SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                            FORM 10-K

_x_   Annual Report Pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934

       For the fiscal year ended December 31, 1997

                               OR

___   Transition Report Pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934

       For the transition period from               to

       COMMISSION FILE NUMBER  0-10007

                      COLONIAL GAS COMPANY
     (Exact name of registrant as specified in its charter)

                Massachusetts              04-1558100
    (State or other jurisdiction of        (I.R.S. Employer
     incorporation or organization)        Identification Number)


       40 Market Street, Lowell,                
         Massachusetts                           01852        
   (Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code:  
(978) 322-3000

Securities registered pursuant to Section 12(b) of the Act:


                  Common Stock, $3.33 par value
                        (Title of Class)

  Securities registered pursuant to Section 12(g) of the Act:  NONE

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

               _x_  Yes    ___   No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K
              ____


  The aggregate market value of the voting stock held by non-
affiliates of the registrant as of February 27, 1998 was
$248,707,883.

  The number of shares of the registrant's common stock outstanding
as of February 27, 1998 was 8,707,497.

               DOCUMENTS INCORPORATED BY REFERENCE

  Portions of the annual report to stockholders for the year ended
December 31, 1997 are incorporated by reference into Part II and
Part IV. Portions of the proxy statement for the 1998 annual
meeting of stockholders are incorporated by reference into Part
III.
                      COLONIAL GAS COMPANY
                                
  FORM 10-K ANNUAL REPORT FOR THE YEAR ENDING DECEMBER 31, 1997
                                
                        TABLE OF CONTENTS
                                
                                


                             PART I
                                
Item  1.  Business
Item  2.  Properties
Item  3.  Legal Proceedings
Item  4.  Submission of Matters to a Vote of Security Holders


                             PART II
                                
Item  5.  Market for Registrant's Common Stock and Related
          Stockholder Matters
Item  6.  Selected Financial Data
Item  7.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations
Item  8.  Financial Statements and Supplementary Data
Item  9.  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure


                            PART III
                                
Item  10. Directors and Executive Officers of the Registrant
Item  11. Executive Compensation
Item  12. Security Ownership of Certain Beneficial 
          Owners and Management
Item  13. Certain Relationships and Related Transactions


                             PART IV
                                
Item  14. Exhibits, Financial Statement Schedules, 
          and Reports on Form 8-K

                             PART I
                                
Item 1. Business

                           THE COMPANY
                                
     Colonial Gas Company ("Colonial" or the "Company"), a
Massachusetts corporation formed in 1849, is primarily a
regulated natural gas distribution utility. The Company serves
over 151,000 utility customers in 24 municipalities located
northwest of Boston and on Cape Cod. Through its subsidiary,
Transgas Inc. ("Transgas"), the Company also provides over-the-
road transportation of liquefied natural gas ("LNG"), propane and
other commodities.

     The Company's corporate office is located at 40 Market
Street, Lowell, Massachusetts 01852. The telephone number is
(978) 322-3000.

     The Company's combined natural gas distribution service
areas in the Merrimack Valley region northwest of Boston and on
Cape Cod cover approximately 622 square miles with a year-round
population of approximately 500,000, which increases by
approximately 350,000 during the summer tourist season on Cape
Cod. The Company is serving approximately 50% of potential
customers in its service areas. Of its 151,600 customers,
approximately 90% are residential accounts. The Company added
6,112 firm sales customers in 1997. The Company's growth has been
based on new residential construction in its service areas and
conversions to gas from other energy sources for existing homes
and businesses. Of the total number of new customers in 1997, 54%
converted from other fuels and 46% were new construction.

     The Company's 1997 consolidated operating revenues were
derived 65% from firm gas sales to residential customers, 31%
from firm gas sales to commercial and industrial customers, 2%
from non-firm customers, 1% from firm transportation customers
and 1% from other revenues. For the year 1997, the Company sold
19,997 MMcf of gas, of which 12,074 MMcf was sold in the
Merrimack Valley area and 7,923 MMcf in the Cape Cod area. At
December 31, 1997, 91% of the Company's residential customers
used gas as their source of heating fuel. The demand for the
products and services furnished by the Company is to a great
extent seasonal, being heaviest in the colder months.

     At December 31, 1997, the Company had 490 full-time-
equivalent employees. Of those employees, 96 are covered by a
collective bargaining agreement with the United Steelworkers of
America which expires in April 2001 and 73 are covered by a
separate collective bargaining agreement with the United
Steelworkers of America which expires in February 2000. In
addition, Transgas employs 62 full-time employees of which 46 are
covered by collective bargaining agreements with the
International Brotherhood of Teamsters . The drivers agreement
expires in June 1999 while the mechanics agreement expires in
July 1999.


