December 4, 1997



Office of Applications and Report Services
Securities and Exchange Commission
Washington, D.C.  20549

Dear Sir or Madame:

We are transmitting herewith Indiana Energy, Inc.'s
1997 Preliminary Proxy Statement.

Respectfully,


/s/Ronald E. Christian
Ronald E. Christian

REC:tmw


                      SCHEDULE 14A INFORMATION
               Proxy Statement Pursuant to Section 14(a)
               of the Securities Exchange Act of 1934

                   (Amendment No.            )

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     by Rule 14a-6(e)(2))    [X] Definitive Proxy Statement
     [ ] Definitive Additional Materials

[ ]  Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12


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                              IEI
                        INDIANA ENERGY, INC.
                     1630 North Meridian Street
                  Indianapolis, Indiana  46202-1496
                                  
                                  
              NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                     TO BE HELD JANUARY 28, 1998
                                  

TO THE SHAREHOLDERS OF INDIANA ENERGY, INC.

     The annual meeting of shareholders of Indiana Energy, Inc.
("Company") will be held at the principal office of the Company, 1630
North Meridian Street, Indianapolis, Indiana 46202, on Wednesday,
January 28, 1998, at 10:30 a.m. (Eastern Standard Time), for the
following purposes:

     1.  To elect four directors of the Company to serve for a term
of three years or until their successors are duly qualified and
elected;

     2.  To approve a proposed amendment of the Company's Articles of
Incorporation to increase the authorized shares of Common Stock to
200,000,000; and

     3.  To transact such other business as may properly come before
the meeting, or any adjournment of the meeting.

     As allowed by the Company's Code of By-Laws, the board of
directors has fixed the close of business on November 24, 1997, as
the record date for determining the shareholders entitled to notice
of and to vote at the meeting and at any adjournment of the meeting.

     It is important that your stock be represented at this meeting
to assure a quorum.  Whether or not you now expect to be present at
the meeting, please fill in, date and sign the enclosed proxy and
return it promptly to the Company in the accompanying addressed
envelope.  No stamp is required if mailed in the United States.  You
have the unconditional right to revoke your proxy at any time before
the authority granted by it is exercised.

     By order of the board of directors.


                                   INDIANA ENERGY, INC.



                                   By RONALD E. CHRISTIAN
Indianapolis, Indiana              Secretary and General Counsel
December 5, 1997


                              CONTENTS
                                  
                                  

PURPOSES OF MEETING
VOTING SECURITIES
PROPOSAL NO. 1:  ELECTION OF DIRECTORS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
 1.  THE AUDIT COMMITTEE
 2.  THE COMPENSATION COMMITTEE
 3.  THE NOMINATING COMMITTEE
 4.  THE PUBLIC AND ENVIRONMENTAL AFFAIRS COMMITTEE
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
DIRECTORS' COMPENSATION
PROPOSAL NO. 2:  AMENDMENT TO THE ARTICLES OF INCORPORATION
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE REPORT
 A. EXECUTIVE COMPENSATION POLICY
 B. COMPONENTS OF EXECUTIVE COMPENSATION
 C. CHIEF EXECUTIVE OFFICER COMPENSATION
 D. COMPENSATION CONSULTANT, TERMINATION BENEFIT AGREEMENTS AND
    DEDUCTIBILITY OF EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMPENSATION
    SUMMARY COMPENSATION TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
CORPORATE PERFORMANCE
    TOTAL RETURN TO SHAREHOLDERS
    RETURN ON EQUITY
RETIREMENT SAVINGS PLAN
RETIREMENT PLANS
EMPLOYMENT AND TERMINATION BENEFIT AGREEMENTS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
COST AND METHOD OF SOLICITATION
ANNUAL REPORT
REVOCATION RIGHTS
SHAREHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING


                        INDIANA ENERGY, INC.
                     1630 North Meridian Street
                  Indianapolis, Indiana 46202-1496
                           (317) 926-3351
                                  
                           PROXY STATEMENT
                                  
     The following information is furnished in connection with the
solicitation of the enclosed proxy by and on behalf of the board of
directors of the Company.  The proxy will be used at the annual
meeting of shareholders to be held at the principal office of the
Company, 1630 North Meridian Street, Indianapolis, Indiana, on
Wednesday, January 28, 1998, at 10:30 A.M. (Eastern Standard Time),
and at any adjournment of the meeting for the matters to be acted
upon under its authority.  The proxy and this proxy statement were
first mailed to the shareholders on or about December 5, 1997.

PURPOSES OF MEETING

     As of this date, the only known business to be presented at the
1998 annual meeting of shareholders is the election of four directors
of the Company to serve for a term of three years or until their
successors are duly qualified and elected, and the amendment of the
Company's Articles of Incorporation to increase the authorized shares
of Common Stock to 200,000,000.  However, the enclosed proxy
authorizes the proxy holders to vote on all other matters that may
properly come before the meeting, and it is the intention of the
proxy holders to take any such action utilizing their best judgment.

VOTING SECURITIES

     The Company has one class of capital stock outstanding,
consisting as of September 30, 1997, of 22,580,543 shares of Common
Stock without par value.  The holders of the outstanding shares of
Common Stock are entitled to one vote for each share held of record
on each matter presented to a vote of the shareholders at the
meeting.  Only shareholders of record at the close of business on
November 24, 1997, will be entitled to vote at the meeting or at any
adjournment of the meeting.

     In connection with the Company's acquisition of Richmond Gas
Corporation ("Richmond") and Terre Haute Gas Corporation ("Terre
Haute"), shares of Common Stock of the Company were issued to certain
members of the Anton Hulman, Jr. family, certain corporations
controlled by them, certain trusts established for their benefit and
certain other persons with personal or business relationships with
the family (collectively, the "Hulman Interests").  At September 30,
1997, the Hulman Interests beneficially owned an aggregate of
2,749,952 shares of the Company, which comprised 12.18 percent of
the Company's outstanding Common Stock.  At September 30, 1997, the
following beneficial owners held more than 5 percent of the
outstanding Common Stock of the Company, the only class of voting
securities outstanding:

<TABLE>
                Name and        Number of     Nature of  
 Title of      Address of        Shares       Beneficial  Percent
  Class        Beneficial     Beneficially    Ownership    of
                 Owner            Owned                   Class
 <S>           <C>            <C>             <C>         <C>
  Common         Hulman &        1,622,435     Voting &    7.19%
                 Company                       Investment
                 900 Wabash
                 Avenue
                Terre Haute,
               Indiana 47807
</TABLE>                    

As a result of the attribution to certain persons of shares held by
Hulman & Company, the following persons are deemed to be beneficial
owners of more than 5 percent of the outstanding Common Stock of the
Company:

<TABLE>
                   Name of         Number of           
    Title of   Beneficial Owner      Shares       Percent of
     Class                        Beneficially       Class
                                     Owned
    <S>        <C>                <C>             <C>
     Common    Mari H. George      2,056,102         9.11%
     Common    Anton H. George     1,849,202         8.19%
     Common    Katherine M.        1,629,100         7.21%
                    George
     Common    Laura L. George     1,849,202         8.19%
     Common    Nancy L. George     1,629,888         7.22%
     Common    M. Josephine        1,626,895         7.20%
                    George
</TABLE>

The number of shares held beneficially by Mari H. George, Anton H.
George, Katherine M. George, Nancy L. George and M. Josephine George
each includes 1,622,435 shares held by Hulman & Company as to which
each, as a director of Hulman & Company, may be deemed to share
voting power and investment power.  The number of shares held
beneficially by Mari H. George and Anton H. George each includes
217,398 shares held by Rose-Hulman Institute of Technology ("Rose-
Hulman") as to which Anton H. George, as a member of the Investment
Management Committee of the Board of Trustees of Rose-Hulman, and as
to which Mari H. George, as a member of the Board of Trustees, may be
deemed to share voting power and investment power, and as to which
each disclaims beneficial ownership.  Laura L. George is the wife of
Anton H. George, and the shares listed for her are those beneficially
owned by Mr. George.  Laura L. George disclaims beneficial ownership
of all such shares.  The information furnished here regarding
beneficial ownership is derived from the Schedule 13D, as amended
most recently on June 29, 1994, filed by the Hulman Interests with
the Securities and Exchange Commission, Forms 3, 4 and 5 filed
through November 15, 1997, and certain acquisitions exempted from
reporting requirements involving Ms. Mari H. George and Ms. M.
Josephine George under the Company's Automatice Dividend Reinvestment
and Stock Purchase Plan.  The filing of the Schedule 13D by the Hulman
Interests did not affirm the existence of a "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
or the regulations promulgated under it.

PROPOSAL NO. 1:  ELECTION OF DIRECTORS

     In connection with the Company's acquisition of Richmond and
Terre Haute, the Company entered into a standstill agreement with the
Hulman Interests.  Under this agreement, the Company agreed to cause
one designee of the Hulman Interests to be elected to the board of
directors of the Company and, until the termination of the standstill
agreement (which is dependent upon the occurrence of certain events
specified in the agreement), to include a designee of the Hulman
Interests in the slate of nominees recommended by the board at the
annual meeting of shareholders at which the term of the original
designee expires.  At a regular meeting held on August 31, 1990, the
board of directors of the Company elected Anton H. George to the
board and he currently serves as a member of the board.

