UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

             [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1999
                                                 -------------
                                       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 1-3382
                                                 ------
                         CAROLINA POWER & LIGHT COMPANY
                         ------------------------------
             (Exact name of registrant as specified in its charter)

           North Carolina                                  56-0165465
           --------------                                  ----------
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
 of incorporation or organization)


        411 Fayetteville Street, Raleigh, North Carolina      27601-1748
        ------------------------------------------------      ----------
             (Address of principal executive offices)         (Zip Code)


                                  919-546-6111
                                  ------------
              (Registrant's telephone number, including area code)

                                      NONE
                                      ----
              (Former name, former address and former fiscal year,
                         if changed since last report)

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  .
                                      ---   ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of the latest  practicable  date.  Common Stock  (Without Par
Value) shares outstanding at July 31, 1999: 159,581,559.

<PAGE>



         SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
         ------------------------------------------
         The matters discussed throughout this Form 10-Q that are not historical
         facts  are  forward-looking   and,   accordingly,   involve  estimates,
         projections,  goals,  forecasts,  assumptions,  risks and uncertainties
         that could cause actual results or outcomes to differ  materially  from
         those expressed in the forward-looking statements.

         Examples of  forward-looking  statements  discussed  in this Form 10-Q,
         PART 1, ITEM 2,  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS",  include, but are not limited to,
         statements under the heading "Other Matters"  concerning the effects of
         electric  utility  industry   restructuring  and  the  outcome  of  the
         Company's Year 2000 compliance efforts.

         Any forward-looking  statement speaks only as of the date on which such
         statement is made,  and the Company  undertakes no obligation to update
         any  forward-looking  statement  or  statements  to  reflect  events or
         circumstances after the date on which such statement is made.

         Examples  of factors  that  should be  considered  with  respect to any
         forward-looking  statements made throughout this document include,  but
         are not limited to, the following: Governmental policies and regulatory
         actions  (including those of the Federal Energy Regulatory  Commission,
         the Environmental Protection Agency, the Nuclear Regulatory Commission,
         the Department of Energy, the North Carolina  Utilities  Commission and
         the South Carolina Public Service Commission); general industry trends;
         operation of nuclear power  facilities;  availability  of nuclear waste
         storage  facilities;  nuclear  decommissioning  costs;  changes  in the
         economy of areas  served by the  Company;  legislative  and  regulatory
         initiatives that impact the speed and degree of industry restructuring;
         ability to obtain adequate and timely rate recovery of costs, including
         potential   stranded   costs  arising  from   industry   restructuring;
         competition from other energy suppliers; ability of the Company and its
         suppliers and  customers to  successfully  address Year 2000  readiness
         issues;  weather  conditions and catastrophic  weather-related  damage;
         market demand for energy;  inflation;  capital market  conditions;  the
         success of the Company's diversified businesses;  unanticipated changes
         in  operating   expenses  and  capital   expenditures   and  legal  and
         administrative proceedings.  All such factors are difficult to predict,
         contain  uncertainties  that may materially affect actual results,  and
         may be beyond the control of the Company.  New factors emerge from time
         to time and it is not  possible for  management  to predict all of such
         factors,  nor can it  assess  the  effect  of each  such  factor on the
         Company.

<PAGE>

PART I. FINANCIAL INFORMATION
        ---------------------

Item 1. Financial Statements

<TABLE>

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

                                      Carolina Power & Light Company
                                (ORGANIZED UNDER THE LAWS OF NORTH CAROLINA)

                                 CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (NOT AUDITED BY INDEPENDENT AUDITORS)
                                               JUNE 30, 1999

------------------------------------------------------------------------------------------------------------
<CAPTION>
Statements of Income
                                                          Three Months Ended         Six Months Ended
                                                               June 30                    June 30
(In thousands except per share amounts)                   1999         1998          1999         1998
-----------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>          <C>          <C>
Operating Revenues
  Electric                                               $ 733,999    $  736,151   $1,472,558   $1,488,447
  Diversified businesses                                    28,823        12,790       53,166       21,990
-----------------------------------------------------------------------------------------------------------
     Total Operating Revenues                              762,822       748,941    1,525,724    1,510,437

Operating Expenses
  Fuel                                                     142,918       135,903      281,882      279,705
  Purchased power                                           96,961       102,711      182,183      188,052
  Other operation and maintenance                          164,819       165,607      307,786      322,400
  Depreciation and amortization                            121,284       123,597      241,840      245,610
  Taxes other than on income                                34,669        34,571       70,670       69,451
  Harris Plant deferred costs, net                           1,964         2,028        3,488        3,807
  Diversified businesses                                    42,836        24,931       81,096       47,552
-----------------------------------------------------------------------------------------------------------
      Total Operating Expenses                             605,451       589,348    1,168,945    1,156,577
-----------------------------------------------------------------------------------------------------------
Operating Income                                           157,371       159,593      356,779      353,860
-----------------------------------------------------------------------------------------------------------

Other Income (Expense)
  Interest income                                            2,270         1,037        4,563        4,474
  Other, net                                                (8,250)       (3,395)     (15,246)     (11,424)
-----------------------------------------------------------------------------------------------------------
      Total Other Income (Expense)                          (5,980)       (2,358)     (10,683)      (6,950)
-----------------------------------------------------------------------------------------------------------
Income before Interest Charges and Income Taxes            151,391       157,235      346,096      346,910
-----------------------------------------------------------------------------------------------------------
Interest Charges
  Long-term debt                                            43,993        43,998       86,394       86,820
  Other interest charges                                     3,042         2,719        5,803        5,330
  Allowance for borrowed funds used during                  (2,964)       (1,487)      (4,792)      (2,898)
construction
-----------------------------------------------------------------------------------------------------------
     Net Interest Charges                                   44,071        45,230       87,405       89,252
-----------------------------------------------------------------------------------------------------------
Income before Income Taxes                                 107,320       112,005      258,691      257,658
Income Taxes                                                44,161        46,536      103,320      105,619
-----------------------------------------------------------------------------------------------------------
Net Income                                                  63,159        65,469      155,371      152,039
Preferred Stock Dividend Requirements                          742           741        1,483        1,483
-----------------------------------------------------------------------------------------------------------
Earnings for Common Stock                                $  62,417    $   64,728   $  153,888   $  150,556
-----------------------------------------------------------------------------------------------------------

Average Common Shares Outstanding                          144,466       143,892      144,380      143,829
Basic Earnings per Common Share                          $    0.43    $     0.45   $     1.07   $     1.05
Diluted Earnings per Common Share                        $    0.43    $     0.45   $     1.06   $     1.05
Dividends Declared per Common Share                      $   0.500    $    0.485   $    1.000   $    0.970


-----------------------------------------------------------------------------------------------------------
See Supplemental Data and Notes to Consolidated Interim Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