        GAS SUPPLY, TRANSPORTATION AND STORAGE RESOURCES

     As discussed below in "Regulatory Matters", in 1997 the
Massachusetts Department of Telecommunications and Energy,
formerly known as the Department of Public  Utilities (the "DTE"),
directed all investor-owned gas utilities to unbundle their rates
and services in order to make supplier choice available to all
gas utility customers beginning November 1, 1998. Unbundled
service involves the customers themselves contracting for supply
to be brought to the Company's distribution system, and the
Company then delivering that supply to the customer's facilities.
Presently, the Company offers unbundled service only to
commercial and industrial customers, and only a small number
subscribe to such service.

     The Company anticipates that the DTE's directives will mean
an increase in the proportion of gas entering the Company's distribution
system that is supplied by others and will entail some transfer
of its gas supply, pipeline transportation and storage resources
to competitive market entities during the next several years.
Until such time, the Company will continue to be responsible for
the management of the gas supplies, pipeline transportation and
storage resources required to serve its firm sales customers.  In
doing so, the Company generally pays negotiated prices for
pipeline-transported supplies and tariffed rates as approved by
the Federal Energy Regulatory Commission ("FERC") for pipeline
transportation and storage services.

     The following table shows the Company's sources of firm
supply available to meet its gas requirements and the actual
components of gas sendout for each of the last three years:

                          1997          1996           1995
                       MMcf(a)   %    MMcf(a)   %    MMcf(a)   %

Firm Pipeline 
   Transportation 
   Capacity             30,313         30,313         30,630

Firm Gas Supply Sources
  Contracts for Pipeline-
     Transported  
     Gas (b)            18,818  75     18,698   71    18,725   70
  LNG contracts          2,616  10      4,150   15     4,150   15
  Storage inventory at
   January 1 (c)         3,754  15      3,614   14     3,956   15
     Total Available    25,188 100     26,462  100    26,831  100

Gas Sendout
  Pipeline-Transported 
     Supplies (d)       14,763  72     15,115   72    14,659   72
  Supplemental Supplies:
     Underground 
       storage           3,605  17      3,346   16     3,270   16
   LNG-as liquid           680   3      1,067    5       844    4
   LNG-as vapor          1,680   8      1,528    7     1,574    8
   Propane-air               5   -          1    -         8    -
     Total Sendout      20,733 100     21,057  100    20,355  100

Ratio of available firm 
   supply to sendout (e)    1.21            1.26           1.32

_________________________
  (a)   The term "MMcf" means one million cubic feet of vapor
        or vapor equivalent.

  (b)   The Company's firm supply purchase contracts are
        structured to enable the Company to purchase volumes
        equivalent to the total amount of its firm pipeline
        transportation capacity during the winter or peak demand
        season, but less than total firm pipeline capacity during
        the off-peak season. Accordingly, the total supply purchase
        contract volumes shown are less than total firm
        transportation capacity for 1997, 1996 and 1995.

  (c)   The Company's storage inventory is drawn down and
        refilled throughout the year depending upon the availability
        and price of gas sources and upon the requirements of the
        Company's customers. The Company's current level of
        underground storage capacity is 4,674 MMcf.

  (d)   Includes firm and spot volumes.

  (e)   The Company's ratio of available firm supply to sendout
        was determined by dividing total firm gas supply sources by
        total sendout.

     The Company's current portfolio is designed to meet the gas
requirements of its firm sales customers for the foreseeable
future.  Additional information concerning the Company's firm gas
supply related resources is set forth below.

Merrimack Valley Service Area Resources

     The Company maintains several contracts with the Tennessee
Gas Pipeline Company ("Tennessee") for the firm transportation by
interstate pipeline of a total of up to 48,496 Mcf per day of gas
from gas production areas to the Company's Merrimack Valley
distribution system. Of this volume, 4,000 Mcf per day can be
delivered on a firm basis to the Company's Cape Cod service area.
These interstate pipeline transportation contracts with Tennessee
have varied expiration dates of between November 1, 2000 and
April 1, 2013. The supply purchase contracts for the gas to be
shipped under these interstate pipeline transportation contracts
are also firm, and are generally extered into for terms of one
year, with renewal options for additional one year terms. In
addition, the Company contracts for underground storage service
which, in conjunction with other Tennessee firm transportation
contracts, provide up to an additional 23,587 Mcf per day of firm
deliverability in the winter season. The underground storage
contracts expire on March 31, 2000 and the associated
transportation contracts expire on November 1, 2000. To
supplement these capabilities during the winter season, the
Company's Merrimack Valley service area on-system LNG and propane-
air facilities have an aggregate sendout capacity of
approximately 76,100 Mcf per day.