     The board of directors of the Company consists of twelve
directors divided into three classes as follows: Paul T. Baker, Otto
N. Frenzel III, Don E. Marsh and Richard P. Rechter, who are nominees
for election with terms expiring in 2001; Niel C. Ellerbrook, L. K.
Evans, Jean L. Wojtowicz and one vacant director position, whose
terms expire in 2000; and Lawrence A. Ferger, Anton H. George, James
C. Shook and John E. Worthen, whose terms expire in 1999.  The
Company is a holding company, and, historically, each of its
directors also served as a director of Indiana Gas Company, Inc.
("Indiana Gas"), its principal subsidiary and a regulated gas
distribution company.  As part of a corporate restructuring that
occurred during the past fiscal year, effective May 1, 1997, with the
exception of Messrs. Ferger and Ellerbrook, the Company's directors
also serve either as a director of Indiana Gas or a director of IEI
Investments, Inc. ("Investments"), the Company's subsidiary that
serves as the corporate parent for non-regulated business activities.
The placement of a portion of the Company's directors on the board of
directors of Investments will ensure the participation of those
individuals in decision making with respect to non-regulated business
activities.  Messrs. Ferger and Ellerbrook serve as directors of
Indiana Gas and Investments.

     At each annual meeting of shareholders, directors are elected to
succeed those whose terms then expire for a term of three years or
until their successors are duly qualified and elected.  Accordingly,
four directors are to be elected by a plurality of votes cast at the
annual meeting of shareholders to be held on January 28, 1998.

     The board of directors intends that the enclosed proxy will be
voted by the proxy holders in favor of the election of the nominees
named below for the office of director of the Company to hold office
for a term of three years or until their respective successors are
duly qualified and elected.  Each of such nominees is now serving as
a director of the Company and has signified the willingness to serve
if elected.  Directors are elected by a plurality of the votes cast.
Plurality means that the individuals who receive the largest number
of votes cast are elected up to the maximum number of directors to be
chosen at the meeting.  Abstentions, broker non-votes, and
instructions on the accompanying proxy card to withhold authority to
vote for one or more of the nominees might result in some nominees
receiving fewer votes. However, the number of votes otherwise
received by the nominee will not be reduced by such action.  If,
however, any situation should arise under which any nominee should be
unable to serve, the authority granted in the enclosed proxy may be
exercised by the proxy holders for the purpose of voting for a
substitute nominee.  Certain information concerning the nominees and
the other directors of the Company is set forth below and under the
caption "Meetings and Committees of the Board of Directors."  Unless
otherwise indicated, each nominee and director has sole investment
and voting power with respect to the shares of Common Stock of the
Company shown as beneficially owned by that person.

<TABLE>

                        Principal Occupation During      Has Been a
    Name and            the Past 5 Years and Other       Director of
    Business       Age  Information (1)                Indiana Gas or
   Location                                                  the
                                                        Company Since
<S>                <C>  <C>                            <C>                          
Nominees For Election Whose Terms Will Expire in 2001
            
PAUL T. BAKER      57   Executive Vice President and        1991
Indianapolis,           Chief Operating Officer of
Indiana                 Indiana Gas since October
                        1997; prior to October 1997
                        and since 1991, Senior Vice
                        President and Chief
                        Operating Officer of Indiana
                        Gas.  Mr. Baker is also an
                        Indiana Gas Director.
                        
OTTO N. FRENZEL    67   Chairman, Executive                 1967
III                     Committee, National City
Indianapolis,           Bank, Indiana, since 1996.
Indiana                 Prior to that time, Chairman
                        of the Board of National
                        City Bank, Indiana.  Mr.
                        Frenzel is an Indiana Gas
                        Director.  He is also a
                        Director of National City
                        Corporation, American United
                        Life Insurance Company,
                        Baldwin & Lyons, Inc.
                        (insurance brokerage firm),
                        and Indianapolis Power and
                        Light Company and IPALCO
                        Enterprises, Inc.
                        
DON E. MARSH       59   Chairman, President and             1986
Indianapolis,           Chief Executive Officer and
Indiana                 Director of Marsh
                        Supermarkets, Inc. Mr. Marsh
                        is an Investments Director.
                        He is also a Director of
                        National City Bank, Indiana
                        and Nash Finch Company.
                        
RICHARD P.         58   Chairman of the Board of            1984
RECHTER                 Rogers Group, Inc.;                   
Bloomington,            President, Chief Executive            
Indiana                 Officer and Director of               
                        Rogers Management, Inc.; and          
                        President, Chief Executive            
                        Officer and Director of  Mid-         
                        South Stone, Inc.  Mr.                
                        Rechter is an Investments             
                        Director.  He is also a               
                        Director of Monroe County             
                        Bank and Monroe Bancorp.              
                                                              
                                                              
Directors Continuing in Office Whose Terms Will Expire in 2000
            
NIEL C.            48   President and Chief                 1991
ELLERBROOK              Operating Officer of the
Indianapolis,           Company since October 1997;
Indiana                 prior to that time and since
                        January 1997, Executive Vice
                        President, Treasurer and
                        Chief Financial Officer; and
                        prior to that time and since
                        1986, Vice President and
                        Treasurer and Chief
                        Financial Officer. President
                        of Indiana Gas since October
                        1997; prior to that time and
                        since January 1997,
                        Executive Vice President and
                        Chief Financial Officer; and
                        prior to that time and since
                        1987, Senior Vice President
                        and Chief Financial Officer.
                        Mr. Ellerbrook is a Director
                        of Indiana Gas and
                        Investments.  He is also a
                        Director of Fifth Third Bank
                        of Central Indiana.
                                                              
L. K. EVANS        69   Retired.  Prior to 1993 and         1988
Columbus,               since 1991, Vice Chairman
Indiana                 and Director of Arvin
                        Industries, Inc. (an Indiana
                        company serving global
                        markets in more than 100
                        countries); and President and
                        Chief Operating Officer from
                        1987. Mr. Evans is an
                        Indiana Gas Director.  He
                        was also a Director of Irwin
                        Financial Corporation,
                        Columbus, Indiana until
                        April, 1994.
                        
JEAN L.            40   President since 1983 and            1996
WOJTOWICZ               founder of Cambridge Capital          
Indianapolis,           Management Corporation (a             
Indiana                 consulting and venture                
                        capital firm).  Ms.                   
                        Wojtowicz is an Investments           
                        Director.  She is also a              
                        Director of Seaboard North            
                        American Holdings, Inc.               
                                                              
Directors Continuing in Office Whose Terms Will Expire in 1999


LAWRENCE A.        63   Chairman and Chief Executive        1984
FERGER                  Officer of the Company and
Indianapolis,           Indiana Gas since October
Indiana                 1997; prior to that time and
                        since January 1996,
                        Chairman, President and
                        Chief Executive Officer of
                        the Company and Indiana Gas;
                        and prior to that time and
                        since 1987, President and
                        Chief Executive Officer of
                        the Company and Indiana Gas.
                        Mr. Ferger is a Director of
                        Indiana Gas and Investments.
                        He is also a Director of
                        National City Bank, Indiana.
                        
ANTON H. GEORGE    38   President since December            1990
Indianapolis,           1989 and a Director of
Indiana                 Indianapolis Motor Speedway
                        Corporation (auto racing); and
                        President since January,
                        1994, Executive Vice
                        President since June 1989,
                        and a Director of Hulman &
                        Company (manufacturer and
                        distributor of baking
                        powder).  Mr. George is an
                        Investments Director.  He is
                        also a Director of First
                        Financial Corporation.
                        
JAMES C. SHOOK     66   President, The Shook Agency,        1983
Lafayette,              Inc. (residential,
Indiana                 commercial and industrial
                        real estate brokerage). Mr.
                        Shook is an Investments
                        Director.  He is also a
                        Director of NBD Bank, N.A.,
                        Lafayette Life Insurance
                        Company (a mutual company)
                        and Crossmann Communities,
                        Inc.
                        
JOHN E. WORTHEN    64   President, Ball State               1997
Muncie, Indiana         University, Muncie, Indiana.          
                        Mr. Worthen is an Indiana
                        Gas Director.  He is also a
                        Director of First Merchants
                        Corp.
</TABLE>

Other executive officers of the Company are Anthony E. Ard, age 56,
and Timothy M. Hewitt, age 47. In October 1997, Mr. Ard was made
Senior Vice President-Corporate Affairs for the Company.  Prior to
October 1997 and since 1995, he was Senior Vice President of
Corporate Affairs for Indiana Gas.  Prior to 1995 and since 1993, he
was Vice President of Corporate Affairs for Indiana Gas.  Prior to
1993, and since 1988, Mr. Ard was Vice President and Secretary for
Indiana Gas and Secretary for the Company.  In 1995, Mr. Hewitt was
elected Vice President of Operations and Engineering for Indiana Gas.
Prior to 1995 and since 1989, he was Vice President of Sales and
Field Operations for Indiana Gas.

