FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
(Mark One)
[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended September 30, 1997

                                    OR
[ ]
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the transition period from ________ to ________

                        Commission file number 1-11023
                              E'TOWN CORPORATION
             (Exact name of registrant as specified in its charter)
       New Jersey                                         22-2596330
(State of incorporation)                    (I.R.S. Employer Identification No.)
    600 South Avenue
  Westfield, New Jersey                                     07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:    (908) 654-1234

 Title of each class                  Name of each exchange on which registered
Common Stock, without par value                 New York Stock Exchange

                        Commission file number 0-628
                         ELIZABETHTOWN WATER COMPANY
            (Exact name of registrant as specified in its charter)
   New Jersey                                              22-1683171
(State of incorporation)                    (I.R.S. Employer Identification No.)
  600 South Avenue
 Westfield, New Jersey                                      07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:     (908) 654-1234

Title of each class                   Name of each exchange on which registered
     None                                                 None    

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__ No_____
  
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date
                                              Outstanding at
 Class of Common Stock:                       September 30, 1997
 E'town Corporation (without par value)            7,969,748
 Elizabethtown Water Company (without par value)*  1,974,902

 * All shares are owned by E'town Corporation
===============================================================================
<PAGE>


                    E'TOWN CORPORATION AND SUBSIDIARIES
               ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

                                  INDEX


-------------------------------------------------------------------------------

PART I - FINANCIAL INFORMATION                                       PAGE

Item 1. Financial Statements

 E'TOWN CORPORATION AND SUBSIDIARIES

    - Statements of Consolidated Income                                1
    - Consolidated Balance Sheets                                     2-3
    - Statements of Consolidated Capitalization                        4
    - Statements of Consolidated Shareholders' Equity                  5
    - Statements of Consolidated Cash Flows                            6

 ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Statements of Consolidated Income                                7
    - Consolidated Balance Sheets                                     8-9
    - Statements of Consolidated Capitalization                        10
    - Statements of Consolidated Shareholder's Equity                  11
    - Statements of Consolidated Cash Flows                            12

  E'TOWN CORPORATION AND SUBSIDIARIES AND
  ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Notes to Consolidated Financial Statements                       13

      Item 2. Management's Discussion and Analysis of Consolidated
              Financial Condition and Results of Operations            17

PART II - OTHER INFORMATION                                            23

      Items 1 - 5                                                      23

      Item 6 (a) - Exhibits                                            23
             (b) - Reports on Form 8-K                                 23

      SIGNATURES                                                       24


<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except Per Share Amounts)
         (Unaudited)
<CAPTION>
                                           Three Months Ended  Nine Months Ended  Twelve Months Ended
                                             September 30,       September 30,       September 30,
                                            1997     1996      1997       1996      1997       1996

------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>      <C>        <C>       <C>        <C>

Operating Revenues                       $  38,643 $ 28,173 $  101,227 $  81,197 $ 130,439  $ 106,868
------------------------------------------------------------------------------------------------------
Operating Expenses:
  Operation                                 12,627   11,207     35,399    33,105    47,101     44,331
  Maintenance                                1,521    1,284      4,744     4,381     6,222      5,742
  Depreciation                               3,118    2,385      9,175     7,096    11,972      9,393
  Revenue taxes                              4,794    3,558     12,637    10,224    16,233     13,441
  Real estate, payroll and other taxes         773      771      2,430     2,427     2,955      3,140
  Federal income taxes                       4,034    1,990      8,270     5,064     9,997      6,516
------------------------------------------------------------------------------------------------------
        Total operating expenses            26,867   21,195     72,655    62,297    94,480     82,563
------------------------------------------------------------------------------------------------------
Operating Income                            11,776    6,978     28,572    18,900    35,959     24,305
------------------------------------------------------------------------------------------------------
Other Income (Expense):
  Allowance for equity funds used during
    construction                                65    1,155        163     3,370       518      4,287
  Federal income taxes                         (44)    (466)      (176)   (1,348)     (398)    (1,747)
  Other - net                                   60      175        342       481       621        771
------------------------------------------------------------------------------------------------------
        Total other income (expense)            81      864        329     2,503       741      3,311
------------------------------------------------------------------------------------------------------
Total Operating and Other Income            11,857    7,842     28,901    21,403    36,700     27,616
------------------------------------------------------------------------------------------------------
Interest Charges:
  Interest on long-term debt                 3,861    3,451     10,896    10,354    14,342     13,356
  Other interest expense - net                 372      753      2,144     1,719     3,069      2,516
  Capitalized interest                        (131)  (1,116)      (371)   (3,117)     (778)    (3,951)
  Amortization of debt discount and expense-net 98       97        294       290       399        379
------------------------------------------------------------------------------------------------------
                                                                                  
        Total interest charges               4,200    3,185     12,963     9,246    17,032     12,300
------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
   of Subsidiary                             7,657    4,657     15,938    12,157    19,668     15,316
Preferred Stock Dividends                      203      203        609       609       813        813
------------------------------------------------------------------------------------------------------
Net Income                               $   7,454 $  4,454 $   15,329 $  11,548 $  18,855  $  14,503
======================================================================================================

Earnings Per Share of Common Stock:
------------------------------------------------------------------------------------------------------
      Primary                            $     .93.$    .58 $     1.94 $    1.51 $    2.39  $    1.91
      Fully Diluted                      $     .92.$    .57 $     1.92 $    1.50 $    2.37  $    1.90
------------------------------------------------------------------------------------------------------

Average Number of Shares Outstanding for
   the Calculation of Earnings Per Share:
------------------------------------------------------------------------------------------------------
      Primary                                7,984    7,709      7,910     7,642     7,875      7,608
      Fully Diluted                          8,267    8,000      8,195     7,934     8,161      7,901
------------------------------------------------------------------------------------------------------

Dividends Paid Per Common Share          $     .51 $    .51 $     1.53 $    1.53 $    2.04  $    2.04
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                            -1-



<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
        (In Thousands)     
<CAPTION>
                                                            September 30,                 December 31,
                                                                 1997                        1996
Assets                                                       (Unaudited)

------------------------------------------------------------------------------------------------------

<S>                                                         <C>                            <C>

Utility Plant-At Original Cost:
   Utility plant in service                                 $  662,198                     $  654,713
   Construction work in progress                                16,463                          7,994
------------------------------------------------------------------------------------------------------
         Total utility plant                                   678,661                        662,707
   Less accumulated depreciation and amortization              111,696                        102,683
------------------------------------------------------------------------------------------------------
         Utility plant-net                                     566,965                        560,024
------------------------------------------------------------------------------------------------------


Non-utility Property and Other
   Investments - Net                                            19,796                         14,113
------------------------------------------------------------------------------------------------------


Current Assets:
   Cash and cash equivalents                                     3,146                          3,228
   Short-term investments                                           31                             31
   Customer and other accounts receivable
    (less reserve: 1997, $826, 1996, $566)                      20,342                         16,187
   Unbilled revenues                                            12,095                          9,356
   Materials and supplies-at average cost                        1,939                          2,045
   Prepaid insurance, taxes, other                               1,152                          3,918
------------------------------------------------------------------------------------------------------
         Total current assets                                   38,705                         34,765
------------------------------------------------------------------------------------------------------


Deferred Charges:
   Waste residual management                                       765                          1,064
   Unamortized debt and preferred stock expenses                10,208                          9,508
   Taxes recoverable through future rates                       30,435                         30,435
   Postretirement benefit expense                                3,677                          3,478
   Other unamortized expenses                                    3,126                          1,820
------------------------------------------------------------------------------------------------------
         Total deferred charges                                 48,211                         46,305
------------------------------------------------------------------------------------------------------
             Total                                          $  673,677                     $  655,207
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>