Cape Cod Service Area Resources

     The Company maintains several contracts with Algonquin Gas
Transmission Company ("Algonquin") for the firm transportation by
interstate pipeline of a total of up to 45,368 Mcf of gas per day
delivered to the Company's Cape Cod distribution system. These
transportation contracts have varied expiration dates of between
April 30, 2012 and October 31, 2013. The Company also maintains
multiple upstream firm transportation contracts from gas
production areas to the Algonquin pipeline, as well as upstream
storage service contracts, on seven other interstate pipelines.
These upstream contracts have varied expiration dates of between
October 31, 2000 and October 31, 2013. As with the Merrimack
Valley system, the supply purchase contracts for gas to be
shipped under firm interstate pipeline transportation contracts
to the Cape Cod distribution system are also firm and are
generally entered into for terms of one year, with renewal
options for additional one year terms. The Company also operates
on-system facilities in the Cape Cod service area capable of providing
approximately 30,000 Mcf per day of sendout during the winter
season.

                       REGULATORY MATTERS
                                
   The  Company  is a public utility subject to the jurisdiction
and regulatory authority of the DTE with respect to its rates as
well  as to the issuance of securities, franchise territory  and
other  related matters. On July 18, 1997, the DTE  directed  the
Company   and   the  other  investor-owned  gas   utilities   in
Massachusetts to collaborate on developing common principles  to
unbundle  their  services  to  provide  customers  with  broader
supplier  choice.   The  DTE  further  directed  that  all   gas
utilities have unbundled rates in effect by November 1, 1998 for
all customer classes.

   Unbundled  service  separates (i) the  part  of  the  service
involving procuring the gas and transporting it to the city-gate
(i.e.  the point where the Company takes gas from the interstate
pipeline  into its distribution systems); and (ii) the  delivery
of  the  gas  to  the  customer's  facility  through  the  local
distribution  system. The Company presently offers an  unbundled
service to commercial and industrial customers who seek to  have
other  suppliers  procure  their  gas  which  the  Company  then
delivers  to them through its distribution system. The Company's
proposal for further rate unbundling is being developed  and  is
expected  to  be filed in the spring of 1998.  In addition,  the
Company  continues to participate in the DTE-directed Unbundling
Collaborative.   The Company cannot predict the outcome  of  the
Unbundling Collaborative process or the other regulatory changes
that  may  take  place, but at this time, the Company  does  not
anticipate  that  the  unbundling of its services  will  have  a
material financial impact on its business.

    Under   the  present  regulatory  system,  the  DTE  permits
Massachusetts gas companies to utilize a cost of gas  adjustment
clause  ("CGAC")  through which firm sales  customers  pay,  via
their  monthly gas bill, the costs incurred by the companies  in
procuring  and  transporting gas to the  companies  distribution
systems.  Changes in non-gas or base rates charged to  customers
are subject to approval by the DTE after formal proceedings.

  Environmental response costs, transition costs and demand side
management (DSM) program costs are recovered through  the  CGAC,
as  approved  by  the  DTE.  The  environmental  response  costs
recovered  through the CGAC relate to the Company's  former  gas
manufacturing  operations,  as  described  under  "Environmental
Matters".  Transition  costs relate to  FERC  approved  pipeline
charges  resulting from Order 636. In addition to full  recovery
of  the  installed conservation measures, the Company  has  been
allowed to recover, under methodologies approved in 1995 for its
residential  DSM  programs and in 1996 for  its  commercial  and
industrial  programs,  the resulting lost margins  and,  through
1996,   financial   incentives  based  on  the   attainment   of
performance goals.

  The Company has made only two requests for base rate increases
since  1984.  Its  most  recent request was  made  in  1993.  In
response  to that request, the DTE approved a base rate increase
that was designed to produce additional revenues of $6.7 million
or  3.9%  annually,  effective  November  1,  1993.  Based  upon
continued  strong  customer growth, cost  control  and  improved
productivity, the Company's goal remains to postpone the  filing
of  a request for its next base rate increase until at least the
year 2000, while maintaining an adequate return to shareholders.
Under  a 1995 industry-wide ruling of the DTE, the Company  will
be  required in its next base rate filing either to  present  an
alternative  incentive-based method of  pricing  or  to  justify
continuation  of  the traditional cost-of-service/rate-of-return
method.