Carolina Power & Light Company
BALANCE SHEETS                                                                       June 30                December 31
(In thousands)                                                                1999            1998          1998
------------------------------------------------------------------------------------------------------------------------
                                   ASSETS
<S>                                                                           <C>            <C>            <C>
Electric Utility Plant
  Electric utility plant in service                                           $  10,418,318  $ 10,199,995   $10,280,638
  Accumulated depreciation                                                       (4,685,796)    (4,358,703)   (4,496,632)
------------------------------------------------------------------------------------------------------------------------
         Electric utility plant in service, net                                   5,732,522     5,841,292     5,784,006
  Held for future use                                                                11,984        11,886        11,984
  Construction work in progress                                                     408,959       196,555       306,866
  Nuclear fuel, net of amortization                                                 184,095       218,506       196,684
------------------------------------------------------------------------------------------------------------------------
       Total Electric Utility Plant, Net                                          6,337,560     6,268,239     6,299,540
------------------------------------------------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents                                                          81,303        40,336        28,872
  Accounts receivable                                                               448,655       484,812       406,418
  Taxes receivable                                                                        -             -        21,000
  Fuel                                                                               90,806        88,595        78,086
  Materials and supplies                                                            142,458       143,707       146,615
  Deferred fuel cost                                                                 44,411        25,914        42,647
  Prepayments                                                                         8,175         2,282        18,446
  Other current assets                                                               82,680        68,781        58,772
------------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                       898,488       854,427       800,856
------------------------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
  Income taxes recoverable through future rates                                     253,000       302,904       277,894
  Abandonment costs                                                                   9,005        24,397        16,083
  Harris Plant deferred costs                                                        58,341        61,839        60,021
  Unamortized debt expense                                                           16,922        37,712        27,010
  Nuclear decommissioning trust funds                                               345,947       286,301       310,702
  Miscellaneous other property and investments                                      398,087       253,380       294,678
  Other assets and deferred debits                                                  248,767       293,946       260,622
------------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                                   1,330,069     1,260,479     1,247,010
------------------------------------------------------------------------------------------------------------------------
            Total Assets                                                      $   8,566,117   $ 8,383,145    $8,347,406

------------------------------------------------------------------------------------------------------------------------
                       CAPITALIZATION AND LIABILITIES

Capitalization
  Common stock equity                                                         $   2,975,565   $ 2,836,285   $ 2,949,305
  Preferred stock - redemption not required                                          59,376        59,376        59,376
  Long-term debt, net                                                             2,716,447     2,581,325     2,614,414
------------------------------------------------------------------------------------------------------------------------
         Total Capitalization                                                     5,751,388     5,476,986     5,623,095
------------------------------------------------------------------------------------------------------------------------
Current Liabilities
  Current portion of long-term debt                                                 201,610       168,075        53,172
  Accounts payable                                                                  231,787       277,812       265,163
  Taxes accrued                                                                      35,280        46,431             -
  Interest accrued                                                                   47,104        43,034        39,941
  Dividends declared                                                                 74,385        72,101        74,400
  Other current liabilities                                                         114,282        99,451       108,824
------------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                  704,448       706,904       541,500
------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Accumulated deferred income taxes                                               1,636,415     1,689,799     1,678,924
  Accumulated deferred investment tax credits                                       206,722       216,925       211,822
  Other liabilities and deferred credits                                            267,144       292,531       292,065
------------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                             2,110,281     2,199,255     2,182,811
------------------------------------------------------------------------------------------------------------------------
            Total Capitalization and Liabilities                              $   8,566,117  $  8,383,145  $  8,347,406
------------------------------------------------------------------------------------------------------------------------
SCHEDULES OF COMMON STOCK EQUITY
(In thousands)

  Common stock (without par value, authorized 200,000,000, issued and         $   1,383,143  $  1,369,636  $  1,374,773
    outstanding 151,337,503, 151,330,894 and 151,337,503 shares, respectively)
  Unearned ESOP common stock                                                       (144,254)     (157,306)     (152,979)
  Capital stock issuance expense                                                       (790)         (790)         (790)
  Retained earnings                                                               1,737,466     1,624,745     1,728,301
------------------------------------------------------------------------------------------------------------------------
         Total Common Stock Equity                                            $   2,975,565  $  2,836,285  $  2,949,305
------------------------------------------------------------------------------------------------------------------------
See Supplemental Data and Notes to Consolidated Interim Financial Statements.


</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Carolina Power & Light Company
STATEMENTS OF CASH FLOWS                                       Three Months Ended           Six Months Ended
                                                                    June 30                      June 30
(In thousands)                                              1999            1998         1999            1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>          <C>             <C>
Operating Activities
  Net income                                                $    63,159     $   65,469   $  155,371      $  152,039
  Adjustments to reconcile net income to net cash provided
   by operating activities
      Depreciation and amortization                             143,534        144,886      286,905         290,047
      Harris Plant deferred costs                                 1,065          1,074        1,679           1,887
      Deferred income taxes                                     (15,407)       (13,145)     (32,805)        (36,602)
      Investment tax credit                                      (2,550)        (2,551)      (5,100)         (5,103)
      Deferred fuel cost (credit)                                (2,172)       (11,862)      (1,765)         (5,284)
      Net (increase) decrease in receivables, inventories,
prepaid expenses
                and other current assets                        (61,429)      (117,960)     (69,861)       (140,392)
      Net increase (decrease) in payables and accrued            36,676         50,781       55,432          94,011
expenses
      Miscellaneous                                              32,260         10,085       27,080          (3,046)
--------------------------------------------------------------------------------------------------------------------
        Net Cash Provided by Operating Activities               195,136        126,777      416,936         347,557
--------------------------------------------------------------------------------------------------------------------
Investing Activities
  Gross property additions                                     (139,938)       (94,464)    (309,004)       (171,798)
  Nuclear fuel additions                                         (5,439)       (15,179)     (32,573)        (71,283)
  Contributions to nuclear decommissioning trust                 (7,712)        (7,688)     (17,995)        (17,939)
  Net cash flow of company-owned life insurance program          (6,729)        (2,797)      (6,850)         (2,524)
   Investment in non-electric activities                        (41,611)       (20,084)    (106,545)        (40,055)
--------------------------------------------------------------------------------------------------------------------

        Net Cash Used in Investing Activities                  (201,429)      (140,212)    (472,967)       (303,599)
--------------------------------------------------------------------------------------------------------------------
Financing Activities
  Proceeds from issuance of long-term debt                            -          1,001      400,970           1,001
  Net increase (decrease) in commercial paper classified as
                   long-term debt                               117,500        130,270     (144,750)        164,400
  Retirement of long-term debt                                      (47)       (40,000)      (1,683)        (41,476)
  Dividends paid on common and preferred stock                  (73,264)       (70,712)    (146,219)       (141,340)
  Miscellaneous                                                    (187)          (633)         144            (633)

