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               UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                         Washington, D. C. 20549-1004

                                   Form 10-Q

(Mark One)

[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 2-30057

                             CANAL ELECTRIC COMPANY
            (Exact name of registrant as specified in its charter)

        Massachusetts                                         04-1733577
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)

One Main Street, Cambridge, Massachusetts                    02142-9150
(Address of principal executive offices)                     (Zip Code)

                                (617) 225-4000
             (Registrant's telephone number, including area code)


     (Former name, address and 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 [ ]

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

                                                     Outstanding at
           Class of Common Stock                     August 1, 1999

        Common Stock, $25 par value                 1,523,200 shares

The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.

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                        PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                            CANAL ELECTRIC COMPANY

                           CONDENSED BALANCE SHEETS

                      JUNE 30, 1999 AND DECEMBER 31, 1998

                                    ASSETS

                            (Dollars in thousands)



                                                    June 30,     December 31,
                                                      1999           1998
                                                   (Unaudited)

PROPERTY, PLANT AND EQUIPMENT, at original cost    $266,351        $265,612
  Less -  Accumulated depreciation and
          amortization                               76,627          77,081
                                                    189,724         188,531
  Add  -  Construction work in progress               2,187           1,852
          Nuclear fuel in process                     1,702           1,568
                                                    193,613         191,951

INVESTMENTS
  Equity in corporate joint venture                   2,756           2,800

CURRENT ASSETS
  Cash and cash equivalents                              18         258,944
  Advances to affiliates                                -            42,235
  Accounts receivable-
    Affiliates                                        4,230          13,642
    Other                                               914           9,736
  Inventories                                         1,213           1,268
  Prepaid income taxes                                8,500           7,575
  Other                                                 977           1,543
                                                     15,852         334,943

DEFERRED CHARGES
  Regulatory assets                                  18,134          18,745
  Other                                               5,817           5,840
                                                     23,951          24,585

                                                   $236,172        $554,279







                            See accompanying notes.

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                            CANAL ELECTRIC COMPANY

                           CONDENSED BALANCE SHEETS

                      JUNE 30, 1999 AND DECEMBER 31, 1998

                        CAPITALIZATION AND LIABILITIES

                            (Dollars in thousands)

                                                    June 30,     December 31,
                                                      1999           1998
                                                   (Unaudited)
CAPITALIZATION
  Common Equity -
    Common stock, $25 par value -
      Authorized - 2,328,200 shares
      Outstanding - 1,523,200 shares,
        wholly-owned by Commonwealth
        Energy System (Parent)                     $ 38,080        $ 38,080
    Amounts paid in excess of par value               8,321           8,321
    Retained earnings                                56,464         241,965
                                                    102,865         288,366



CAPITAL LEASE OBLIGATIONS                            10,269          10,551

CURRENT LIABILITIES
  Interim Financing -
    Notes payable to banks                           27,875             -
    Advances from affiliates                          4,515             -
                                                     32,390             -
  Other Current Liabilities -
    Accounts payable -
      Affiliates                                        339         137,965
      Other                                           3,866          31,327
  Capital lease obligations                             566             568
  Accrued taxes and other                             3,470           3,339
                                                      8,241         173,199
                                                     40,631         173,199
DEFERRED CREDITS
  Accumulated deferred income taxes                  64,867          64,383
  Unamortized investment tax credits and other       17,540          17,780
                                                     82,407          82,163

COMMITMENTS AND CONTINGENCIES
                                                   $236,172        $554,279



                            See accompanying notes.