                                            -2-



<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                (In Thousands)
<CAPTION>

                                                            September 30,                 December 31,
                                                                 1997                         1996
Capitalization and Liabilities                               (Unaudited)

------------------------------------------------------------------------------------------------------


Capitalization (Note 3):
<S>                                                         <C>                            <C>       

      Common shareholders' equity                           $  192,300                     $  183,512
      Cumulative preferred stock                                12,000                         12,000
      Long-term debt - net                                     243,299                        193,481
------------------------------------------------------------------------------------------------------
            Total capitalization                               447,599                        388,993
------------------------------------------------------------------------------------------------------


Current Liabilities:
      Notes payable - banks (Note 5)                            28,000                         69,000
      Long-term debt - current portion                              30                             30
      Accounts payable and other liabilities                    12,201                         16,197
      Customers' deposits                                          309                            300
      Municipal and state taxes accrued                         12,410                         13,887
      Federal income taxes accrued                                  38
      Interest accrued                                           4,518                          3,483
      Preferred stock dividends accrued                             59                             59
------------------------------------------------------------------------------------------------------
            Total current liabilities                           57,565                        102,956
------------------------------------------------------------------------------------------------------


Deferred Credits:
      Customers' advances for construction                      38,884                         43,636
      Federal income taxes                                      77,961                         75,942
      State income taxes                                           185                            185
      Unamortized investment tax credits                         8,110                          8,245
      Accumulated postretirement benefits                        4,165                          3,651
------------------------------------------------------------------------------------------------------
            Total deferred credits                             129,305                        131,659
------------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                            39,208                         31,599
------------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
------------------------------------------------------------------------------------------------------
                Total                                       $  673,677                     $  655,207
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>










                                            -3-



<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
    (In Thousands Except Share Amounts)           
<CAPTION>
                           
                                                           September 30,                  December 31,
                                                                 1997                          1996
                                                             (Unaudited)

------------------------------------------------------------------------------------------------------
<S>                                                         <C>                            <C>
 E'town Corporation:
     Common Shareholders' Equity:
        Common stock without par value, authorized,
        15,000,000 shares, issued 1997, 8,000,800
        shares; 1996, 7,807,751 shares                      $  151,349                     $  145,660
        Paid-in capital                                          1,315                          1,315
        Capital stock expense                                   (5,160)                        (5,160)
        Retained earnings                                       45,710                         42,434
        Less cost of treasury stock; 1997, 31,052
         shares; 1996, 25(914)shares                              (737)
------------------------------------------------------------------------------------------------------
            Total common shareholders' equity                  192,300                        183,512
------------------------------------------------------------------------------------------------------

 Elizabethtown Water Company:
     Cumulative Preferred Stock
        $100 par value, authorized, 200,000 shares; $5.90
        series, issued and outstanding, 120,000 shares          12,000                         12,000

     Cumulative Preferred Stock:
        $25 par value, authorized, 500,000 shares; none issued
------------------------------------------------------------------------------------------------------

 Long-Term Debt (Note 4):
       E'town Corporation:
          6 3/4% Convertible Subordinated Debentures, due 2012  11,354                         11,548

       Elizabethtown Water Company:
          7.20% Debentures, due 2019                            10,000                         10,000
          7 1/2% Debentures, due 2020                           15,000                         15,000
          6.60% Debentures, due 2021                            10,500                         10,500
          6.70% Debentures, due 2021                            15,000                         15,000
          8 3/4% Debentures, due 2021                           27,500                         27,500
          8% Debentures, due 2022                               15,000                         15,000
          5.60% Debentures, due 2025                            40,000                         40,000
          7 1/4% Debentures, due 2028                           50,000                         50,000
          Variable Rate Debentures, due 2027                    50,000

  The Mount Holly Water Company:
          Notes Payable (due serially through 2000)                 68                             87
------------------------------------------------------------------------------------------------------
              Total long-term debt                             244,422                        194,635
          Unamortized discount-net                              (1,123)                        (1,154)
------------------------------------------------------------------------------------------------------
              Total long-term debt-net                         243,299                        193,481
------------------------------------------------------------------------------------------------------
                 Total Capitalization                       $  447,599                     $  388,993
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>





                                            -4-


<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
 (In Thousands Except Share Amounts)  
<CAPTION>

                                                             September 30,               December 31,
                                                                 1997                        1996
                                                             (Unaudited)

------------------------------------------------------------------------------------------------------


Common Stock:
       <S>                                                  <C>                            <C>
       Balance at Beginning of Period                       $  145,660                     $  138,667
       Common stock issued under Dividend Reinvestment
       and Stock Purchase Plan (1997, 177,992 shares;
       1996, 258,673 shares)                                     5,266                          6,993
       Issuance of restricted stock (1997, 4,044 shares)           122
       Exercise of stock options (1997, 11,013 shares)             301
------------------------------------------------------------------------------------------------------
       Balance at End of Period                                151,349                        145,660
------------------------------------------------------------------------------------------------------

Paid-in Capital:                                                 1,315                          1,315
------------------------------------------------------------------------------------------------------

Capital Stock Expense:                                          (5,160)                        (5,160)
------------------------------------------------------------------------------------------------------

Retained Earnings:
       Balance at Beginning of Period                           42,434                         42,995
       Net Income                                               15,329                         15,073
       Dividends on common stock (1997, $1.53, 1996, $2.04)    (12,053)                       (15,634)
------------------------------------------------------------------------------------------------------
       Balance at End of Period                                 45,710                         42,434
------------------------------------------------------------------------------------------------------

Treasury Stock:
       Balance at Beginning of Period                             (737)                          (737)
       Exercise of stock options (1997, 5,176 shares)             (177)
------------------------------------------------------------------------------------------------------
       Balance at End of Period                                   (914)                          (737)
------------------------------------------------------------------------------------------------------

          Total Common Shareholders' Equity                 $  192,300                     $  183,512
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
















                                            -5-




<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
           (In Thousands)
             (Unaudited)       
<CAPTION>
                                                                                   Nine Months Ended
                                                                                      September 30,
                                                                                    1997       1996

------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
   <S>                                                                           <C>       <C>
   Net Income                                                                    $  15,329 $  11,548 
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation                                                                  9,175      7,096
       (Increase) in deferred charges                                               (1,007)    (1,997)
       Deferred income taxes and investment tax
         credits-net                                                                 1,884      2,082
       Capitalized interest and AFUDC                                                 (534)    (6,487)
       Other operating activities-net                                                  473         35
   Change in current assets and current liabilities
      excluding cash, short-term investments and
      current portion of debt:
         Customer and other accounts receivable                                     (4,155)       295
         Unbilled revenues                                                          (2,739)    (1,143)
         Accounts payable and other liabilities                                     (3,987)    (2,291)
         Accrued/prepaid interest and taxes                                          2,362        (89)
         Other                                                                         104        195
------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                                  16,905      9,244
------------------------------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
    Proceeds from issuance of common stock                                           5,388      5,456
    Proceed from issuance of debentures                                             50,000
    Debt and preferred stock issuance and
      amortization costs                                                              (700)       300
    Repayment of long-term debt                                                       (213)      (205)
    Contributions and advances for construction-net                                  2,857      3,367
    Net (decrease) increase in notes payable - banks                               (41,000)    30,500
    Dividends paid on common stock                                                 (12,053)   (11,678)
------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                                  4,279     27,740
------------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
    Utility plant expenditures (excluding allowance
     for funds used during construction)                                           (15,825)   (40,456)
    Purchase of Edison operating contract                                           (5,701)
    Proceeds from sale of land                                                         461
    Development costs of land (excluding
      capitalized interest)                                                           (201)      (183)
------------------------------------------------------------------------------------------------------
         Cash used for investing activities                                        (21,266)   (40,639)
------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and
  Cash Equivalents                                                                     (82)    (3,655)
Cash and Cash Equivalents at
  Beginning of Period                                                                3,228      4,925
------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                           3,146 $    1,270
======================================================================================================
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                                      $  11,639 $    7,984
       Income taxes                                                              $   2,825 $    2,648
       Preferred stock dividends                                                 $     531 $      531
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                            -6-


