulated operating revenues was primarily attributable to the following factors:

	Millions
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)	$	(20.8	)
General rate increase, effective August 1, 2007		10.1
Lower off-system sales volumes		(9.6	)
Lower system sales volumes and other variations		(8.1	)
Higher prices charged for off-system sales		1.3
Lower Infrastructure System Replacement Surcharges (ISRS) revenues		(0.5	)
Total Variation	$	(27.6	)

Regulated operating expenses for the quarter ended December 31, 2007 decreased $28.4 million from the same quarter last year. Natural and propane gas expense decreased $28.7 million, or 11.4%, from last year’s level, primarily attributable to lower rates charged by our suppliers, lower system volumes purchased for sendout, and lower off-system gas expense. Other operation and maintenance expenses increased $2.2 million, or 5.5%, primarily due to higher injuries and damages expense, increased maintenance charges, a higher provision for uncollectible accounts, and higher wage rates, partially offset by lower group insurance charges. Taxes, other than income, decreased $2.1 million, or 11.1%, primarily due to decreased gross receipts taxes (attributable to the decreased revenues) and lower property taxes.

Non-Regulated Services Operating Revenues and Operating Expenses

Laclede Group’s non-regulated services operating revenues for this quarter increased $0.9 million compared to the same quarter last year primarily due to SM&P’s attainment of new business in existing markets. The increase in non-regulated services operating expenses totaling $1.3 million was attributable to increased operating expenses due to growth and other cost increases.

Non-Regulated Gas Marketing Operating Revenues and Operating Expenses

Non-regulated gas marketing operating revenues increased $28.3 million primarily due to increased sales volumes and higher per unit gas sales prices by LER. The increase in non-regulated gas marketing operating expenses totaling $25.2 million was primarily associated with increased volumes purchased and higher prices charged by suppliers.

Other Income and (Income Deductions) - Net

Other income and income deductions – net decreased $0.7 million due to decreased income associated with changes in the cash surrender value of life insurance policies, lower income associated with carrying costs applied to under-recoveries of gas costs, and other minor variations. Such carrying costs are recovered through the Utility’s PGA Clause.

Income Taxes

The $1.0 million increase in income taxes was primarily due to higher pre-tax income.

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REGULATORY MATTERS

During fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule affecting the disconnection and reconnection practices of utilities during the winter heating season. Those modifications included provisions to allow the Utility to obtain accounting authorizations and defer for future recovery certain costs incurred with the modifications. During fiscal 2007, the Utility deferred for future recovery $2.7 million of costs associated with the fiscal 2007 heating season. On October 31, 2007, the Utility filed for determination and subsequent recovery of the deferred amount. On November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri Office of Public Counsel to submit their positions regarding the Utility’s filing by February 28, 2008.

On November 9, 2007, the Utility made an ISRS filing with the Commission designed to increase revenues by $1.6 million annually, pending approval by the Commission. On January 15, 2008, the Commission approved implementation of the surcharge to be effective January 18, 2008.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. Laclede Gas believes that the remaining $1.7 million of the MoPSC Staff’s proposed disallowance lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC.

On December 31, 2007, the MoPSC Staff filed a memorandum with the Commission proposing a disallowance of $2.8 million related to the Company’s recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s Staff’s memorandum raised questions regarding whether certain sales and capacity release transactions subject to the Federal Energy Regulatory Commission (FERC)’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. The Company has commenced an internal review of the questions raised by the MoPSC Staff and has notified the FERC Staff that it has taken this action.

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:

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. The Utility’s provision for uncollectible accounts is dependent on the regulatory treatment provided for such costs. As approved by the MoPSC, the Utility is allowed to defer for future recovery certain costs associated with amendments to the Cold Weather Rule.

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. For the Utility, the amount of expense recognized and the amounts reflected in other comprehensive income are dependent upon the regulatory treatment provided for such costs, as discussed further below. 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.

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Goodwill valuation – In accordance with Statement of Financial Accounting Standards (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. This test of goodwill impairment may be carried forward from one year to the next if the most recent fair value determination exceeded the carrying value by a substantial margin, the assets and liabilities that comprise the reporting entity had not changed significantly, and the Company believes that based on an analysis of events that had occurred and circumstances that had changed since the most recent fair value determination, the likelihood that a current fair value determination would be less than the current carrying amount is remote.

Laclede Gas accounts for its regulated operations in accordance with 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 regulatory liabilities are recoverable or refundable through the regulatory process. Management believes the following represent the more significant items recorded through the application of SFAS No. 71:

The Utility’s 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 regulatory liabilities that are recovered or refunded in a subsequent period. The PGA Clause also authorizes the Utility to recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection season for sale during the heating season. The PGA Clause also permits the application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of financial instruments. Effective October 1, 2007, the PGA Clause also provides for a portion of income from off-system sales and capacity release revenues to be flowed through to customers.

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. 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. Laclede Gas’ provision for income tax expense also records the income tax effect associated with the difference between overheads capitalized to construction for financial reporting purposes and those recognized for tax purposes without recording an offsetting deferred income tax expense. These two methods are consistent with the regulatory treatment prescribed by the MoPSC.

Asset retirement obligations are recorded in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” and Financial Accounting Standards Board Interpretation Number (FIN) 47, “Accounting for Conditional Asset Retirement Obligations.” Asset retirement obligations are calculated using various assumptions related to the timing, method of settlement, inflation, and profit margins that third parties would demand to settle the future obligations. These assumptions require the use of judgment and estimates and may change in future periods as circumstances dictate. As authorized by the MoPSC, Laclede Gas accrues future removal costs associated with its property, plant and equipment through its depreciation rates, even if a legal obligation does not exist as defined by SFAS No. 143 and FIN 47. The difference between removal costs recognized in depreciation rates and the accretion expense and depreciation expense recognizable under SFAS No. 143 and FIN 47 is a timing difference between the recovery of these costs in rates and their recognition for financial reporting purposes. Accordingly, consistent with SFAS No. 71, these differences are deferred as regulatory liabilities.

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The amount of net periodic pension and other postretirement benefit cost recognized in the financial statements related to the Utility’s qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC, which have been established in the rate-making process for the recovery of these costs from customers. The differences between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting purposes are deferred as regulatory assets or regulatory liabilities. SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” requires that changes that affect the funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as components of pension and other postretirement benefit cost, be reflected in other comprehensive income. For the Utility’s qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.

For further discussion of significant accounting policies, see Note 1 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2007.

ACCOUNTING PRONOUNCEMENTS

The Company has evaluated or is in the process of evaluating the impact that recently issued accounting standards will have on the Company’s financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Standards section of Note 1 to the Consolidated Financial Statements.

FINANCIAL CONDITION

CREDIT RATINGS

As of December 31, 2007, 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		A-
Laclede Gas First Mortgage Bonds	A	A3	A+
Laclede Gas Commercial Paper	A-1	P-2
Laclede Capital Trust I 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 lag 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 used in operating activities for the three months ended December 31, 2007 was $7.7 million, compared with $31.7 million for the same period last year. The variation is primarily attributable to increases in advance customer billings and a reduction in net cash payments associated with the Utility’s use of natural gas financial instruments. Additionally, while LER reported improved operating cash flows compared to last year, this was largely offset by variations associated with the timing of the collections of gas cost under the Utility’s PGA Clause.

Net cash used in investing activities for the three months ended December 31, 2007 was $14.6 million compared with $13.1 million for the three months ended December 31, 2006. Cash used in investing activities primarily reflected capital expenditures in both periods.

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Net cash provided by financing activities was $36.5 million for the three months ended December 31, 2007 compared with $45.9 million for the three months ended December 31, 2006. The decrease primarily reflects the maturity of long-term debt, partially offset by the issuance of additional short-term debt this year.

LIQUIDITY AND CAPITAL RESOURCES

As indicated above, the Company’s short-term borrowing requirements typically peak during the 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 has a line of credit in place of $320 million, which expires in December 2010. In November 2007, the Utility established a seasonal line of credit of $40 million, which will expire in March 2008. The Utility had short-term borrowings aggregating to a maximum of $304.5 million at any one time during the quarter. Short-term borrowings outstanding at December 31, 2007 were $294.5 million, including $40 million from the seasonal line of credit, at a weighted average interest rate of 5.4% per annum. Based on short-term borrowings at December 31, 2007, a change in interest rates of 100 basis points would increase or decrease pre-tax earnings and cash flows by approximately $2.9 million on an annual basis. Portions of such increases or decreases may be offset through the application of PGA carrying costs.

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) to be at least 2.25 times interest expense. On December 31, 2007, total debt was 63% of total capitalization. For the twelve months ended December 31, 2007, EBITDA was 3.40 times interest expense.

Laclede Gas has on file with the Securities and Exchange Commission (SEC) an effective shelf registration on Form S-3 for issuance of $350 million of securities. The full amount of this shelf registration remains available to Laclede Gas at this time. The Utility has authority from the MoPSC to issue up to $500 million in first mortgage bonds, unsecured debt, and equity securities. In December 2007, pursuant to this authority, the Utility sold 30 shares of its common stock to Laclede Group for $1.0 million, leaving $495.2 million remaining under this authorization as of the date of this filing. The amount, timing and type of additional financing to be issued will depend on cash requirements and market conditions.

On November 1, 2007, Laclede Gas paid at maturity $40 million principal amount of 7 1/2% First Mortgage Bonds. This maturity was funded through short-term borrowings. At December 31, 2007, Laclede Gas had fixed-rate long-term debt totaling $310 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 with the SEC, that 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 December 31, 2007. 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 $50 million in working capital lines of credit, expiring in August 2008, to meet short-term liquidity needs of its subsidiaries. These lines of credit have covenants limiting the total debt of the consolidated Laclede Group to no more that 70% of the Company’s total capitalization, giving a 50% debt weighting to the subordinated debt issued to an unconsolidated affiliated trust. This ratio stood at 58% on December 31, 2007. These lines have been used to provide letters of credit 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. At December 31, 2007, letters of credit provided on behalf of SM&P totaled $2.8 million. There were no borrowings under Laclede Group’s lines during the quarter.

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends through 2014. At December 31, 2007, the maximum guarantees under these leases are $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At December 31, 2007, the carrying value of the liability recognized for these guarantees was $0.3 million.

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SM&P has several operating leases, the aggregate annual cost of which is $8.3 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 $19.0 million. In the event that Laclede Group would be required to make payments under these guarantees, it is expected that a significant portion of such payments would be recovered through proceeds from the liquidation of assets obtained under the terms of the leases. The fair market value of the vehicles being leased is estimated at $15.1 million. No amounts have been recorded for these guarantees in the financial statements.

Laclede Group had guarantees totaling $48.8 million for performance and payment of certain wholesale gas supply purchases by LER, as of December 31, 2007. Since that date, total guarantees issued by Laclede Group on behalf of LER increased by $1.2 million bringing the total to $50.0 million in guarantees outstanding at January 30, 2008. No amounts have been recorded for these guarantees in the financial statements.

Utility capital expenditures were $13.0 million for the three months ended December 31, 2007, compared with $11.8 million for the same period last year. Non-utility capital expenditures were $0.4 million for the three months ended December 31, 2007 compared with $0.1 million for the same period last year.

Consolidated capitalization at December 31, 2007, excluding current obligations of preferred stock, consisted of 55.3% Laclede Group common stock equity, 0.1% Laclede Gas preferred stock equity, 5.8% long-term debt to unconsolidated affiliate trust, and 38.8% 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 December 31, 2007 and at September 30, 2007, such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable, Accounts Payable, Regulatory Assets and Regulatory Liabilities, and Advance Customer Billings. The Consolidated Balance Sheet at December 31, 2006 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

CONTRACTUAL OBLIGATIONS

As of December31,2007, Laclede Group had contractual obligations with payments due as summarized below(inmillions):

			Payments due by period
			Remaining						Fiscal Years
Contractual Obligations	Total		Fiscal Year 2008		Fiscal Years 2009-2010		Fiscal Years 2011-2012		2013 and thereafter
Principal Payments on Long-Term Debt	$	356.4	$	—	$	—	$	25.0	$	331.4
Interest Payments on Long-Term Debt		481.5		13.6		46.2		43.7		378.0
Operating Leases (a)		17.1		5.1		8.5		2.5		1.0
Purchase Obligations – Natural Gas (b)		1,514.0		509.2		538.0		382.7		84.1
Purchase Obligations – Other (c)		110.7		12.6		18.7		16.3		63.1
Total (d)	$	2,479.7	$	540.5	$	611.4	$	470.2	$	857.6

(a)

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.

(b)

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 December 31, 2007 New York Mercantile Exchange 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 are generally entered into prior to or during the heating season.

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(c)

These purchase obligations reflect miscellaneous agreements for the purchase of materials and the procurement of services necessary for normal operations.