--------------------------------------------------------------------------------------------------------------------
        Net Cash Provided by (Used in) Financing                 44,002         19,926      108,462         (18,048)
Activities
--------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                        37,709          6,491       52,431          25,910
Cash and Cash Equivalents at Beginning of the Period             43,594         33,845       28,872          14,426
--------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period              $    81,303     $   40,336   $   81,303      $   40,336
--------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the period - interest                      $    28,351     $   35,170   $   81,370      $   91,127
                              income taxes                  $   108,337     $  120,724   $  109,493      $  126,794
--------------------------------------------------------------------------------------------------------------------
See Supplemental Data and Notes to Consolidated Interim Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Carolina Power & Light Company
SUPPLEMENTAL  DATA                                    Three Months Ended           Six Months Ended
                                                            June 30                     June 30
                                                      1999          1998         1999          1998
-----------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>          <C>           <C>
Operating Revenues (in thousands)
  Retail                                              $  580,155    $ 593,570    $ 1,182,419   $ 1,191,332
  Wholesale                                              136,832      128,355        258,120       263,775
  Miscellaneous revenue                                   17,012       14,226         32,019        33,340
-----------------------------------------------------------------------------------------------------------

            Total Electric                               733,999      736,151      1,472,558     1,488,447
  Diversified businesses                                  28,823       12,790         53,166        21,990
-----------------------------------------------------------------------------------------------------------

            Total Operating Revenues                  $  762,822    $ 748,941    $ 1,525,724   $ 1,510,437
-----------------------------------------------------------------------------------------------------------

Energy Sales (millions of kWh)
Retail
  Residential                                              2,753        2,868          6,416         6,306
  Commercial                                               2,689        2,640          5,121         4,999
  Industrial                                               3,827        3,904          7,111         7,383
  Other                                                      326          318            638           632
-----------------------------------------------------------------------------------------------------------
          Total Retail                                     9,595        9,730         19,286        19,320
  Wholesale                                                3,772        3,447          7,042         7,316
-----------------------------------------------------------------------------------------------------------

            Total Energy Sales                            13,367       13,177         26,328        26,636
-----------------------------------------------------------------------------------------------------------

Energy Supply (millions of kWh)
  Generated - coal                                         6,840        6,779         13,392        13,565
                     nuclear                               5,405        5,069         11,145        10,658
                     hydro                                   145          266            355           641
                     combustion turbines                      47          140             67           159
  Purchased                                                1,392        1,415          2,320         2,571
-----------------------------------------------------------------------------------------------------------

            Total Energy Supply (Company Share)           13,829       13,669         27,279        27,594
-----------------------------------------------------------------------------------------------------------

Detail of Income Taxes (in thousands)
    Income tax expense (credit) - current             $   62,118    $  62,232    $   141,225    $  147,324
deferred                                                 (15,407)     (13,145)       (32,805)      (36,602)
investment tax credit                                     (2,550)      (2,551)        (5,100)       (5,103)
-----------------------------------------------------------------------------------------------------------

               Total Income Tax Expense               $   44,161    $  46,536    $   103,320    $  105,619
-----------------------------------------------------------------------------------------------------------
See Notes to Consolidated Interim Financial
</TABLE>
<PAGE>


Carolina Power & Light Company
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.       ORGANIZATION AND BASIS OF PRESENTATION
         --------------------------------------
         A.       Organization.  Carolina Power & Light Company (the Company) is
                  -------------
                  a  public  service   corporation   primarily  engaged  in  the
                  generation, transmission, distribution and sale of electricity
                  in  portions of North and South  Carolina.  The Company has no
                  other material  segments of business.  Operating income on the
                  Statements of Income includes  approximately  $171 million and
                  $172  million  attributable  to the  electric  segment for the
                  three months ended June 30, 1999 and 1998,  respectively,  and
                  $385  million and $379  million for the six months  ended June
                  30, 1999 and 1998, respectively.

         B.       Basis of Presentation.  These  consolidated  interim financial
                  ----------------------
                  statements  should be read in  conjunction  with the Company's
                  consolidated  financial  statements  included in the Company's
                  1998 Annual  Report on Form 10-K.  The  amounts are  unaudited
                  but, in the  opinion of  management,  reflect all  adjustments
                  necessary to fairly present the Company's  financial  position
                  and  results of  operations  for the interim  periods.  Due to
                  temperature  variations  between  seasons  of the year and the
                  timing of outages of  electric  generating  units,  especially
                  nuclear-fueled  units,  the results of operations  for interim
                  periods are not necessarily indicative of amounts expected for
                  the  entire   year.   Certain   amounts  for  1998  have  been
                  reclassified  to  conform  to the 1999  presentation,  with no
                  effect on  previously  reported  net  income  or common  stock
                  equity.

                  In preparing financial  statements that conform with generally
                  accepted accounting principles, management must make estimates
                  and assumptions that affect the reported amounts of assets and
                  liabilities,  disclosure of contingent  assets and liabilities
                  at the  date  of  the  financial  statements  and  amounts  of
                  revenues and expenses  reflected during the reporting  period.
                  Actual results could differ from those estimates.

2.       NCNG MERGER
         -----------
         On July 15,  1999,  the  Company  completed  the  acquisition  of North
         Carolina  Natural Gas  Corporation  (NCNG)  pursuant to the terms of an
         Agreement  and Plan of Merger by and between the Company and NCNG dated
         November  10,  1998,  as amended  and  restated  April 22,  1999.  Each
         outstanding  share of NCNG common stock was converted into the right to
         receive  0.8054  shares of  Company  common  stock  which  amounted  to
         8,244,056  Company  shares,  with cash being paid in lieu of fractional
         shares. NCNG is operating as a wholly-owned subsidiary of the Company.

         In  conjunction  with the  merger,  the Company and NCNG signed a joint
         stipulation  agreement  with the  Public  Staff of the  North  Carolina
         Utilities  Commission  (NCUC) in which the  Company  agreed to cap base
         retail electric rates, with limited exceptions,  through December 2004,
         and NCNG  agreed to cap margin  rates for gas sales and  transportation
         services, with limited exceptions, through November 1, 2003. Management
         is of the opinion that this agreement will not have a material  adverse
         effect on the consolidated  results of operations or financial position
         of the Company.

3.       NUCLEAR DECOMMISSIONING
         -----------------------
         In  the  Company's   retail   jurisdictions,   provisions  for  nuclear
         decommissioning  costs are approved by the NCUC and the South  Carolina
         Public Service Commission and are based on site-specific estimates that
         include the costs for removal of all radioactive  and other  structures
         at the site. In the wholesale jurisdiction,  the provisions for nuclear
         decommissioning  costs are based on amounts  agreed upon in  applicable
         rate agreements.  Based on the site-specific estimates discussed below,
         and using an assumed  after-tax  earnings  rate of 7.75% and an assumed
         cost escalation rate of 4%, current levels of rate recovery for nuclear
         decommissioning  costs are adequate to provide for  decommissioning  of
         the Company's nuclear facilities.