<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
         (In Thousands)
           (Unaudited)
<CAPTION>
                                           Three Months Ended  Nine Months Ended Twelve Months Ended
                                             September 30,       September 30,        September 30,
                                            1997     1996      1997       1996      1997       1996

------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>      <C>        <C>       <C>        <C>      
Operating Revenues                       $  37,815 $ 28,172 $  100,161 $  81,195 $ 129,324  $ 106,866
------------------------------------------------------------------------------------------------------
Operating Expenses:
  Operation                                 11,575   10,884     33,589    32,358    44,944     43,151
  Maintenance                                1,498    1,284      4,721     4,381     6,199      5,742
  Depreciation                               3,046    2,385      9,103     7,096    11,900      9,393
  Revenue taxes                              4,794    3,558     12,637    10,224    16,233     13,441
  Real estate, payroll and other taxes         756      755      2,373     2,375     2,867      3,059
  Federal income taxes                       4,220    2,160      8,739     5,480    10,619      7,047
------------------------------------------------------------------------------------------------------
        Total operating expenses            25,889   21,026     71,162    61,914    92,762     81,833
------------------------------------------------------------------------------------------------------
Operating Income                            11,926    7,146     28,999    19,281    36,562     25,033
------------------------------------------------------------------------------------------------------
Other Income (Expense):
  Allowance for equity funds used during
    construction                                65    1,155        163     3,370       518      4,287
  Federal income taxes                         (33)    (443)      (134)   (1,315)     (281)    (1,645)
  Other - net                                   27      111        219       387       284        413
------------------------------------------------------------------------------------------------------
        Total other income (expense)            59      823        248     2,442       521      3,055
------------------------------------------------------------------------------------------------------
Total Operating and Other Income            11,985    7,969     29,247    21,723    37,083     28,088
------------------------------------------------------------------------------------------------------
Interest Charges:
  Interest on long-term debt                 3,671    3,252     10,318     9,759    13,570     12,570
  Other interest expense - net                 293      753      2,060     1,714     2,986      2,368
  Allowance for funds used during construction (50)  (1,035)      (127)   (2,884)     (452)    (3,641)
  Amortization of debt discount and expense-net 89       88        267       264       365        345
------------------------------------------------------------------------------------------------------
        Total interest charges               4,003    3,058     12,518     8,853    16,469     11,642
------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends      7,982    4,911     16,729    12,870    20,614     16,446
Preferred Stock Dividends                      203      203        609       609       813        813
------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK      $   7,779 $  4,708 $   16,120 $  12,261 $  19,801  $  15,633
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>














                                            -7-




<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
        (In Thousands)   
<CAPTION>
                                                            September 30,                 December 31,
                                                                 1997                          1996
Assets                                                       (Unaudited)

------------------------------------------------------------------------------------------------------


Utility Plant-At Original Cost:
<S>                                                         <C>                            <C>       
   Utility plant in service                                 $  662,197                     $  654,713
   Construction work in progress                                16,212                          7,994
------------------------------------------------------------------------------------------------------
         Total utility plant                                   678,409                        662,707
   Less accumulated depreciation and amortization              111,696                        102,683
------------------------------------------------------------------------------------------------------
         Utility plant-net                                     566,713                        560,024
------------------------------------------------------------------------------------------------------


Non-utility Property                                                80                             81
------------------------------------------------------------------------------------------------------


Current Assets:
   Cash and cash equivalents                                     1,866                          3,122
   Customer and other accounts receivable
    (less reserve: 1997, $826, 1996, $566)                      19,236                         16,725
   Unbilled revenues                                            11,224                          9,356
   Materials and supplies-at average cost                        1,939                          2,045
   Prepaid insurance, taxes, other                               1,152                          3,742
------------------------------------------------------------------------------------------------------
         Total current assets                                   35,417                         34,990
------------------------------------------------------------------------------------------------------


Deferred Charges:
   Waste residual management                                       765                          1,064
   Unamortized debt and preferred stock expenses                 9,715                          8,989
   Taxes recoverable through future rates                       30,435                         30,435
   Postretirement benefit expense                                3,677                          3,564
   Other unamortized expenses                                    3,018                          1,632
------------------------------------------------------------------------------------------------------
         Total deferred charges                                 47,610                         45,684
------------------------------------------------------------------------------------------------------
             Total                                          $  649,820                     $  640,779
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>











                                            -8-





<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
         (In Thousands)
<CAPTION>
                                                             September 30,                December 31,
Capitalization and Liabilities                                   1997                         1996
                                                             (Unaudited)
------------------------------------------------------------------------------------------------------


Capitalization (Note 3):
<S>                                                         <C>                            <C>       
      Common shareholder's equity                           $  187,684                     $  182,293
      Cumulative preferred stock                                12,000                         12,000
      Long-term debt - net                                     231,945                        181,933
------------------------------------------------------------------------------------------------------
            Total capitalization                               431,629                        376,226
------------------------------------------------------------------------------------------------------


Current Liabilities:
      Notes payable - banks                                     23,000                         69,000
      Long-term debt - current portion                              30                             30
      Accounts payable and other liabilities                    11,248                         17,093
      Customers' deposits                                          296                            300
      Municipal and state taxes accrued                         12,411                         13,887
      Federal income taxes accrued                                 595
      Interest accrued                                           4,374                          3,158
      Preferred stock dividends accrued                             59                             59
------------------------------------------------------------------------------------------------------
            Total current liabilities                           52,013                        103,527
------------------------------------------------------------------------------------------------------


Deferred Credits:
      Customers' advances for construction                      38,884                         43,636
      Federal income taxes                                      75,975                         73,950
      Unamortized investment tax credits                         8,110                          8,245
      Accumulated postretirement benefits                        4,001                          3,596
------------------------------------------------------------------------------------------------------
            Total deferred credits                             126,970                        129,427
------------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                            39,208                         31,599
------------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
------------------------------------------------------------------------------------------------------
                Total                                       $  649,820                     $  640,779
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>






                                            -9-






<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
             (In Thousands) 
<CAPTION>
                                                             September 30,                December 31,
                                                                 1997                         1996
                                                             (Unaudited)
------------------------------------------------------------------------------------------------------

<S>                                                         <C>                            <C>
     Common Shareholder's Equity:
        Common stock without par value, authorized,
        10,000,000 shares, issued 1997 and 1996,
        1,974,902 shares                                    $   15,741                     $   15,741
        Paid-in capital                                        118,780                        117,457
        Capital stock expense                                     (485)                          (485)
        Retained earnings                                       53,648                         49,580
------------------------------------------------------------------------------------------------------
            Total common shareholder's equity                  187,684                        182,293
------------------------------------------------------------------------------------------------------

     Cumulative Preferred Stock
        $100 par value, authorized, 200,000 shares; $5.90
        series, issued and outstanding, 120,000 shares          12,000                         12,000

     Cumulative Preferred Stock:
        $25 par value, authorized, 500,000 shares; none issued
------------------------------------------------------------------------------------------------------