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                            CANAL ELECTRIC COMPANY

             CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS

           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998

                            (Dollars in thousands)
                                  (Unaudited)
                                      Three Months Ended    Six Months Ended
                                        1999      1998        1999     1998

ELECTRIC OPERATING REVENUES            11,385    42,371      23,633    90,618

OPERATING EXPENSES
  Fuel used in production                 214    17,942         640    43,710
  Electricity purchased for resale        125       133         269       281
  Other operation and maintenance       3,497    11,088       6,561    19,806
  Depreciation                          1,748     5,038       3,459    10,077
  Taxes -
    Income                              2,173     2,012       5,307     4,076
    Local property                        270       604         540     1,300
    Payroll and other                      49       200         243       417
                                        8,076    37,017      17,019    79,667

OPERATING INCOME                        3,309     5,354       6,614    10,951

OTHER INCOME
  Additional gain from sale
    of assets, net                        -         -         6,533       -
  Other                                   248       223       1,754       352
                                          248       223       8,287       352

INCOME BEFORE INTEREST CHARGES          3,557     5,577      14,901    11,303

INTEREST CHARGES
  Long-term debt                          -       1,976         -       3,954
  Other interest charges                  296       120         270       298
                                          296     2,096         270     4,252

NET INCOME                              3,261     3,481      14,631     7,051

RETAINED EARNINGS -
  Beginning of period                  64,458    56,700     241,965    53,130
  Dividends on common stock           (11,255)   (4,036)   (200,132)   (4,036)

RETAINED EARNINGS -
  End of period                       $56,464   $56,145    $ 56,464  $ 56,145







                            See accompanying notes.

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                            CANAL ELECTRIC COMPANY

                      CONDENSED STATEMENTS OF CASH FLOWS

                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998

                            (Dollars in thousands)
                                  (Unaudited)


                                                          1999           1998

OPERATING ACTIVITIES
  Net income                                           $  14,631       $7,051
  Additional gain from sale of assets                    (10,750)         -
  Effects of noncash items -
   Depreciation and amortization                           4,526       11,220
   Deferred income taxes and investment
     tax credits, net                                        355         (900)
   Earnings from corporate joint venture                    (140)        (223)
  Dividends from corporate joint venture                     184          240
  Change in working capital, exclusive of cash and
   cash equivalents, advances to affiliates and
   interim financing                                    (147,028)       3,313
  All other operating items                                  528         (661)
Net cash provided by (used for) operating activities    (137,694)      20,040

INVESTING ACTIVITIES
  Payments from affiliates                                42,235          -
  Additions to property, plant and equipment                (208)      (2,089)
Net cash provided by (used for)
  investing activities                                    42,027       (2,089)

FINANCING ACTIVITIES
  Proceeds from (payment of) short-term borrowings        27,875      (19,475)
  Payment of dividends                                  (200,132)      (4,036)
  Reimbursement of transaction costs                       4,483          -
  Advances from affiliates                                 4,515        5,660
Net cash used for financing activities                  (163,259)     (17,951)

Net decrease in cash and cash equivalents               (258,926)         -
Cash and cash equivalents at beginning of period         258,944           18
Cash at end of period                                  $      18      $    18


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
   Interest (net of capitalized amounts)               $     257      $ 4,111
   Income taxes                                        $   5,908      $ 4,779







                            See accompanying notes.

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                            CANAL ELECTRIC COMPANY

                    NOTES TO CONDENSED FINANCIAL STATEMENTS

(1)  General Information

         Canal Electric Company (the Company) is a wholly-owned subsidiary of
     Commonwealth Energy System (the Parent).  The Parent together with its
     subsidiaries is referred to as "COM/Energy."  The Parent is an exempt
     public utility holding company under the provisions of the Public Utility
     Holding Company Act of 1935 and, in addition to its investment in the
     Company, has interests in other utility and several nonregulated compa-
     nies.  In December 1998, the Parent signed an Agreement and Plan of
     Merger with BEC Energy, the parent company of Boston Edison Company, that
     will create an energy delivery company, that includes the Company,
     serving approximately 1.3 million customers located entirely within
     Massachusetts including more than one million electric customers in 81
     communities and 240,000 gas customers in 51 communities.