(1)  Includes, but is not limited to, directorships in corporations
with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or which are subject to the
requirements of Section 15(d) of that Act or in a company registered
as an investment company under the Investment Company Act of 1940.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The Company has the following standing committees of the board
of directors:

  1.  The Audit Committee.
  
     The members of this committee are L.K. Evans, chair, Anton
H. George, Jean L. Wojtowicz and John E. Worthen.  The committee
makes recommendations to the board as to the selection and retention
of the independent accountants, reviews the scope, conduct and
results of audits performed, and makes inquiry as to the differences
of views, if any, between such independent accountants and officers
and employees of the Company and subsidiaries with respect to the
financial statements and records and accounting policies, principles,
methods and systems.  It further determines that services performed
by the independent accountants in addition to the annual audit
examination do not impair such accountants' independence in
performing the audit examination.  Finally, the committee reviews the
policies and guidelines of the Company and subsidiaries designed to
ensure the proper use and accounting for corporate assets, and the
activities of the Company's Internal Audit department.  There were
two meetings of the committee during the past fiscal year.

  2.  The Compensation Committee.
  
     The members of this committee are Otto N. Frenzel III, chair,
Don E. Marsh and Richard P. Rechter. None of the members is an
officer or employee of the Company.  The committee has the
responsibility of formulating recommendations to the board as to the
compensation to be paid to the officers of the Company and its
subsidiaries.  It also administers the Company's Annual Management
Incentive Plan, the Executive Restricted Stock Plan, and the
Directors Restricted Stock Plan.  There were three meetings of the
committee during the past fiscal year.

  3.  The Nominating Committee.
  
     The members of this committee are Lawrence A. Ferger, chair, Don
E. Marsh and James C. Shook.  The duties and powers of the committee
are to search for, evaluate and make recommendations to the board of
directors as to nominees to be submitted annually to the shareholders
for election to the board as well as to fill vacancies occurring from
time to time on the board.  In that connection, the committee is
authorized to act on behalf of the Company and the board in
receiving, giving consideration to and making recommendations to the
board respecting communications submitted to the Company from
shareholders relating to nominees for directors.  Such communications
must be in writing and with respect to the next annual election must
be received by the Company, addressed to the secretary, no later than
August 7, 1998.  There were two meetings of the committee during the
past fiscal year.

     If a shareholder entitled to vote for the election of directors
at a shareholders' meeting desires to nominate a person for election
to the board of directors of the Company, pursuant to the Company's
By-Laws, any such nominations must be made pursuant to notice
delivered to, or mailed and received at, the principal office of the
Company, not less than 50 days nor more than 90 days prior to the
meeting.  However, in the event that less than 60 days notice of the
meeting is given, the shareholder's notice must be received not later
than the tenth day following the date of notice of the meeting.  Such
shareholder's notice must set forth, in addition to the name and
address of the shareholder submitting the nomination, as to each
person whom the shareholder proposes to nominate for election or re-
election as a director:  (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of
the Company which are beneficially owned by such person, (iv) any
other information relating to such person that is required to be
disclosed in the solicitation of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including,
without limitation, such person's written consent to be named in the
proxy statement as a nominee and to serving as a director, if
elected), and (v) the qualifications of the nominee to serve as a
director of the Company.


  4.  The Public and Environmental Affairs Committee.
  
     The members of this committee are Richard P. Rechter, chair, and
James C. Shook.  There is presently one vacancy on this committee.
The duties and powers of the committee are to review current
policies, programs, procedures and processes of the Company and its
subsidiaries affected by public policy and affecting the environment.
It also reviews reports from Company management on public policy and
environmental matters and monitors compliance with, and trends and
emerging policy developments in, business and environmental
regulation.  In addition, the committee reports to the board of
directors on public policy and environmental issues affecting the
Company and its subsidiaries.  There were two meetings of the
committee during the past fiscal year.

     The board of directors of the Company had six meetings during
the last fiscal year.  Don E. Marsh attended fewer than 75 percent of
the aggregate of board meetings and meetings of committees of the
board of which he is a member.  No other incumbent director attended
fewer than 75 percent of the aggregate of board meetings and meetings
of committees of the board of which they are members.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Under  the  federal  securities laws, the Company's  directors,
certain officers, and ten percent shareholders are required to report
to  the  Securities and Exchange Commission, by specific  due  dates,
transactions and holdings in the Company's Common Stock.  During  the
past  fiscal  year,  with the exceptions discussed  in  the  following
paragraph,  all  persons  with  responsibility  for  such   reporting
complied with the requirements of Section 16(a).

      At the end of calendar year 1994, Indiana Gas and Chemical Corp.
("IGCC"), a shareholder of 168,605 shares of the Company's Common
Stock, was liquidated.  Among IGCC's shareholders was the Joseph R.
Cloutier Trust ("Trust"), which is a party to the standstill agreement
with the Hulman Interests referenced in "Proposal No. 1: Election Of
Directors" on page 3, and which has a reporting obligation under
Section 16(a).  In connection with the process of confirming
compliance with Section 16(a) during the past fiscal year, the
Company became aware that the Trust had received 5,321 shares of the
Company's Common Stock at the time of the liquidation of IGCC and 
that acquisition of shares was not reported to the Securities
and Exchange Commission as required by Section 16(a).  Upon
learning of this omission in reporting, the Company promptly
advised the Trust of its reporting obligation, and the Trust
has since complied.  During this process the Company also became
aware that for each quarterly dividend period from December 1, 1991
through June 3, 1996, Ms. M. Josephine George inadvertently did not
report acquisitions totaling 449.5 shares of the Company's Common
Stock under the Automatic Dividend Reinvestment and Stock Purchase
Plan.  Upon being apprised of the need to report the acquisitions,
Ms. George timely did so.
     
     
DIRECTORS' COMPENSATION

     Non-employee directors of the Company and of Indiana Gas or
Investments receive combined fees totaling $21,000 per year for
service on the boards of these companies.  The fees are paid under
the Directors Restricted Stock Plan approved by the shareholders at
their January 13, 1992, meeting.  Under the plan, $7,000 of the
combined directors' fees paid by the Company and Indiana Gas or
Investments to non-employee directors is in the form of restricted
shares of the Company. The restricted shares are issued to each non-
employee director at the beginning of their three-year term, and the
number of restricted shares is determined by dividing $21,000 ($7,000
for each year) by the per share market price of the Company's stock
during the period specified in the plan.  Directors may elect to
receive the remaining $14,000 in unrestricted shares or in cash.  To
receive the restricted shares, a director must consent to the
restrictions in writing.  To elect to receive unrestricted shares
instead of cash, a director must provide an irrevocable written
election to the secretary of the Company before the beginning of the
calendar year for which the election relates.  Moreover, if during
the calendar year a non-employee is elected to fill a vacancy in the
board of directors, under the plan a one time election is permitted
to allow the director to receive the balance of that calendar year's
compensation in unrestricted shares.

     Restricted shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution until the first to occur
of:  (1) the expiration of the director's term of office for which
the grant relates; (2) the grantee's death or disability; (3) the
termination of the grantee's status as a director pursuant to the
mandatory retirement policy for directors; (4) the involuntary
termination of the grantee's status as a director; (5) approval by a
majority of the other directors of the grantee's voluntary
termination of his/her status as a director because of the relocation
of his/her principal place of residence outside of Indiana; or (6) a
change in control of the Company. In no event, however, are the
restricted shares transferable and free of restrictions before the
expiration of a six-month period beginning the first day of the
director's term of office or, if later, the date of issuance of the
shares.

     All restricted shares bear a legend citing the restrictions
contained in the plan.  When the restrictions lapse, the grantee is
entitled to have the legend removed from any shares or certificates.
Restrictions are lifted automatically upon the expiration of the
period to which the restrictions apply.  If a director voluntarily
terminates his/her status as such before the expiration of the period
of restriction, any shares still subject to restriction are
immediately forfeited.

     The Company has reserved 71,172 shares for grant under the plan.
As of September 30, 1997, 47,945 shares remain in reserve.  Those
shares may consist of authorized but unissued shares or shares
reacquired by the Company, including shares purchased in the open
market.  If any shares subject to the grants are forfeited, the
forfeited shares become available for reissuance under the plan.

     The board may amend, modify, alter or terminate the plan at any
time.  Amendments, modifications or alterations which would:  (1)
increase the number of shares reserved for issuance under the plan,
(2) materially modify the class of individuals to whom grants of
shares may be made, (3) materially modify the manner in which shares
are granted, or (4) materially increase the benefits accruing to
grantees under the plan, must be approved by the Company's
shareholders.

     Non-employee directors also receive a fee of $500 for each
Company board meeting attended and $500 for each board meeting of
Indiana Gas or Investments attended.  Each non-employee member of a
committee of the board is paid a fee of $1,000 for each meeting of
the committee attended, and each non-employee chair of a committee is
paid an additional fee of $1,000 for each meeting attended.