 Long-Term Debt:
          7.20% Debentures, due 2019                            10,000                         10,000
          7 1/2% Debentures, due 2020                           15,000                         15,000
          6.60% Debentures, due 2021                            10,500                         10,500
          6.70% Debentures, due 2021                            15,000                         15,000
          8 3/4% Debentures, due 2021                           27,500                         27,500
          8% Debentures, due 2022                               15,000                         15,000
          5.60% Debentures, due 2025                            40,000                         40,000
          7 1/4% Debentures, due 2028                           50,000                         50,000
         Variable Rate Debentures, due 2027                     50,000

  The Mount Holly Water Company:
          Notes Payable (due serially through 2000)                 68                             87
------------------------------------------------------------------------------------------------------
              Total long-term debt                             233,068                        183,087
          Unamortized discount-net                              (1,123)                        (1,154)
------------------------------------------------------------------------------------------------------
              Total long-term debt-net                         231,945                        181,933
------------------------------------------------------------------------------------------------------
                 Total Capitalization                       $  431,629                     $  376,226
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>







                                            -10-






<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
               (In Thousands)
<CAPTION>

                                                             Nine Months
                                                                Ended                   Year Ended
                                                             September 30,              December 31,
                                                                 1997                       1996
                                                             (Unaudited)
------------------------------------------------------------------------------------------------------


<S>                                                         <C>                            <C>       
Common Stock:                                               $   15,741                     $   15,741
------------------------------------------------------------------------------------------------------

Paid-in Capital:
       Balance at Beginning of Period                          117,457                        112,157
       Capital contributed by parent company                     1,323                          5,300
------------------------------------------------------------------------------------------------------
       Balance at End of Period                                118,780                        117,457
------------------------------------------------------------------------------------------------------

Capital Stock Expense:                                            (485)                          (485)
------------------------------------------------------------------------------------------------------

Retained Earnings:
       Balance at Beginning of Period                           49,580                         49,272
       Income before preferred stock dividends                  16,729                         16,755
       Dividends on common stock                               (12,053)                       (15,634)
       Dividends on preferred stock                               (608)                          (813)
------------------------------------------------------------------------------------------------------
       Balance at End of Period                                 53,648                         49,580
------------------------------------------------------------------------------------------------------

          Total Common Shareholder's Equity                 $  187,684                     $  182,293
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



















                                            -11-




<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
            (In Thousands)
              (Unaudited)        
<CAPTION>
                                                                                  Nine Months Ended
                                                                                     September 30,
                                                                                    1997       1996

------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S>                                                                              <C>        <C>      
   Income before preferred stock dividends                                       $  16,729  $  12,870
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation                                                                  9,103      7,096
       (Increase) in deferred charges                                               (1,087)    (2,025)
       Deferred income taxes and investment tax
         credits-net                                                                 1,890      2,082
       Allowance for funds used during construction                                   (290)    (6,253)
       Other operating activities-net                                                  248        (57)
   Change in current assets and current liabilities
      excluding cash, short-term investments and
      current portion of debt:
         Customer and other accounts receivable                                     (2,511)     2,003
         Unbilled revenues                                                          (1,868)    (1,143)
         Accounts payable and other liabilities                                     (5,849)    (2,334)
         Accrued/prepaid interest and taxes                                          2,925        (45)
         Other                                                                         104        193
------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                                  19,394     12,387
------------------------------------------------------------------------------------------------------

Cash Flows (Used) and Provided by Financing Activities:
    Capital contributed by parent company                                            1,323      3,332
    Proceed from issuance of debentures                                             50,000
    Debt and preferred stock issuance and
      amortization costs                                                              (726)       274
    Repayment of long-term debt                                                        (19)       (23)
    Contributions and advances for construction-net                                  2,857      3,367
    Net increase in notes payable - banks                                          (46,000)    30,500
    Dividends paid on common stock and preferred stock                             (12,584)   (12,209)
------------------------------------------------------------------------------------------------------
          Net cash (used) and provided by financing activities                      (5,149)    25,241
------------------------------------------------------------------------------------------------------

Cash Flows Used for Investing Activities:
    Utility plant expenditures (excluding allowance
     for funds used during construction)                                           (15,501)   (40,456)
                                                             
------------------------------------------------------------------------------------------------------
         Cash used for investing activities                                        (15,501)   (40,456)
------------------------------------------------------------------------------------------------------
Net (Decrease)  in Cash and
  Cash Equivalents                                                                  (1,256)    (2,828)
Cash and Cash Equivalents at
  Beginning of Period                                                                3,122      3,797
------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                       $   1,866 $      969
======================================================================================================
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                                      $  11,038 $    7,419
       Income taxes                                                              $   2,825 $    2,648
       Preferred stock dividends                                                 $     531 $      531
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                            -12-

<PAGE>

                      E'TOWN CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    ORGANIZATION
      E'town Corporation (E'town or Corporation), a New Jersey holding
      company, is the parent company of Elizabethtown Water Company
      (Elizabethtown or Company), Edison Water Company (Edison) (See Note 9)
      and E'town Properties, Inc. (Properties) and owner of a 65% interest in
      Applied Watershed Management, LLC (AWM).  The Mount Holly Water Company
      (Mount Holly) is a wholly owned subsidiary of Elizabethtown.

2.    INTERIM FINANCIAL STATEMENTS
      The financial statements reflect all adjustments which, in the opinion
      of management, are necessary for a fair presentation.  The Notes to
      Consolidated Financial Statements accompanying the 1996 Annual Report to
      Shareholders and the 1996 Form 10-K should be read in conjunction with
      this report.

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period.

      Certain prior year amounts have been reclassified to conform to the
      current year's presentation.

 3.  CAPITALIZATION
     E'town routinely makes equity contributions to Elizabethtown which
     represent a portion of the proceeds of common stock issued under E'town's
     Dividend Reinvestment and Stock Purchase Plan (DRP).  E'town contributed
     $1.3 million from the DRP proceeds of  $5.3 million to Elizabethtown for
     the nine months ended September 30, 1997. The remaining $4.0 million of
     DRP proceeds were used to partially finance Edison Water Company's
     operation of the water system of the Township of Edison (See Note 9).

4.   LONG-TERM DEBT
     On June 4, 1997, Elizabethtown issued a total of $50.0 million of 30-year
     Variable Rate Debentures (Debentures), $25.0 million of Series A and
     $25.0 million of Series B, to evidence a like amount of Variable Rate
     Notes issued through the New Jersey Economic Development Authority
     (NJEDA). The proceeds were used to repay $50.0 million of balances
     outstanding under the Company's revolving credit agreement. The NJEDA
     Notes are remarketed on a weekly basis at which time the interest rates
     on each issue are subject to change. The rates in effect as of September
     30, 1997 were 3.75% for Series A and 3.65% for Series B.

5.   LINES OF CREDIT
      On July 25, 1997, Elizabethtown terminated its committed revolving
      credit agreement (Agreement). The Agreement was executed in 1994 to
      provide up to $60.0 million in revolving short-term financing to
      partially finance Elizabethtown's capital program. Elizabethtown
      replaced the Agreement with $75.0 million of uncommitted lines of credit
      and has borrowings outstanding under these lines of $23.0 million as of
      September 30, 1997. E'town Corporation has $5.0 million of uncommitted
      lines of credit and has borrowings outstanding under these lines of $5.0
      million as of September 30, 1997. The above lines, together with
      internal funds and proceeds of future issuances of debt and preferred
      stock by Elizabethtown and sales of common stock and issuances of short-
      and long-term debt by E'town, are expected to be sufficient to finance
      the Corporation's capital needs.