         The Company's most recent  site-specific  estimates of  decommissioning
         costs were developed in 1998, using 1998 cost factors, and are based on
         prompt  dismantlement  decommissioning,  which  reflects  the  cost  of
         removal of all radioactive and other structures  currently at the site,
         with such removal occurring shortly after operating license expiration.
         These estimates,  in 1998 dollars, are $279.8 million for Robinson Unit
         No. 2, $299.6  million  for  Brunswick  Unit No. 1, $298.7  million for
         Brunswick  Unit No. 2 and  $328.1  million  for the Harris  Plant.  The
         estimates  are  subject  to  change  based  on  a  variety  of  factors
         including,  but not limited to, cost escalation,  changes in technology
         applicable to nuclear  decommissioning and changes in federal, state or
         local regulations.  The cost estimates exclude the portion attributable
         to North  Carolina  Eastern  Municipal  Power  Agency,  which  holds an
         undivided  ownership  interest  in the  Brunswick  and  Harris  nuclear
         generating  facilities.  Operating  licenses for the Company's  nuclear
         units  expire  in the year  2010 for  Robinson  Unit  No.  2,  2016 for
         Brunswick  Unit No. 1, 2014 for  Brunswick  Unit No. 2 and 2026 for the
         Harris Plant.

         The Financial Accounting Standards Board is proceeding with its project
         regarding accounting  practices related to obligations  associated with
         the  retirement  of  long-lived  assets,  and an  exposure  draft  of a
         proposed  accounting  standard is expected to be issued during the last
         half of 1999. It is uncertain  when the final  statement will be issued
         and what effects it may ultimately have on the Company's accounting for
         nuclear decommissioning and other retirement costs.

4.       COMMITMENTS AND CONTINGENCIES
         -----------------------------
         Contingencies existing as of the date of these statements are described
         below.  No  significant  changes have occurred since December 31, 1998,
         with respect to the  commitments  discussed in Note 12 of the financial
         statements included in the Company's 1998 Annual Report on Form 10-K.


         A.       Applicability of SFAS-71.  As a regulated entity,  the Company
                  -------------------------
                  is  subject  to  the  provisions  of  Statement  of  Financial
                  Accounting  Standards No. 71,  "Accounting  for the Effects of
                  Certain  Types  of  Regulation"  (SFAS-71).  Accordingly,  the
                  Company records certain assets and liabilities  resulting from
                  the  effects of the  ratemaking  process,  which  would not be
                  recorded under generally  accepted  accounting  principles for
                  unregulated  entities.  The  Company's  ability to continue to
                  meet the criteria for  application  of SFAS-71 may be affected
                  in  the  future  by  competitive   forces,   deregulation  and
                  restructuring in the electric utility  industry.  In the event
                  that SFAS-71 no longer  applied to a separable  portion of the
                  Company's   operations,    related   regulatory   assets   and
                  liabilities   would  be  eliminated   unless  an   appropriate
                  regulatory recovery mechanism is provided. Additionally, these
                  factors  could  result in an  impairment  of electric  utility
                  plant assets as determined  pursuant to Statement of Financial
                  Accounting  Standards No. 121,  "Accounting for the Impairment
                  of Long-Lived  Assets and for Long-Lived Assets to Be Disposed
                  Of." The  Company's  regulatory  assets  totaled $426 million,
                  $493 million and $480 million as of June 30, 1999 and 1998 and
                  December 31, 1998, respectively.


         B.       Claims  and  Uncertainties.  a)  The  Company  is  subject  to
                  ---------------------------
                  federal,  state and local regulations addressing air and water
                  quality,  hazardous  and  solid  waste  management  and  other
                  environmental matters.

                  Various  organic  materials  associated with the production of
                  manufactured  gas,  generally  referred  to as coal  tar,  are
                  regulated  under  various  federal and state  laws.  There are
                  several  manufactured  gas  plant  (MGP)  sites to  which  the
                  Company and certain  entities  that were later merged into the
                  Company had some  connection.  In this  regard,  the  Company,
                  along with others,  is participating  in a cooperative  effort
                  with the North Carolina  Department of Environment and Natural
                  Resources,  Division  of Waste  Management  (DWM),  which  has
                  established  a uniform  framework  to address  MGP sites.  The
                  investigation  and  remediation  of specific MGP sites will be
                  addressed  pursuant  to one or more  Administrative  Orders on
                  Consent (AOC) between the DWM and the potentially  responsible
                  party or parties.  The Company has signed AOCs to  investigate
                  certain sites and anticipates  signing AOCs to remediate sites
                  as well. The Company  continues to identify parties  connected
                  to  individual  MGP  sites,  and  to  determine  the  relative
                  relationships  of the Company and other parties to those sites
                  and the degree to which the  Company  will  undertake  efforts
                  with others at individual  sites.  The Company does not expect
                  the costs  associated  with these  sites to be material to the
                  financial position and results of operations of the Company.

                  The Company has been notified by regulators  such as the North
                  Carolina Department of Environment and Natural Resources,  the
                  South Carolina Department of Health and Environmental Control,
                  and the United States  Environmental  Protection Agency of its
                  involvement or potential  involvement in several sites,  other
                  than  MGP  sites,  that  may  require   investigation   and/or
                  remediation.  Although  the  Company  may incur costs at these
                  sites, based upon the current status of the sites, the Company
                  does not expect  those  costs to be material to the results of
                  operations of the Company.

                  The  Company  carries  a  liability  for the  estimated  costs
                  associated with certain remedial activities. This liability is
                  not material to the financial position of the Company.

                  b) As required under the Nuclear Waste Policy Act of 1982, the
                  Company  entered into a contract  with the U.S.  Department of
                  Energy  (DOE) under which the DOE agreed to begin taking spent
                  nuclear fuel by no later than January 31, 1998.  All similarly
                  situated  utilities  were  required to sign the same  standard
                  contract.


                  In April of 1995, the DOE issued a final  interpretation  that
                  it did not  have an  unconditional  obligation  to take  spent
                  nuclear fuel by January 31, 1998. In Indiana & Michigan  Power
                                                       -------------------------
                  v. DOE,  the U.S.  Court of Appeals  vacated  the DOE's  final
                  ------
                  interpretation  and  ruled  that the DOE had an  unconditional
                  obligation to begin taking spent  nuclear fuel.  The Court did
                  not specify a remedy because the DOE was not yet in default.


                  After the DOE failed to comply with the  decision in Indiana &
                                                                       ---------
                  Michigan  Power v. DOE, a group of  utilities  (including  the
                  ----------------------
                  Company)  petitioned  the U.S.  Court of Appeals  in  Northern
                  States Power (NSP) v. DOE,  seeking an order requiring the DOE
                  to begin  taking spent  nuclear fuel by January 31, 1998.  DOE
                  took the position  that their delay was  unavoidable,  and the
                  DOE  was  excused  from   performance   under  the  terms  and
                  conditions  of the  contract.  The Court of Appeals  issued an
                  order  which  precluded  DOE  from  treating  the  delay as an
                  unavoidable delay. However, the Court of Appeals did not order
                  the DOE to begin taking spent nuclear  fuel,  stating that the
                  utilities had a potentially  adequate remedy by filing a claim
                  for damages under the contract.