     There is an unfunded plan under which non-employee directors may
defer all or any part of fees received in cash until the occurrence
of certain conditions specified in the plan.  Under the plan, which
has been in place since fiscal year 1995, at the election of the
participant, amounts deferred are considered for accounting purposes
to either be invested in Company Common Stock (Stock Fund) or utility
bonds (Bond Fund), with a return measured pursuant to a formula
specified in the plan.  Amounts deferred under the Stock Fund are
tracked as phantom units of Company Common Stock and the account
value changes when the Company pays dividends, as well as when the
Common Stock price fluctuates.  Amounts deferred under the Bond Fund
earn a return equal to the mean between the high and low of the
Corporate Bond Yield averages, Average Public Utility (aa rated), for
the past twelve (12) months reported in Moody's Bond Survey in its
published issue in the November preceding the January 1, on which the
rate is to come into effect.  The rate changes each January 1.

PROPOSAL NO. 2:  AMENDMENT TO THE ARTICLES OF INCORPORATION

     The board of directors deems it advisable, and thus proposes to
amend the Company's Articles of Incorporation (the "Articles") to
increase the authorized shares of Common Stock from 64,000,000 shares
to 200,000,000 shares.  Thus, Article 4, as amended, would state:

                              ARTICLE 4
                                  
                          Number of Shares
                                  
     The Corporation shall have authority to issue a total of Two
Hundred and Four Million (204,000,000) Shares.

     Section 5.01 of the Articles provides for the authority to issue
4,000,000 shares of Preferred Stock and Section 5.02 of the Articles
provides that all of the remaining shares that the Corporation has
authority to issue constitute Common Stock.  Accordingly, the
amendment will have the effect of increasing the authorized shares of
Common Stock of the Company from 64,000,000 to 200,000,000.

     All attributes of the additional authorized but unissued shares
of Common Stock would be the same as those of the currently
outstanding shares of Common Stock.  The increase in authorized
shares will not affect shareholders' equity in the Company or the
capital or surplus accounts of the Company.

     On September 30, 1997, the number of outstanding shares of
Common Stock was 22,580,543; the number of shares of Common Stock
reserved for issuance under the Company Executive Restricted Stock
Plan was 541,498; the number of shares of Common Stock reserved for
issuance under the Company Directors Restricted Stock Plan was
71,172; the number of shares of Common Stock reserved for issuance
under the Company Automatic Dividend Reinvestment and Stock Purchase
Plan was 566,737; the number of shares of Common Stock reserved for
issuance under the Company Retirement Savings Plan was 1,000,000; and
the number of shares of Common Stock unissued, unreserved and available
for use was 16,724,628.  There are no shares of Preferred Stock
outstanding.

     The amendment increasing the number of authorized shares is
being proposed to make available additional shares of Common Stock
for general corporate purposes, including potential issuances of
shares pursuant to stock dividends, stock splits, acquisitions,
financings and the Company's shareholder rights agreement.  In the
judgment of the board of directors, the additional shares authorized
by the proposed amendment will provide flexibility in corporate
decision-making in the event shares should be needed for any such
desirable corporate purposes.  The authorized but unissued shares of
Common Stock can be issued without shareholder approval subject,
however, to (i) the requirements of the New York Stock Exchange with
respect to the Common Stock which, among other matters, require
shareholder approval for certain issuances of shares which would
result in an increase of 20% or more in the number or voting power of
shares outstanding prior to the issuance, and (ii) applicable
corporate law requirements.

     Although the Company has no present intention to issue shares of
Common Stock in the future to make an acquisition of control of the
Company more difficult, future issuances of Common Stock could have
that effect.  For example, the acquisition of shares of the Company's
Common Stock by a person to acquire control of the Company might be
discouraged through the public or private issuance of additional
shares of Common Stock, since such issuance would dilute the
percentage interest of the acquiring person in the equity of the
Company.  Shares of Common Stock could also be issued to existing
stockholders as a dividend or privately placed with purchasers who
might side with the board of directors in opposing a takeover bid,
thus discouraging such a bid.  The Company is not aware of any effort
to accumulate its shares of Common Stock or to acquire control of the
Company by means of a merger, tender offer solicitation in opposition
to management or otherwise.

     The Company has in place certain provisions in its Articles and
By-Laws which may have an anti-takeover effect.  The Articles include
provisions that require the approval by the holders of 80% of the
voting power of Common Stock entitled to vote generally in the
election of directors as a condition for mergers and certain other
business combinations of the Company with any holder of more than 10%
of that voting power ("Interested Shareholder") unless either (a) the
transaction is approved by at least a majority of the directors who
are unaffiliated with the Interested Shareholder and were directors
before the Interested Shareholder became an Interested Shareholder,
or (b) certain price and procedural requirements are met.  The
Articles also provide for a classified board of directors and for
removal of directors only for cause upon the affirmative vote of
holders of at least 80% of the voting power of the Company's shares.
These provisions make it more difficult for shareholders to replace
or remove directors even when this may be desired by holders of a
majority of the Common Stock, thereby making it more difficult for an
entity desiring to acquire or merge with the Company to obtain
control of the board of directors.  Also, the Articles authorize the
issuance of 4,000,000 shares of Preferred Stock, the designations and
relative preferences, limitations and rights, including voting
rights, of which may be set by the directors.  The rights of the
holders of shares of different series of Preferred Stock may vary
with respect to the matters which the board of directors has the
discretion to establish.  Those matters include dividend rights,
preferences with respect to liquidation or other distributions,
redemption and conversion rates and terms, and voting powers.
Because the voting powers of any series of Preferred Stock are to be
determined by the directors, the existence of that class of
securities enables the directors to vest large amounts of voting
power in persons acquiring Preferred Stock.  Holders of Preferred
Stock may be given the right to vote as a class on certain matters
and to elect directors, and each share may be convertible into such
number of shares of Common Stock as may be specified by the
directors.  The ability of the directors to establish voting,
redemption, conversion and other rights of holders of Preferred Stock
might be used as part of a plan to frustrate a takeover attempt of
the Company.  The directors might establish and issue Preferred Stock
even though the shareholders generally approve of the terms of a
proposed takeover.  Certain provisions of the By-Laws may also be
deemed to have an anti-takeover effect.  These sections further
provide that shareholders may nominate directors or bring other
business before a meeting of shareholders only if certain ownership,
notification and related timing requirements are satisfied.

     The proposal to be acted upon at this meeting is not the result
of a plan by the Company to adopt a series of anti-takeover
provisions and the Company has no present intention to propose anti-
takeover measures in the future.  However, the Company does have a
shareholder rights agreement, amended and restated as of May 31,
1996, pursuant to which it has distributed a dividend of one common
share purchase right for each outstanding share of Common Stock.  If
and when the rights become exercisable, each right will entitle the
registered holder to purchase from the Company one share of Common
Stock at $60.00 per share.  The rights are not intended to prevent a
fair and equitable takeover of the Company and will not do so.
However, the rights should discourage any effort to acquire the
Company in a manner or on terms not approved by the board of
directors.  The rights are designed to deal with the serious problem
of a potential acquirer using coercive or unfair tactics to deprive
the board of directors of any real opportunity to determine the
future of the Company and to realize the value of a shareholder's
investment in the Company.

     If the amendment increasing the authorized shares had been
approved by the Company's shareholders on September 30, 1997, there
would have been 152,724,628 shares of Common Stock unissued,
unreserved and available for issue on that date.  The Company's
authorized, unissued, and unreserved shares may be issued in such
amounts, at such times and for such purposes as the board of
directors may determine and, unless required by statute or the
Articles or the rules of the New York Stock Exchange, without further
shareholder action.  There are no preemptive rights with respect to
the Company's shares of Common Stock. The issuance of any or all of
the authorized but unissued shares of Common Stock would have the
effect of reducing the percentage of the Company owned by the present
shareholders and may have a dilutive effect on earnings per share and
on the equity and voting power of existing holders of Common Stock.
At this time, the Company has no specific plans, understandings, or
arrangements for issuing any of the additional authorized shares of
Common Stock.

     The Articles do not provide for cumulative voting.  As a result,
in order to be ensured of representation on the board of directors, a
shareholder must control the votes of a majority of the shares
present and voting at a shareholders' meeting at which a quorum is
present.  The lack of cumulative voting requires an entity seeking a
takeover to acquire a substantially greater number of shares to
ensure representation on the board of directors than would be
necessary were cumulative voting available.

     The proposed amendment of the Articles will be approved if the
votes cast in favor of the amendment exceed the votes cast against.
Accordingly, abstentions, broker non-votes and instructions on the
accompanying proxy to withhold authority for the proposed amendment
will not be treated as votes against the proposal.  The proposed
amendment of the Articles will be filed with the Indiana Secretary of
State and become effective upon the receipt of such shareholder
approval.

COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth the number of shares of Common
Stock of the Company beneficially owned by the directors, the chief
executive officer, the four named executive officers during the past
fiscal year, and all directors and executive officers as a group, as
of September 30, 1997:


<TABLE>
   Name of Individuals or Identity     Shares Owned
   of Group                            Beneficially (1)
   <S>                                 <C>
   ANTHONY E. ARD                            21,970  (2)
   Indianapolis, Indiana
   
   PAUL T. BAKER                             35,434  (2)
   Indianapolis, Indiana
   
   NIEL C. ELLERBROOK                        32,182  (2)(3)
   Indianapolis, Indiana
   
   L. K. EVANS                                4,588  (4)(5)
   Columbus, Indiana
   
   LAWRENCE A. FERGER                        87,660  (2)(6)
   Indianapolis, Indiana
   
   OTTO N. FRENZEL III                       18,139  (5)(7)
   Indianapolis, Indiana
   
   ANTON H. GEORGE                        1,849,202  (1)(5)
   Indianapolis, Indiana
   
   TIMOTHY M. HEWITT                         12,818  (2)(4)
   Indianapolis, Indiana
   
   DON E. MARSH                               5,763  (5)
   Indianapolis, Indiana
   
   RICHARD P. RECHTER                         7,551  (4)(5)
   Bloomington, Indiana
   
   JAMES C. SHOOK                            42,416  (5)(8)
   Lafayette, Indiana
   
   JEAN L. WOJTOWICZ                          1,776  (5)
   Indianapolis, Indiana
   
   JOHN E. WORTHEN                              426  (5)
   Muncie, Indiana
   
   All directors and executive            2,119,925  (1)
   officers as a group (13 persons)

</TABLE>

(1)  Except for Anton H. George, no director or executive officer
owned beneficially as of September 30, 1997, more than .39 percent of
Common Stock of the Company.  Excluding Anton H. George, all
directors and executive officers owned beneficially an aggregate of
270,723 shares or 1.20 percent of Common Stock of the Company
outstanding as of that date.  The beneficial ownership by Anton H.
George of 1,849,202 shares or 8.19 percent of Common Stock of  the
Company is discussed above in "Voting Securities."

(2)  Includes shares awarded to Messrs. Ard, Baker, Ellerbrook,
Ferger and Hewitt under the Company Executive Restricted Stock
Plan, which are subject to certain transferability restrictions and
forfeiture provisions.

(3)  Includes 809 shares held by Mr. Ellerbrook's wife, and he
disclaims beneficial interest therein.

(4)  Some or all of the shares owned by Messrs. Evans, Hewitt and
Rechter are owned jointly with their wives.

(5)  Includes shares granted under the Company Directors Restricted
Stock Plan, some of which shares are subject to certain
transferability restrictions and forfeiture provisions.

(6)  Includes 3,981 shares held by Mr. Ferger's wife, and he
disclaims beneficial interest therein.

(7)  Includes 3,774 shares held in a trust, of which Mr. Frenzel is a
co-trustee, and he disclaims beneficial interest therein.

(8)  Includes 1,500 shares held by Mr. Shook's wife, and he disclaims
beneficial interest therein.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On December 29, 1995, IGC Energy, Inc. ("Energy"), an indirect,
wholly owned subsidiary of the Company, entered into a subscription
agreement to purchase an interest in a limited partnership known as
the Cambridge Ventures, L.P. (Partnership) ("CVLP").  CVLP is
licensed by the United States Small Business Administration as a
small business investment company.  As such, CVLP operates as a
venture fund and invests in equities, debt securities with equity
participation and secured short and long-term loans; CVLP also
participates in other funds.  Energy has invested a total of $275,000
in CVLP, which represents, in the opinion of the board of directors,
a fair and reasonable investment for Energy.  Energy holds ten (10)
partnership units out of the two hundred and twenty five and one half
units (225.5) that have been sold in CVLP as of December 31, 1996.
On January 26, 1996, Jean L. Wojtowicz was elected to the board of
directors of the Company and Indiana Gas.  Although Ms. Wojtowicz is
no longer an Indiana Gas director, she is now an Investments
director.  Ms. Wojtowicz is the President and a Director of Cambridge
Capital Management Corp., which owns 50 percent of Cambridge
Ventures, Inc., the general partner in CVLP.

EXECUTIVE COMPENSATION AND OTHER INFORMATION


COMPENSATION COMMITTEE REPORT
     The Compensation Committee is responsible for reviewing and
approving all elements of the total compensation program for officers
of the Company and its subsidiaries and serves as the administrator
of the Company's Annual Management Incentive Plan ("Incentive Plan")
and the Executive Restricted Stock Plan ("Stock Plan").  The
committee is also responsible for monitoring the Company's executive
compensation programs to ensure that they are aligned with the
Company's business strategies and financial goals.

  A.  Executive Compensation Policy.
  
     The Company's total compensation program for officers includes
base salaries, annual incentive payments, and restricted stock
grants.  The committee's primary objective is to achieve above-
average performance by providing the opportunity to earn above-
average total compensation (base salary, at-risk annual and long-term
incentives) for above-average performance.  Each element of total
compensation is designed to work in concert.  The total program is
designed to attract, motivate, reward and retain the broad-based
management talent required to serve customer, employee, and
shareholder interests. The Company believes that the program also
motivates the Company's officers to acquire and retain appropriate
levels of stock ownership and is competitive with programs offered by
the companies that comprise the peer group ("Peer Group") included in
the performance graph on page 24.  It is the opinion of the
committee that the total compensation earned by Company officers in
fiscal year 1997 achieves these objectives and is fair and
reasonable.  Each aspect of the total compensation program is
discussed in greater detail below.

  B.  Components of Executive Compensation.
  
     Annual Compensation.  The annual compensation program consists
of two components, base salary and an at-risk incentive payment.
Individual salaries are set within ranges based on comparisons to
actual pay for comparable positions within the Peer Group, and
industry in general.  In determining actual salaries within these
ranges, the committee takes into consideration individual
performance, experience, potential, and changes in executive
responsibilities.  Establishing industry-based salary ranges provides
an objective standard by which to judge the reasonableness of the
Company's salaries, maintains the Company's ability to compete for
and retain qualified executives, and ensures that internal
responsibilities are properly rewarded.

     All of the Company's officers, but particularly the five highest
paid officers, have a significant portion of their total compensation
at risk.  Participation in the Incentive Plan, which includes the
chief executive officer, is extended to those positions that play key
roles in achieving annual financial and operating objectives.  Annual
incentive opportunities are also based on periodic reviews of
prevailing Peer Group practices for comparable positions. The
potential incentive award is determined annually by non-employee
directors and is based upon a percentage of each participant's base
salary.  During the past fiscal year, incentive opportunities for
executive officers, excluding the chief executive officer, ranged
from 40 to 50 percent of salary.

     Prior to the start of the fiscal year, the committee recommends
to the board of directors, and the board of directors (excluding
Company and subsidiary employees) determines, minimum, target, and
maximum corporate performance levels.  The performance that is
measured is the Company's financial performance, as determined by the
Company's consolidated return on equity, relative to the average
return on equity of companies in the Peer Group.  Target performance
levels are set in excess of Peer Group performance in order to ensure
the linkage between financial performance and executive rewards.
Depending upon the Company's financial performance, the size of this
component can range from zero to the maximum level established for
each participant in the Incentive Plan.

     In determining the cash payment that was received by executive
officers during the past fiscal year, the Company's consolidated
return on equity exceeded the target performance level and was at the
maximum performance level as determined by the board of directors.
Incentive payouts correspondingly were at the maximum amounts.

     The second and smaller performance component is based upon each
executive's achievement of individual goals, which are consistent
with the Company's overall objectives and which are established prior
to the beginning of the fiscal year.  Individual performance is
monitored and evaluated subjectively throughout the fiscal year.
Overall performance is measured after the end of the fiscal year by
the chief executive officer.  Among the executive officers, during
the past fiscal year, no person had more than one-fourth of their
total potential incentive under the Incentive Plan dependent upon the
attainment of individual objectives.

     Amounts actually paid under the Incentive Plan during the past
fiscal year relate to the Company's financial performance during
fiscal year 1996.  The amounts payable under the Incentive Plan as a
result of the Company's financial performance for the past fiscal
year will not be determined and paid until the end of calendar year
1997, and, accordingly,  will be reflected in next year's proxy
statement as part of fiscal year 1998 compensation.

     During the past fiscal year, Indiana Gas recognized, with the
approval of its board of directors, and the concurrence of the
independent members of the Company's board of directors, an after-tax
restructuring charge in the amount of $24.5 million.  The charge
occurred as a result of a restructuring of Indiana Gas' operations,
including the implementation of several actions designed to both
reduce its operating costs and position it to remain a competitive
choice for energy consumers vis-a-vis other energy providers.  The
Indiana Gas board of directors concluded that these actions were
necessary in light of the fundamental changes occurring in the
industry.  The Company's consolidated return on equity for the past
fiscal year after the Indiana Gas restructuring charge was 7 percent
and before the Indiana Gas restructuring charge was 14.7 percent.

     The Incentive Plan authorizes the independent members of the
Company's board of directors to exclude the effect of the
restructuring charge from the measurement of the Company's
consolidated return on equity if they conclude that the action is
appropriate in light of unforeseen or unusual circumstances.  On
October 31, 1997, the Company's independent members of the board of
directors determined that the restructuring charge should be excluded
when measuring the Company's fiscal year 1997 consolidated return on
equity under the Incentive Plan.  In making that determination, those
directors concluded that in light of the swift and fundamental
changes occurring in the energy industry, as well as the long-term
benefits that should inure to Indiana Gas and its customers from the
restructuring, management should be encouraged to undertake this
action, even though it will adversely affect the Company's short-term
financial results.  This action will affect payments made under the
Incentive Plan during fiscal year 1998, and will be reported as
compensation in next year's proxy statement.  Absent this
determination by the independent members of the board of directors,
management would experience a substantial reduction in their at-risk
compensation, even though their actions were determined by the board
of directors to be both necessary and appropriate.