(d)

The categories of Capital Leases and Other Long-Term liabilities have been excluded from the table above because there are no applicable amounts of contractual obligations under these categories. Also, commitments related to pension and postretirement benefit plans have been excluded from the table above. The Company expects to make contributions to its qualified, trusteed pension plans totaling $0.9 million during the remainder of fiscal year 2008. Laclede Gas anticipates a $0.3 million contribution relative to its non-qualified pension plans during the remainder of fiscal year 2008. With regard to the postretirement benefits, the Company anticipates Laclede Gas will contribute $8.2 million to the qualified trusts and $0.3 million directly to participants from Laclede Gas’ funds during the remainder of fiscal year 2008. For further discussion of the Company’s pension and postretirement benefit plans, refer to Note 3, Pension Plans 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 PGA 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 December 31, 2007, the Utility held 21.5 million MMBtu of futures contracts at an average price of $8.36 per MMBtu. These positions have various expiration dates, the longest of which extends through October 2008.

In the course of its business, Laclede Group’s non-regulated gas marketing affiliate, LER, enters into fixed price commitments associated with the purchase or sale of natural gas. As part of LER’s risk management policy, 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 December 31, 2007, LER’s unmatched positions are 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 change, however, Laclede Gas may be required to incur additional costs. For information relative to environmental matters, see Note 14 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2007. There have been no significant changes relative to environmental matters in the first quarter of fiscal year 2008.

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.

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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 28 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 first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of environmental matters and legal proceedings, see Note 14 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2007. 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, on page 23 of this report.

Laclede Group and its subsidiaries are involved in 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

On December 20, 2007, the Board of Directors of Laclede Gas approved the sale of 30 shares of Laclede Gas common stock to Laclede Group. The proceeds from the sale, totaling $1.0 million, were used to reduce short-term borrowings. Exemption from registration was claimed under Section 4(2) of the Securities Act of 1933.

Item 6. Exhibits

(a) See Exhibit Index

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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.
Dated:	January 30, 2008	By:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Chief Financial Officer
			(Authorized Signatory and Chief Financial Officer)

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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
Dated:	January 30, 2008	By:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Senior Vice President and
			Chief Financial Officer
			(Authorized Signatory and Chief Financial Officer)

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INDEX TO EXHIBITS

Exhibit No.
10.1	-	Form of Restricted Stock Award Agreement.
10.2	-	Form of Performance Contingent Restricted Stock Award Agreement for all participants except the Chief Executive Officer and the Executive Vice President – Energy and Administrative Services.
10.3	-	Forms of Performance Contingent Restricted Stock Award Agreements for Chief Executive Officer.
10.4	-	Form of Performance Contingent Restricted Stock Award Agreement for Executive Vice President – Energy and Administrative Services.
12	-	Ratio of Earnings to Fixed Charges.
31	-	CEO and CFO Certifications under Exchange Act Rule 13a – 14(a).
32	-	CEO and CFO Section 1350 Certifications.
99.1	-	Laclede Gas Company - Financial Statements, Notes to Financial Statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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EX-10.1

Exhibit 10.1

The Laclede Group

2006 Equity Incentive Plan

Restricted Stock Award Agreement

THIS AGREEMENT, made as of this 5th day of December 2007, between The Laclede Group, Inc. (the “Company”) and ______________________ (the “Participant”).

Pursuant to the terms of the Company’s 2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the “Plan”), the Participant has been awarded shares of Restricted Stock conditioned upon the execution and delivery by the Company and the Participant of this Agreement setting forth the terms and conditions applicable to such award.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows:

  1.            Award of Restricted Stock.  Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Company awards to the Participant, effective as of the Award Date,_____________ (____________) shares of Common Stock of the Company, subject to the terms, conditions and restrictions described in this Agreement and in the Plan (the “Restricted Stock”).

  2.            Award Date.  The Award Date of the Restricted Stock awarded under this Agreement is December 5, 2007.

  3.            Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Administrator, shall govern.  All capitalized terms used herein, but not otherwise defined, shall have the meaning given to such terms in the Plan.

  4.            Restrictions and Conditions.  Except as otherwise provided in this Agreement, Participant shall forfeit, for no consideration, any and all right to the Restricted Stock under this Award upon Participant’s termination of employment with the Company and any of its subsidiaries for any reason prior to December 5, 2010 (“Vesting Date”).

  5.            Lapse of Restrictions.  The Participant accepts this Restricted Stock Award and agrees that the restrictions relative to the Award shall lapse and all Shares of Restricted Stock shall vest in Participant on the Vesting Date.

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  Notwithstanding the foregoing, vesting shall be accelerated upon the following circumstances:

(a)   unless the Administrator determines otherwise at a later date, if within two years following a Change in Control the Participant’s employment is terminated by the Company or a subsidiary of the Company without Cause (a “Change in Control Termination”), the restrictions shall lapse as to all Restricted Shares upon the earlier of the Vesting Date or the date of the Change in Control Termination; or

(b)   if a Participant leaves employment of the Company and its subsidiaries due to mandatory retirement requirements prior to the Vesting Date, the restrictions shall lapse as to such number of shares of Restricted Stock determined by multiplying the total number of Restricted Shares subject to this Award by a fraction the numerator of which is the number of full months from the Award Date to the Participant’s mandatory retirement date and the denominator of which is thirty-six (36).

  6.            Shareholder Rights.  Participant shall have all of the rights of a shareholder of the Company with respect to shares of Restricted Stock, including the right to vote and to receive dividends, but the Restricted Stock remains subject to the non-transferability restrictions set forth in Section 8 of this Agreement.

  7.            How Shares are Held.  The Restricted Stock shall be held by a Company custodian until all of the restrictions have lapsed and all applicable terms and conditions have been met.  The Company shall cause the shares of Restricted Stock to be issued without a restrictive legend when all restrictions lapse as provided in Section 5.

  8.            Shares Non-Transferable.  The Restricted Stock shall not be transferable by Participant and may not be, sold, assigned, disposed of, or pledged or hypothecated as collateral for a loan or as security for performance of any obligation or for any other purpose until after the restrictions have lapsed as provided in Section 5.

  9.            No Right to Continued Employment.  Nothing in this Agreement shall confer on the Participant any right to continuance of employment by the Company or a subsidiary nor shall it interfere in any way with the right of Participant’s employer to terminate Participant’s employment at any time.

  10.            Tax Withholding and Tax Election.  The Company shall not be obligated to deliver any shares of Restricted Stock until Participant pays to the Company in cash, or any other form of property acceptable to the Company, the amount required to be withheld for any federal, state or local income, FICA or other taxes of any kind with respect to such shares.  The Participant may, by notice to the Company, elect to have such withholding satisfied by a reduction of the number of shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value of the Common Stock on the date the restrictions lapse as provided in Section 5.  The Company

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and its subsidiaries shall, to the extent permitted by law, have the right to deduct such taxes, from any payment of any kind otherwise due to Participant.  Until the restrictions have lapsed as provided in Section 5, any dividends paid relative to the Restricted Stock shall be treated as compensation and subject to tax withholdings in accordance with tax laws then in effect.

The Participant may, but is not required to, elect to apply the rules of Section 83(b) of the Internal Revenue Code, as amended (“Code”) to the issuance of the shares of Restricted Stock that is subject to a substantial risk of forfeiture.  If the Participant makes an affirmative election under Section 83(b) of the Code, the Participant must file such election within 30 days after the date of this Agreement with the Internal Revenue Service and notify the Company within 30 days after making such election.

  11.            Confidential Information and Restrictions on Soliciting Employees.  Notwithstanding any provision of this Agreement to the contrary, the Participant shall pay to the Company the Fair Market Value of the Restricted Stock that vests under this Award, if, during the period beginning on the date hereof and ending eighteen months following the date the Participant’s employment with the Company and its subsidiaries terminates provided that such termination is other than a Change in Control Termination, the Participant: (1) discloses Confidential Information, as defined below, to any person not employed by the Company or any of its subsidiaries or not engaged to render services to the Company or any of its subsidiaries; or (2) Solicits Employees, as defined below.  Fair Market Value shall be calculated on the date of the first violation of this Section 11.

For purposes of this Section 11, “Confidential Information” means information concerning the Company, its subsidiaries and their business that is not generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C) methods of operation and processes; (D) information regarding present and/or future products, developments, processes and systems; (E) information on customers or potential customers, including customers’ names, sales records, prices, and other terms of sales and cost information; (F) personnel data; (G) business plans, marketing plans, financial data and projections; and (H) information received in confidence from third parties.This provision shall not preclude the Participant from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or subsidiary or from disclosure required by law or court order.

“Solicits Employees” means the Participant’s direct or indirect hire, solicit to hire, or attempt to induce any employee of the Company or a subsidiary (who is an employee of the Company or a subsidiary as of the time of such hire or solicitation or attempt to hire) or any former employee of the Company or a subsidiary (who was employed by the Company or a subsidiary within the 12-month period immediately preceding the date of such hire or solicitation or attempt to hire) to leave the employment of the Company or a subsidiary.

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  12.            Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof, contain the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter and may only be amended by mutual written consent of the parties.

  13.            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri, without regard to the provisions governing conflict of laws.

  14.            Compliance with Laws and Regulations.  The obligation of the Company to deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

  15.            Participant Acknowledgment.  By accepting this Award, the Participant acknowledges receipt of a copy of the Plan, and acknowledges that all decisions, determinations and interpretations of the Administrator in respect of the Plan and this Agreement shall be final and conclusive.

In addition, the Participant expressly acknowledges that violation by the Participant of Section 11 of this Agreement will obligate the Participant to pay to the Company the Fair Market Value of the Restricted Stock that becomes vested pursuant to Section 5.

The Laclede Group, Inc.
By:
	D. H. Yaeger
Title:	Chairman of the Board, President and Chief
	Executive Officer

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EX-10.2

Exhibit 10.2

The Laclede Group

2006 Equity Incentive Plan

Performance Contingent

Restricted Stock Award Agreement

THIS AGREEMENT, made as of this 5th day of December 2007, between The Laclede Group, Inc. (the “Company”) and «Name» (the “Participant”).

Pursuant to the terms of the Company’s 2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the “Plan”), this Award allows the Participant to earn up to [insert maximum] shares of Common Stock conditioned upon the execution and delivery by the Company and the Participant of this Agreement setting forth the terms and conditions applicable to such award.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows:

  1.            Award of Restricted Stock.  Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Company awards to the Participant, effective as of the Award Date, a maximum of «Grant» («Spelled_Out») shares of Common Stock of the Company, subject to the terms, conditions and restrictions described in this Agreement and in the Plan (the “Performance Contingent Restricted Stock”).  Of the Performance Contingent Restricted Stock,

     ·   [insert target number] shares (“Performance Restricted Shares”) are issued on the Award Date and Participant shall have all of the rights of a shareholder of the Company with respect to such shares, including the right to vote and to receive dividends, but such shares remain subject to the performance contingencies in Section 5 and non-transferability restrictions in Section 7 of this Agreement

     ·   [insert delta to get to high performance number] shares (“Potential Performance Restricted Shares”) represent shares, all or some of which the Participant may earn if performance exceeds Target, but as to which Participant shall have no rights of a shareholder.  Such rights shall only be obtained, if at all, once performance during the Performance Period has exceeded Target, the Board has certified to such attainment, and one or more Potential Performance Restricted Shares are delivered to the Participant.

  2.            Award Date.  The Award Date of the Performance Contingent Restricted Stock awarded under this Agreement is December 5, 2007.

  3.            Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Administrator, shall govern.  All capitalized terms used herein, but not otherwise defined, shall have the meaning given to such terms in the Plan.

  4.            Restrictions and Conditions.  Except as otherwise provided in this Agreement, Participant shall forfeit any and all right to the Performance Contingent Restricted Stock upon Participant’s termination of employment with the Company and its subsidiaries for any reason prior to the end of the Performance Period.

  5.            Lapse of Restrictions.  The Participant accepts this Performance Contingent Restricted Stock Award and agrees that the restrictions relative to such Award shall lapse only following the conclusion of the Performance Period and only to the extent that one or more of the Performance Contingencies set forth in Appendix A have been met or exceeded.  If performance on neither Performance Contingency has been achieved at or above Threshold, then all Performance Contingent Restricted Stock is forfeited.  If performance on one or more of the Performance Contingencies has been achieved between the Threshold and Target or Target and High Performance levels of performance, the Administrator shall interpolate for performance between the applicable levels and shall determine the number of shares of Performance Contingent Restricted Stock as to which the restrictions shall lapse.  Because the Company cannot issue fractional shares, the Administrator will round to the nearest whole number of shares of Performance Contingent Restricted Stock in such interpolations.

The Award will be subject to forfeiture of up to 50% of the shares earned based upon performance relative to the Performance Contingencies, as determined by the Administrator in its sole discretion, if the Company’s Total Shareholder Return, as defined in Appendix A, for the Performance Period is in the bottom quartile relative to the defined comparator group identified by the Administrator.

Vesting of any Performance Restricted Shares as well as the issuance, if any, of Potential Performance Restricted Shares under this Agreement shall occur on the business day immediately following the date of the certification by the Board of Directors (“Certification Date”) of (a) the satisfaction of one or more of the Performance Contingencies and (b) the number of shares of Performance Contingent Restricted Stock to be vested or issued; provided, that no Performance Contingent Restricted Stock shall vest or be issued if Participant is terminated with or without Cause or if the Participant voluntarily terminates employment with the Company and all of its subsidiaries prior to the Certification Date.  Any Potential Performance Restricted Shares that the Board certifies are earned will be issued and delivered to the Participant in no event later than March 15 of the year following the end of the Performance Period.  Any Performance Restricted Shares or Potential Performance Restricted Shares as to which any or all of the respective Performance Contingencies has not been satisfied shall be forfeited.