                  After the DOE failed to begin  taking  spent  nuclear  fuel by
                  January 31, 1998, a group of utilities (including the Company)
                  filed a motion  with the U.S.  Court of Appeals to enforce the
                  mandate in NSP v. DOE.  Specifically,  the utilities asked the
                             -----------
                  Court to  permit  the  utilities  to  escrow  their  waste fee
                  payments,  to order the DOE not to use the  waste  fund to pay
                  damages to the utilities,  and to order the DOE to establish a
                  schedule for disposal of spent nuclear fuel.  The Court denied
                  this motion  based  primarily  on the grounds that a review of
                  the  matter  was  premature,  and that  some of the  requested
                  remedies fell outside of the mandate in NSP v. DOE.
                                                          -----------

                  Subsequently,  a number of utilities  each filed an action for
                  damages  in the  Court  of  Claims  and  before  the  Court of
                  Appeals.  The Company is in the process of evaluating  whether
                  it should file a similar action for damages.  In NSP v. United
                                                                   -------------
                  States,  the United  States  Court of Claims  decided that NSP
                  ------
                  must pursue its  administrative  remedies instead of filing an
                  action in the Court of Claims.  NSP has filed an interlocutory
                  appeal to the U.S.  Court of Appeals  based on NSP's  position
                  that the  Court of  Claims  has  jurisdiction  to  decide  the
                  matter.  A group of  utilities  (including  the  Company)  has
                  submitted an amicus brief in support of NSP's position.

                  The Company  also  continues to monitor  legislation  that has
                  been  introduced in Congress  which might provide some limited
                  relief. The Company cannot predict the outcome of this matter.

                  c) In the opinion of management,  liabilities, if any, arising
                  under other pending claims would not have a material effect on
                  the  financial  position  and  results  of  operations  of the
                  Company.


<PAGE>



5.       EARNINGS PER COMMON SHARE
         -------------------------
         Restricted stock awards and contingently issuable shares had a dilutive
         effect on earnings per share and increased the weighted-average  number
         of common  shares  outstanding  for  dilutive  purposes  by 289,087 and
         282,988 for the three and six months ended June 30, 1999, respectively,
         and by 260,173 and 237,980 for the three and six months  ended June 30,
         1998,  respectively.  The  weighted-average  number  of  common  shares
         outstanding  for dilutive  purposes was 144.8 million and 144.7 million
         for three and six months ended June 30, 1999,  respectively,  and 144.2
         million and 144.1  million for the three and six months  ended June 30,
         1998, respectively.

6.       NEW ACCOUNTING STANDARD
         -----------------------

         The  Financial  Accounting  Standards  Board  (FASB)  has  delayed  the
         effective date for Statement of Financial  Accounting  Standards (SFAS)
         No.  133,   "Accounting   for   Derivative   Instruments   and  Hedging
         Activities".  The delay,  published  as SFAS No. 137,  "Accounting  for
         Derivative  Instruments  and  Hedging  Activities  -  Deferral  of  the
         Effective Date of FASB  statement No. 133",  changes the effective date
         to fiscal years beginning after June 15, 2000.




<PAGE>


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

                              RESULTS OF OPERATIONS
                For the Three and Six Months Ended June 30, 1999,
           As Compared With the Corresponding Periods One Year Earlier
           -----------------------------------------------------------

         Operating Revenues - Electric
         -----------------------------

         For the three and six months  ended June 30, 1999,  electric  operating
         revenues were affected by the following factors (in millions):

                                                      Three Months    Six Months
                                                      ------------    ----------
Weather                                                 $  (20)        $   (18)
Customer growth/changes in usage patterns                   13              31
Price                                                       2              (15)
Sales to other utilities                                    1              (13)
Sales to North Carolina Eastern Municipal Power Agency     (1)               -
Other                                                       3               (1)
                                                            -               ---

   Total                                                $  (2)         $   (16)
                                                           ===             ====



         The  decrease in the weather  component  of revenue for both periods is
         the result of milder than normal temperatures in the current periods as
         compared to prior periods. The increase in the customer  growth/changes
         in usage  patterns  component  of revenue for both  comparison  periods
         reflects  continued  growth in the  number of  customers  served by the
         Company;  while  residential  and  commercial  sales  increased for the
         six-month period, industrial sales have decreased, primarily reflecting
         a cyclical decline in the chemical and textile  industries.  During the
         three-month  period,  the price  component of revenues  was  negatively
         impacted  by the effect of  real-time  pricing  on sales to  industrial
         customers which was more than offset by other price-related  increases,
         primarily due to changes in the price structure of the contract between
         the Company and North Carolina  Electric  Membership  Corporation.  The
         price-related decrease for the six-month period is primarily due to the
         effect of  real-time  pricing  on sales to  industrial  customers.  The
         decrease  in sales to  other  utilities  for the  six-month  period  is
         primarily  due to milder  temperatures  in the  Northeast  and  Midwest
         during the first  quarter of 1999 and to the  expiration  of  long-term
         sales agreements.


         Operating Expenses - Electric
         -----------------------------
         Other operation and maintenance expense decreased during the six months
         ended June 30, 1999 primarily due to the timing of plant outages.

         Diversified Business Operations
         -------------------------------
         Operating  revenues and  expenses of  diversified  business  operations
         primarily  reflect  results  of  two  of  the  Company's  subsidiaries,
         Strategic Resource Solutions Corp. (SRS) and Interpath  Communications,
         Inc. (Interpath). The increase in operating revenues for the three- and
         six-month  periods is primarily due to an increase in the customer base
         of both subsidiaries. The increase in operating expenses for the three-
         and six-month periods is primarily attributable to Interpath's business
         expansion   program.   Operating  expenses  at  SRS  did  not  increase
         significantly due to cost-cutting  measures implemented during 1998 and
         early 1999.




<PAGE>



               MATERIAL CHANGES IN LIQUIDITY AND CAPITAL RESOURCES
                For the Three and Six Months Ended June 30, 1999
               ---------------------------------------------------

         Cash Flow and Financing
         -----------------------
         On March 5, 1999 the Company  issued $400 million  principal  amount of
         Senior Notes, 5.95% Series due March 1, 2009. The net proceeds from the
         issuance were used to reduce commercial paper borrowings.

         As of June 30, 1999, the Company's  revolving credit facilities totaled
         $750 million,  all of which are  long-term  agreements  supporting  its
         commercial  paper  borrowings.  The  Company is required to pay minimal
         annual  commitment fees to maintain its credit  facilities.  Consistent
         with  management's  intent  to  maintain  its  commercial  paper  on  a
         long-term  basis,  and as supported by its long-term  revolving  credit
         facilities, the Company included in long-term debt all commercial paper
         outstanding of approximately $337 million,  $410 and $488 million as of
         June 30, 1999, June 30, 1998 and December 31, 1998, respectively.