   On  the  same  July  18, 1997 date that the  DTE  issued  its
directive  to the Massachusetts investor-owned gas utilities  to
collaborate  on  unbundling their services, the DTE  issued  its
order  declining to approve the Company's proposed joint venture
with  Cabot  LNG Corporation.  The proposed joint venture  would
have  combined  certain  LNG assets and  resources  of  the  two
companies,  including the Company's Tewksbury LNG  facility  and
its  LNG  trucking company subsidiary, Transgas Inc.  The  DTE's
decision declining to approve the joint venture appeared  to  be
based in large part on its unwillingness to allow a supply asset
like the Tewksbury LNG facility to be used as proposed until the
issues related to unbundling were resolved.

   The  Company follows the provisions of Statement of Financial
Accounting  Standards  No. 71 "Accounting  for  the  Effects  of
Certain  Types of Regulation" ("SFAS 71") requiring the  Company
to record the financial statement effects of the rate regulation
to  which  the Company is currently subject.  Future  regulatory
changes  could  result  in the Company  no  longer  meeting  the
provisions  of SFAS 71 for all or part of its business,  thereby
requiring the elimination of the financial statement effects  of
regulation for that portion of its business.


                           COMPETITION

     As discussed above in "Regulatory Matters", the DTE has
directed the Company to unbundle its services so that all
customers can have the opportunity to choose their supplier of
natural gas.

     Massachusetts law protects gas utility companies like the
Company from competition with respect to the distribution of gas
within its franchise areas by providing that, where the gas
company exists in active operation, no other person may lay pipe
in the public ways without the approval, after notice and
hearing, of the municipal authorities and the DTE. If a
municipality desires to enter the gas business, it must take
certain procedural steps, including a favorable vote by a
majority of the voters in a city election or two-thirds vote at
each of two town meetings. In addition, the municipality must
purchase the property of any gas company operating in the
municipality (if the company elects to sell) to the extent, and
at such prices, as may be agreed upon; if no agreement is
reached, resolution will be determined by the DTE.

     In addition, although FERC orders have generally permitted
larger industrial users to obtain piped gas from other sources
and by-pass a utility's distribution system, the Company has not
seen nor does it believe that these FERC orders will have a
material adverse effect on its business, in part because large
industrial users are not a significant part of its customer base.

     Fuel oil suppliers, electric utilities and propane suppliers
provide competition generally for residential, commercial and
industrial customers. Interruptible gas service is generally in
competition with No. 6 fuel oil which most of the interruptible
customers are equipped to use. Lower prices of oil and other
fuels may adversely affect the Company's ability to retain or
attract customers. The Company's rates for bundled gas service
have remained generally competitive with the price of alternative
fuels, but the long-term impact of changes in fuel prices and
changes in state regulatory policies on the Company and its rates
cannot be predicted.

                      ENVIRONMENTAL MATTERS
                                
     The Company is subject to Federal and state laws and
regulations dealing with environmental protection. Compliance
with such environmental laws and regulations has resulted in
increased costs with respect to the Company's existing
operations.

     Working with the Massachusetts Department of Environmental
Protection, the Company is engaged in site assessments and
evaluation of remedial options for contamination that has been
attributed to the Company's former gas manufacturing site and at
various related disposal sites. During 1990, the DTE ruled that
Colonial and eight other Massachusetts gas distribution
companies can recover environmental response costs related to
former gas manufacturing operations over a seven-year period,
without carrying costs, through the CGAC. Through December 31,
1997, the Company had incurred environmental response costs of
$11,875,000 of which $8,042,000 has been recovered from
customers to date.

     As of December 31, 1997, the Company has recorded on the
balance sheet a long-term liability of $707,000 and, based upon
rate recovery, has recorded a corresponding regulatory asset.
This amount represents estimated future response costs for these
sites based on the Company's preferred methods of remediation.
Actual environmental response costs to be incurred depends on
various factors, and therefore future costs may differ from the
amount currently recorded as a liability.

                          TRANSGAS INC.

     Transgas primarily provides over-the-road transportation of
liquefied natural gas, propane and other commodities. In 1997,
Transgas provided such service to approximately 25 commercial and
gas utility customers located in the eastern half of the United
States. Transgas also provides a highly specialized LNG portable
pipeline service, which permits gas utilities to provide a
continuous supply of natural gas to communities when pipeline gas
is interrupted for scheduled or emergency shutdowns or when
supplemental supplies are required during periods of peak winter
demand. Transgas is subject to various federal and state
regulations applicable to motor carriers of hazardous materials.

     Transgas had revenues of $5,529,000 in 1997. Approximately
72% of Transgas' revenue in 1997 was derived from transporting
LNG from Distrigas of Massachusetts Corporation's  import
terminal, located in Everett, Massachusetts. Transgas' revenues
decreased $5,502,000 or 50% compared to 1996 due primarily to the
warmer than normal weather in the first quarter of 1997 which
generated a significant decrease in demand for the truck
transportation of LNG throughout the year.