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Notwithstanding the foregoing,

  (i)   In the event of a Change in Control, the Performance Contingent Restricted Stock shall be deemed earned at Target prorated based on the number of months in the Performance Period to the date of the Change in Control and all restrictions as to such number of shares shall lapse if:

(a)	the Award has not otherwise been forfeited and
(b)	the successor or surviving corporation (or parent thereof) does not assume this Award or replace it with a comparable award, provided further that if the Award is assumed or replaced, such assumed or replaced Award shall provide that the restrictions shall lapse if Participant is involuntarily terminated without Cause within 24 months of the Change in Control (a “Change in Control Termination”);

 (ii)   if a Participant leaves the employment of the Company and its subsidiaries due to death, Disability or retirement (including early retirement and disability retirement) prior to the end of the Performance Period, the Participant will be eligible to earn a prorated Award, as the Administrator may determine, based on the number of full months as a Participant during the Performance Period and will be eligible to receive the underlying shares if the Performance Contingencies are satisfied and the restrictions lapse as outlined above.

  6.            How Shares are Held.  The Performance Restricted Shares shall be held by a Company custodian until all of the restrictions have lapsed and all applicable terms and conditions have been met.  The Company shall deliver to the Participant the number of whole shares of Performance Restricted Shares as to which the Administrator has determined the restrictions have lapsed as provided in Section 5.  Potential Performance Restricted Shares, when earned, shall be issued and delivered as provided in Section 5.

  7.            Shares Non-Transferable.  The Performance Contingent Restricted Stock shall not be transferable by Participant and may not be, sold, assigned, disposed of, or pledged or hypothecated as collateral for a loan or as security for performance of any obligation or for any other purpose until, with respect to the Performance Restricted Shares, after the restrictions have lapsed as provided in Section 5 and, with respect to the Potential Performance Restricted Shares, after such shares have been issued and delivered to the Participant.

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  8.            No Right to Continued Employment.  Nothing in this Agreement shall confer on the Participant any right to continuance of employment by the Company or a subsidiary, nor shall it interfere in any way with the right of Participant’s employer to terminate Participant’s employment at any time.

  9.            Tax Withholding and Tax Election.  The Company shall not be obligated to deliver any shares of Performance Contingent Restricted Stock until Participant pays to the Company in cash, or any other form of property acceptable to the Company, the amount required to be withheld for any federal, state or local income, FICA or other taxes of any kind with respect to such shares.  The Participant may, by notice to the Company, elect to have such withholding satisfied by a reduction of the number of whole shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value of the Common Stock on the date the restrictions lapse as provided in Section 5.  The Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct such taxes, from any payment of any kind otherwise due to Participant.  Until the restrictions have lapsed as provided in Section 5, any dividends paid relative to the Performance Restricted Shares shall be treated as compensation and subject to tax withholdings in accordance with tax laws then in effect.

The Participant may, but is not required to, elect to apply the rules of Section 83(b) of the Internal Revenue Code, as amended, (“Code”) to the issuance of Performance Restricted Shares that is subject to a substantial risk of forfeiture.  If the Participant makes an affirmative election under Section 83(b) of the Code, the Participant must file such election within 30 days after the date of this Agreement with the Internal Revenue Service and notify the Company within 30 days after making such election.

  10.            Confidential Information and Restrictions on Soliciting Employees.  Notwithstanding any provision of this Agreement to the contrary, the Participant shall pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock vested and issued to Participant under this Award if, during the period beginning on the date hereof and ending eighteen months following the date the Participant’s employment with the Company and its subsidiaries terminates (provided that such termination is other than a Change in Control Termination), the Participant: (1) discloses Confidential Information, as defined below, to any person not employed by the Company or any of its subsidiaries or not engaged to render services to the Company or any of its subsidiaries; or (2) Solicits Employees, as defined below.  Fair Market Value shall be calculated on the date of the first violation of this Section 10.

For purposes of this Section 10, “Confidential Information”means information concerning the Company, its subsidiaries and their business that is not generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C) methods of operation and processes; (D) information regarding present and/or future products, developments, processes and systems; (E) information on customers or potential customers, including customers’ names, sales records, prices, and other terms of sales and cost information; (F) personnel data; (G) business plans, marketing plans,

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financial data and projections; and (H) information received in confidence from third parties.This provision shall not preclude the Participant from use or disclosure of information known generally to the public other than by his or her disclosure of such information or of information not considered confidential by persons engaged in the business conducted by the Company or subsidiary or from disclosure required by law or court order.

“Solicits Employees” means the Participant’s direct or indirect hire of, solicit to hire, or attempt to induce (or Participant’s assisting of any third party to hire, solicit or attempt to induce) any employee of the Company or a subsidiary (who is an employee of the Company or a subsidiary as of the time of such hire or solicitation or attempt to hire) or any former employee of the Company or a subsidiary (who was employed by the Company or a subsidiary within the 12-month period immediately preceding the date of such hire or solicitation or attempt to hire) to leave the employment of the Company or a subsidiary.

  11.            Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof, contain the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter and may only be amended by mutual written consent of the parties.

  12.            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri, without regard to the provisions governing conflict of laws.

  13.            Compliance with Laws and Regulations.  The obligation of the Company to deliver shares of Common Stock under this Award shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

  14.            Participant Acknowledgment.  By accepting these Awards, the Participant acknowledges receipt of a copy of the Plan, and acknowledges that all decisions, determinations and interpretations of the Administrator in respect of the Plan and this Agreement shall be final and conclusive.

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In addition, the Participant expressly acknowledges that violation by the Participant of Section 10 of this Agreement will obligate the Participant to pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock that becomes vested or is issued pursuant to Section 5.

 The Laclede Group, Inc.

By:
	D. H. Yaeger
Title:	Chairman of the Board, President and Chief
	Executive Officer
«Name»

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Appendix A to Stock Award to

«Name»

Performance Period.  The “Performance Period” for this Award shall be the period beginning October 1, 2007 and ending September 30, 2010.

Performance Contingencies.  The “Performance Contingencies” for this Award include two performance measures:  EPS Growth and Dividend Growth as specified below:

EPS Growth  – EPS Growth is measured as the average of the annual earnings per share of Common Stock for the Company’s fiscal years 2008, 2009 and 2010.  The Threshold, Target, and High Performance levels of performance and performance contingent restricted stock (PCRS) as to which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Average of $   per share or above	Average of $   per share or above	Average of $  per share or above
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant x 70%]	[2/3 of PCRS in grant x 70%]	[# of PCRS in grant x 70%]

Dividend Growth  – Dividend Growth is measured as the total dividends per share declared on the Company’s common stock in fiscal year 2010.  The Threshold, Target and High Performance levels of performance and PCRS as to which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Dividends declared of $   per share or above	Dividends declared of $   per share or above	Dividends declared of $   per share or above
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant  x 30%]	[2/3 of PCRS in grant x 30%]	[# of PCRS in grant x 30%]

Total Shareholder Return for the Company or for a comparator company shall be calculated as follows:

	Average share price for the 7/1/10 – 9/30/10 quarter
+	value of reinvested dividends
=	Total end of performance period value
–	average share price for the 7/1/07 – 9/30/07 quarter
=	Total value created in performance period
÷	average share price for the 7/1/07 – 9/30/07 quarter
=	Total Shareholder Return

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Illustration:  If a Participant received an award of 150 shares of Performance Contingent Restricted Stock with 100 shares being Performance Restricted Shares and 50 shares being Potential Performance Restricted Shares and if the Administrator determines that the Company attained Target Performance on the EPS Performance Contingency, midway between Target and High Performance on the Dividend Growth Performance Contingency, and TSR exceeded the 50th percentile of the comparator group, then upon the Board’s certification of such performance the 100 Performance Restricted Shares would vest and 8 shares of the 50 Potential Performance Restricted Shares would be issued and delivered to the Participant.

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EX-10.3

Exhibit 10.3

The Laclede Group

2006 Equity Incentive Plan

Performance Contingent

Restricted Stock Award Agreement

THIS AGREEMENT, made as of this 5th day of December 2007, between The Laclede Group, Inc. (the “Company”) and Douglas H. Yaeger (the “Participant”).

Pursuant to the terms of the Company’s 2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the “Plan”), this Award allows the Participant to earn up to [insert maximum] shares of Common Stock conditioned upon the execution and delivery by the Company and the Participant of this Agreement setting forth the terms and conditions applicable to such award.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows:

  1.            Award of Restricted Stock.  Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Company awards to the Participant, effective as of the Award Date, a maximum of «Grant» («Spelled_Out») shares of Common Stock of the Company, subject to the terms, conditions and restrictions described in this Agreement and in the Plan (the “Performance Contingent Restricted Stock”).  Of the Performance Contingent Restricted Stock,

      ·   [insert target number] shares (“Performance Restricted Shares”) are issued on the Award Date and Participant shall have all of the rights of a shareholder of the Company with respect to such shares, including the right to vote and to receive dividends, but such shares remain subject to the performance contingency in Section 5 and non-transferability restrictions in Section 7 of this Agreement

      ·   [insert delta to get to high performance number] shares (“Potential Performance Restricted Shares”) represent shares, all or some of which the Participant may earn if performance exceeds Target, but as to which Participant shall have no rights of a shareholder.  Such rights shall only be obtained, if at all, once performance during the Performance Period has exceeded Target, the Board has certified to such attainment, and one or more Potential Performance Restricted Shares are delivered to the Participant.

  2.            Award Date.  The Award Date of the Performance Contingent Restricted Stock awarded under this Agreement is December 5, 2007.

  3.            Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Administrator, shall govern.  All capitalized terms used herein, but not otherwise defined, shall have the meaning given to such terms in the Plan.

  4.            Restrictions and Conditions.  Except as otherwise provided in this Agreement, Participant shall forfeit any and all right to the Performance Contingent Restricted Stock upon Participant’s termination of employment with the Company and its subsidiaries for any reason prior to the end of the Performance Period.

  5.            Lapse of Restrictions.  The Participant accepts this Performance Contingent Restricted Stock Award and agrees that the restrictions relative to such Award shall lapse only following the conclusion of the Performance Period and only to the extent that the Performance Contingency set forth in Appendix A has been met or exceeded.  If performance on the Performance Contingency has not been achieved at or above Threshold, then all Performance Contingent Restricted Stock is forfeited.  If performance on the Performance Contingency has been achieved between the Threshold and Target or Target and High Performance levels of performance, the Administrator shall interpolate for performance between the applicable levels and shall determine the number of shares of Performance Contingent Restricted Stock as to which the restrictions shall lapse.  Because the Company cannot issue fractional shares, the Administrator will round to the nearest whole number of shares of Performance Contingent Restricted Stock in such interpolations.

The Award will be subject to forfeiture of up to 50% of the shares earned based upon performance relative to the Performance Contingency, as determined by the Administrator in its sole discretion, if the Company’s Total Shareholder Return, as defined in Appendix A, for the Performance Period is in the bottom quartile relative to the defined comparator group identified by the Administrator.

Vesting of any Performance Restricted Shares as well as the issuance, if any, of Potential Performance Restricted Shares under this Agreement shall occur on the business day immediately following the date of the certification by the Board of Directors (“Certification Date”) of (a) the satisfaction of the Performance Contingency and (b) the number of shares of Performance Contingent Restricted Stock to be vested or issued; provided, that no Performance Contingent Restricted Stock shall vest or be issued if Participant is terminated with or without Cause or if the Participant voluntarily terminates employment with the Company and all of its subsidiaries prior to the Certification Date.  Any Potential Performance Restricted Shares that the Board certifies are earned will be issued and delivered to the Participant in no event later than March 15 of the year following the end of the Performance Period.  Any Performance Restricted Shares or Potential Performance Restricted Shares as to which the Performance Contingency has not been satisfied shall be forfeited.

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Notwithstanding the foregoing,

(i) In the event of a Change in Control, the Performance Contingent Restricted Stock shall be deemed earned at Target prorated based on the number of months in the Performance Period to the date of the Change in Control and all restrictions as to such number of shares shall lapse if:

(a)	the Award has not otherwise been forfeited and
(b)	the successor or surviving corporation (or parent thereof) does not assume this Award or replace it with a comparable award, provided further that if the Award is assumed or replaced, such assumed or replaced Award shall provide that the restrictions shall lapse if Participant is involuntarily terminated without Cause within 24 months of the Change in Control (a “Change in Control Termination”);

(ii) if a Participant leaves the employment of the Company and its subsidiaries due to death, Disability or retirement (including early retirement and disability retirement) prior to the end of the Performance Period, the Participant will be eligible to earn a prorated Award, as the Administrator may determine, based on the number of full months as a Participant during the Performance Period and will be eligible to receive the underlying shares if the Performance Contingency is satisfied and the restrictions lapse as outlined above.

  6.            How Shares are Held.  The Performance Restricted Shares shall be held by a Company custodian until all of the restrictions have lapsed and all applicable terms and conditions have been met.  The Company shall deliver to the Participant the number of whole shares of Performance Restricted Shares as to which the Administrator has determined the restrictions have lapsed as provided in Section 5.  Potential Performance Restricted Shares, when earned, shall be issued and delivered as provided in Section 5.