     Long-Term Incentive Compensation.  The purpose of the Stock Plan
is to retain and motivate the Company's principal officers and to
increase their incentive to work toward the attainment of the
Company's long-term growth and profit objectives by providing them
with a means of acquiring or increasing a proprietary interest.
Under the Stock Plan, the committee recommends to the board, and the
board (excluding Company and subsidiary employees) determines, the
executive officers, as well as other principal officers, to whom
grants will be made and the percentage of each officer's base salary
to be used for determining the number of shares to be granted.  Like
the potential cash payment that may be received under the Incentive
Plan, this component of total compensation is also performance driven
and totally at-risk.

     The Stock Plan provides for a grant to eligible officers at the
outset of each measuring period and also provides for grants of
shares to be made to newly eligible principal officers during a
measuring period.  Through the end of the past fiscal year, every
three years a grant was provided for each measuring period under the
plan, with those periods consisting of consecutively running three-
year periods.  Shares were allocated under the Stock Plan effective
October 1, 1987, for the "First Measuring Period," October 1, 1990,
for the "Second Measuring Period," October 1, 1993, for the "Third
Measuring Period," and October 1, 1996, for the "Fourth Measuring
Period."  As discussed below, effective October 1, 1997, the Stock
Plan was amended to provide for annual grants to participants rather
than grants every three years.

     To be eligible for a grant, a principal must consent in writing
to observe the restrictions imposed on the shares.  The shares may
not be sold, transferred, pledged, or assigned until such
restrictions are lifted.  For the three-year grants that were
provided under the Stock Plan through the end of the past fiscal
year, the restrictions are lifted in 33 1/3 percent increments on the
fourth, fifth, and sixth anniversaries of the calendar day
immediately preceding the first calendar day of the measuring period.

     The granting of additional shares, if any, and the application
of forfeiture provisions, depends upon two primary criteria:  (i)
certain measurements of the total return to the Company's
shareholders in comparison to the total return of shareholders of the
companies in the Peer Group; and (ii) the continued employment of the
officer during the period of restriction.

     For each three-year measuring period under the Stock Plan,
depending upon the total return provided to the Company's
shareholders relative to the total return provided by each of the
companies in the Peer Group, there are three possible outcomes.
If the Company's total return places it in the bottom quartile,
all of the shares are forfeited.  If the Company's total return
places it in the second or third quartiles, the original grant is
vested, subject to continuing employment by the officers during
the remaining period of restriction.  If the Company's total
return places it in the top quartile, the original grant is doubled
and vested, subject to continuing employment by the officers during
the remaining period of restriction.

     For the First Measuring Period ended September 30, 1990, the
Second Measuring Period ended September 30, 1993, and the Third
Measuring Period ended September 30, 1996, the number of shares
originally granted were doubled under the Stock Plan because the
Company's total return to shareholders placed it in the top quartile
compared to the total return performance of the Peer Group companies.
Among all of the companies in the Peer Group, the Company was the
sole Peer Group member to perform in the top quartile for all three
measuring periods.

     Effective October 1, 1997, the Stock Plan was amended to provide
that grants would be provided on an annual basis instead of every
three years.  To reflect the change from three-year grants to annual
grants, the percentage of the participant's annual salary that is
used to determine the grant is no longer subject to a multiplier of
three.  Although grants will still be subject to a three year total
return performance measuring period, as described above, all of the
restrictions will be lifted on the fourth anniversary of the calendar
day immediately preceding the first calendar day of the measuring
period applicable to that grant.  It is the opinion of the committee
that this will better ensure that in each fiscal year the Company's
total return to shareholders will have a significant effect upon
participants' total compensation.

     It is the opinion of the committee that the Stock Plan meets its
objective of providing executive officers, as well as other principal
officers, with the appropriate long-term interest in maximizing
shareholder value.  A participant's increased level of equity in the
Company is contingent upon the additional enhancement of shareholder
value relative to the performance of companies in the Peer Group.  In
addition, the vesting restrictions provide an incentive for all plan
participants to remain with the Company.

  C.  Chief Executive Officer Compensation.
  
     The compensation of Lawrence A. Ferger, Chairman and Chief
Executive Officer, consists of the same components as for other
executive officers, namely base salary, an at-risk payment under the
Incentive Plan, and an at-risk grant of restricted stock under the
Stock Plan.

     In establishing Mr. Ferger's total compensation for fiscal year
1997, the committee considered the total compensation of other chief
executive officers in the Peer Group, the financial and business
performance of the Company, and a subjective evaluation of the
leadership role provided by Mr. Ferger.

     Mr. Ferger's payment received under the Incentive Plan during
fiscal year 1997 was based entirely upon the financial performance of
the Company as measured by its consolidated return on equity relative
to the average return on equity of companies in the Peer Group.  This
method of measurement ensures the linkage of this aspect of Mr.
Ferger's compensation to Company performance.  Under the Incentive
Plan, the maximum award Mr. Ferger was eligible to receive was an
amount equal to sixty percent of his base salary.  As discussed above
with respect to other executive officers, during the past fiscal year
the Company's consolidated return on equity exceeded the target
performance level and was at the maximum performance level as
determined by the board.  The incentive payout correspondingly was at
the maximum level.

     Mr. Ferger's receipt of restricted shares under the Stock Plan
is likewise directly linked to the Company's performance.  Whether
stock is received and, if so, in what amount, will depend upon the
measurement of the total return provided to the Company's
shareholders in comparison to the total return provided to the
shareholders of companies in the Peer Group.  As discussed above with
respect to the other executive officers, fiscal year 1997 was the
first year of the fourth three year measuring period under the Stock
Plan.  Whether and to what extent Mr. Ferger will be permitted to
retain the grant of restricted stock received during the past fiscal
year under the Stock Plan will depend upon the Company's financial
performance during the Fourth Measuring Period.  Moreover, grants of
restricted stock after the past fiscal year will be in accordance
with the Stock Plan, as amended, as discussed in Section B under "Long-
Term Incentive Compensation".

     For the same reasons expressed above with respect to the
conclusion regarding the appropriateness of the total compensation
provided other executive officers, it is the opinion of the committee
that Mr. Ferger's total compensation is reasonable and appropriate.

     D.   Compensation Consultant, Termination Benefit Agreements And
          Deductibility Of Executive Compensation.
     
     To assist the committee, the services of an independent
compensation consultant are utilized.  The consultant assists by
evaluating the total compensation system relative to the compensation
systems employed by companies in the Peer Group.  The consultant also
provides an additional measure of assurance that the system is a
reasonable and appropriate means to achieve the Company's objectives.

     As described on page 27 under the heading "Employment and
Termination Benefit Agreements," with the exception of Timothy M.
Hewitt, the Company has entered into such agreements with each of the
executive officers.  Neither form of agreement affects in any manner
the recommendations of the committee and the determinations by the
board (excluding employees of the Company and its subsidiaries) with
respect to the total compensation provided the executive officers.

     In 1993, Congress enacted Section 162(m) of the Internal Revenue
Code (Code), applicable to the individual executives named in
the Summary Compensation Table, that disallows corporate deductibility
for "compensation" paid in excess of $1 million unless the compensation
is payable solely on account of achievement of an objective performance
goal. The committee does not anticipate that in the near future the
compensation paid to executive officers in the form of base salaries
and incentive compensation will be non-deductible under Section
162(m) of the Code.

                         
                         Otto N. Frenzel III, Chair
                         Don E. Marsh
                         Richard P. Rechter
                         
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
     Lawrence A. Ferger is a director of National City Bank, Indiana.
Otto N. Frenzel III, chair of the Company's Compensation Committee,
is Chairman of the Executive Committee of National City Bank,
Indiana.  During the past fiscal year, Indiana Gas had a bank line of
credit agreement with National City Bank, Indiana for borrowing by
Indiana Gas not to exceed $25,000,000 at any one time.  At September
30, 1997, there was $5,000,000 outstanding under such line.  The
interest on borrowings under that line of credit has been at a rate
not to exceed the prime lending rate at the bank which, in the
opinion of the board of directors, is fair.  Similar bank lines of
credit agreements have been in effect between Indiana Gas and the
bank in the normal course of business for many years.  Moreover, as
of September 30, 1997, Energy Realty, Inc., an indirect subsidiary of
the Company, had two loans outstanding in an aggregate amount of
approximately $5,432,254 from National City Bank, Indiana at variable
rates of interest tied to commercially-recognized benchmarks, which
in the opinion of the board of directors are fair.  During the past
fiscal year, the Company and its subsidiaries collectively paid
National City Bank, Indiana remittance processing fees, including
bank service charges, of $611,495, and interest on short-term debt in
the amount of $247,064, which payments, in the opinion of the board
of directors, were fair.  Finally, on July 31, 1995, Energy Realty,
Inc. and National City Bank, Indiana each invested $806,250 in the
Lebanon Housing Partnership, L.P.  As a result of these investments,
each company owns 37.125% of the partnership.