     Transgas provides over-the-road transportation services by
utilizing a fleet of 41 tractors. Transgas owns 53 trailers which
are specifically designed for the transportation of LNG and other
cryogenic liquids. Transgas also leases 16 LNG trailers. In
addition, Transgas owns 5 trailers which are designed for the
transportation of propane. Transgas also leases 6 LPG trailers.
In addition to the equipment described above, Transgas also has
14 portable LNG vaporizer trailers, as well as 2 flat bed
trailers and 2 van trailers.

     Transgas competes with other motor carriers engaged in the
transportation of various gases and other products. Transgas
believes, however, that it is the leading over-the-road
transporter of LNG due to the size of its specialized LNG trailer
fleet and the number of LNG loads it delivers annually.

     As discussed above in "Regulatory Matters", the Company's
proposed joint venture with Cabot LNG Corporation, which would
have included the sale to Cabot LNG Corporation of a 50% interest
in Transgas, was not approved by the DTE. Accordingly, the
proposed joint venture has terminated and the Company has no
present plans to sell any of its interest in Transgas.

Item 1A. Executive Officers of the Registrant.

     The following table indicates the present executive officers
of the Company, their ages, the dates when their service with the
Company began and their respective positions with the Company.

                                                  Affiliated with
   Name and Age           Position with Company    Company Since

Frederic L. Putnam, Jr.    Chairman and
(73)                       Senior Executive 
                           Officer                    1953

Frederic L. Putnam, III 
(52)                       President and Chief 
                           Executive Officer          1975 

Charles W. Sawyer          Executive Vice President 
(52)                       and Chief Operating 
                           Officer                    1976

Nickolas Stavropoulos      Executive Vice President
(40)                       - Finance, Marketing, and 
                           Chief Financial Officer    1979

John P. Harrington (55)   Senior Vice President -
                          Gas Supply and Assistant 
                          to the President            1966

Victor W. Baur (54)       President - Transgas Inc.   1972

Dennis W. Carroll (51)    Vice President and 
                          Treasurer                   1990 

    Mr. Putnam, Jr. has been Chairman of the Board of Directors
since 1981 and the Senior Executive Officer since February 1995
and before that the Chief Executive Officer since 1977. He has
also been a Director since 1973.

     Mr. Putnam, III, the son of F.L. Putnam, Jr., has been
President and Chief Executive Officer since February 1995. He had
been President since May 1994, Executive Vice President and
General Manager from April 1993 until May 1994 and before that
Vice President and General Manager from August 1989 until April
1993. He has also been a Director since November 1991.

     Mr. Sawyer has been Executive Vice President and Chief
Operating Officer since February 1995. He had been Vice President
- Operations since August 1989.

     Mr. Stavropoulos has been Executive Vice President -
Finance, Marketing and Chief Financial Officer since February
1995. He had been Vice President - Finance and Chief Financial
Officer since August 1989. He has also been a Director since
February 1993.

     Mr. Harrington has been Senior Vice President - Gas Supply
and Assistant to the President since February 1995. He had been
Vice President - Gas Supply since August 1989. He has also been a
Director since February 1993.

     Mr. Baur has been President of Transgas Inc. since July
1990. He also became a Director in August 1993.

     Mr. Carroll has been Vice President and Treasurer since
August 1990.

     These officers hold office until the next annual meeting of
the Board of Directors or until their successors are duly elected
and qualified, subject to earlier removal.

Item 2. Properties.

     The Company has two principal operations centers and a
natural gas storage facility with approximately 1,000,000 Mcf of
LNG storage capacity located in Tewksbury, Massachusetts. In
general, the Company's gas production and storage facilities,
metering and regulation stations and operations centers,
including the Tewksbury LNG facility, are located on land it
owns.

     A 175,000 Mcf LNG storage tank located on land owned by the
Company in South Yarmouth, Massachusetts is leased from an
unaffiliated company under a lease whose term is scheduled to
expire in August, 1998. The Company has begun discussions with
the lessor on the future use of this LNG storage tank. The
Company also has a lease which expires in 2002 for office
facilities in Lowell, Massachusetts.

     The Company's distribution mains of approximately 3,040
miles are located within public highways under franchises or
permits from state or municipal authorities, or on land owned by
others under easements or licenses from the owners. The Company's
first mortgage bonds are collateralized by utility property.

     Management considers that the Company's properties are
adequate for the conduct of its business for the reasonably
foreseeable future.

Item 3. Legal Proceedings.