  7.            Shares Non-Transferable.  The Performance Contingent Restricted Stock shall not be transferable by Participant and may not be, sold, assigned, disposed of, or pledged or hypothecated as collateral for a loan or as security for performance of any obligation or for any other purpose until, with respect to the Performance Restricted Shares, after the restrictions have lapsed as provided in Section 5 and, with respect to the Potential Performance Restricted Shares, after such shares have been issued and delivered to the Participant.

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  8.            No Right to Continued Employment.  Nothing in this Agreement shall confer on the Participant any right to continuance of employment by the Company or a subsidiary, nor shall it interfere in any way with the right of Participant’s employer to terminate Participant’s employment at any time.

  9.            Tax Withholding and Tax Election.  The Company shall not be obligated to deliver any shares of Performance Contingent Restricted Stock until Participant pays to the Company in cash, or any other form of property acceptable to the Company, the amount required to be withheld for any federal, state or local income, FICA or other taxes of any kind with respect to such shares.  The Participant may, by notice to the Company, elect to have such withholding satisfied by a reduction of the number of whole shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value of the Common Stock on the date the restrictions lapse as provided in Section 5.  The Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct such taxes, from any payment of any kind otherwise due to Participant.  Until the restrictions have lapsed as provided in Section 5, any dividends paid relative to the Performance Restricted Shares shall be treated as compensation and subject to tax withholdings in accordance with tax laws then in effect.

The Participant may, but is not required to, elect to apply the rules of Section 83(b) of the Internal Revenue Code, as amended, (“Code”) to the issuance of Performance Restricted Shares that is subject to a substantial risk of forfeiture.  If the Participant makes an affirmative election under Section 83(b) of the Code, the Participant must file such election within 30 days after the date of this Agreement with the Internal Revenue Service and notify the Company within 30 days after making such election.

  10.            Confidential Information and Restrictions on Soliciting Employees.  Notwithstanding any provision of this Agreement to the contrary, the Participant shall pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock vested and issued to Participant under this Award if, during the period beginning on the date hereof and ending eighteen months following the date the Participant’s employment with the Company and its subsidiaries terminates (provided that such termination is other than a Change in Control Termination), the Participant: (1) discloses Confidential Information, as defined below, to any person not employed by the Company or any of its subsidiaries or not engaged to render services to the Company or any of its subsidiaries; or (2) Solicits Employees, as defined below.  Fair Market Value shall be calculated on the date of the first violation of this Section 10.

For purposes of this Section 10, “Confidential Information”means information concerning the Company, its subsidiaries and their business that is not generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C) methods of operation and processes; (D) information regarding present and/or future products, developments, processes and systems; (E) information on customers or potential customers, including customers’ names, sales records, prices, and other terms of sales and cost information; (F) personnel data; (G) business plans, marketing plans,

4

financial data and projections; and (H) information received in confidence from third parties.This provision shall not preclude the Participant from use or disclosure of information known generally to the public other than by his or her disclosure of such information or of information not considered confidential by persons engaged in the business conducted by the Company or subsidiary or from disclosure required by law or court order.

“Solicits Employees” means the Participant’s direct or indirect hire of, solicit to hire, or attempt to induce (or Participant’s assisting of any third party to hire, solicit or attempt to induce) any employee of the Company or a subsidiary (who is an employee of the Company or a subsidiary as of the time of such hire or solicitation or attempt to hire) or any former employee of the Company or a subsidiary (who was employed by the Company or a subsidiary within the 12-month period immediately preceding the date of such hire or solicitation or attempt to hire) to leave the employment of the Company or a subsidiary.

  11.            Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof, contain the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter and may only be amended by mutual written consent of the parties.

  12.            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri, without regard to the provisions governing conflict of laws.

  13.            Compliance with Laws and Regulations.  The obligation of the Company to deliver shares of Common Stock under this Award shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

  14.            Participant Acknowledgment.  By accepting these Awards, the Participant acknowledges receipt of a copy of the Plan, and acknowledges that all decisions, determinations and interpretations of the Administrator in respect of the Plan and this Agreement shall be final and conclusive.

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In addition, the Participant expressly acknowledges that violation by the Participant of Section 10 of this Agreement will obligate the Participant to pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock that becomes vested or is issued pursuant to Section 5.

The Laclede Group, Inc.

By:            ____________________________________

Title:

__________________________________________

Douglas H. Yaeger

6

Appendix A to Stock Award to

Douglas H. Yaeger

Performance Period.  The “Performance Period” for this Award shall be the period beginning October 1, 2007 and ending September 30, 2010.

Performance Contingency.  The “Performance Contingency” for this Award is the following performance measure:

EPS Growth  – EPS Growth is measured as the average of the annual earnings per share of Common Stock for the Company’s fiscal years 2008, 2009 and 2010.  The Threshold, Target, and High Performance levels of performance and performance contingent restricted stock (PCRS) as to which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Average of $   per share or above	Average of $   per share or above	Average of $  per share or above
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant x 70%]	[2/3 of PCRS in grant x 70%]	[# of PCRS in grant x 70%]

Total Shareholder Return for the Company or for a comparator company shall be calculated as follows:

	Average share price for the 7/1/10 – 9/30/10 quarter
+	value of reinvested dividends
=	Total end of performance period value
–	average share price for the 7/1/07 – 9/30/07 quarter
=	Total value created in performance period
÷	average share price for the 7/1/07 – 9/30/07 quarter
=	Total Shareholder Return

7

The Laclede Group

2006 Equity Incentive Plan

Performance Contingent

Restricted Stock Award Agreement

THIS AGREEMENT, made as of this 5th day of December 2007, between The Laclede Group, Inc. (the “Company”) and Douglas H. Yaeger (the “Participant”).

Pursuant to the terms of the Company’s 2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the “Plan”), this Award allows the Participant to earn up to [insert maximum] shares of Common Stock conditioned upon the execution and delivery by the Company and the Participant of this Agreement setting forth the terms and conditions applicable to such award.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows:

  1.            Award of Restricted Stock.  Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Company awards to the Participant, effective as of the Award Date, a maximum of «Grant» («Spelled_Out») shares of Common Stock of the Company, subject to the terms, conditions and restrictions described in this Agreement and in the Plan (the “Performance Contingent Restricted Stock”).  Of the Performance Contingent Restricted Stock,

     ·   [insert target number] shares (“Performance Restricted Shares”) are issued on the Award Date and Participant shall have all of the rights of a shareholder of the Company with respect to such shares, including the right to vote and to receive dividends, but such shares remain subject to the performance contingency in Section 5 and non-transferability restrictions in Section 7 of this Agreement

     ·   [insert delta to get to high performance number] shares (“Potential Performance Restricted Shares”) represent shares, all or some of which the Participant may earn if performance exceeds Target, but as to which Participant shall have no rights of a shareholder.  Such rights shall only be obtained, if at all, once performance during the Performance Period has exceeded Target, the Board has certified to such attainment, and one or more Potential Performance Restricted Shares are delivered to the Participant.

  2.            Award Date.  The Award Date of the Performance Contingent Restricted Stock awarded under this Agreement is December 5, 2007.

  3.            Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict

between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Administrator, shall govern.  All capitalized terms used herein, but not otherwise defined, shall have the meaning given to such terms in the Plan.

  4.            Restrictions and Conditions.  Except as otherwise provided in this Agreement, Participant shall forfeit any and all right to the Performance Contingent Restricted Stock upon Participant’s termination of employment with the Company and its subsidiaries for any reason prior to the end of the Performance Period.

  5.            Lapse of Restrictions.  The Participant accepts this Performance Contingent Restricted Stock Award and agrees that the restrictions relative to such Award shall lapse only following the conclusion of the Performance Period and only to the extent that the Performance Contingency set forth in Appendix A has been met or exceeded.  If performance on the Performance Contingency has not been achieved at or above Threshold, then all Performance Contingent Restricted Stock is forfeited.  If performance on the Performance Contingency has been achieved between the Threshold and Target or Target and High Performance levels of performance, the Administrator shall interpolate for performance between the applicable levels and shall determine the number of shares of Performance Contingent Restricted Stock as to which the restrictions shall lapse.  Because the Company cannot issue fractional shares, the Administrator will round to the nearest whole number of shares of Performance Contingent Restricted Stock in such interpolations.

The Award will be subject to forfeiture of up to 50% of the shares earned based upon performance relative to the Performance Contingency, as determined by the Administrator in its sole discretion, if the Company’s Total Shareholder Return, as defined in Appendix A, for the Performance Period is in the bottom quartile relative to the defined comparator group identified by the Administrator.

Vesting of any Performance Restricted Shares as well as the issuance, if any, of Potential Performance Restricted Shares under this Agreement shall occur on the business day immediately following the date of the certification by the Board of Directors (“Certification Date”) of (a) the satisfaction of the Performance Contingency and (b) the number of shares of Performance Contingent Restricted Stock to be vested or issued; provided, that no Performance Contingent Restricted Stock shall vest or be issued if Participant is terminated with or without Cause or if the Participant voluntarily terminates employment with the Company and all of its subsidiaries prior to the Certification Date.  Any Potential Performance Restricted Shares that the Board certifies are earned will be issued and delivered to the Participant in no event later than March 15 of the year following the end of the Performance Period.  Any Performance Restricted Shares or Potential Performance Restricted Shares as to which the Performance Contingency has not been satisfied shall be forfeited.

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Notwithstanding the foregoing,

  (i)   In the event of a Change in Control, the Performance Contingent Restricted Stock shall be deemed earned at Target prorated based on the number of months in the Performance Period to the date of the Change in Control and all restrictions as to such number of shares shall lapse if:

(a)	the Award has not otherwise been forfeited and
(b)	the successor or surviving corporation (or parent thereof) does not assume this Award or replace it with a comparable award, provided further that if the Award is assumed or replaced, such assumed or replaced Award shall provide that the restrictions shall lapse if Participant is involuntarily terminated without Cause within 24 months of the Change in Control (a “Change in Control Termination”);

  (ii)   if a Participant leaves the employment of the Company and its subsidiaries due to death, Disability or retirement (including early retirement and disability retirement) prior to the end of the Performance Period, the Participant will be eligible to earn a prorated Award, as the Administrator may determine, based on the number of full months as a Participant during the Performance Period and will be eligible to receive the underlying shares if the Performance Contingency is satisfied and the restrictions lapse as outlined above.

  6.            How Shares are Held.  The Performance Restricted Shares shall be held by a Company custodian until all of the restrictions have lapsed and all applicable terms and conditions have been met.  The Company shall deliver to the Participant the number of whole shares of Performance Restricted Shares as to which the Administrator has determined the restrictions have lapsed as provided in Section 5.  Potential Performance Restricted Shares, when earned, shall be issued and delivered as provided in Section 5.

  7.            Shares Non-Transferable.  The Performance Contingent Restricted Stock shall not be transferable by Participant and may not be, sold, assigned, disposed of, or pledged or hypothecated as collateral for a loan or as security for performance of any obligation or for any other purpose until, with respect to the Performance Restricted Shares, after the restrictions have lapsed as provided in Section 5 and, with respect to the Potential Performance Restricted Shares, after such shares have been issued and delivered to the Participant.

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  8.            No Right to Continued Employment.  Nothing in this Agreement shall confer on the Participant any right to continuance of employment by the Company or a subsidiary, nor shall it interfere in any way with the right of Participant’s employer to terminate Participant’s employment at any time.

  9.            Tax Withholding and Tax Election.  The Company shall not be obligated to deliver any shares of Performance Contingent Restricted Stock until Participant pays to the Company in cash, or any other form of property acceptable to the Company, the amount required to be withheld for any federal, state or local income, FICA or other taxes of any kind with respect to such shares.  The Participant may, by notice to the Company, elect to have such withholding satisfied by a reduction of the number of whole shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value of the Common Stock on the date the restrictions lapse as provided in Section 5.  The Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct such taxes, from any payment of any kind otherwise due to Participant.  Until the restrictions have lapsed as provided in Section 5, any dividends paid relative to the Performance Restricted Shares shall be treated as compensation and subject to tax withholdings in accordance with tax laws then in effect.

The Participant may, but is not required to, elect to apply the rules of Section 83(b) of the Internal Revenue Code, as amended, (“Code”) to the issuance of Performance Restricted Shares that is subject to a substantial risk of forfeiture.  If the Participant makes an affirmative election under Section 83(b) of the Code, the Participant must file such election within 30 days after the date of this Agreement with the Internal Revenue Service and notify the Company within 30 days after making such election.

  10.            Confidential Information and Restrictions on Soliciting Employees.  Notwithstanding any provision of this Agreement to the contrary, the Participant shall pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock vested and issued to Participant under this Award if, during the period beginning on the date hereof and ending eighteen months following the date the Participant’s employment with the Company and its subsidiaries terminates (provided that such termination is other than a Change in Control Termination), the Participant: (1) discloses Confidential Information, as defined below, to any person not employed by the Company or any of its subsidiaries or not engaged to render services to the Company or any of its subsidiaries; or (2) Solicits Employees, as defined below.  Fair Market Value shall be calculated on the date of the first violation of this Section 10.