                                   -13-

<PAGE>
6.   EARNINGS PER SHARE
     Primary earnings per share are computed on the basis of the weighted
     average number of shares outstanding, plus common stock equivalents,
     which reflect the assumption that all stock options are exercised.  Fully
     diluted earnings per share assume both the conversion of the
      6 3/4% Convertible Subordinated Debentures and the common stock
     equivalents.  Reference is made to Exhibit 11 for the computations of
     earnings per share.

7.   NON-UTILITY PROPERTY AND OTHER INVESTMENTS
     Included in Non-utililty Property and Other Investments at September 30,
     1997 is an investment of $1.3 million ($.2 million net of related
     deferred taxes) in a limited partnership that owns Solar Electric
     Generating System V (SEGS), located in California.

     Also included in Non-utility Property and Other Investments at September
     30, 1997 is $12.8 million of investments in various  parcels of
     undeveloped land in New Jersey.  The carrying value of each parcel
     includes the original cost plus any real estate taxes, interest and,
     where applicable, direct costs capitalized while rezoning or governmental
     approvals were being sought. Based upon independent appraisals received
     at various times prior to 1996, the estimated net realizable value of
     each property exceeds its respective carrying value as of September 30,
     1997. No information has come to the attention of management since these
     appraisals were last performed that would indicate the aggregate carrying
     value of these parcels has been impaired.

     One of the real estate parcels was sold in June 1997 for $.4 million,
     resulting in a gain of less than $.1 million. E'town and Properties are
     assessing their position with regard to the remaining real estate
     investments.

     The Corporation will continue to monitor the relationship between the
     carrying and net realizable values of its properties through updated
     appraisals and its investment in SEGS based upon information provided by
     SEGS management and through cash flow analyses.

8.   REGULATORY MATTERS
     Rates

     Elizabethtown
     On October 25, 1996, Elizabethtown received a rate increase under a
     stipulation resulting in an increase in annual revenues of $21.8 million.
     The rate increase reflects a full allowance for the capital cost as well
     as a full allowance for the operating costs of the Canal Road Water
     Treatment Plant (Plant). The Plant was placed in service on October 24,
     1996 for a cost of $101.6 million plus an Allowance for Funds Used During
     Construction (AFUDC) of $13.5 million.

     On April 21, 1997, Elizabethtown and Mount Holly filed petitions for rate
     increases, to be effective January 1, 1998, for the recovery of costs
     associated with Statement of Financial Accounting Standards (SFAS) No.
     106 "Employers" Accounting For Postretirement Benefits Other Than
     Pensions. The resulting rate increases would reflect recovery over a
     fifteen year period of amounts previously deferred on the Consolidated
     Balance Sheets for postretirement benefits since 1993 and prospectively,
     the difference between the amounts currently recovered in rates and the
     full SFAS No. 106 expense on an accrual basis. The petitions were filed
     in connection with a generic stipulation signed by several New Jersey
     public utilities, as well as the New Jersey Board of Public Utilities and
     the New Jersey Division of Ratepayer Advocate. The settlement  was
     designed to provide a generic mechanism for New Jersey utilities to
     recover postretirement costs that have been deferred since the adoption
     of SFAS No. 106. The total increases in annual operating revenues
     resulting from these petitions are expected to be $.4 million for
     Elizabethtown and Mount Holly.

                                   -14-
<PAGE>
      Mount Holly
      In June 1995, Mount Holly petitioned the New Jersey Board of Public
      Utilities (BPU) for an increase in rates, to take place in two phases.
      The first phase was stipulated for a rate increase effective February
      1996 of $.6 million. The second phase would recover the cost of a new
      water supply, treatment and transmission system necessary to obtain
      water outside a designated portion of an aquifer currently used by Mount
      Holly, and to treat and pump the water into the Mount Holly distribution
      system.   Management believes this project is the most cost-effective
      alternative available to Mount Holly to comply with recent state
      legislation that restricts the amount of water that can be withdrawn
      from an aquifer in certain areas of southern New Jersey. The project,
      referred to as the Mansfield project, had been originally estimated to
      cost $16.5 million, excluding AFUDC. Mount Holly has expended $3.0
      million on the Mansfield Project as of September 30, 1997, excluding
      AFUDC. The land for the supply and treatment facilities has been
      purchased and test wells have been drilled and can produce the required
      supply. On October 5, 1995, the New Jersey Department of Environmental
      Protection (NJDEP) granted Mount Holly a water allocation permit for
      four wells that are to be the water supply for this project. On October
      20, 1995, another water  purveyor requested of the NJDEP, and was
      subsequently granted, an adjudicatory hearing in opposition to the
      permit. On August 5, 1997, Mount Holly settled this matter by entering
      into an agreement with the other water purveyor and NJDEP. Under the
      agreement Mount Holly will purchase 1.0 million gallons per day from the
      other purveyor for a period to include the later of two years or the
      date the Mansfield project is placed into service. Purchases are
      expected to begin approximately January 1998 or at such date as the
      other purveyor has installed the facilities necessary to effect the
      transfer of water to the Mount Holly distribution system. The other
      purveyor has withdrawn its objection to the water allocation permit.

      As a result of the settlement agreement Mount Holly expects to continue
      with its plan to construct the Mansfield  Project subject to an
      acknowledgement by the BPU and the parties to Mount Holly's last rate
      case of the need for the Mansfield Project. This acknowledgement should
      also indicate that the Mansfield Project is the most cost-effective
      alternative for Mount Holly to meet the State restrictions on well water
      diversions.

      On September 23, 1997, Mount Holly filed a petition with the BPU to
      establish a Purchased Water Adjustment Clause (PWAC) to reflect the cost
      of water expected to be purchased from the purveyor under the settlement
      agreement discussed above. The petition requests an increase in annual
      operating revenues of approximately $1.3 million or 40.3%. Mount Holly
      has requested deferred accounting treatment, in its PWAC petition, for
      the cost of the purchased water until such time as the rate increase
      under the PWAC becomes effective. This methodology would ensure that the
      recording of the revenues under the PWAC petition would coincide with
      the recording of the purchased water expenses under the settlement
      agreement.

      Mount Holly also expects to petition the BPU in the fourth quarter of
      1997 for an increase in base rates resulting from increases in
      construction, operating and financing costs incurred since Mount Holly's
      last rate increase in January 1996. A decision would be expected by the
      third quarter of 1998.

      Mount Holly expects to file a separate rate case for the cost of the
      Mansfield Project to coincide with the completion of the project and the
      expiration of the agreement to purchase water from the other purveyor.
      This rate case would replace the second phase of Mount Holly's June 1995
      rate request discussed above.

9.    EDISON CONTRACT
      On June 25, 1997, E'town and Edison Water Company signed an agreement to
      operate the water supply system of the Township of Edison for a 20-year
      period. E'town formed a wholly-owned subsidiary, Edison Water Company,

                                   -15-
<PAGE>                    
      for the purpose of managing the assets and operations of the Edison
      Township system. The Edison system serves about 11,000 residential,
      commercial and industrial customers. Under the terms of the Edison
      Contract, Edison Water Company expects to make expenditures of
      approximately $25.0 million over the 20-year period which, under the
      terms of the agreement include capital improvements to the water system
      as well as payments to the Township of Edison. Of this total
      approximately $14.0 million is expected to be expended in the first
      three years. An initial payment of $5.7 million was made upon closing.