         The Company is a wholesale electric generating company organized in
     1902 under the laws of the Commonwealth of Massachusetts.  On December
     30, 1998, in response to the significant changes that have taken place in
     the utility industry, COM/Energy sold substantially all of its non-
     nuclear generating assets, including the Company's generating station, to
     affiliates of The Southern Company of Atlanta, Georgia.  The Company's
     generating stations, located in Sandwich, Massachusetts consisted of two
     units: Canal Unit 1, wholly-owned by the Company; and Canal Unit 2,
     jointly-owned by the Company and Montaup Electric Company (Montaup) (an
     unaffiliated company).  The Company continues to have a 3.52% interest in
     the Seabrook 1 nuclear power plant to provide a portion of the capacity
     and energy needs of Cambridge Electric Light Company (Cambridge) and
     Commonwealth Electric Company (Commonwealth).

         The Company had 109 regular employees prior to the sale of Canal
     Units 1 and 2 on December 30, 1998; however, following the sale, the
     Company no longer has any employees.

(2)  Significant Accounting Policies

         (a) Principles of Accounting

         The Company's significant accounting policies are described in Note 2
     of Notes to Financial Statements included in its 1998 Annual Report on
     Form 10-K filed with the Securities and Exchange Commission.  For interim
     reporting purposes, the Company follows these same basic accounting
     policies but considers each interim period as an integral part of an
     annual period and makes allocations of certain expenses to interim
     periods based upon estimates of such expenses for the year.

         The unaudited financial statements for the periods ended June 30,
     1999 and 1998, reflect, in the opinion of the Company, all adjustments
     necessary to summarize fairly the results for such periods.  In addition,
     certain prior period amounts are reclassified from time to time to
     conform with the presentation used in the current period's financial
     statements.

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                            CANAL ELECTRIC COMPANY

         Income tax expense is recorded using the statutory rates in effect
     applied to book income subject to tax recorded in the interim period.

         (b) Regulatory Assets

         The Company is regulated as to rates, accounting and other matters by
     various authorities, including the FERC and the Massachusetts Department
     of Telecommunications and Energy (DTE).

         Based on the current regulatory framework, the Company accounts for
     the economic effects of regulation in accordance with the provisions of
     Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting
     for the Effects of Certain Types of Regulation."  The Company has
     established various regulatory assets in cases where the FERC has
     permitted or is expected to permit recovery of specific costs over time.
     In the event the criteria for applying SFAS No. 71 are no longer met, the
     accounting impact would be an extraordinary, non-cash charge to opera-
     tions of an amount that could be material.  Criteria that give rise to
     the discontinuance of SFAS No. 71 include: 1) increasing competition
     restricting the Company's ability to establish prices to recover specific
     costs, and 2) a significant change in the current manner in which rates
     are set by regulators from cost-based regulation to another form of
     regulation.  These criteria are reviewed on a regular basis to ensure the
     continuing application of SFAS No. 71 is appropriate.  Based on the
     current evaluation of the various factors and conditions that are
     expected to impact future cost recovery, the Company believes that its
     regulatory assets are probable of future recovery.

         The principal regulatory assets included in deferred charges were as
     follows:
                                               June 30,     December 31,
                                                 1999           1998
                                               (Dollars in thousands)

        Deferred income taxes                 $15,737        $15,737
        Seabrook related costs                  2,397          3,008
                                              $18,134        $18,745

         In November 1997, the Commonwealth of Massachusetts enacted a
     comprehensive electric utility industry restructuring bill.  On November
     19, 1997, the Company, together with Cambridge and Commonwealth filed a
     restructuring plan with the DTE.  The plan, approved by the DTE on
     February 27, 1998, provides that Commonwealth and Cambridge, beginning
     March 1, 1998, initiate a ten percent rate reduction for all customer
     classes and allow customers to choose their energy supplier.  As part of
     the plan, the DTE authorized the recovery of certain strandable costs and
     provides that certain future costs may be deferred to achieve or maintain
     the rate reductions that the restructuring bill mandates.  The legisla-
     tion gives the DTE the authority to determine the amount of strandable
     costs that is eligible for recovery.  Costs that qualify as strandable
     costs and are eligible for recovery include, but are not limited to,
     certain above market costs associated with generation
 
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                            CANAL ELECTRIC COMPANY

     facilities, costs associated with long-term commitments to purchase power
     at above market prices from independent power producers and regulatory
     assets and associated liabilities related to the generation portion of
     the electric business.