For purposes of this Section 10, “Confidential Information”means information concerning the Company, its subsidiaries and their business that is not generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C) methods of operation and processes; (D) information regarding present and/or future products, developments, processes and systems; (E) information on customers or potential customers, including customers’ names, sales records, prices, and other terms of sales and cost information; (F) personnel data; (G) business plans, marketing plans,

4

financial data and projections; and (H) information received in confidence from third parties.This provision shall not preclude the Participant from use or disclosure of information known generally to the public other than by his or her disclosure of such information or of information not considered confidential by persons engaged in the business conducted by the Company or subsidiary or from disclosure required by law or court order.

“Solicits Employees” means the Participant’s direct or indirect hire of, solicit to hire, or attempt to induce (or Participant’s assisting of any third party to hire, solicit or attempt to induce) any employee of the Company or a subsidiary (who is an employee of the Company or a subsidiary as of the time of such hire or solicitation or attempt to hire) or any former employee of the Company or a subsidiary (who was employed by the Company or a subsidiary within the 12-month period immediately preceding the date of such hire or solicitation or attempt to hire) to leave the employment of the Company or a subsidiary.

  11.            Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof, contain the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter and may only be amended by mutual written consent of the parties.

  12.            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri, without regard to the provisions governing conflict of laws.

  13.            Compliance with Laws and Regulations.  The obligation of the Company to deliver shares of Common Stock under this Award shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

  14.            Participant Acknowledgment.  By accepting these Awards, the Participant acknowledges receipt of a copy of the Plan, and acknowledges that all decisions, determinations and interpretations of the Administrator in respect of the Plan and this Agreement shall be final and conclusive.

5

In addition, the Participant expressly acknowledges that violation by the Participant of Section 10 of this Agreement will obligate the Participant to pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock that becomes vested or is issued pursuant to Section 5.

The Laclede Group, Inc.

By:            ____________________________________

Title:

__________________________________________

Douglas H. Yaeger

6

Appendix A to Stock Award to

Douglas H. Yaeger

Performance Period.  The “Performance Period” for this Award shall be the period beginning October 1, 2007 and ending September 30, 2010.

Performance Contingency.  The “Performance Contingency” for this Award is the following performance measure:

Dividend Growth  – Dividend Growth is measured as the total dividends per share declared on the Company’s common stock in fiscal year 2010.  The Threshold, Target and High Performance levels of performance and Performance Contingent Restricted Stock as to which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Dividends declared of $   per share or above	Dividends declared of $   per share or above	Dividends declared of $   per share or above
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant  x 30%]	[2/3 of PCRS in grant x 30%]	[# of PCRS in grant x 30%]

Total Shareholder Return for the Company or for a comparator company shall be calculated as follows:

	Average share price for the 7/1/10 – 9/30/10 quarter
+	value of reinvested dividends
=	Total end of performance period value
–	average share price for the 7/1/07 – 9/30/07 quarter
=	Total value created in performance period
÷	average share price for the 7/1/07 – 9/30/07 quarter
=	Total Shareholder Return

7

EX-10.4

Exhibit 10.4

The Laclede Group

2006 Equity Incentive Plan

Performance Contingent

Restricted Stock Award Agreement

THIS AGREEMENT, made as of this 5th day of December 2007, between The Laclede Group, Inc. (the “Company”) and Kenneth J. Neises (the “Participant”).

Pursuant to the terms of the Company’s 2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the “Plan”), this Award allows the Participant to earn up to 15,000 shares of Common Stock conditioned upon the execution and delivery by the Company and the Participant of this Agreement setting forth the terms and conditions applicable to such award.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows:

1.            Award of Restricted Stock.  Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Company awards to the Participant, effective as of the Award Date, a maximum of 15,000 (fifteen thousand) shares of Common Stock of the Company, subject to the terms, conditions and restrictions described in this Agreement and in the Plan (the “Performance Contingent Restricted Stock”).  Of the Performance Contingent Restricted Stock,

  ·   10,000 shares (“Performance Restricted Shares”) are issued on the Award Date and Participant shall have all of the rights of a shareholder of the Company with respect to such shares, including the right to vote and to receive dividends, but such shares remain subject to the performance contingencies in Section 5 and non-transferability restrictions in Section 7 of this Agreement

  ·   5,000 shares (“Potential Performance Restricted Shares”) represent shares, all or some of which the Participant may earn if performance exceeds Target, but as to which Participant shall have no rights of a shareholder.  Such rights shall only be obtained, if at all, once performance during the Performance Period has exceeded Target, the Board has certified to such attainment, and one or more Potential Performance Restricted Shares are delivered to the Participant.

2.            Award Date.  The Award Date of the Performance Contingent Restricted Stock awarded under this Agreement is December 5, 2007.

3.            Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Administrator, shall govern.  All capitalized terms used herein, but not otherwise defined, shall have the meaning given to such terms in the Plan.

4.            Restrictions and Conditions.  Except as otherwise provided in this Agreement, Participant shall forfeit any and all right to the Performance Contingent Restricted Stock upon Participant’s termination of employment with the Company and its subsidiaries for any reason prior to the end of the Performance Period.

5.            Lapse of Restrictions.  The Participant accepts this Performance Contingent Restricted Stock Award and agrees that the restrictions relative to such Award shall lapse only following the conclusion of the Performance Period and only to the extent that one or more of the Performance Contingencies set forth in Appendix A have been met or exceeded.  If performance on neither Performance Contingency has been achieved at or above Threshold, then all Performance Contingent Restricted Stock is forfeited.  If performance on one or more of the Performance Contingencies has been achieved between the Threshold and Target or Target and High Performance levels of performance, the Administrator shall interpolate for performance between the applicable levels and shall determine the number of shares of Performance Contingent Restricted Stock as to which the restrictions shall lapse.  Because the Company cannot issue fractional shares, the Administrator will round to the nearest whole number of shares of Performance Contingent Restricted Stock in such interpolations.

Vesting of any Performance Restricted Shares as well as the issuance, if any, of Potential Performance Restricted Shares under this Agreement shall occur on the business day immediately following the date of the certification by the Board of Directors (“Certification Date”) of (a) the satisfaction of one or more of the Performance Contingencies and (b) the number of shares of Performance Contingent Restricted Stock to be vested or issued; provided, that no Performance Contingent Restricted Stock shall vest or be issued if Participant is terminated with or without Cause or if the Participant voluntarily terminates employment with the Company and all of its subsidiaries prior to the Certification Date.  Any Potential Performance Restricted Shares that the Board certifies are earned will be issued and delivered to the Participant in no event later than March 15 of the year following the end of the Performance Period.  Any Performance Restricted Shares or Potential Performance Restricted Shares as to which any or all of the respective Performance Contingencies has not been satisfied shall be forfeited.

2

Notwithstanding the foregoing,

   (i)   In the event of a Change in Control, the Performance Contingent Restricted Stock shall be deemed earned at Target based on the number of months in the Performance Period to the date of the Change in Control and all restrictions as to such number of shares shall lapse if:

(a)	the Award has not otherwise been forfeited and
(b)	the successor or surviving corporation (or parent thereof) does not assume this Award or replace it with a comparable award, provided further that if the Award is assumed or replaced, such assumed or replaced Award shall provide that the restrictions shall lapse if Participant is involuntarily terminated without Cause within 24 months of the Change in Control (a “Change in Control Termination”);

(ii)   if a Participant leaves the employment of the Company and its subsidiaries due to death, Disability or retirement (including early retirement and disability retirement) prior to the end of the Performance Period, the Participant will be eligible to earn a prorated Award, as the Administrator may determine, based on the number of full months as a Participant during the Performance Period and will be eligible to receive the underlying shares if the Performance Contingencies are satisfied and the restrictions lapse as outlined above.

6.            How Shares are Held.  The Performance Restricted Shares shall be held by a Company custodian until all of the restrictions have lapsed and all applicable terms and conditions have been met.  The Company shall deliver to the Participant the number of whole shares of Performance Restricted Shares as to which the Administrator has determined the restrictions have lapsed as provided in Section 5.  Potential Performance Restricted Shares, when earned, shall be issued and delivered as provided in Section 5.

7.            Shares Non-Transferable.  The Performance Contingent Restricted Stock shall not be transferable by Participant and may not be, sold, assigned, disposed of, or pledged or hypothecated as collateral for a loan or as security for performance of any obligation or for any other purpose until, with respect to the Performance Restricted Shares, after the restrictions have lapsed as provided in Section 5 and, with respect to the Potential Performance Restricted Shares, after such shares have been issued and delivered to the Participant.

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8.            No Right to Continued Employment.  Nothing in this Agreement shall confer on the Participant any right to continuance of employment by the Company or a subsidiary, nor shall it interfere in any way with the right of Participant’s employer to terminate Participant’s employment at any time.

9.            Tax Withholding and Tax Election.  The Company shall not be obligated to deliver any shares of Performance Contingent Restricted Stock until Participant pays to the Company in cash, or any other form of property acceptable to the Company, the amount required to be withheld for any federal, state or local income, FICA or other taxes of any kind with respect to such shares.  The Participant may, by notice to the Company, elect to have such withholding satisfied by a reduction of the number of whole shares otherwise so deliverable, such reduction to be calculated based on the Fair Market Value of the Common Stock on the date the restrictions lapse as provided in Section 5.  The Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct such taxes, from any payment of any kind otherwise due to Participant.  Until the restrictions have lapsed as provided in Section 5, any dividends paid relative to the Performance Restricted Shares shall be treated as compensation and subject to tax withholdings in accordance with tax laws then in effect.

The Participant may, but is not required to, elect to apply the rules of Section 83(b) of the Internal Revenue Code, as amended, (“Code”) to the issuance of Performance Restricted Shares that is subject to a substantial risk of forfeiture.  If the Participant makes an affirmative election under Section 83(b) of the Code, the Participant must file such election within 30 days after the date of this Agreement with the Internal Revenue Service and notify the Company within 30 days after making such election.

10.            Confidential Information and Restrictions on Soliciting Employees.  Notwithstanding any provision of this Agreement to the contrary, the Participant shall pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock vested and issued to Participant under this Award if, during the period beginning on the date hereof and ending eighteen months following the date the Participant’s employment with the Company and its subsidiaries terminates (provided that such termination is other than a Change in Control Termination), the Participant: (1) discloses Confidential Information, as defined below, to any person not employed by the Company or any of its subsidiaries or not engaged to render services to the Company or any of its subsidiaries; or (2) Solicits Employees, as defined below.  Fair Market Value shall be calculated on the date of the first violation of this Section 10.

For purposes of this Section 10, “Confidential Information”means information concerning the Company, its subsidiaries and their business that is not generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C) methods of operation and processes; (D) information regarding present and/or future products, developments, processes and systems; (E) information on customers or potential customers, including customers’ names, sales records, prices, and other terms of sales and cost information; (F) personnel data; (G) business plans, marketing plans,

4

financial data and projections; and (H) information received in confidence from third parties.This provision shall not preclude the Participant from use or disclosure of information known generally to the public other than by his or her disclosure of such information or of information not considered confidential by persons engaged in the business conducted by the Company or subsidiary or from disclosure required by law or court order.

“Solicits Employees” means the Participant’s direct or indirect hire of, solicit to hire, or attempt to induce (or Participant’s assisting of any third party to hire, solicit or attempt to induce) any employee of the Company or a subsidiary (who is an employee of the Company or a subsidiary as of the time of such hire or solicitation or attempt to hire) or any former employee of the Company or a subsidiary (who was employed by the Company or a subsidiary within the 12-month period immediately preceding the date of such hire or solicitation or attempt to hire) to leave the employment of the Company or a subsidiary.

11.            Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof, contain the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter and may only be amended by mutual written consent of the parties.

12.            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri, without regard to the provisions governing conflict of laws.

13.            Compliance with Laws and Regulations.  The obligation of the Company to deliver shares of Common Stock under this Award shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

14.            Participant Acknowledgment.  By accepting these Awards, the Participant acknowledges receipt of a copy of the Plan, and acknowledges that all decisions, determinations and interpretations of the Administrator in respect of the Plan and this Agreement shall be final and conclusive.

5

In addition, the Participant expressly acknowledges that violation by the Participant of Section 10 of this Agreement will obligate the Participant to pay to the Company the Fair Market Value of the Performance Contingent Restricted Stock that becomes vested or is issued pursuant to Section 5.

The Laclede Group, Inc.
By:
	D. H. Yaeger
Title:	Chairman of the Board, President and Chief
	Executive Officer
Kenneth J. Neises

6

Appendix A to Stock Award to

Kenneth J. Neises

 Performance Period.  The “Performance Period” for this Award shall be the period beginning October 1, 2007

 and ending September 30, 2009.