10.   STOCK-BASED COMPENSATION
      E'town has a Stock Option (Plan) under which options to purchase shares
      of E'town common stock have been granted to certain officers and other
      key employees at prices not less than the fair market value at the date
      of grant. As permitted under SFAS No. 123, the Corporation applies
      Accounting Principles Board Opinion 25 and related Interpretations in
      accounting for its Plan.  Accordingly, no compensation cost is
      recognized for the Plan.  In May 1997, options to purchase up to 25,000
      shares of common stock at a price of $29.75 were issued. Had
      compensation cost for this issuance been determined based on the fair
      value at the grant dates for awards under the Plan consistent with the
      alternative method prescribed by SFAS No. 123, the effect on E'town's
      net income and earnings per share would not be material.

11.  NEW ACCOUNTING PRONOUNCEMENTS
     The Financial Accounting Standards Board has issued SFAS No. 128,
     "Earnings Per Share," which is effective for financial statements issued
     after December 15, 1997.  The pronouncement simplifies the calculation of
     earnings per share in that a calculation of "basic" earnings per share is
     reported in lieu of primary earnings per share. Basic earnings per share
     includes only the weighted average number of common shares outstanding
     for the period and does not consider the dilutive effect of the
     Corporation's outstanding stock options. There would be no effect on the
     Corporation's calculation of earnings per share if the pronouncement were
     applied currently.

     The Financial Accounting Standards Board has issued SFAS No. 131,
     "Disclosures about Segments of an Enterprise and Related Information"
     which is effective for financial statements issued after December 15,
     1997. The pronouncement requires disclosure of selected information about
     operating segments in interim financial reports. Based upon the relative
     materiality of the Corporation's business segments to the consolidated
     financial statements no additional disclosures would be required.


                                   -16-


<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

E'town Corporation (E'town or Corporation), a New Jersey holding company, is
the parent company of Elizabethtown Water Company (Elizabethtown or Company),
Edison Water Company (Edison) and E'town Properties, Inc. (Properties) and
owner of a 65% interest in Applied Watershed Management, LLC (AWM).  The
Mount Holly Water Company (Mount Holly) is a wholly owned subsidiary of
Elizabethtown.  The assets and operating results of Elizabethtown constitute
the predominant portions of E'town's assets and operating results.  Mount
Holly contributed 3% of the Company's consolidated operating revenues for
1996.  The following analysis sets forth significant events affecting the
financial condition of E'town and Elizabethtown at September 30, 1997, and
the results of operations for the three, nine and twelve months ended
September 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Capital Expenditures Program
Capital expenditures, primarily for water utility plant, were $15.8 million
for the first nine months of 1997. Capital expenditures for the three-year
period ending December 31, 1999 are estimated to be
$140.1 million, of which $125.3 million is for utility plant ($105.8 million
for Elizabethtown and $19.5 million for Mount Holly), $14.0 million for
Edison Water Company and $.8 million for non-utility expenditures.
Elizabethtown's three-year capital program includes $69.3 million for projects
of a routine nature. This program also includes $56.0 million of major
projects such as new transmission mains, improvements to pumping facilities,
construction of a new operations center in the western portion of our service
territory and other miscellaneous projects. Mount Holly expects to incur
significant capital expenditures later in 1998 and 1999 to construct new
water supply, treatment and transmission facilities as discussed below.
 
To ensure an adequate supply of quality water from an aquifer serving parts
of southern New Jersey, state legislation requires Mount Holly, as well as
other suppliers obtaining water from designated portions of this aquifer, to
reduce pumpage from its wells.  Mount Holly has received approval from the
New Jersey Department of Environmental Protection (NJDEP) for its plan to
develop a new water supply, treatment and transmission system necessary to
obtain water outside the designated portion of the aquifer, and to treat the
water and pump it into the Mount Holly system.  This is referred to as the
Mansfield Project.  The project was originally estimated to cost $16.5
million, excluding an Allowance for Funds Used During Construction (AFUDC),
of which $13.6 million is anticipated to be spent over the next three years.
Mount Holly has expended $3.0 million on the Mansfield Project as of
September 30, 1997, excluding AFUDC. The land for the supply and treatment
facilities has been purchased and wells have been drilled and can produce the
required supply.

In October 1995, the NJDEP granted Mount Holly a water allocation permit for
four wells that are to be the water supply for the Mansfield Project. Later
that month, another water purveyor requested of the NJDEP, and was
subsequently granted, an adjudicatory hearing in opposition to the permit. On
August 5, 1997 Mount Holly settled this matter by entering into an agreement
with the other water purveyor and NJDEP. Under the agreement Mount Holly will
purchase 1.0 million gallons per day from the other purveyor for a period of
two years or until the Mansfield project is placed into service. The other
purveyor has  withdrawn its objection to the water allocation permit.

On September 23, 1997, Mount Holly filed a petition with the BPU to establish
a Purchased Water Adjustment Clause (PWAC) to reflect the cost of water
expected to be purchased from another purveyor under the settlement agreement
discussed above. The petition requests an increase in annual operating
revenues of approximately $1.3 million or 40.3%. Mount Holly has requested
deferred accounting treatment, in its PWAC petition, for the cost of the
purchased water until such time as the rate increase under the PWAC becomes
effective. This methodology would ensure that the recording of the revenues
under the PWAC petition would coincide with the recording of the purchased
water expenses under the settlement agreement.

                                   -17-
<PAGE>
Mount Holly also expects to petition the BPU in the fourth quarter of 1997
for an increase in base rates resulting from increases in construction,
operating and financing costs incurred since Mount Holly's last rate increase
in January 1996. A decision is expected by the third quarter of 1998.

Mount Holly expects to file a separate rate case for the cost of the
Mansfield Project to coincide with the completion of the project and the
expiration of the agreement to purchase water from the other purveyor.

On October 25, 1996, Elizabethtown received a rate increase under a
stipulation resulting in an increase in annual revenues of $21.8 million. The
rate increase reflects a full allowance for the estimated capital cost as
well as a full allowance for the operating costs of the Canal Road Water
Treatment Plant (Plant). The Plant was placed in service on October 24, 1996
for a cost of $101.6 million plus an Allowance for Funds Used During
Construction of $13.5 million.


Capital Resources
For the three-year period ending December 31, 1999, Elizabethtown, including
Mount Holly, estimates that 57% of its capital expenditures are expected to
be financed with internally generated funds (after payment of common stock
dividends). The balance will be financed with a combination of contributions
from E'town of the proceeds from the sale of E'town common stock, long-term
debentures, proceeds of tax-exempt New Jersey Economic Development Authority
(NJEDA) bonds and short-term borrowings. The NJEDA has granted preliminary
approval for the financing of almost all of Elizabethtown's major projects
during the next three years and the Mansfield Project. Elizabethtown expects
to pursue tax-exempt financing to the extent that final allocations are
granted by the NJEDA. The Company's senior debt is currently rated A3 and A
by Moody's Investors Service and Standard & Poor's Ratings Group,
respectively. Standard & Poor's, in 1996, reaffirmed the Company's A rating
and upgraded its rating outlook from "negative" to "stable."

Expenditures required for the capital improvements required under the terms
of the contract for Edison Water Company are expected to be financed with a
combination of capital contributions from E'town of the proceeds from the
sale of E'town common stock and, on an interim basis, short-term borrowings.
Efforts to fund expenditures of Edison Water Company with longer-term debt
are in progress.

On June 4, 1997, Elizabethtown issued $50.0 million of 30-year Variable Rate
Debentures to evidence a like amount of Variable Rate Notes issued through
the NJEDA. The proceeds of the issue were used to repay amounts outstanding
under the revolving credit agreement discussed below.