         (c) Divestiture of Generation Assets

         The cost of transitioning to competition will be mitigated, in part,
     by the sale of COM/Energy's non-nuclear generating assets.  On May 27,
     1998, COM/Energy agreed to sell substantially all of its non-nuclear
     generating assets (984 MW) to affiliates of The Southern Company of
     Atlanta, Georgia.  The sale was conducted through an auction process that
     was outlined in a restructuring plan filed with the DTE in November 1997
     in conjunction with the state's industry restructuring legislation enact-
     ed in 1997.  The sale was approved by the DTE on October 30, 1998 and by
     the FERC on November 12, 1998.  Proceeds from the sale of the Company's
     non-nuclear generating assets, after construction-related adjustments at
     the closing that occurred on December 30, 1998, amounted to approximately
     $395 million or 6 times their book value of approximately $65.4 million.
     The proceeds from the sale, net of book value, transaction costs and
     certain other adjustments amounted to approximately $298 million and will
     be used to reduce transition costs of Cambridge and Commonwealth related
     to electric industry restructuring that otherwise would have been
     collected through a non-bypassable transition charge.  An adjustment of
     $5.1 million was recorded in the first quarter of 1999 that reduced the
     book value to $60.3 million.  The Company has determined that this
     transaction was not a taxable event because it provided no economic
     benefit to the Company.

         COM/Energy established Energy Investment Services, Inc. as the
     vehicle to invest the net proceeds from the sale of the Company's
     generation assets.  These proceeds will be invested in a conservative
     portfolio of securities that is designed to maintain principal and earn a
     reasonable return.  Both the principal amount and income earned will be
     used to reduce the transition costs that would otherwise be billed to
     customers of Cambridge and Commonwealth.

(3)  Commitments and Contingencies

         Construction

         The Company is engaged in a continuous construction program presently
     estimated at $9.7 million for the five-year period 1999 through 2003.  Of
     that amount, $1.2 million is estimated for 1999.  As of June 30, 1999,
     construction expenditures, including an allowance for funds used during
     construction were minimal.  The Company expects to finance these expendi-
     tures with internally generated funds and short-term borrowings that are
     ultimately expected to be repaid with proceeds from the issuance of long-
     term debt and equity securities.


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                            CANAL ELECTRIC COMPANY

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

     The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying condensed statements of income.  This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.

     A summary of the period to period changes in the principal items included
in the Condensed Statements of Income for the three and six months ended June
30, 1999 and 1998 and unit sales for these periods is shown below:

                                  Three Months Ended     Six Months Ended
                                        June 30,              June 30,
                                     1999 and 1998         1999 and 1998
                                            Increase (Decrease)
                                          (Dollars in thousands)

Electric Operating Revenues         $(30,986)  (73.1)%   $(66,985)  (73.9)%

Operating Expenses -
  Fuel used in production            (17,728)  (98.8)     (43,070)  (98.5)
  Electricity purchased
    for resale                            (8)   (6.0)         (12)   (4.3)
  Other operation and maintenance     (7,591)  (68.5)     (13,245)  (66.9)
  Depreciation                        (3,290)  (65.3)      (6,618)  (65.7)
  Taxes -
    Federal and state income             161     8.0        1,231    30.2
    Local property and other            (485)  (60.3)        (934)  (54.4)
                                     (28,941)  (78.2)     (62,648)  (78.6)

Operating Income                      (2,045)  (38.2)      (4,337)  (39.6)

Other Income                              25    11.2        7,935 2,254.3

Income Before Interest Charges        (2,020)  (38.2)      (4,337)  (39.6)

Interest Charges                      (1,800)  (85.9)      (3,982)  (93.7)