     None of the Company's executive officers is a member of the
Compensation Committee.

COMPENSATION

     The following tabulation shows for the fiscal years ended
September 30, 1995, 1996 and 1997, the compensation paid by the
Company and its subsidiaries to each of the five most highly
compensated executive officers of the Company (considering for this
purpose Mr. Ard, Mr. Baker and Mr. Hewitt, all of whom were executive
officers of Indiana Gas during the past fiscal year, to be executive
officers of the Company) in all capacities in which they served.

<TABLE>                                  
                     Summary Compensation Table
                                  
     (a)        (b)    (c)       (d)          (e)         (h)          (i)
<S>             <C>    <C>       <C>      <C>         <C>           <C>
                                                        Long-Term
                                                      Compensation   All Other
                  Annual Compensation                    Payouts    Compensation
                                          Other Annual    LTIP
Name and                                  Compensation   Payouts
Principal
Position in
Group (1)       Year   Salary    Bonus(2)     (3)         (4)          (5)
                                                                     
                  
Lawrence A.     1995   $347,615  $139,439 $ 35,665     $198,336      $ 15,790
Ferger,         1996    370,922   173,808   26,817      223,592        15,980
Chairman,       1997    396,692   222,577   55,052      297,232        39,225
President and
Chief
Executive
Officer

Paul T. Baker,  1995    236,077    75,093   10,541       52,506        13,050
Sr. V.P. and    1996    249,308    89,709    8,240       59,183        13,137
Chief           1997    257,785   118,561   20,134       99,068        28,991
Operating
Officer,
Indiana Gas

Niel C.         1995    175,885    56,179   14,271       81,829        11,700
Ellerbrook,     1996    186,846    67,617   10,604       92,235        11,985
Executive V.P.  1997    217,923    89,271   21,050      114,419        21,117
and Treasurer
and Chief
Financial
Officer

Anthony E.      1995    133,962    32,755    7,905       48,202        10,926
Ard,            1996    142,019    38,104    5,727       54,332        12,067
Sr. V.P. of     1997    147,477    68,485   10,678       58,102        20,037
Corp. Affairs,
Indiana Gas
                
Timothy M.      1995    124,577    31,875    6,071       38,601        13,251
Hewitt, V.P.    1996    131,385    36,680    4,317       43,509        10,721
of Operations   1997    136,977    50,510    7,577       41,739        14,662
and
Engineering,
Indiana Gas
</TABLE>

(1)  The principal position titles are as of September 30, 1997.  As
described on pages 4-7, Messrs. Ferger, Baker, Ellerbrook and Ard each
had principal position changes effective October 1, 1997.

(2)  The amounts shown in this column are payments under the Annual
Management Incentive Plan, which was discussed above in Parts B and C
of the Compensation Committee Report relating to "Annual
Compensation."  Amounts paid in any fiscal year are attributable to
the Company's performance in the prior fiscal year.  Payments earned
in fiscal year 1997 have not been determined and approved for
distribution by the Company's Compensation Committee.  The Company's
performance over the last five years is depicted on page 25.

(3)  The amounts shown in this column are dividends paid on
restricted shares issued under the Stock Plan, which was discussed
above in Parts B and C of the Compensation Committee Report relating
to "Long-Term Incentive Compensation."

(4)  The amounts shown in this column represent the value of shares
issued under the Stock Plan and for which restrictions were lifted in
each of those fiscal years.  For instance, the amounts shown for
fiscal year 1997 represent the value of one-third of the Third
Measuring Period shares, including the performance grant, issued
under the Stock Plan and for which restrictions were lifted as of
September 30, 1997.  After the lifting of those restrictions, the
executive officers, as a group, held 79,034 restricted shares, with
an aggregate market value of those shares as of that date of
$2,351,263.  Those shares continue to be subject to restrictions
imposed by the Stock Plan, and they represent two-thirds of the
initial grant and the performance grant of the Third Measuring Period
shares, and all of the initial grant of the Fourth Measuring Period.
The number and value of restricted shares held by each executive
officer on September 30, 1997, was as follows:  Lawrence A. Ferger -
37,880 shares, $1,126,930; Paul T. Baker - 14,178 shares, $421,796;
Niel C. Ellerbrook - 14,458 shares, $430,126; Anthony E. Ard - 7,332
shares, $218,127; and Timothy M. Hewitt - 5,186 shares, $154,284.

(5)  The amounts shown in this column are Company contributions to
the Retirement Savings Plan and the dollar value of insurance premiums
paid by, or on behalf of, the Company and its subsidiaries with
respect to split-dollar life insurance for the benefit of executive
officers.

LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR

<TABLE>
                                        Estimated Future Payouts
                                    Under Non-Stock Price-Based Plans
                                                                     
      (a)          (b)       (c)          (d)        (e)        (f)
<S>            <C>       <C>            <C>        <C>        <C>
               Number of  Performance                        
Name and         Shares,    or Other                Target      
Principal       Units or Periods Until  Threshold   Number     Maximum
Position in       Other   Maturation    Number of  of Shares  Number of
Group (1)      Rights(2) or Payout(3)    Shares(4)   (5)      Shares(6)

Lawrence A.      32,885          -           0       17,899     35,798     
Ferger,          
Chairman,
President and
Chief Executive
Officer

Paul T. Baker,   12,513          -           0        7,518     15,036     
Sr. V.P. and     
Chief Operating
Officer,
Indiana Gas
                                                       
Niel C.          12,535          -           0        6,766     13,532     
Ellerbrook,       
Executive V.P.                                         
and Treasurer                                          
and Chief                                              
Financial                                              
Officer                                                
                                                       
Anthony E. Ard,   6,355          -           0        3,425      6,850     
Sr. V.P. of      
Corp.  Affairs,
Indiana Gas
                                                       
Timothy M.        4,485          -           0        2,381      4,762     
Hewitt, V.P. of   
Operations and
Engineering,
Indiana Gas

</TABLE>

(1)  The principal position titles are as of September 30, 1997.  As
described on pages 4-7, Messrs. Ferger, Baker, Ellerbrook and Ard each
had principal position changes effective October 1, 1997.

(2)  This column shows the restricted shares awarded during fiscal
year 1997 under the Executive Restricted Stock Plan.  The manner for
determining the awards under the plan, and other terms and conditions
of that plan, are discussed above in Part B of the Compensation
Committee Report relating to "Long-Term Incentive Compensation."  The
market value of the shares on the dates of the grants is determined
according to a formula in the plan based on an average price over a
period of time preceding the grant.  Dividends are paid directly to
the holders of the stock.  Included are the performance grant
relating to the Third Measuring Period and the initial grant shares
for the Fourth Measuring Period.  As explained above in footnote (4)
to the Summary Compensation Table, one-third of the Third Measuring
Period initial grant and performance grant shares became unrestricted
as of September 30, 1997, and the dollar value of those shares is
shown in the fiscal year 1997 data in column (h) of the Summary
Compensation Table.

(3)  As discussed above in Part B of the Compensation Committee
Report relating to "Long-Term Incentive Compensation," for grants
provided through the end of the past fiscal year, the restrictions
are lifted in 33 1/3 percent increments on the fourth, fifth, and
sixth anniversaries of the calendar day immediately preceding the
first calendar day of the measuring period.  The granting of additional
shares, if any, and the application of forfeiture provisions depends
upon certain measurements of the Company's total return to
shareholders in comparison to the total return to shareholders of a
predetermined group of comparable companies.

(4)  The Fourth Measuring Period initial grant shares, which are
included in the total number of shares shown in column (b) and are
set forth separately in column (e), are subject to forfeiture.  If
the Company's performance compared to the peer group during this
measuring period places it in the bottom quartile, the executive
officers will forfeit all of the shares granted for this period.

(5)  The Fourth Measuring Period initial grant shares, which are
included in the total number of shares in column (b), are presented
in this column.  If the Company's performance compared to the peer
group during this measuring period places it in the middle two
quartiles, these shares will vest.  As indicated in footnote (2), in
addition to these shares, column (b) includes the Third Measuring
Period performance grant shares.  The performance grant shares will
generally vest upon the expiration of the relevant time periods
specified in the Executive Restricted Stock Plan and are no longer
subject to risk of forfeiture.

(6)  Under the Executive Restricted Stock Plan, if the Company's
performance compared to the peer group during the Fourth Measuring
Period places it in the top quartile, an additional performance grant
equal to the original Fourth Measuring Period grant will be made.  In
that event, the shares shown in column (e) will be doubled.