     See Item 1, "Business--Environmental Matters" above, which
is incorporated herein.

Item 4. Submission of Matters to a Vote of Security Holders.

     No matter was submitted to a vote of the Company's security
holders during the quarter ended December 31, 1997.

                             PART II
                                
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's 1997 annual report to stockholders under the caption
"Shareholder Information" and under Note C of the "Notes to
Consolidated Financial Statements".

Item 6. Selected Financial Data.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's 1997 annual report to stockholders under the caption
"Selected Financial Data".

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's 1997 annual report to stockholders under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations".

Item 8. Financial Statements and Supplementary Data.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's 1997 annual report to stockholders under the following
captions: "Consolidated Statements of Income", "Consolidated
Balance Sheets", "Consolidated Statements of Cash Flows",
"Consolidated Statements of Common Equity", "Notes to
Consolidated Financial Statements", "Report of Independent
Certified Public Accountants" and "Shareholder Information".

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

     None.

                            PART III
                                
Item 10. Directors and Executive Officers of the Registrant.

     The information required to be reported hereunder pursuant
to Item 401 of Regulation S-K for the Company's Directors is
incorporated by reference to the information reported in the
Company's Proxy Statement/Prospectus for its 1998 annual meeting
of stockholders under the caption "INFORMATION ABOUT NOMINEES
AND INCUMBENT DIRECTORS".

     The information required to be reported hereunder pursuant
to Item 401 of Regulation S-K for the Executive Officers of the
Registrant is incorporated by reference to the information in
Item 1A of this Form 10-K under the caption "Executive Officers
of the Registrant".

     The information required to be reported hereunder pursuant
to Item 405 of Regulation S-K is incorporated by reference to the
information reported in the Company's Proxy Statement/Prospectus
for its 1998 annual meeting of stockholders under the caption
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."

Item 11. Executive Compensation.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's Proxy Statement/Prospectus for its 1998 annual meeting
of stockholders under the caption "EXECUTIVE COMPENSATION" and
under the subheading "Directors' Compensation" of the caption
"INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS".

Item 12. Security Ownership of Certain Beneficial Owners and
Management.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's Proxy Statement/Prospectus for its 1998 annual meeting
of stockholders under the caption "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT".


Item 13. Certain Relationships and Related Transactions.

     The information required to be reported hereunder is
incorporated by reference to the information reported in the
Company's Proxy Statement/Prospectus for its 1998 annual meeting
of stockholders under the caption "INFORMATION ABOUT NOMINEES
AND INCUMBENT DIRECTORS".

                             PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.

(a)  1.  Financial Statements  The Consolidated Financial
         Statements of the Company (including the Report of
         Independent Certified Public Accountants) required to be
         reported herein are incorporated by reference to the
         information reported in the Company's 1997 annual report
         to stockholders under the following captions:
         "Consolidated Statements of Income", "Consolidated
         Balance Sheets", "Consolidated Statements of Cash Flows",
         "Consolidated Statements of Common Equity", "Notes to
         Consolidated Financial Statements" and "Report of
         Independent Certified Public Accountants".

      2. Financial Statement Schedules  The following
         Financial Statement Schedule and report thereon are filed
         as part of this Form 10-K on the pages indicated below:

Schedule                                                Page
Number          Description                             Number

          Report of Independent Certified 
          Public Accountants on Schedule                 

  II      Valuation and Qualifying Accounts for 
          the three years ended December 31, 1997         

Schedules other than those listed above are either not required
or not applicable, or the required information is shown in the
financial statements or notes thereto. Columns omitted from
schedules filed have been omitted because the information is not
applicable.

      3.    List of Exhibits

Exhibit
Number           Exhibit                        Reference

 3a  Restated Articles of Organization of   Incorporated herein
     Colonial Gas Company, dated April      by reference.
     19, 1989, as amended on July 16,
     1992 and supplemented by a
     certificate of vote of Directors
     establishing a series of a class of
     stock filed on November 30, 1993,
     filed as Exhibit 3(a) to the
     Registrant's Annual Report on Form
     10-K for the fiscal year ended
     December 31, 1993.
                                            
 3b  By-Laws of Colonial Gas Company, as    Incorporated herein
     amended to date, filed as Exhibit      by reference.
     3(b) to the Registrant's Annual
     Report on Form 10-K for the fiscal
     year ended December 31, 1996.
                                            
 4a  Second Amended and Restated First      Incorporated herein
     Mortgage Indenture, dated as of June   by reference.
     1, 1992, filed as Exhibit 4(b) to
     Form 10-Q of the Registrant for the
     quarter ended June 30, 1992.
                                            