 Performance Contingencies.  The “Performance Contingencies” for this Award include three performance

 measures:    LER Expansion, Restructure Propane Storage and Succession Management as specified below:

 1.  LER Expansion.  The Threshold, Target, and High Performance levels of performance and performance

 contingent restricted stock (PCRS) as to which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Develop and present by 7/31/08	Implement and submit by early FY ‘09	$ .   earnings by end of FY ‘09
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant x 50%]	[2/3 of PCRS in grant x  50%]	[# of PCRS in grant x  50%]

 2.  Propane Operation.  The Threshold, Target and High Performance levels of performance and PCRS as to

 which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	by 6/30/08	Obtain                      develop and submit by early FY ’09	by end of FY ’09.
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant  x  30%]	[2/3 of PCRS in grant x  30%]	[# of PCRS in grant x  30 %]

 3.  Sucession Management.  The Threshold, Target and High Performance levels of performance and PCRS as to

 which restrictions may lapse are as follows:

	Threshold	Target	High Performance
Level of Performance	Develop plan to manage succession with specific developmental activities by 9/30/08	Substantial progress toward implementation of plan by 9/30/09	Direct and oversee through FY ‘09
Number of PCRS as to which restrictions lapse	[1/3 of PCRS in grant  x  20%]	[2/3 of PCRS in grant x  20%]	[# of PCRS in grant x  20%]

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EX-12

Exhibit 12

THE LACLEDE GROUP, INC. AND SUBSIDIARY COMPANIES

SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Twelve Months Ended
	Dec 31,		September 30,
(Thousands of Dollars)		2007		2007		2006		2005		2004		2003
Income before interest
charges and income taxes	$	115,073	$	112,078	$	108,783	$	91,435	$	84,196	$	80,270
Add: One third of applicable
rentals charged to operating
expense (which approximates
the interest factor)		4,686		4,710		4,514		3,250		2,333		2,873
Total Earnings	$	119,759	$	116,788	$	113,297	$	94,685	$	86,529	$	83,143
Interest on long-term debt –
Laclede Gas	$	22,002	$	22,502	$	22,329	$	22,835	$	22,010	$	20,169
Other interest		15,456		14,727		13,850		7,714		6,804		6,802
Add: One third of applicable
rentals charged to operating
expense (which approximates
the interest factor)		4,686		4,710		4,514		3,250		2,333		2,873
Total Fixed Charges	$	42,144	$	41,939	$	40,693	$	33,799	$	31,147	$	29,844
Ratio of Earnings to Fixed
Charges		2.84		2.78		2.78		2.80		2.78		2.79

LACLEDE GAS COMPANY

SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Twelve Months Ended
	Dec 31,		September 30,
(Thousands of Dollars)		2007		2007		2006		2005		2004		2003
Income before interest
charges and income taxes	$	80,251	$	80,134	$	72,077	$	72,092	$	73,956	$	76,274
Add: One third of applicable
rentals charged to operating
expense (which approximates
the interest factor)		1,548		1,485		1,291		938		538		457
Total Earnings	$	81,799	$	81,619	$	73,368	$	73,030	$	74,494	$	76,731
Interest on long-term debt	$	22,002	$	22,502	$	22,329	$	22,835	$	22,010	$	20,169
Other interest		11,697		11,101		10,236		4,076		3,192		3,752
Add: One third of applicable
rentals charged to operating
expense (which approximates
the interest factor)		1,548		1,485		1,291		938		538		457
Total Fixed Charges	$	35,247	$	35,088	$	33,856	$	27,849	$	25,740	$	24,378
Ratio of Earnings to Fixed
Charges		2.32		2.33		2.17		2.62		2.89		3.15

EX-31

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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 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:	January 30, 2008	Signature:	/s/ Douglas H. Yaeger
			Douglas H. Yaeger
			Chairman of the Board,
			President and Chief
			Executive Officer

CERTIFICATION

I, Mark D. Waltermire, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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 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:	January 30, 2008	Signature:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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 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:	January 30, 2008	Signature:	/s/ Douglas H. Yaeger
			Douglas H. Yaeger
			Chairman of the Board,
			President and Chief
			Executive Officer

CERTIFICATION

I, Mark D. Waltermire, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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 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:	January 30, 2008	Signature:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Senior Vice President and
			Chief Financial Officer

EX-32

Exhibit 32

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §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 December 31, 2007 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 December 31, 2007 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date:	January 30, 2008	/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 §906 of the Sarbanes-Oxley Act of 2002, I, Mark D. Waltermire, 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 December 31, 2007 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 December 31, 2007 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date:	January 30, 2008	/s/ Mark D. Waltermire
		Mark D. Waltermire
		Chief Financial Officer

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §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 December 31, 2007 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 December 31, 2007 fairly presents, in all material respects, the financial condition and results of operations of  Laclede Gas Company.

Date:	January 30, 2008	/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 §906 of the Sarbanes-Oxley Act of 2002, I, Mark D. Waltermire, Senior Vice President and 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 December 31, 2007 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 December 31, 2007 fairly presents, in all material respects, the financial condition and results of operations of  Laclede Gas Company.

Date:	January 30, 2008	/s/ Mark D. Waltermire
		Mark D. Waltermire
		Senior Vice President and
		Chief Financial Officer

EX-99.1

Exhibit 99.1

LACLEDE GAS COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
	Three Months Ended
	December 31,
(Thousands)	2007		2006
Operating Revenues:
Utility	$	320,892	$	348,488
Other		786		662
Total Operating Revenues		321,678		349,150
Operating Expenses:
Utility
Natural and propane gas		222,841		251,523
Other operation expenses		35,213		33,680
Maintenance		6,235		5,598
Depreciation and amortization		8,713		8,497
Taxes, other than income taxes		16,681		18,759
Total Utility Operating Expenses		289,683		318,057
Other		725		651
Total Operating Expenses		290,408		318,708
Operating Income		31,270		30,442
Other Income and (Income Deductions) – Net		2,032		2,743
Interest Charges:
Interest on long-term debt		5,126		5,626
Other interest charges		4,016		3,420
Total Interest Charges		9,142		9,046
Income Before Income Taxes		24,160		24,139
Income Tax Expense		8,365		8,464
Net Income		15,795		15,675
Dividends on Redeemable Preferred Stock		10		12
Earnings Applicable to Common Stock	$	15,785	$	15,663

See Notes to Financial Statements.

1

LACLEDE GAS COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
	Three Months Ended
	December 31,
(Thousands)	2007		2006
Net Income	$	15,795	$	15,675
Other Comprehensive Income, Before Tax:
Amortization of actuarial loss included in net periodic pension cost		43		—
Income Tax Expense Related to Items of Other Comprehensive Income		17		—
Other Comprehensive Income, Net of Tax		26		—
Comprehensive Income	$	15,821	$	15,675

See Notes to Financial Statements.

2

LACLEDE GAS COMPANY
BALANCE SHEETS
(UNAUDITED)
	Dec. 31,			Sept. 30,			Dec. 31,
(Thousands)	2007			2007			2006
ASSETS
Utility Plant	$	1,195,431		$	1,187,828		$	1,158,480
Less:  Accumulated depreciation and amortization		395,447			394,034			389,433
Net Utility Plant		799,984			793,794			769,047
Other Property and Investments		38,554			36,933			36,482
Current Assets:
Cash and cash equivalents		4,038			2,454			5,643
Accounts receivable:
Gas customers – billed and unbilled		199,067			102,224			176,181
Associated companies		325			253			4,648
Other		18,970			8,973			29,898
Allowances for doubtful accounts		(8,373	)		(10,961	)		(9,094	)
Inventories:
Natural gas stored underground at LIFO cost		132,006			138,198			135,225
Propane gas at FIFO cost		19,913			19,950			20,325
Materials, supplies, and merchandise at average cost		4,915			4,864			5,902
Derivative instrument assets		13,924			26,296			13,177
Unamortized purchased gas adjustments		8,613			12,813			34,538
Deferred income taxes		392			275			—
Prepayments and other		6,971			6,970			6,853
Total Current Assets		400,761			312,309			423,296
Deferred Charges:
Prepaid pension cost		—			—			62,472
Regulatory assets		288,868			285,054			178,334
Other		3,525			3,113			5,237
Total Deferred Charges		292,393			288,167			246,043
Total Assets	$	1,531,692		$	1,431,203		$	1,474,868

3

LACLEDE GAS COMPANY
BALANCE SHEETS (Continued)
(UNAUDITED)
	Dec. 31,			Sept. 30,			Dec. 31,
(Thousands, except share amounts)	2007			2007			2006
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and Paid-in capital (10,337, 10,307, and     10,197 shares issued, respectively)	$	153,010		$	151,510		$	146,218
Retained earnings		203,800			195,728			202,609
Accumulated other comprehensive loss		(1,701	)		(1,727	)		(834	)
Total Common Stock Equity		355,109			345,511			347,993
Redeemable preferred stock (less current sinking fund     requirements)		627			627			787
Long-term debt (less current portion)		309,138			309,122			309,062
Total Capitalization		664,874			655,260			657,842
Current Liabilities:
Notes payable		294,450			211,400			257,150
Accounts payable		83,575			45,084			86,438
Accounts payable – associated companies		3,341			4,065			3
Advance customer billings		27,382			25,440			19,583
Current portion of long-term debt and preferred stock		160			40,160			40,159
Wages and compensation accrued		13,262			11,532			12,700
Dividends payable		8,280			7,974			7,947
Customer deposits		15,128			15,899			16,600
Interest accrued		6,073			10,806			5,972
Taxes accrued		16,130			19,210			29,812
Deferred income taxes current		—			—			4,413
Other		5,664			5,342			4,596
Total Current Liabilities		473,445			396,912			485,373
Deferred Credits and Other Liabilities:
Deferred income taxes		230,840			223,192			224,120
Unamortized investment tax credits		4,143			4,200			4,377
Pension and postretirement benefit costs		67,648			63,678			20,385
Asset retirement obligations		26,445			26,054			26,378
Regulatory liabilities		39,687			39,589			34,137
Other		24,610			22,318			22,256
Total Deferred Credits and Other Liabilities		393,373			379,031			331,653
Total Capitalization and Liabilities	$	1,531,692		$	1,431,203		$	1,474,868

See Notes to Financial Statements.

4

LACLEDE GAS COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
	Three Months Ended
	December 31,
(Thousands)	2007			2006
Operating Activities:
Net Income	$	15,795		$	15,675
Adjustments to reconcile net income to net cash     provided by (used in) operating activities:
Depreciation and amortization		8,713			8,497
Deferred income taxes and investment tax credits		1,914			(6,309	)
Other – net		426			410
Changes in assets and liabilities:
Accounts receivable – net		(109,500	)		(103,411	)
Unamortized purchased gas adjustments		4,200			9,843
Deferred purchased gas costs		1,943			14,796
Accounts payable		37,767			30,676
Advance customer billings		1,942			(11,860	)
Taxes accrued		(3,080	)		14,267
Natural gas stored underground		6,192			2,192
Other assets and liabilities		13,251			(1,041	)
Net cash used in operating activities		(20,437	)		(26,265	)
Investing Activities:
Capital expenditures		(13,012	)		(11,758	)
Other investments		(1,122	)		(960	)
Net cash used in investing activities		(14,134	)		(12,718	)
Financing Activities:
Maturity of first mortgage bonds		(40,000	)		—
Issuance of short-term debt – net		83,050			49,850
Dividends paid		(7,909	)		(7,594	)
Issuance of common stock to Laclede Group		1,006			—
Other		8			56
Net cash provided by financing activities		36,155			42,312
Net Increase in Cash and Cash Equivalents		1,584			3,329
Cash and Cash Equivalents at Beginning of Period		2,454			2,314
Cash and Cash Equivalents at End of Period	$	4,038		$	5,643
Supplemental Disclosure of Cash Paid (Refunded) During the Period for:
Interest	$	14,360		$	13,338
Income taxes		4,119			(9,733	)

See Notes to Financial Statements.

5

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. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Laclede Gas’ Fiscal Year 2007 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 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.

BASIS OF PRESENTATION - 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. Also, Laclede Group may charge or reimburse Laclede Gas for certain tax-related amounts. Unpaid balances relating to these activities are reflected in the Laclede Gas Balance Sheets as Accounts Receivable-Associated Companies or as Accounts Payable-Associated Companies. Additionally, Laclede Gas may, on occasion, borrow funds from or lend funds to affiliated companies. Unpaid balances relating to these arrangements, if any, are reflected in Notes Receivable-Associated Companies or Notes Payable-Associated Companies.

REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on monthly cycles. The Utility records its utility operating revenues from gas sales and transportation services 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 amounts of accrued unbilled revenues at December 31, 2007 and 2006, for the Utility, were $50.7 million and $41.4 million, respectively. The amount of accrued unbilled revenue at September 30, 2007 was $11.9 million.

INCOME TAXES - Laclede Gas has elected, for tax purposes only, various accelerated depreciation provisions of the Internal Revenue Code. In addition, certain other costs are expensed currently for tax purposes while being deferred for book purposes. Effective October 1, 2007, generally accepted accounting principles require that tax benefits be recognized in the financial statements as determined by new recognition and measurement provisions. These provisions permit the benefit from a tax position to be recognized only if, and to the extent that, it is more likely than not that the tax position will be sustained upon examination by the taxing authority, based on the technical merits of the position. Unrecognized tax benefits and related interest and penalties, if any, are recorded as liabilities. 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 in the financial statements, and the related tax basis. Changes in enacted tax rates, if any, and certain property basis differences will be reflected by entries to regulatory asset or liability accounts.

Laclede Gas’ investment tax credits utilized prior to 1986 have been deferred and are being amortized in accordance with regulatory treatment over the useful life of the related property.

Laclede Group files a consolidated federal income tax return and allocates income taxes to Laclede Gas and its other subsidiaries as if each entity were a separate taxpayer.