In July 1997, Elizabethtown terminated its revolving credit agreement
(Agreement).  The Agreement  was executed in 1994 to provide up to $60.0
million in revolving short-term financing to partially fund Elizabethtown's
capital program. Elizabethtown has replaced the Agreement with $75.0 million
of uncommitted lines of credit of which $23.0 million is outstanding as of
September 30, 1997. E'town Corporation has $5.0 million of uncommitted lines
of credit. The above lines, together with internal funds and proceeds of
future issuances of debt and preferred stock by Elizabethtown and sales of
common stock and issuances of short- and long-term debt by E'town are
expected to be sufficient to finance the Corporation's capital needs.

RESULTS OF OPERATIONS
 
Net Income for the three months ended September 30, 1997 was $7.5 million or
$.93 per share as compared to $4.5 million or $.58 per share for the same
period in 1996. Net income for the nine months ended September 30, 1997 was
$15.3 million or $1.94 per share as compared to $11.5 million or $1.51 per
share for the same period in 1996. Net income for the twelve months ended
September 30, 1997 was $18.9 million or $2.39 per share as compared to $14.5
million or $1.91 per share for the same period in 1996. Net income increased
for the three, nine and twelve month periods primarily due to higher revenues
related to an increase in rates for Elizabethtown effective October 1996 in

                              -18-
<PAGE>
addition to increases in water consumption in Elizabethtown's residential
customer class. This increase in revenues was offset somewhat by increases in
financing and operating costs, primarily related to the Plant.

Operating Revenues increased $10.5 million or 37.2%, $20.0 million or 24.7%
and $23.6 million or 22.1% for the three, nine and twelve months ended
September 30, 1997 compared to the same periods in 1996. These increases
resulted primarily from a rate increase of $21.8 million in annual revenues
for Elizabethtown in October 1996, which accounted for $6.1 million, $16.4
million and $20.2 million of the increases for the three, nine and twelve
month periods, respectively. The remainder of the increases in operating
revenues are primarily the result of increased water consumption by
Elizabethtown's residential customers due to unusually warm, dry weather in
the third quarter of 1997. Edison Water Company contributed $.7 million to
the revenue increases for the three, nine and twelve month periods due to the
assumption by E'town of the operations of that system in July 1997.

Operation Expenses increased $1.4 million or 12.7%, $2.3 million or 6.9% and
$2.8 million or 6.2% for the three, nine and twelve months ended September
30, 1997, respectively, over the comparable periods in 1996.  The increases
for the third quarter are attributable primarily to higher variable costs
associated with increases in water consumption. The increases for the nine
and twelve month periods are primarily attributable to the operation of the
Plant, which went into service in October 1996.  Such costs are reflected in
Elizabethtown's rate increase that became effective in October 1996.

Maintenance Expenses increased $.2 million or 18.5%, $.4 million or 8.3% and
$.5 million or 8.4% for the three, nine and twelve months ended September 30,
1997, respectively, over the comparable 1996 amounts. These increases are
primarily due to the timing of various preventive maintenance activities
during those periods, a portion of which relate to the Plant.

Depreciation Expense increased $.7 million or 30.7% $2.1 million or 29.3% and
$2.6 million or 27.5% for the three, nine and twelve month periods ended
September 30, 1997, compared to the same periods in 1996. The increases were
due primarily to a higher level of depreciable plant in service, of which the
predominant portion was related to the Plant.

Revenue Taxes increased $1.2 million, or 34.7%, $2.4 million or 23.6% and
$2.8 million or 20.8% for the three, nine and twelve month periods ended
September 30, 1997, compared to the same periods in 1996 based upon the
increases in operating revenues, as discussed above, upon which these taxes
are calculated.

Real Estate, Payroll and Other Taxes Expenses changed by insignificant
amounts for the three and nine month periods and decreased $.2 million or 5.9%
for the twelve month period ended September 30, 1997, compared to the same
periods in 1996.

Federal Income Taxes as a component of operating expenses increased $2.0
million or 102.7%, $3.2 million or 63.3% and $3.5 million or 53.4% for the
three, nine and twelve month periods ended September 30, 1997 compared to the
comparable periods in 1996 due to the changes in the components of taxable
income discussed herein.

Other Income (Expense) decreased $.8 million or 90.6%, $2.2 million or 86.9%
and $2.6 million or 77.6% for the three, nine and twelve month periods ended
September 30, 1997 compared to the same periods in 1996. These decreases are
due primarily to the reduction in AFUDC, the largest portion of which was
recorded while the Plant was under construction. These decreases were offset
by the decreases in associated federal income taxes.

Total Interest Charges increased $1.0 million or 31.9%, $3.7 million or 40.2%
and $4.7 million or 38.5% for the three, nine and twelve month periods ended
September 30,1997 compared to the same periods in 1996 due primarily to a
reduction in the debt component of AFUDC. This reduction  in AFUDC was

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related to the completion of the Plant in October 1996. This increase in
total interest charges was further affected by a net increase in short-term
borrowings previously incurred under the revolving credit agreement to
finance the construction of  Elizabethtown's ongoing capital program, the
predominant portion of which was the Plant. A portion of these borrowings
were refinanced with long-term debt in June 1997 (see Capital Resources).
Interest expense also increased due to borrowings by E'town to finance
expenditures under the Edison Contract.

ECONOMIC OUTLOOK

Forward Looking Information
Information in this report includes certain forward looking statements within
the meaning of the Federal securities laws. Any forward looking statements
are based upon information currently available and are subject to future
events, risks and uncertainties that could cause actual results to differ
materially from those expressed in the statements. Such events, risks and
uncertainties include, without limitation, actions of regulators, the effects
of weather on water consumption, changes in historical patterns of water
consumption and demand, including changes through increased use of
water-conserving devices, conditions in capital and real estate markets,
increases in operating expenses due to factors beyond the Corporation's
control, changes in environmental regulation and associated costs of
compliance and other claims or assessments made upon the Corporation.

E'town Corporation and Subsidiaries
Consolidated earnings for E'town for the next several years are expected to
be determined by (i) Elizabethtown's ability to increase sales and to further
control operating expenses through improved productivity, (ii) Mount Holly's
and, in the future, Elizabethtown's, ability to obtain adequate and timely
rate relief in connection with future utility plant additions and, to a
lesser degree, (iii) the ability of E'town to generate returns from its
unregulated businesses and (iv) the ability of E'town and Properties to
generate returns from the sale of their real estate for purposes of
reinvestment in  water and wastewater businesses. In light of strong
financial results in the second and third quarters, management believes that
its original goal to increase earnings per share by approximately 15% for
1997 is conservative. This expectation assumes normal water consumption
patterns for the fall and winter of 1997 as well as the absence of adverse
conditions which could occur as noted in the description of forward looking
information detailed above.

Elizabethtown and Subsidiary - Regulated Utilities
On October 25, 1996, a rate increase under a stipulation (1996 Stipulation)
went into effect for Elizabethtown. This is resulting in an increase in
annual operating revenues of $21.8 million.     Elizabethtown, excluding
Mount Holly, earned a rate of return on common equity of 9.0% in 1996.
Elizabethtown's authorized rate of return on common equity is currently
11.25%. In 1997, Elizabethtown expects to close this gap between its earned
return on common equity in 1996 and its authorized return. This again assumes
normal water consumption patterns in the fall and winter of 1997. Realizing
rates of return in 1998 comparable to authorized levels will require
continued customer additions and the success of ongoing cost control efforts,
as well as rate relief later in that year.