         The Company's  First Mortgage Bonds are currently rated "A2" by Moody's
         Investors  Service,  "A" by  Standard  and  Poor's and "A+" by Duff and
         Phelps.  Moody's  Investors  Service,  Standard and Poor's and Duff and
         Phelps  have rated the  Company's  commercial  paper  "P-1",  "A-1" and
         "D-1", respectively.



                                  OTHER MATTERS
                                  -------------
         NCNG Merger
         -----------
         On July  15,  1999,  the  Company  completed  the  acquisition  of NCNG
         pursuant to the terms of an Agreement and Plan of Merger by and between
         the Company and NCNG dated  November 10, 1998,  as amended and restated
         April  22,  1999.  Each  outstanding  share of NCNG  common  stock  was
         converted  into the right to receive  0.8054  shares of Company  common
         stock which amounted to 8,244,056 Company shares,  with cash being paid
         in lieu of  fractional  shares.  NCNG is  operating  as a  wholly-owned
         subsidiary of the Company.

         In  conjunction  with the  merger,  the Company and NCNG signed a joint
         stipulation  agreement  with the Public  Staff of the NCUC in which the
         Company  agreed  to  cap  base  retail  electric  rates,  with  limited
         exceptions,  through December 2004, and NCNG agreed to cap margin rates
         for gas sales and  transportation  services,  with limited  exceptions,
         through  November  1,  2003.  Management  is of the  opinion  that this
         agreement will not have a material  adverse effect on the  consolidated
         results of operations or financial position of the Company.


         Competition
         -----------
         Wholesale Competition
         ---------------------
         On May 13, 1999, the Federal Energy Regulatory Commission (FERC) issued
         a  Notice  of  Proposed  Rulemaking  (NOPR)  on  Regional  Transmission
         Organizations (RTOs). This NOPR proposes to set minimum characteristics
         and functions for transmission  entities,  including independent system
         operators and transmission companies, to become FERC-approved RTOs. The
         NOPR does not require RTO  membership  for all  utilities  by a certain
         date. Initial comments on the NOPR are due on August 23, 1999 and reply
         comments are due on September 29, 1999. The FERC is expected to issue a
         final rule by the end of this year.  The Company  will submit  comments
         regarding  the NOPR and may file reply  comments  as well.  The Company
         continues to evaluate the potential  effects of this NOPR.  The Company
         cannot predict the outcome of this matter.


         North Carolina Activities
         -------------------------
         In May 1999, the North Carolina General Assembly  approved  legislation
         that expanded from 23 to 29 members the study commission it established
         to evaluate the future of electric  service in the state.  All 29 study
         commission  members  have  been  appointed.  The  study  commission  is
         expected to resume its  meetings in August and to make its final report
         to the North Carolina  General Assembly during 2000. The Company cannot
         predict the outcome of this matter.




<PAGE>


         South Carolina Activities
         -------------------------
         The 1999 session of the South Carolina  General  Assembly  adjourned in
         June  1999,  without  approving  any  legislation   regarding  electric
         industry restructuring. The South Carolina General Assembly is expected
         to continue considering the electric industry  restructuring bills that
         were  introduced  this year during its 2000  legislative  session.  The
         Company cannot predict the outcome of this matter.

         Federal Activities
         ------------------
         Several  bills  regarding  electric  industry  restructuring  have been
         introduced  in  Congress  this  year.  A draft bill is  expected  to be
         introduced in the House Commerce  Committee sometime during the fall of
         1999. The Company cannot predict the outcome of this matter.

         Company  Activities
         -------------------
         The Company and Southern  Natural Gas Company,  a subsidiary  of SONAT,
         Inc.,  have  delayed  the  planned-in-service   date  of  the  Palmetto
         Interstate  Pipeline.  In conjunction  with this delay,  on-going route
         selection  and  survey  activities  have  been  suspended.   Since  the
         announcement of the Palmetto  Interstate  Pipeline in March,  two other
         competing  pipelines  have  been  proposed.  The delay  with  allow the
         Company to analyze those  alternatives.  The Company cannot predict the
         outcome of this matter.


         Year 2000
         ---------

         Background
         ----------
         The Company's overall goal is to be Year 2000 ready, and its efforts to
         reach this goal are on target.  "Year 2000 ready"  means that  critical
         systems,  devices,  applications  or business  relationships  have been
         evaluated  and are expected to be suitable for  continued  use into and
         beyond  the Year  2000,  or  contingency  plans are in place.  Critical
         systems are defined as those that (i)  directly  relate to the safe and
         reliable  generation and delivery of  electricity  and (ii) support the
         Company's ability to provide high-quality customer service.


         The Company began  addressing  the Year 2000 issue in 1994 by beginning
         to assess  its  business  computer  systems,  such as  general  ledger,
         payroll,  customer billing and inventory control. The majority of these
         systems  were   corrected  and  have  been  running  in  the  Company's
         day-to-day  computing  environment  since 1996. Also, by the mid-1990s,
         two major  accounting  systems  were  replaced  with  systems that were
         designed to be Year 2000 ready. The Company has addressed the remaining
         business   systems  and  will   conduct   supplementary   testing,   as
         appropriate.


         During  mid-1997,  a Corporate  Year 2000  Project was  established  to
         provide  leadership  and direction to the Year 2000 efforts  throughout
         the Company and its subsidiaries.  Also, the project scope was expanded
         to include "embedded" systems (such as process control computers, chart
         recorders,  data loggers,  calibration  equipment and chemical analysis
         equipment),   end-user  computing  hardware  and  software   (including
         personal  computers,  spreadsheets,  word processing and other personal
         and workgroup  applications),  plant and corporate  facilities (such as
         security  systems,  elevators  and  heating and  cooling  systems)  and
         business relationships with key suppliers and customers.

         The Company has used a multi-step  approach in conducting its Year 2000
         Project.  These  steps  are:  inventory,  assessment,  remediation  and
         testing, and contingency planning.  The first step, an inventory of all
         systems and devices with potential Year 2000 problems, was completed in
         January 1998.  The next step,  completed in the first half of 1998, was
         to conduct an initial  assessment  of the  inventory to  determine  the
         state of its Year  2000  readiness.  As part of the  assessment  phase,
         remediation  strategies were identified and remediation  cost estimates
         were  developed.  The Company has utilized  both  internal and external
         resources to remediate and test for Year 2000 readiness.  The Company's
         primary approach has been for the Corporate Year 2000 Program Office to
         provide overall  leadership and direction and assign  responsibility to
         individual  departments  and business  units for Year 2000 readiness in
         their respective areas. Staffing decisions regarding the labor required
         to complete the project have been made at the department/business  unit
         level.  Several hundred of the Company's  employees as well as contract
         personnel  have been used on this  effort.  Vendor  labor has also been
         occasionally used. The Company achieved its goal of Year 2000 readiness
         for all  critical  systems  by the June  30,1999  target  date with one
         exception. This exception is a power plant system that will be replaced
         during a planned  outage this fall.  Supplementary  testing to maintain
         Year 2000 readiness will continue through 1999, as appropriate.