Net Income                          $   (220)    6.3     $  7,580   107.5

Unit Sales (MWH) Decrease           (950,298)  (95.7)  (2,120,349)  (94.4)


                             Three Months Ended        Six Months Ended
                                   June 30,               June 30,
MWH Unit Sales                 1999        1998        1999        1998

Canal Unit 1                      -       495,880          -     1,391,111
Canal Unit 2                      -       357,394          -       713,554
Seabrook 1                     42,652      69,676      125,544     141,228
                               42,652     992,950      125,544   2,245,893


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                            CANAL ELECTRIC COMPANY

Revenue, Fuel and Purchased Power

    Operating revenues for the three and six months ended June 30, 1999
decreased $31 million (73.1%) and $67 million (73.9%), respectively, due to
the sale of the Company's Unit 1 and 2 generation facilities on December 30,
1998.  The sale of these units was an integral part of COM/Energy's restruc-
turing plan as approved by the DTE.  The significant decrease in unit sales
results from the absence of power from Units 1 and 2 following their sale.
The change in unit sales also reflects the decreased availability of Seabrook.

    The significant decline in fuel used in production of $17.7 million
(98.8%) and $43.1 million (98.5%) during the current three and six-month
periods reflects the aforementioned sale of Units 1 and 2.

    Other Operating Expenses

    The decreases in other operation and maintenance and depreciation for the
three and six months ended June 30, 1999 resulted from the sale of Units 1 and
2.  Federal and state income taxes increased in both current periods due to a
higher level of pre-tax income.  The decrease for the current quarter and six-
month periods in local property and other taxes reflects lower property taxes
($334,000 and $760,000) and payroll and other taxes ($153,000 and $176,000),
respectively, due to the sale of Units 1 and 2.

    Other Income

    The significant increase in other income during the six-month period was
primarily due to an additional gain, related to the sale of the Company's
generating assets, that resulted from certain adjustments to the assets' book
value ($5.1 million), and a reduction in transaction costs ($4.5 million)
associated with the retirement of the Company's long-term debt in 1998.  The
increase in interest income ($200,000 and $1.6 million) related to advances to
affiliates and short-term investments also had a positive impact on other
income in the three and six-month periods, respectively.

    Interest Charges

    The significant decline in total interest charges for the current quarter
and six-month period resulted from the retirement of the Company's long-term
debt with a portion of the proceeds from the sale of Units 1 and 2.

Merger with BEC Energy

    The electric utility industry has continued to change in response to
legislative and regulatory mandates that are aimed at lowering prices for
energy by creating a more competitive marketplace.  These pressures have
resulted in an increasing trend in the electric industry to seek competitive
advantages and other benefits through business combinations.  On December 5,
1998, COM/Energy and BEC Energy (BEC), headquartered in Boston, Massachusetts,
entered into an Agreement and Plan of Merger (the Merger Agreement).  Pursuant
to the Merger Agreement, COM/Energy and BEC will be merged into a new holding
company to be known as NSTAR.  The merger will create an energy delivery
company serving approximately 1.3 million customers located entirely within
Massachusetts, including more than one million electric customers in 81
communities and 240,000 gas customers in 51 communities.  The merger is

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                            CANAL ELECTRIC COMPANY

expected to occur shortly after the satisfaction of certain conditions,
including the receipt of the required approvals.  On June 24, 1999, common
shareholders of COM/Energy and BEC approved the merger.  On June 30, 1999, the
FERC approved the merger.  On July 27, 1999, the DTE approved the rate plan
filed by the retail utility subsidiaries of the two companies that is an
integral part of the merger.  On August 16, 1999, the Massachusetts Attorney
General's Office and a group of four intervenors filed appeals of the DTE's
rate plan order with the Massachusetts Supreme Judicial Court.  Significant
elements of the rate plan include a four-year distribution rate freeze for
each of the NSTAR retail utility subsidiaries and the recovery of all merger-
related costs including an acquisition premium of approximately $516 million.
On August 11, 1999, the Nuclear Regulatory Commission approved the transfer of
control of the Company's interest in the Seabrook nuclear generating plant
from COM/Energy to NSTAR.  The remaining merger approval from the Securities
and Exchange Commission is expected to be issued in August.