Mount Holly earned a rate of return on common equity of 3.5% in 1996,
compared to an authorized rate of return of 11.25% established in its most
recent rate proceeding. Mount Holly contributed $.02 to E'town's consolidated
earnings per share in 1996. Management expects Mount Holly to increase its
contribution to E'town's earnings per share by obtaining additional rate
relief as discussed below. Such rate relief should also enable Mount Holly to
realize rates of return more in line with authorized levels.

Mount Holly
In June 1995, Mount Holly petitioned the New Jersey Board of Public Utilities
(BPU) for an increase in rates, to take place in two phases. The first phase
was stipulated for a rate increase effective February 1996 of $.6 million.
The second phase would recover the cost of a new water supply, treatment and
transmission system necessary to obtain water outside a designated portion of
an aquifer currently used by Mount Holly, and to treat and pump the water
into the Mount Holly distribution system. Management believes this project is
the most cost-effective alternative available to Mount Holly to comply with
recent state legislation that restricts the amount of water that can be
withdrawn from an aquifer in certain areas of southern New Jersey. The

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<PAGE>
project, referred to as the Mansfield project, had been originally estimated
to cost $16.5 million, excluding AFUDC. Mount Holly has expended $3.0 million
on the Mansfield Project as of September 30, 1997, excluding AFUDC. The land
for the supply and treatment facilities has been purchased and test wells
have been drilled and can produce the required supply. On October 5, 1995,
the New Jersey Department of Environmental Protection (NJDEP) granted Mount
Holly a water allocation permit for four wells that are to be the water
supply for this project. On October 20, 1995, another water   purveyor
requested of the NJDEP, and was subsequently granted, an adjudicatory hearing
in opposition to the permit. On August 5, 1997, Mount Holly settled this
matter by entering into an agreement with the other water purveyor and NJDEP.
Under the agreement Mount Holly will purchase 1.0 million gallons per day
from the other purveyor for a period to include the later of two years or the
date the Mansfield project is placed into service. Purchases are expected to
begin approximately January 1998 or at such date as the other purveyor has
installed the facilities necessary to effect the transfer of water to the
Mount Holly distribution system. The other purveyor has withdrawn its
objection to the water allocation permit.

As a result of the settlement agreement, Mount Holly expects to continue with
its plan to construct the Mansfield  Project subject to an acknowledgement by
the BPU and the parties to Mount Holly's last rate case of the need for the
Mansfield Project. This acknowledgement should also indicate that the
Mansfield Project is the most cost-effective alternative for Mount Holly to
meet the State restrictions on well water diversions. (See Liquidity and
Capital Resources above, for a discussion of rate issues associated with the
settlement agreement for the water allocation permit as well as rate issues
for other increases in costs).

E'town and Properties
The activities of E'town and Properties are not regulated by the BPU.

E'town
On June 25, 1997, E'town and Edison Water Company signed an agreement to
operate the water supply system of the Township of Edison for a 20-year
period. The Edison system serves about 11,000 residential, commercial and
industrial customers. Under the terms of the contract Edison Water Company
expects to make expenditures of approximately $25.0 million over the 20-year
period. Of this total approximately $14.0 million is expected to be expended
in the first three years. An initial payment of $5.7 million was made upon
closing. E'town expects to realize a return on its investment in the project
comparable to that realized by E'town's regulated utility operations. The
earnings effect is expected to be small during the first few years and is
expected to increase after year five.

In order to form AWM, in 1995, the Corporation entered into a three-year
joint venture agreement with Applied Wastewater General Partnership (AWG) a
unit of several privately held and affiliated companies providing design,
engineering, construction and operating services for water and wastewater
facilities. AWM has been pursuing opportunities to design, finance, engineer,
construct, own, operate and/or sell water and wastewater facilities for
municipal and corporate clients, primarily in New Jersey. E'town has agreed
to provide capital contributions to AWM of up to $.5 million to finance AWM's
working capital needs. E'town may provide additional financing for particular
projects of AWM. AWG has been providing the substantial portion of the
operations-related services required to be performed by AWM. Either party may

                                   -21-
<PAGE>
terminate the agreement at any time. E'town formed AWM to expand its range of
services to include wastewater, particularly to the smaller communities that
surround the franchise areas of Elizabethtown and Mount Holly.

Included in Non-Utility Property and Other Investments at September 30, 1997
is an investment of $1.3 million ($.2 million net of related deferred taxes)
in a limited partnership that owns Solar Electric Generating System V (SEGS),
located in California.

Properties
E'town Properties and E'town Corporation own various parcels of undeveloped
land in New Jersey carried as investments of $12.8 million in Non-Utility
Property and Other Investments - Net in the Consolidated Balance Sheets of
E'town at  September 30, 1997.

The carrying value of each parcel includes the original cost plus any real
estate taxes, interest and, where applicable, direct costs capitalized while
rezoning or governmental approvals are or were being sought.

One of the parcels was sold in June 1997 for $.4 million at a gain of less
than $.1 million.  Based on independent appraisals received at various times
prior to 1996, management believes that the estimated net realizable value of
each property exceeds its respective carrying value as of June 30, 1997.
E'town and Properties are assessing their position with regard to the
remaining real estate investments. E'town expects to reinvest the net
proceeds of any sale into water and wastewater investments in efforts to
yield a current return.

E'town will continue to monitor the relationship between the carrying and net
realizable values of its properties through updated appraisals, when
appropriate, and of its investment in SEGS based on information provided by
SEGS management.

New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," which is effective
for financial statements issued after December 15, 1997.  The pronouncement
simplifies the calculation of earnings per share in that a calculation of
"basic" earnings per share is reported in lieu of primary earnings per share.
Basic earnings per share includes only the weighted average number of common
shares outstanding for the period and does not consider the dilutive effect
of the Corporation's outstanding stock options. There would be no effect on
the Corporation's calculation of earnings per share if the pronouncement were
applied currently.

The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" which is
effective for financial statements issued after December 15, 1997. The
pronouncement requires disclosure of selected information about operating
segments in interim financial reports. Based upon the relative materiality of
the Corporation's business segments to the consolidated financial statements
no additional disclosures would be required.

                                       -22-
<PAGE>
PART II - OTHER INFORMATION

Items 1 - 5:

      Nothing to Report.

Item 6(a) - Exhibits

   Exhibits to Part I:

      Exhibit 4(i) - Indenture dated as of June 1, 1997 from Elizabethtown
                     Water Company to The Bank of New York, Trustee, relating
                     to Variable Rate Demand Debentures, due 2027 (Series B)

      Exhibit 4(j) - Indenture dated as of June 1, 1997 from Elizabethtown
                     Water Company to The Bank of New York, Trustee,
                     relating to Variable Rate Demand Debentures, due 2027
                     (Series A)

      Exhibit 11  -  E'town Corporation and Subsidiaries - Statement Regarding
                     Computation of Per Share Earnings

      Exhibit 12  -  Elizabethtown Water Company - Computation of Ratio of
                     Earnings to Fixed Charges and Preferred Dividends and
                     Computation of Ratio of earnings to Fixed Charges

      Exhibit 27  -  E'town Corporation and Subsidiaries and Elizabethtown
                     Water Company and Subsidiary - Financial Data Schedules

Item 6(b) - Reports on Form 8-K


                None



                                   -23-

<PAGE>
                            E'TOWN CORPORATION
                     ELIZABETHTOWN WATER COMPANY

                              SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: November 13, 1997

                                    E'TOWN CORPORATION
                                    ELIZABETHTOWN WATER COMPANY

 
 
                                    /s/ Gail P. Brady
                                    ________________________________
                                    Gail P. Brady
                                    Treasurer


 
                                    /s/ Dennis W. Doll
                                    ________________________________
                                    Dennis W. Doll
                                    Controller


 




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