POSTRETIREMENT BENEFITS

6 Months Ended

Jun. 30, 2011

POSTRETIREMENT BENEFITS [Abstract]

POSTRETIREMENT BENEFITS [Text Block]

9. POSTRETIREMENT BENEFITS

Nicor Gas maintains a noncontributory defined benefit pension plan covering substantially all employees hired prior to 1998.  Pension benefits are based on years of service and the highest average salary for management employees and job level for collectively bargained employees (referred to as pension bands).  The benefit obligation related to collectively bargained benefits considers the company’s past practice of regular benefit increases.  Nicor Gas also provides health care and life insurance benefits to eligible retired employees under a plan that includes a limit on the company’s share of cost for employees hired after 1982.

The company’s postretirement benefit costs have historically been considered in rate proceedings in the period they are accrued.  As a regulated utility, Nicor Gas expects continued rate recovery of the eligible costs of its defined benefit postretirement plans and, accordingly, associated changes in the plan’s funded status have been deferred as a regulatory asset or liability until recognized in net income, instead of being recorded in accumulated other comprehensive income.  However, to the extent Nicor Gas employees perform services for non-regulated affiliates and to the extent such employees are eligible to participate in these plans, the affiliates are charged for the cost of these benefits and the changes in the funded status relating to these employees are recorded in accumulated other comprehensive income.

About one-fourth of the net benefit cost related to these plans has been capitalized as a cost of constructing gas distribution facilities and the remainder is included in gas distribution operating and maintenance expense, net of amounts charged to affiliates.  Net benefit cost included the following components (in millions):

	Pension benefits						Health care and other benefits
	2011			2010			2011		2010
Three months ended June 30
Service cost	$	2.5		$	2.5		$	.6	$	.5
Interest cost		4.1			4.0			3.0		2.9
Expected return on plan assets		(7.8	)		(7.3	)		-		-
Recognized net actuarial loss		2.4			2.9			1.5		1.1
Amortization of prior service cost		.1			.1			.1		.1
Net benefit cost	$	1.3		$	2.2		$	5.2	$	4.6

Six months ended June 30
Service cost	$	5.0		$	4.9		$	1.2	$	1.1
Interest cost		8.2			8.0			6.1		5.9
Expected return on plan assets		(15.6	)		(14.5	)		-		-
Recognized net actuarial loss		4.8			5.9			3.0		2.1
Amortization of prior service cost		.2			.2			.1		.1
Net benefit cost	$	2.6		$	4.5		$	10.4	$	9.2

The Health Care Act contains provisions that may impact Nicor Gas’ obligation for retiree health care benefits.  The company does not currently believe these provisions will materially increase its postretirement benefit obligation, but will continue to evaluate the impact of future regulations and interpretations.