         Several external reviews of the project have been conducted to validate
         the  reliability  of risk and cost  estimates as well as work processes
         and  work  products.   These  have  included  project  reviews  by  two
         consulting  firms, an embedded systems audit by an engineering firm and
         a legal  review by an external law firm.  In  addition,  the Company is
         actively  conducting  formal  communications  with  the  suppliers  and
         customers with which it has active contracts to determine the extent to
         which the  Company is  vulnerable  to those third  parties'  failure to
         remediate  their own Year 2000 issues.  The Company  ranked its vendors
         and  suppliers  to identify  those  considered  to be  critical.  Those
         identified  as  critical  include  telecommunications  providers,  fuel
         suppliers  (nuclear,  coal,  natural  gas  and  other),  transportation
         carriers, vendors of certain nuclear systems and components, vendors of
         fossil  power plant  digital  control  systems and  financial  services
         suppliers.  The Company cannot predict the outcome of other  companies'
         remediation efforts.

         Costs
         -----
         As of June 30, 1999, the total  remaining cost of the Year 2000 Project
         is  estimated  at $7 million.  To date,  the Company has  incurred  and
         expensed approximately $13 million related to the inventory, assessment
         and remediation of non-compliant  systems,  equipment and applications.
         The  remaining $7 million  budgeted for the Year 2000 Project  includes
         the  following  expenditures:  $2.5  million for meters to be installed
         during the remainder of 1999,  $1.5 million for  compliance  efforts at
         non-regulated  subsidiaries  of the Company,  $2 million for  remaining
         project costs to be incurred  during the balance of 1999 and into 2000,
         and $1 million for Year 2000 readiness contingencies.  The costs of the
         project  and the date on which the Company  plans to complete  the Year
         2000 modifications are based on management's best estimates, which were
         derived  using  assumptions  of future  events  including the continued
         availability of certain  resources,  third parties' Year 2000 readiness
         and other factors.

         Risk Assessment
         ---------------
         At this time,  the Company  believes its most  reasonably  likely worst
         case  scenario  is that  key  customers  could  experience  significant
         reductions in their power needs due to their own Year 2000 issues.  The
         Company is conducting  informal  meetings  with its largest  wholesale,
         industrial and commercial  customers and is holding information sharing
         forums  to gather  information  on Year  2000  readiness.  Based on the
         information  provided  through  these  contacts,  the  Company  has not
         identified any major customer that appears to be at significant risk of
         not being  Year 2000  ready.  For this  reason,  the  Company  does not
         believe that this scenario is likely to occur. Nonetheless, the Company
         has assessed the effect of such a scenario by using  current  financial
         data.  That data indicates that if the Company's  twenty key industrial
         customers  experienced  significant reduced power needs for a period of
         one month,  the Company's  revenues would decrease by  approximately 6%
         for that month.

         An  alternative  worst-case  scenario  includes the effect of cascading
         disruptions  caused by other  entities  whose  electrical  systems  are
         connected to the  Company's.  The Company has assessed the risk of this
         scenario,  believes  that its  contingency  plans  would  mitigate  the
         long-term  occurrence  of such a scenario,  and does not expect that it
         would have a material  adverse  effect on its  financial  position  and
         results of operations.

         Contingency Plans
         -----------------
         Contingency  plans have been prepared to help ensure that the Company's
         critical  business  processes  will  continue to function on January 1,
         2000 and beyond.  The  Company's  contingency  plans are  structured to
         address both  remediation  of systems and their  components and overall
         business  operating risk. These plans are intended to mitigate internal
         risks,  as well as potential risks in the supply chain of the Company's
         suppliers and customers. The Company's contingency plans were developed
         by June 30, 1999 in accordance with the target dates established by the
         Nuclear   Regulatory   Commission  and  the  North  American   Electric
         Reliability Council (NERC).

         The  Company  has  developed  contingency  plans to  mitigate  the risk
         associated with the failure of critical vendors or suppliers.  Based on
         the Company's on-going  assessment of the risk of  non-compliance,  the
         Company will take action up to and  including  entering into a business
         relationship with an alternate vendor or supplier.

         One of the Company's emergency contingency plans specifically addresses
         emergency  scenarios  that  may  arise  due to the fact  that  electric
         utility  systems  throughout the southeast  region of the United States
         are interconnected. The Company has been working actively with the NERC
         and the Southeastern  Electric Reliability Council to address the issue
         of overall grid  reliability and  protection.  In order to mitigate the
         risk of cascading  regional  electric  failures,  the Company can, as a
         last resort,  isolate its transmission  system either  automatically or
         manually.  The Company's emergency readiness  contingency plan includes
         the performance of regular  training  exercises that include  simulated
         disaster  recovery  scenarios.  As part of its  Year  2000  contingency
         planning,  the Company is reviewing its disaster recovery  scenarios to
         identify  those that can be used  specifically  for Year 2000 readiness
         training.

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk
                  ----------------------------------------------------------
         During the six months ended June 30, 1999,  the  Company's  market risk
         exposure was affected by the issuance of $400 million  principal amount
         of Senior  Notes,  5.95%  Series  due March 1, 2009.  Total  fixed rate
         long-term  debt at June 30,  1999 was $1.975  billion,  with an average
         interest rate of 7.02%.  Related to the issuance,  the Company  settled
         its interest rate lock, receiving approximately $9.7 million which will
         reduce  interest  expense over the 10-year debt term. The proceeds from
         the issuance were used to reduce  commercial  paper  borrowings.  Total
         commercial paper outstanding at June 30, 1999 was $337 million, with an
         average interest rate of 5.03%.


<PAGE>


         PART II.  OTHER INFORMATION
                   -----------------

         Item 1.  Legal Proceedings
         -------  -----------------

         Legal aspects of certain  matters are set forth in Part I, Item I Notes
         to the Consolidated Interim Financial  Statements,  Note 4: Commitments
         and Contingencies.


         Item 2.  Changes in Securities and Use of Proceeds
         -------  -----------------------------------------

         STRATEGIC RESOURCE SOLUTIONS CORP.


         (a)  Securities  Issued.  On August 9, 1999,  the Company  issued 4,239
              -------------------
         shares of its Common Stock (Common  Shares) in connection with the June
         5, 1997 merger of Knowledge  Builders,  Inc.  (KBI) into a wholly-owned
         subsidiary  of  the  Company  (CaroCapital,   Inc.,  a  North  Carolina
         Enterprise  Corporation  since  renamed  Strategic  Resource  Solutions
         Corp).  Of these,  3,903  shares  were  issued as  post-closing  merger
         consideration  to the former holders of KBI common stock for KBI shares
         that were canceled in the merger.  The remaining 336 shares were issued
         as incentive  compensation  payments based upon the 1998 performance of
         SRS  and  its   subsidiaries   arising  under  incentive   compensation
         agreements entered into pursuant to the merger agreement with KBI.