GROSS RECEIPTS TAXES - Gross receipts taxes associated with Laclede Gas’ natural gas utility service are imposed on the Utility and billed to its customers. These amounts are recorded gross in the Statements of Income. Amounts recorded in Utility Operating Revenues for the quarters ended December 31, 2007 and 2006 were $13.0 million, and $14.7 million, respectively. Gross receipts taxes are expensed by the Utility and included in the Taxes Other Than Income line.

STOCK-BASED COMPENSATION – Officers and employees of Laclede Gas, as determined by the Compensation Committee of Laclede Group’s Board of Directors, are eligible to be selected for awards under the Laclede Group 2006 Equity Incentive Plan. For Laclede Group’s non-employee directors, shares are awarded under the Restricted Stock Plan for Non-Employee Directors. Refer to Note 1 of the Financial Statements included in the Utility’s Form 10-K for the fiscal year ended September 30, 2007 for descriptions of these plans. For awards made to its employees, the Utility records its allocation of compensation cost from Laclede Group with a corresponding increase to additional paid-in capital.

6

The amounts of compensation cost allocated to the Utility for share-based compensation arrangements for the quarters ended December 31, 2007 and 2006 are presented below:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Total compensation cost	$	540		$	468
Compensation cost capitalized		(135	)		(118	)
Compensation cost recognized in net income		405			350
Income tax benefit recognized in net income		(156	)		(135	)
Compensation cost recognized in net income, net of income tax	$	249		$	215

As of December 31, 2007, there was approximately $4.5 million in unrecognized compensation cost related to nonvested share-based compensation arrangements (options and restricted stock) that is expected to be allocated to the Utility over a weighted average period of approximately 2.4 years.

NEW ACCOUNTING STANDARDS – In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” Under FIN 48, Laclede Gas may recognize the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Laclede Gas adopted the provisions of FIN 48 as of October 1, 2007. For details regarding the cumulative effect of adoption and other pertinent information, see Note 3, Income Taxes.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement applies to fair value measurements required under other accounting guidance that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. The guidance in this Statement does not apply to the Laclede Group’s stock-based compensation plans accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” This Statement will be effective for the Utility as of the beginning of fiscal year 2009. Laclede Gas is currently evaluating the provisions of this Statement.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” As discussed in Note 2 to the Financial Statements included in the Utility’s Fiscal Year 2007 Form 10-K, Laclede Gas adopted the recognition and disclosure provisions of this Statement effective September 30, 2007. The Statement also requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial position. This requirement is effective for the Utility as of the end of fiscal year 2009. In conjunction with adoption of this provision of SFAS No. 158, the Utility will be required to change its valuation date for its pension and other postretirement plans from June 30 to September 30. The Utility is currently evaluating the impact of adoption of the change in measurement date on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted to choose, at specified election dates, to measure eligible items at fair value (fair value option). Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting date. The decision about whether to elect the fair value option is applied instrument by instrument with few exceptions. The decision is also irrevocable (unless a new election date occurs) and must be applied to entire instruments and not to portions of instruments. SFAS No. 159 requires that cash flows related to items measured at fair value be classified in the statement of cash flows according to their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows” (as amended). SFAS No. 159 is effective for the Utility as of the beginning of fiscal year 2009. Laclede Gas is currently evaluating the provisions of this Statement.

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In June 2007, the FASB ratified the consensus reached in Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” This Issue addresses how anentity should recognize the tax benefit received on dividends that are (a) paid to employees holding equity-classified nonvested shares, equity-classified nonvested share units, or equity-classified outstanding share options and (b) charged to retained earnings under SFAS No. 123(R). The Task Force reached a consensus that such tax benefits should be recognized as an increase in additional paid-in capital. This EITF Issue also addresses how the accounting for these tax benefits is affected if an entity’s estimate of forfeitures changes in subsequent periods. This EITF Issue is effective for Laclede Gas as of the beginning of fiscal year 2009. The Utility is currently evaluating the provisions of this EITF Issue.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” This Statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS No. 160 clarifies that noncontrolling interests should be separately reported as equity in the balance sheet. Additionally, SFAS No. 160 requires certain changes in presentation to income statements. SFAS No. 160 also addresses accounting for changes in the parent’s ownership interest of a subsidiary, accounting for the deconsolidation of a subsidiary, and disclosure requirements. This Statement is effective for Laclede Gas as of the beginning of fiscal year 2010. Currently, Laclede Gas does not have any subsidiaries and therefore adoption of this Statement is not expected to have any effect on the Utility’s financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (141(R)), “Business Combinations.” This Statement revises SFAS No. 141 but retains the fundamental requirements in SFAS No. 141 that the acquisition method (formerly known as purchase method) of accounting be used for all business combinations. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. SFAS 141(R) requires acquisition-related costs to be accounted for separately instead of being allocated to the assets acquired and liabilities assumed. SFAS No. 141(R) also amends the guidance related to the recognition of certain assets acquired and liabilities assumed that relate to contingencies, research and development assets acquired that have no alternative future use, and negative goodwill arising from a bargain purchase. Laclede Gas is required to adopt SFAS No. 141(R) prospectively to business combinations with acquisition dates on or after October 1, 2009 (fiscal 2010). Because this Statement is only applicable to future business combinations, existing amounts reported on the Utility’s financial statements will not be impacted by adoption of this Statement.

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 highest three years of the last ten years of employment. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.

Pension costs for the quarters ending December 31, 2007 and 2006 were $1.5 million and $1.4 million, respectively, including amounts charged to construction.

The net periodic pension costs include the following components:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Service cost - benefits earned
during the period	$	3,242		$	3,106
Interest cost on projected
benefit obligation		4,670			4,482
Expected return on plan assets		(5,162	)		(5,074	)
Amortization of prior service cost		272			284
Amortization of actuarial loss		791			920
Sub-total		3,813			3,718
Regulatory adjustment		(2,280	)		(2,364	)
Net pension cost	$	1,533		$	1,354

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Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service Commission (MoPSC or Commission) 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 three months ended December 31, 2007 or 2006.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 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. The recovery in rates for the Utility’s qualified pension plans is based on an allowance of $4.1 million annually effective October 1, 2005 and $4.8 million annually effective August 1, 2007. The difference between this amount and pension expense as calculated pursuant to the above and that otherwise would be included in the Statements of Income and Comprehensive Income is deferred as a regulatory asset or regulatory liability.

Laclede Gas provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs for the quarters ended December 31, 2007 and 2006 were $1.9 million and $2.0 million, respectively, including amounts charged to construction.

Net periodic postretirement benefit costs consisted of the following components:

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Service cost – benefits earned during
the period	$	1,140		$	1,016
Interest cost on accumulated
postretirement benefit obligation		977			900
Expected return on plan assets		(510	)		(431	)
Amortization of transition obligation		34			34
Amortization of prior service cost		(582	)		(582	)
Amortization of actuarial loss		746			811
Sub-total		1,805			1,748
Regulatory adjustment		105			223
Net postretirement benefit cost	$	1,910		$	1,971

Missouri state law provides for the recovery in rates of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established 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.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 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. Previously, the recovery in rates for the postretirement benefit costs was based on an alternative methodology for amortization of unrecognized gains and losses as ordered by the MoPSC. The Commission ordered that the recovery in rates be based on an annual allowance of $7.6 million, effective August 1, 2007. The difference between this amount and postretirement benefit cost based on the above and that otherwise would be included in the Statements of Income and Comprehensive Income is deferred as a regulatory asset or regulatory liability.

3. INCOME TAXES

Laclede Group files a consolidated federal and state tax return and allocates income taxes to Laclede Gas and its other subsidiaries as if each entity were a separate taxpayer. Laclede Group and Laclede Gas adopted the provisions of FIN 48, “Accounting for the Uncertainty in Income Taxes,” as of October 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” Pursuant to FIN 48, the Utility may recognize the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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Upon adoption of FIN 48, Laclede Gas recognized an increase to beginning retained earnings as a cumulative-effect adjustment totaling $0.4 million and reclassified $2.1 million of income tax liabilities from current to non-current liabilities. Total unrecognized tax benefits as of October 1, 2007 were $1.9 million, all of which would favorably impact the effective tax rate, if recognized. The Utility recognizes potential accrued interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. Potential interest and penalties accrued (net of income tax benefit) associated with the Utility’s uncertain tax positions were $0.2 million at October 1, 2007. Unrecognized tax benefits, accrued interest payable, and accrued penalties payable are included in the Other line of the Deferred Credits and Other Liabilities section of the Balance Sheets. There have been no material changes in the Utility’s unrecognized tax benefits since the date of adoption of FIN 48.

Laclede Group and/or Laclede Gas are subject to U.S. federal income tax as well as income tax of state and city jurisdictions. These companies are no longer subject to examination for fiscal years prior to 2004. The Utility cannot currently estimate the potential change in its unrecognized tax benefits within the next 12-month period because of current audit activity.

4. OTHER INCOME AND INCOME DEDUCTIONS – NET

	Three Months Ended
	December 31,
(Thousands)		2007			2006
Allowance for funds used during construction	$	(9	)	$	(14	)
Interest income		1,155			1,386
Other income		537			322
Other income deductions		349			1,049
Other income and (income deductions) – net	$	2,032		$	2,743

The decrease in other income and income deductions – net for the quarter ended December 31, 2007, compared with the quarter ended December 31, 2006, was due to decreased income associated with changes in the cash surrender value of life insurance policies, lower income associated with carrying costs applied to under-recoveries of gas costs, and other minor variations. Such carrying costs are recovered through the Utility’s Purchased Gas Adjustment (PGA) Clause.

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.

	Regulated		Non-		Adjustments
	Gas		Regulated		&
(Thousands)	Distribution		Other		Eliminations		Total
Three Months Ended
December 31, 2007
Operating revenues	$	320,892	$	786	$	—	$	321,678
Net income		15,757		38		—		15,795
Total assets		1,529,861		1,831		—		1,531,692
Three Months Ended
December 31, 2006
Operating revenues	$	348,488	$	662	$	—	$	349,150
Net income		15,669		6		—		15,675
Total assets		1,473,506		1,362		—		1,474,868

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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 change, however, Laclede Gas may be required to incur additional costs. See Note 12 to the Financial Statements included in Laclede Gas’ Fiscal Year 2007 Form 10-K for information relative to environmental matters generally. There have been no significant changes relative to environmental matters in the first quarter of 2008.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. Laclede Gas believes that the remaining $1.7 million of the MoPSC Staff’s proposed disallowance lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC.

On December 31, 2007, the MoPSC Staff filed a memorandum with the Commission proposing a disallowance of $2.8 million related to the Laclede Gas’s recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s Staff’s memorandum raised questions regarding whether certain sales and capacity release transactions subject to the Federal Energy Regulatory Commission (FERC)’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. The Utility has commenced an internal review of the questions raised by the MoPSC Staff and has notified the FERC Staff that it has taken this action.

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 operations of the Utility.

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends through 2014. At December 31, 2007, the maximum guarantees under these leases are $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At December 31, 2007, the carrying value of the liability recognized for these guarantees was $0.3 million.

Laclede Gas has entered into various contracts, expiring on dates through 2017, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at December 31, 2007 are estimated at approximately $447 million. Additional contracts are generally entered into prior to or during the heating season.

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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 “may,” “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:

• weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;

• volatility in gas prices, particularly sudden and sustained spikes in natural gas prices;

• the impact of higher natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;

• changes in gas supply and pipeline availability; particularly those changes that impact supply for and access to our market area;

• legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting

• allowed rates of return

• incentive regulation

• industry structure

• purchased gas adjustment provisions

• rate design structure and implementation

• franchise renewals

• environmental or safety matters

• taxes

• pension and other postretirement benefit liabilities and funding obligations

• accounting standards;

• the results of litigation;

• retention of, ability to attract, ability to collect from and conservation efforts of customers;

• capital and energy commodity market conditions, including the ability to obtain funds for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;

• discovery of material weakness in internal controls; and

• 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.

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LACLEDE GAS COMPANY

RESULTS OF OPERATIONS

Laclede Gas is regulated by the Missouri Public Service Commission (MoPSC or Commission) and serves the City of St. Louis and parts of ten 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. The Utility’s innovative weather mitigation rate design 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. 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.

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 Laclede Gas’ strategy. The Utility’s distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 16,000 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 settlement of the Utility’s 2007 rate case resulted in enhancements to the Utility’s weather mitigation rate design that better ensure the recovery of its fixed costs and margins despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage. The Utility’s income from off-system sales remains subject to fluctuations in market conditions. In conjunction with the settlement of the 2005 rate case, effective October 1, 2005, the Utility retained all pre-tax income from off-system sales and capacity release revenues up to $12 million annually. Pre-tax amounts in excess of $12 million were shared with customers, with the Utility retaining 50% of amounts exceeding that threshold. The Stipulation & Agreement approved by the MoPSC in the Utility’s 2007 rate case increases the portion of pre-tax income from off-system sales and capacity release revenues that is shared with customers. Effective October 1, 2007, the Utility is allowed to retain 15% to 25% of the first $6 million in annual income earned (depending on the level of income earned) and 30% of income exceeding $6 million annually. Some of the factors impacting the level of off-system sales include the availability and cost of the Utility’s natural gas supply, the weather in its 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 Gas continues to work actively to reduce the impact of higher costs associated with wholesale natural gas prices by strategically structuring its natural gas supply portfolio and through the use of financial instruments. Nevertheless, the cost of purchased gas remains high, relative to historical levels. 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 costs, cost reductions, and related carrying costs associated with the use of financial instruments to hedge the purchase price of natural gas, as well as gas inventory carrying costs. The Utility believes it will continue to be able to obtain sufficient gas supply. The generally higher price levels may continue to affect sales volumes (due to the conservation efforts of customers) and cash flows (associated with the timing of collection of gas costs and related accounts receivable from customers).