 4b  First Supplemental Indenture, dated    Incorporated herein
     as of June 15, 1992, filed as          by reference.
     Exhibit 4(c) to Form 10-Q of the
     Registrant for the quarter ended
     June 30, 1992.
                                            
 4c  Form of Rights Agreement, dated as     Incorporated herein
     of December 1, 1993, between the       by reference.
     registrant and BankBoston, N.A.
     (f/k/a/ The First National Bank of
     Boston), as Rights Agent, together
     with the following exhibits thereto:
     (i) Form of Vote Establishing the
     Series A-1 Junior Participating
     Preferred Stock, (ii) Form of Rights
     Certificate, and (iii) Summary of
     Rights to Purchase Preferred Shares.
     Filed as Exhibit 1 to the Company's
     Registration Statement on Form 8-A
     filed on November 22, 1993 (File No.
     0-10007).
                                            
 4d  Second Supplemental Indenture,         Incorporated herein
     executed on September 27, 1995,        by reference.
     relating to the Secured Medium Term
     Notes, Series A,  filed as Exhibit
     4(c) to the Registrant's Form 10-K
     for the fiscal year ended December
     31, 1995.
                                            
 4e  Amendment to Second Supplemental       Incorporated herein
     Indenture, dated as of October 12,     by reference.
     1995, relating to the Secured Medium
     Term Notes, Series A, filed as
     Exhibit 4(d) to the Registrant's
     Form 10-K for the fiscal year ended
     December 31, 1995.
                                            
 4f  Third Supplemental Indenture, dated    Incorporated herein
     as of December 15, 1995 to Second      by reference.
     Amended and Restated First Mortgage
     Indenture.
                                            
 4g  Revolving Credit Agreement for         Incorporated herein
     Colonial Gas Company, dated as of      by reference.
     September 12, 1997, filed as Exhibit
     4(e) to Form 10-Q of the Registrant
     for the quarter ended September 30,
     1997.
                                            
 4h  Revolving Credit Agreement for         Incorporated herein
     Massachusetts Fuel Inventory Trust,    by reference.
     dated as of September 12, 1997,
     filed as Exhibit 4(f) to Form 10-Q
     of the Registrant for the quarter
     ended September 30, 1997.
                                            
 4i  Purchase Contract, dated as of June    Incorporated herein
     27, 1990 between Massachusetts Fuel    by reference.
     Inventory Trust acting by and
     through its Trustee, Shawmut Bank,
     N.A. and Colonial Gas Company, filed
     as Exhibit 10(e) to Form 8-K of the
     Registrant for quarter ended June
     30, 1990.
                                            
 4j  Security Agreement and Assignment of   Incorporated herein
     Contracts, dated as of September 12,   by reference.
     1997 made by Massachusetts Fuel
     Inventory Trust in favor of Fleet
     National Bank as Agent for
     designated banks, filed as Exhibit
     4(h) to Form 10-Q of the Registrant
     for the quarter ended September 30,
     1997.
                                            
 4k  Trust Agreement, dated as of June      Incorporated herein
     22, 1990 between Colonial Gas          by reference.
     Company (as Trustor) and Shawmut
     Bank, N.A. (as Trustee), filed as
     Exhibit 10(d) to Form 8-K of the
     Registrant for quarter ended June
     30, 1990.
                                            
 10a Lease Agreement, dated as of May 1,    Incorporated herein
     1982, with Olde Market House           by reference.
     Associates of Lowell, filed as
     Exhibit 10(y) to the Registrant's
     Annual Report on Form 10-K for the
     fiscal year ended December 31, 1982.
                                            
 10b Lease of Equipment from The National   Incorporated herein
     Shawmut Bank of Boston (now State      by reference.
     Street Bank and Trust Company,
     successor) as Trustee, as Lessor
     dated as of May 1, 1973, filed as
     Exhibit 13(c) to Colonial Gas Energy
     System's Registration Statement on
     Form S-1.  Commission File No. 2-
     54673.
                                            
 10c Form Employment Agreement for          Incorporated herein
     corporate officers, filed as Exhibit   by reference.
     10(kk) to the Registrant's Annual
     Report on Form 10-K for the fiscal
     year ended December 31, 1992.
                                            
 10d Rate increase deferral incentive       Incorporated herein
     policy, dated January 1, 1995, filed   by reference.
     as Exhibit 10(xx) to the
     Registrant's Annual Report on Form
     10-K for the fiscal year ended
     December 31, 1994.
                                            
 10e 1997 Transitional Executive            Filed herewith as
     Incentive Plan.                         Exhibit 10e.
                                            