    The Merger Agreement may be terminated under certain circumstances,
including by any party if the merger is not consummated by December 5, 1999,
subject to an automatic extension of six months if the requisite regulatory
approvals have not yet been obtained by such date.  The merger will be
accounted for as an acquisition of COM/Energy by BEC using the purchase method
of accounting.

    Upon effectiveness of the merger, Thomas J. May, BEC's current Chairman,
President and Chief Executive Officer (CEO), will become the Chairman and CEO
of NSTAR.  Russell D. Wright, COM/Energy's current President and CEO, will
become the President and Chief Operating Officer of NSTAR and will serve on
NSTAR's board of trustees. Also, upon effectiveness of the merger, NSTAR's
board of trustees will consist of the Parent's and BEC's current trustees.

Year 2000

    The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year.  Any computer
program that has date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000.  This could result in a temporary
inability to process transactions or engage in normal business activities.
COM/Energy has been involved in Year 2000 compliancy since 1996.

    COM/Energy, on a coordinated basis and with the assistance of RCG Infor-
mation Technologies and other consultants, is addressing the Year 2000 issue.
COM/Energy has followed a five-phase process in its Year 2000 compliance
efforts, as follows: Awareness (through a series of internal announcements to
employees and through contacts with vendors); Inventory (all computers,
applications and embedded systems that could potentially be affected by the
Year 2000 problem); Assessment (all applications or components and the impact
on overall business operations and a plan to correct deficiencies and the cost
to do so); Remediation (the modification, upgrade or replacement of deficient
hardware and software applications and infrastructure modifications); and
Testing (a detailed, comprehensive testing program for the modified critical
component, system or software that involves the planning, execution and
analysis of results).

    COM/Energy's inventory phase required an assessment of all date sensitive

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                            CANAL ELECTRIC COMPANY

information and transaction processing computer systems and determined that
approximately 90% of its software systems needed some modifications or
replacement.  Plans were developed, implemented, and all of these systems have
been modified, upgraded or replaced.  COM/Energy is currently at a 98%
completion level in its five-phase process for all systems, with completion of
the last stages of its extensive testing process for the final six systems
expected by September 30, 1999.

    COM/Energy has also inventoried its non-information technology systems
that may be date sensitive (facilities, electric and gas operations, energy
supply/production and distribution) that use embedded technology such as
micro-controllers and micro-processors.  COM/Energy has completed its assess-
ment of these non-information technology systems and determined that 20% of
these systems required remediation or replacement.  COM/Energy has reported to
the North American Electric Reliability Council (NERC) that it met the NERC
target date of June 30, 1999 for 100% readiness of all its mission critical
components required for the continued safe and reliable delivery of electrici-
ty into the Year 2000.  COM/Energy's gas and other operations are also at a
100% completion level for all mission critical issues regarding Year 2000
readiness.  Overall, the non-information technology systems are at a 99%
completion level, with the final items scheduled for completion by August 31,
1999.

    Modifying and testing COM/Energy's information and transaction processing
systems from 1996 through 2000 is currently expected to cost approximately
$10.2 million, including approximately $900,000, $3.1 million and $3.2 million
incurred through 1997, 1998 and the first half of 1999, respectively.
Approximately $3 million is expected to be spent during the remainder of 1999
and in 2000.  Year 2000 costs have been expensed as incurred and will continue
to be funded from operations.