         (b) Underwriters  and Other  Purchasers.  No underwriters  were used in
             ------------------------------------
         connection with this issuance of Common Shares.  The Common Shares were
         issued  (A) as merger  consideration  to former  holders  of KBI common
         stock whose KBI shares were canceled in the merger and (B) as incentive
         compensation  payments  to certain  SRS  employees  based upon the 1998
         performance of SRS.


         (c)  Consideration.  The  consideration  for 3,903 of the Common Shares
              --------------
         issued was the cancellation of former shares of KBI in the merger.  The
         other 336 Common Shares were issued as compensation pursuant to certain
         incentive compensation award agreements.


         (d) Exemption from  Registration  Claimed.  The Common Shares described
             --------------------------------------
         above were issued on the basis of an exemption from registration  under
         Section  4(2) of the  Securities  Act of 1933.  The Common  Shares were
         issued to a limited number of persons and subjected to  restrictions on
         resale appropriate for private placements,  and appropriate  disclosure
         was made to all persons to whom Common Shares were issued.


         RESTRICTED STOCK AWARDS:


         (a)  Securities  Delivered.  On July 21,  1999,  10,400  shares  of the
              ----------------------
         Company's Common Shares were delivered to a certain key employee of the
         Company  pursuant to the terms of the Company's  1997 Equity  Incentive
         Plan (Plan), which was approved by the Company's shareholders on May 7,
         1997.  Section 9 of the Plan  provides for the  granting of  Restricted
         Stock  by  the  Personnel,   Executive   Development  and  Compensation
         Committee   (now   known  as  the   Committee   on   Organization   and
         Compensation),  (the  Committee) to key  employees of the Company.  The
         Common  Shares  delivered  pursuant to the Plan were acquired in market
         transactions  directly  for the  account  of the  recipient  and do not
         represent newly-issued shares of the Company.

         (b) Underwriters  and Other  Purchasers.  No underwriters  were used in
             ------------------------------------
         connection  with the delivery of Common  Shares  described  above.  The
         Common Shares were  delivered to a certain key employee of the Company.
         The Plan defines "key  employee" as an officer or other employee of the
         Company  who,  in  the  opinion  of  the   Committee,   can  contribute
         significantly to the growth and  profitability  of, or perform services
         of major importance to, the Company.

         (c)  Consideration.  The Common  Shares  were  delivered  to provide an
              --------------
         incentive  to the employee  recipient to exert their utmost  efforts on
         the Company's behalf and thus enhance the Company's  performance  while
         aligning  the   employee's   interest   with  those  of  the  Company's
         shareholders.


         (d) Exemption from Registration Claimed. The Common Shares described in
             ------------------------------------
         this Item were delivered on the basis of an exemption from registration
         under Section 4(2) of the Securities Act of 1933. Receipt of the Common
         Shares  required no investment  decision on the part of the  recipient.
         All award decisions were made by the Committee, which consists entirely
         of non-employee directors.


         Item 4.  Submission of Matter to a Vote of Security Holders
         -------  --------------------------------------------------

         a)   The Annual Meeting of the Shareholders was held on May 12, 1999.

         b)   The  meeting  involved  the  election  of one Class II director to
              serve a  one-year  term and four  Class I  directors  to serve for
              three-year terms.  Proxies for the meeting were solicited pursuant
              to  Regulation  14. There was no  solicitation  in  opposition  to
              management's  nominees  as listed  below,  and all  nominees  were
              elected


         c) The total votes for the election of directors were as follows:

       Class II                     Votes For          Votes Withheld
       --------                     ---------          --------------
       (Term expiring in 2000)

       Sherwood H. Smith Jr.        130,726,989        1,993,640

       Class I
       -------
       (Term expiring in 2002)

       Leslie M. Baker Jr.          130,817,610        1,903,019
       John H. Mullin II            130,592,003        2,128,626
       William O. McCoy             130,742,209         1,978,420
       J. Tylee Wilson              130,726,517        1,994,112


         Item 5.  Other Information
         -------  -----------------

         POTENTIAL TRANSITION TO HOLDING COMPANY STRUCTURE
         -------------------------------------------------
         The  Company  is  considering   the  formation  of  a  holding  company
         structure,  in which the Company  would become a subsidiary  of a newly
         formed holding company.  This conversion is being considered because of
         the advantages it might offer as the Company  continues to confront the
         rapidly changing  environment  facing electric  utilities.  The holding
         company  structure  would  allow  greater  organizational  flexibility,
         including a clearer separation of regulated  businesses from each other
         and   from   unregulated    businesses   such   as   energy   services,
         telecommunications,  and electric  generation  projects  for  wholesale
         markets. This structure would also offer greater financing flexibility,
         because the  holding  company  would not be required to obtain  utility
         commission  approval  each time it seeks to issue  securities  to raise
         cash or as consideration in acquisitions.

         The Company's shareholders would have to approve formation of a holding
         company  structure,  as would various  regulatory  authorities.  If the
         Company  converts  to a holding  company  structure,  each share of the
         Company's common stock will automatically be exchanged for one share of
         common stock of the new holding  company.  There can be no assurance as
         to when or whether the contemplated  holding company  structure will be
         submitted for shareholder approval or be established.


         SALE OF SRS's Lighting Division
         -------------------------------

         On July 2, 1999,  SRS  completed  the sale of its lighting  division to
         SLI, Inc.

         CONTINUED OWNERSHIP OF INTERPATH
         --------------------------------
         The  Company  is  currently   examining   strategic  options  regarding
         continued ownership of Interpath and expects to announce its intentions
         later this year.

         Item 6.  Exhibits and Reports on Form 8-K
         -------  --------------------------------
         (a)    See EXHIBIT INDEX

         (b)    Reports on Form 8-K filed during or with respect to the quarter:

                  The  Company  filed a  Current  Report on Form 8-K on July 22,
                  1999,  reporting  under Item 5 the July 15, 1999 completion of
                  the Company's  acquisition  of NCNG.  Exhibits  related to the
                  issuance were listed under Item 7 of the Report.


<PAGE>


                                       SIGNATURES


         Pursuant to  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.


                                                CAROLINA POWER & LIGHT COMPANY
                                                ------------------------------
                                                       (Registrant)


                                          By   /s/     Glenn E. Harder
                                             -----------------------------------
                                                       Glenn E. Harder
                                                Executive Vice President and
                                                   Chief Financial Officer
                                                (Principal Financial Officer)







Date:     August 12, 1999


<PAGE>


                                  EXHIBIT INDEX

         Exhibit Number                           Description

                    27                            Financial Data Schedule



<PAGE>