 10f Executive Performance and Equity       Incorporated herein
     Incentive Plan included as Appendix    by reference.
     A to the Proxy Statement/Prospectus
     portion of Colonial Energy's
     Registration Statement on Form S-4
     filed on March 6, 1998.  Commission
     File No. 333-47441.
                                            
 13a Those portions of the 1997 Annual      Filed herewith as
     Report to Stockholders which have      Exhibit 13a.
     been incorporated by reference in
     Part II Items 5 - 8 and Part IV Item
     14 part a 1.
                                            
 21a Subsidiaries of the Registrant.        Filed herewith as
                                            Exhibit 21a.
                                            
 23a Consent of Independent Certified       Filed herewith as
     Public Accountants.                    Exhibit 23a.
____________________

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

  Exhibits 10c, 10d, 10e, and 10f above are management
  contracts or compensatory plans or arrangements in which
  the executive officers of the Company participate.

(b)  Reports on Form 8-K.

      None

      REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
                            SCHEDULE
                   
 
                                
                                
                                
                                
To the Shareholders of
Colonial Gas Company


In connection with our audit of the consolidated financial
statements of Colonial Gas Company and subsidiaries referred
to in our report dated January 14, 1998, which is included
in the 1997 Annual Report to Stockholders and incorporated
by reference in Part II of this Form 10-K, we have also
audited the schedule listed at Part IV, Item 14(a)2. In our
opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.



                                   GRANT THORNTON LLP

Boston, Massachusetts
January 14, 1998

                                                    SCHEDULE II

              COLONIAL GAS COMPANY AND SUBSIDIARIES
                VALUATION AND QUALIFYING ACCOUNTS
           For the Three Years Ended December 31, 1997
                         (In Thousands)


COLUMN A              COLUMN B      COLUMN C    COLUMN D    COLUMN E
                                    ADDITIONS                
                                    CHARGED                 BALANCE AT
                      BALANCE AT    TO COSTS                AT
                      BEGINNING     AND                     END OF 
DESCRIPTION           OF PERIOD     EXPENSES   DEDUCTIONS   PERIOD 
                                                             
                For the Year Ended December 31, 1997
                                                             
Reserve for           $2,715        $1,956     $1,468   (1) $3,203
uncollectible 
accounts                                   
                                                             
Reserve for insurance $  742        $  506     $  400      $   848
claims
                                                             
                For the Year Ended December 31, 1996
                                                             
Reserve for           $2,205        $2,127     $1,617   (1) $2,715
uncollectible
accounts                                  
                                                             
Reserve for insurance  $ 634         $510       $ 402         $742
claims
                                                             
                For the Year Ended December 31, 1995
                                                             
Reserve for           $1,670        $1,821     $1,286   (1) $2,205
uncollectible 
accounts                                  
                                                             
Reserve for insurance  $ 527          $431      $ 324         $634
claims
                                                             

(1)  Accounts charged off, net of collections.

                                SIGNATURES
                                     
  Pursuant to the requirements of Section 13 or 15 (d) 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.

                         COLONIAL GAS COMPANY          Date

                    By s/F.L. Putnam , Jr.             March 12, 1998
                         F.L. Putnam, Jr., Chairman
                         of the Board of Directors

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

         Signature               Title                 Date

s/F.L. Putnam, Jr.         Senior Executive Officer,    March 12, 1998
  F.L. Putnam, Jr.         Director

s/Nickolas Stavropoulos    Executive Vice President -   March 12, 1998
  Nickolas Stavropoulos    Finance, Marketing and 
                           Chief Financial Officer,
                           Director (Principal Financial 
                           Officer)

s/D.W. Carroll             Vice President and 
  D.W. Carroll             Treasurer (Principal         March 12, 1998
                           Accounting Officer)

s/V.W. Baur                Director                     March 12, 1998
  V.W. Baur

s/J.P. Harrington          Director                     March 12, 1998
  J.P. Harrington

s/H.C. Homeyer             Director                     March 12, 1998
  H.C. Homeyer

s/R.L. Hull                Director                     March 12, 1998
  R.L. Hull

s/R. A. Perkins            Director                     March 12, 1998
  R. A. Perkins

s/F.L. Putnam, III         President and Chief          March 12, 1998 
  F.L. Putnam, III         Executive Officer, 
                           Director

s/J.F. Reilly, Jr.         Director                     March 12, 1998
  J.F. Reilly, Jr.

s/A.B. Sides, Jr.          Director                     March 12, 1998
  A.B. Sides, Jr.

s/M.M. Stapleton           Director                     March 12, 1998
  M.M. Stapleton

s/C.O. Swanson             Director                     March 12, 1998
  C.O. Swanson