Quarter Ended December 31, 2007

Earnings

Laclede Gas’ net income for the quarter ended December 31, 2007 was $15.8 million, slightly better than the quarter ended December 31, 2006. The benefit of the general rate increase effective August 1, 2007, totaling $10.1 million was largely offset by the following factors, quantified on a pre-tax basis:

• lower income from off-system sales and capacity release, totaling $3.4 million, primarily due to a reduction in the Utility’s share of such income (pursuant to the 2007 rate case);

• the net effect of lower system gas sales margins, primarily due to an unusually late start to the heating season, and other variations totaling $3.2 million; and,

• increases in operation and maintenance expenses totaling $2.2 million.

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Utility 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 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 revenues and net income.

Utility operating revenues for the quarter ended December 31, 2007 were $320.9 million, or $27.6 million less than the same period last year. Temperatures experienced in the Utility’s service area during the quarter were 8.5% warmer than normal and essentially the same as the comparable period last year. Total system therms sold and transported were 0.27 billion for the quarter ended December 31, 2007 compared with 0.28 billion for the same period last year. Total off-system therms sold and transported were 0.05 billion for the quarter ended December 31, 2007 compared with 0.07 billion for the same period last year. The decrease in utility operating revenues was primarily attributable to the following factors:

	Millions
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)	$	(20.8	)
General rate increase, effective August 1, 2007		10.1
Lower off-system sales volumes		(9.6	)
Lower system sales volumes and other variations		(8.1	)
Higher prices charged for off-system sales		1.3
Lower Infrastructure System Replacement Surcharges (ISRS) revenues		(0.5	)
Total Variation	$	(27.6	)

Utility operating expenses for the quarter ended December 31, 2007 decreased $28.4 million from the same quarter last year. Natural and propane gas expense decreased $28.7 million, or 11.4%, from last year’s level, primarily attributable to lower rates charged by our suppliers, lower system volumes purchased for sendout, and lower off-system gas expense. Other operation and maintenance expenses increased $2.2 million, or 5.5%, primarily due to higher injuries and damages expense, increased maintenance charges, a higher provision for uncollectible accounts, and higher wage rates, partially offset by lower group insurance charges. Taxes, other than income, decreased $2.1 million, or 11.1%, primarily due to decreased gross receipts taxes (attributable to the decreased revenues) and lower property taxes.

Other Income and (Income Deductions) - Net

Other income and income deductions – net decreased $0.7 million due to decreased income associated with changes in the cash surrender value of life insurance policies, lower income associated with carrying costs applied to under-recoveries of gas costs, and other minor variations. Such carrying costs are recovered through the Utility’s PGA Clause.

REGULATORY MATTERS

During fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule affecting the disconnection and reconnection practices of utilities during the winter heating season. Those modifications included provisions to allow the Utility to obtain accounting authorizations and defer for future recovery certain costs incurred with the modifications. During fiscal 2007, the Utility deferred for future recovery $2.7 million of costs associated with the fiscal 2007 heating season. On October 31, 2007, the Utility filed for determination and subsequent recovery of the deferred amount. On November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri Office of Public Counsel to submit their positions regarding the Utility’s filing by February 28, 2008.

On November 9, 2007, the Utility made an ISRS filing with the Commission designed to increase revenues by $1.6 million annually, pending approval by the Commission. On January 15, 2008, the Commission approved implementation of the surcharge to be effective January 18, 2008.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. Laclede Gas believes that the remaining $1.7 million of the MoPSC Staff’s proposed disallowance lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC.

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On December 31, 2007, the MoPSC Staff filed a memorandum with the Commission proposing a disallowance of $2.8 million related to the Laclede Gas' recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit and intends to vigorously oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s Staff’s memorandum raised questions regarding whether certain sales and capacity release transactions subject to the Federal Energy Regulatory Commission (FERC)’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. The Utility has commenced an internal review of the questions raised by the MoPSC Staff and has notified the FERC Staff that it has taken this action.

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. The Utility’s provision for uncollectible accounts is dependent on the regulatory treatment provided for such costs. As approved by the MoPSC, the Utility is allowed to defer for future recovery certain costs associated with amendments to the Cold Weather Rule.

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. For the Utility, the amount of expense recognized and the amounts reflected in other comprehensive income are dependent upon the regulatory treatment provided for such costs, as discussed further below. 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 regulatory liabilities are recoverable or refundable through the regulatory process. Management believes the following represent the more significant items recorded through the application of SFAS No. 71:

The Utility’s 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 regulatory liabilities that are recovered or refunded in a subsequent period. The PGA Clause also authorizes the Utility to recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection season for sale during the heating season. The PGA Clause also permits the application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of financial instruments. Effective October 1, 2007, the PGA Clause also provides for a portion of income from off-system sales and capacity release revenues to be flowed through to customers.

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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. 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. Laclede Gas’ provision for income tax expense also records the income tax effect associated with the difference between overheads capitalized to construction for financial reporting purposes and those recognized for tax purposes without recording an offsetting deferred income tax expense. These two methods are consistent with the regulatory treatment prescribed by the MoPSC.

Asset retirement obligations are recorded in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” and Financial Accounting Standards Board Interpretation Number (FIN) 47, “Accounting for Conditional Asset Retirement Obligations.” Asset retirement obligations are calculated using various assumptions related to the timing, method of settlement, inflation, and profit margins that third parties would demand to settle the future obligations. These assumptions require the use of judgment and estimates and may change in future periods as circumstances dictate. As authorized by the MoPSC, Laclede Gas accrues future removal costs associated with its property, plant and equipment through its depreciation rates, even if a legal obligation does not exist as defined by SFAS No. 143 and FIN 47. The difference between removal costs recognized in depreciation rates and the accretion expense and depreciation expense recognizable under SFAS No. 143 and FIN 47 is a timing difference between the recovery of these costs in rates and their recognition for financial reporting purposes. Accordingly, consistent with SFAS No. 71, these differences are deferred as regulatory liabilities.

The amount of net periodic pension and other postretirement benefit cost recognized in the financial statements related to the Utility’s qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC, which have been established in the rate-making process for the recovery of these costs from customers. The differences between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting purposes are deferred as regulatory assets or regulatory liabilities. SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” requires that changes that affect the funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as components of pension and other postretirement benefit cost, be reflected in other comprehensive income. For the Utility’s qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.

For further discussion of significant accounting policies, see Note 1 to the Financial Statements included in Exhibit 99.1 of the Laclede Group’s Form 10-K for the fiscal year ended September 30, 2007.

ACCOUNTING PRONOUNCEMENTS

Laclede Gas has evaluated or is in the process of evaluating the impact that recently issued accounting standards will have on the Utility’s financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Standards section of Note 1 to the Financial Statements.

FINANCIAL CONDITION

CREDIT RATINGS

As of December 31, 2007, 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.

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CASH FLOWS

Laclede Gas’ short-term borrowing requirements typically peak during colder months when Laclede Gas borrows money to cover the lag 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 used in operating activities for the three months ended December 31, 2007 was $20.4 million, compared with $26.3 million for the same period last year. The variation is primarily attributable to increases in advance customer billings and a reduction in net cash payments associated with the Utility’s use of natural gas financial instruments. These factors were partially offset by an increase in net cash payments to Laclede Group for the Utility’s allocation of income taxes and variations associated with the timing of the collections of gas cost under the Utility’s PGA Clause.

Net cash used in investing activities for the three months ended December 31, 2007 was $14.1 million compared with $12.7 million for the three months ended December 31, 2006. Cash used in investing activities primarily reflected capital expenditures in both periods.

Net cash provided by financing activities was $36.2 million for the three months ended December 31, 2007 compared with $42.3 million for the three months ended December 31, 2006. The decrease primarily reflects the maturity of long-term debt, partially offset by the issuance of additional short-term debt this year.

LIQUIDITY AND CAPITAL RESOURCES

As indicated above, the Utility’s short-term borrowing requirements typically peak during the 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 has a line of credit in place of $320 million, which expires in December 2010. In November 2007, the Utility established a seasonal line of credit of $40 million, which will expire in March 2008. The Utility had short-term borrowings aggregating to a maximum of $304.5 million at any one time during the quarter. Short-term borrowings outstanding at December 31, 2007 were $294.5 million, including $40 million from the seasonal line of credit, at a weighted average interest rate of 5.4% per annum. Based on short-term borrowings at December 31, 2007, a change in interest rates of 100 basis points would increase or decrease pre-tax earnings and cash flows by approximately $2.9 million on an annual basis. Portions of such increases or decreases may be offset through the application of PGA carrying costs.

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) to be at least 2.25 times interest expense. On December 31, 2007, total debt was 63% of total capitalization. For the twelve months ended December 31, 2007, EBITDA was 3.40 times interest expense.

Laclede Gas has on file with the Securities and Exchange Commission an effective shelf registration on Form S-3 for issuance of $350 million of securities. The full amount of this shelf registration remains available to Laclede Gas at this time. The Utility has authority from the MoPSC to issue up to $500 million in first mortgage bonds, unsecured debt, and equity securities. In December 2007, pursuant to this authority, the Utility sold 30 shares of its common stock to Laclede Group for $1.0 million, leaving $495.2 million remaining under this authorization as of the date of this filing. The amount, timing and type of additional financing to be issued will depend on cash requirements and market conditions.

On November 1, 2007, Laclede Gas paid at maturity $40 million principal amount of 7 1/2% First Mortgage Bonds. This maturity was funded through short-term borrowings. At December 31, 2007, Laclede Gas had fixed-rate long-term debt totaling $310 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 Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends through 2014. At December 31, 2007, the maximum guarantees under these leases are $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At December 31, 2007, the carrying value of the liability recognized for these guarantees was $0.3 million.

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Utility capital expenditures were $13.0 million for the three months ended December 31, 2007, compared with $11.8 million for the same period last year.

Capitalization at December 31, 2007, excluding current obligations of preferred stock, consisted of 53.4% common stock equity, 0.1% preferred stock, and 46.5% 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 December 31, 2007 and at September 30, 2007, such as Accounts Receivable – Net, Gas Stored Underground, Notes Payable, Accounts Payable, Regulatory Assets and Regulatory Liabilities, and Advance Customer Billings. The Balance Sheet at December 31, 2006 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

CONTRACTUAL OBLIGATIONS

As of December 31, 2007, Laclede Gas had contractual obligations with payments due as summarized below (in millions):

			Payments due by period
			Remaining						Fiscal Years
Contractual Obligations	Total		Fiscal Year 2008		Fiscal Years 2009-2010		Fiscal Years 2011-2012		2013 and thereafter
Principal Payments on Long-Term Debt	$	310.0	$	—	$	—	$	25.0	$	285.0
Interest Payments on Long-Term Debt		392.2		10.9		39.0		36.6		305.7
Operating Leases (a)		12.1		3.7		6.6		1.7		0.1
Purchase Obligations – Natural Gas (b)		446.8		264.0		91.3		44.4		47.1
Purchase Obligations – Other (c)		110.4		12.4		18.6		16.3		63.1
Total (d)	$	1,271.5	$	291.0	$	155.5	$	124.0	$	701.0

(a)	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.
(b)	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 December 31, 2007 New York Mercantile Exchange 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 are generally entered into prior to or during the heating season.
(c)	These purchase obligations reflect miscellaneous agreements for the purchase of materials and the procurement of services necessary for normal operations.
(d)	The categories of Capital Leases and Other Long-Term liabilities have been excluded from the table above because there are no applicable amounts of contractual obligations under these categories. Also, commitments related to pension and postretirement benefit plans have been excluded from the table above. The Utility expects to make contributions to its qualified, trusteed pension plans totaling $0.9 million during the remainder of fiscal year 2008. Laclede Gas anticipates a $0.3 million contribution relative to its non-qualified pension plans during the remainder of fiscal year 2008. With regard to the postretirement benefits, the Utility anticipates it will contribute $8.2 million to the qualified trusts and $0.3 million directly to participants from Laclede Gas’ funds during the remainder of fiscal year 2008. For further discussion of the Company’s pension and postretirement benefit plans, refer to Note 2, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements.

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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 PGA 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 December 31, 2007, the Utility held 21.5 million MMBtu of futures contracts at an average price of $8.36 per MMBtu. These positions have various expiration dates, the longest of which extends through October 2008.

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 Laclede Gas’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Laclede Gas may be required to incur additional costs. For information relative to environmental matters, see Note 12 to the Financial Statements included in the Utility’s Form 10-K for the fiscal year ended September 30, 2007. There have been no significant changes relative to environmental matters in the first quarter of fiscal year 2008.

OFF-BALANCE SHEET ARRANGEMENTS

Laclede Gas has no off-balance sheet arrangements.

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