    In addition to its internal efforts, COM/Energy has initiated formal
communications with its significant suppliers to determine the extent to which
COM/Energy may be vulnerable to its suppliers' failure to correct their own
Year 2000 issues.  COM/Energy has ranked its vendors in terms of importance,
and as of June 30, 1999 has received adequate responses from 100% of its
"critical" and "high" rated vendors.  Failure of COM/Energy's significant
suppliers to address Year 2000 issues could have a material adverse effect on
COM/Energy's operations, although it is not possible at this time to quantify
the amount of business that might be lost or the costs that could be incurred
by COM/Energy.  Contact with all other vendors is continuing and inadequate
responses are being pursued by COM/Energy.  COM/Energy is prepared to replace
certain suppliers or to initiate other contingency plans for any vendor not
responding to COM/Energy's satisfaction.

    In addition, parts of the global infrastructure, including national
banking systems, electrical power grids, gas pipelines, transportation
facilities, communications and governmental activities, may not be fully
functional after 1999.  Infrastructure failures could significantly reduce
COM/Energy's ability to acquire energy and its ability to serve its customers
as effectively as they are now being served.  COM/Energy has identified the
elements of the infrastructure that are critical to its operations and has
requested and obtained information as to the expected Year 2000 readiness of
these elements.

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                            CANAL ELECTRIC COMPANY

    COM/Energy has completed the development of its Year 2000 contingency
plans for all operational areas that may be effected by Year 2000 issues.
COM/Energy's gas and electric operations currently have emergency operating
plans, as well as information technology disaster recovery plans, as compo-
nents of their standard operating procedures.  These plans have been enhanced,
identifying potential Year 2000 risks to normal operations and the appropriate
response to these potential failures.  These plans also include actions to be
taken in the event of third party and infrastructure failures with regard to
the Year 2000 event, although in certain cases, there may be no practical
alternative course of action available to COM/Energy.  The implementation of
the contingency plans will continue throughout the remainder of 1999.

    COM/Energy is working with other energy industry entities, both regional-
ly and nationally, with respect to Year 2000 readiness and is cooperating in
the development of local and wide-scale contingency planning.

    While COM/Energy believes its efforts to address the Year 2000 issue will
allow it to be successful in avoiding any material adverse effect on
COM/Energy's operations or financial condition, it recognizes that failing to
resolve Year 2000 issues on a timely basis would, in a "most reasonably likely
worst case scenario," significantly limit its ability to acquire and distrib-
ute energy and process its daily business transactions for a period of time,
especially if such failure is coupled with third party or infrastructure
failures.  Similarly, COM/Energy could be significantly effected by the
failure of one or more significant suppliers, customers or components of the
infrastructure to conduct their respective operations after 1999.  Adverse
affects on COM/Energy could include, among other things, business disruption,
increased costs, loss of business and other similar risks.

    The foregoing discussion regarding Year 2000 project timing, effective-
ness, implementation and costs includes forward-looking statements that are
based on management's current evaluation using available information.  Factors
that might cause material changes include,but are not limited to, the avail-
ability of key Year 2000 personnel, the readiness of third parties, and
COM/Energy's ability to respond to unforeseen Year 2000 complications.

Forward-Looking Statements

    This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and is
intended to be subject to the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995.  A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those stated in the forward-looking state-
ments.  Those factors include developments in the legislative, regulatory and
competitive environment, certain environmental matters, demands for capital
expenditures and the availability of cash from various sources.

<PAGE>
<PAGE 14>

                            CANAL ELECTRIC COMPANY

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

        None.

Item 5. Other Information

        None.

Item 6. Exhibits and Reports on Form 8-K

   (a)  Exhibits

        Exhibit 27 - Financial Data Schedule

        Filed herewith as Exhibit 1 is the Financial Data Schedule for the
        six months ended June 30, 1999.

   (b)  Reports on Form 8-K

        No reports on Form 8-K were filed for the three months ended June 30,
        1999.

<PAGE>
<PAGE 15>

                            CANAL ELECTRIC COMPANY

                                   SIGNATURE

   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.



                                              CANAL ELECTRIC COMPANY
                                                   (Registrant)


                                              Principal Financial Officer:



                                              JAMES D. RAPPOLI
                                              James D. Rappoli,
                                              Financial Vice President
                                                and Treasurer



Date:  August 16, 1999