CORPORATE PERFORMANCE

     The following Total Return to Shareholders graph compares the
performance of the Company with that of the S&P 500 Composite, the
S&P Utilities Index and a group of peer gas distribution companies,
with the return weighted based on market capitalization.  The Return
on Equity graph compares the performance of the Company with the same
peer group.  For fiscal year 1997, companies in the peer group are as
follows:  AGL Resources,  Atmos Energy Corp., Bay State Gas Co.,
Cascade Natural Gas Corp., CTG Energy Resources, Inc. (formerly
Connecticut Natural Gas Corp.), Energen Corp., KeySpan Energy Corp.
(formerly Brooklyn Union), Laclede Gas Co., MCN Energy Group
(formerly MCN Corp.), National Fuel Gas Co., New Jersey Resources
Corp., NICOR, Inc., NW Natural (formerly Northwest Natural Gas Co.),
NUI Corp., Pacific Enterprises, Pennsylvania Enterprises, Inc.,
Peoples Energy Corp., Piedmont Natural Gas Co., Inc., Public Service
Co. of North Carolina, Inc., South Jersey Industries, Inc., SEMCO
Energy, Inc. (formerly Southeastern Michigan Gas Enterprises, Inc.),
Southern Union Co., Southwest Gas Corp., Southwestern Energy Co., UGI
Corp., Washington Gas Light Co. and WICOR, Inc.  The companies to be
included in the peer group were determined by one of the Company's
investment bankers and approved by the Company's Compensation
Committee.

     From year to year, the Company's investment bankers review the
composition of the peer group to ensure comparability among the
member companies.  If in their judgment a company is determined not
to be comparable, it will be removed from the peer group and, if
possible, replaced with a comparable company.  Companies can also be
removed if they are acquired or merged out of existence.  Based upon
an assessment of the comparability of the existing peer group, the
Company's investment bankers changed the peer group used for fiscal
year 1996 (the "1996 Peer Group") by removing both United Cities Gas
Co. and Washington Energy Co., which were each merged out of
existence, and adding Eastern Enterprises.  The 1996 Peer Group, as
revised for these changes, was used during fiscal year 1997 (the
"1997 Peer Group").  The following graphs reflect comparisons of
total return for the 1997 Peer Group, the 1996 Peer Group, the S&P
500 and the S&P Utilities.

Total Return to Shareholders (1) (2) (3)

                           [INSERT GRAPH A]

<TABLE>                                  
                  1992   1993   1994    1995   1996    1997
<S>              <C>    <C>    <C>     <C>    <C>     <C>
IEI              0.00%  24.79% 11.36%  28.07% 51.02%  93.01%
1997 PEER GROUP  0.00%  30.03% 15.90%  32.02% 66.55%  99.41%
1996 PEER GROUP  0.00%  30.50% 15.88%  31.42% 65.91%  99.75%
S&P 500          0.00%  13.00% 17.17%  52.02% 82.92% 156.91%
S&P UTILITIES    0.00%  24.43%  8.13%  37.96% 48.31%  69.64%
</TABLE>

(1)  The total return on investment (change in the year-end stock
price plus reinvested dividends) for each of the periods for the
Company, the respective peer groups, the S&P 500 Composite and the
S&P Utilities Index is based on the stock price or composite index at
the end of fiscal 1992.

(2)  As discussed in the "Compensation Committee Report" above, the
Stock Plan also measures the Company's total return to shareholders.
However, the Stock Plan methodology requires a determination of the
total return to shareholders of the Company and the peer group
companies by comparing a 12-month average trading price at the end of
the measuring period with a 12-month average price preceding the
measuring period. Unlike the Stock Plan methodology, the methodology
used in preparing the above performance graph requires a measurement
of the total return to shareholders of the Company and of the peer
group companies at specific points in time--activity as of September
30, 1992 compared with activity as of September 30, 1993, 1994, 1995,
1996 and 1997.  Moreover, the Stock Plan also uses a three-year
measurement period versus the five-year measurement period used in
the above performance graph.  Finally, the Stock Plan's measurement
of peer group companies' performance is not weighted by the
companies' relative market capitalization, while the above
performance graph does use such weighting. Because of the differences
in these two methodologies, the measurements produced by the Stock
Plan and the above performance graph will vary.

(3)  Two companies had a significant impact on the total return
performance of both the 1997 Peer Group and the 1996 Peer Group when
those returns were weighted based upon market capitalization.
Excluding those two companies which have returns substantially higher
than the other companies in the Peer Groups, the total returns of
both the 1997 Peer Group and the 1996 Peer Group would have been
approximately 85 percent, compared to the Company's total return of
approximately 93 percent.

Return on Equity (1) (2) (3)

                          [INSERT GRAPH B]
<TABLE>                                  
                  1992    1993   1994    1995   1996
<S>              <C>     <C>    <C>     <C>    <C>
IEI              11.46%  14.68% 13.00%  11.94% 14.63%
PEER GROUP        9.45%  10.34% 11.40%   9.15% 12.05%
</TABLE>

(1)  Under the Incentive Plan, payments are awarded on the basis of
the Company's average return on equity compared to that of the peer
group in any fiscal year and are paid in the first quarter of the
succeeding fiscal year.  Accordingly, payments paid to executive
officers in the first quarter of fiscal year 1997 were based on the
Company's comparative return on equity during the fiscal year 1996,
and so on, back to 1988, the first year in which payments were made.

(2)  For purposes of the Incentive Plan, average return on equity for
both the Company and the peer group has been computed using the
simple average of beginning and ending common shareholders' equity as
of September 30.

(3)  The peer group return on equity by fiscal year reflects the peer
group for each of those years as determined by the Company's
investment bankers and approved by the Compensation Committee.  See
the discussion above under "Corporate Performance."

RETIREMENT SAVINGS PLAN

     As of October 1, 1994, Indiana Gas merged its Retirement Savings
Plan for bargaining employees ("Bargaining Savings Plan") into its
Retirement Savings Plan for non-bargaining employees ("Savings
Plan").  The primary objective for this action was to reduce the
level of resources required to administer two plans.  In general, the
Savings Plan permits participants to elect to have not more than 15
percent of their qualified compensation (subject to certain maximums
imposed on highly compensated employees by the Internal Revenue Code)
invested on a tax-deferred basis in shares of the Company's Common
Stock or various investment funds.  Non-bargaining participants in
the Savings Plan have matching Company contributions made to the plan
on their behalf equal to 100 percent of their contributions not in
excess of 3 percent of their individual redirected compensation, and
50 percent of their contributions in excess of 3 percent, but not in
excess of 8 percent of their individual redirected compensation.
Also, a 2.5 percent lump sum Company contribution is made to the
Savings Plan for all eligible non-bargaining employees at the end of
each year.  Effective October 1, 1997, sponsorship of the Savings
Plan was transferred from Indiana Gas to the Company and that plan
was renamed the Indiana Energy, Inc. Retirement Savings Plan.  Other
than sponsorship of the plan, it remains unchanged in all material
respects.

     The Summary Compensation Table shows the value of Indiana Gas
contributions made to the plan for executive officers in the column
marked "All Other Compensation."

RETIREMENT PLANS

     During the past fiscal year, Indiana Gas had two defined benefit
pension plans covering full-time employees of the Company and certain
of its subsidiaries who meet certain age and service requirements.
One such plan covers salaried employees, including executive
officers, and provides fixed benefits at normal retirement age based
upon compensation and length of service, the costs of which are fully
paid by the employer and are computed on an actuarial basis.  The
pension plan also provides for benefits upon death, disability and
early retirement under conditions specified therein.  The
remuneration covered by this plan includes all compensation for
regular work periods (excluding overtime, bonuses and other forms of
additional compensation).  As of July 1, 1991, the retirement plans
maintained by Terre Haute and Richmond were merged into, and became
part of, the Indiana Gas defined benefit pension plans.  Effective
October 1, 1997, sponsorship of the plan that covers salaried
employees was transferred to the Company and it was renamed the
Indiana Energy, Inc. Combined Non-Bargaining Retirement Plan.  Other
than sponsorship of the plan, it remains unchanged in all material
respects.

     During the past fiscal year, Indiana Gas had a supplemental
pension plan covering the principal officers of the Company, its
subsidiaries, and Carl L. Chapman, president of ProLiance Energy,
LLC, a joint venture between a Company subsidiary and Citizens By-
Products Coal Company, an affiliate of Citizens Gas & Coke Utility.
The supplemental pension plan provides fixed benefits at normal
retirement age based upon compensation and is computed on an
actuarial basis.  The supplemental pension plan also provides for
benefits upon death, disability and early retirement under conditions
specified therein, including service requirements.  This supplemental
pension plan also provides a reduced benefit to a participant who
voluntarily terminates his employment with a participating employer
(which may consist of the Company or one or more of its subsidiaries)
before normal retirement age (65), but following a change in control
of the Company.  The remuneration covered by the supplemental pension
plan includes all compensation for regular work periods (including
incentive payments and other forms of additional compensation).
Effective October 1, 1997, sponsorship of this plan was transferred
to the Company and it was renamed the Indiana Energy, Inc. Unfunded
Supplemental Retirement Plan.  Other than sponsorship of the plan, it
remains unchanged in all material respects.

     Upon retirement at or after age 65, any participant in the
supplemental pension plan will, in general, be entitled to an annual
pension for life which, when added to primary Social Security
benefits, benefits paid under the defined benefit pension plan
described above and benefits under the Retirement Savings Plan
attributable to contributions by participants' employers, will equal
approximately 65 percent of the participant's average annual
compensation during the 60 consecutive calendar months immediately
preceding the participant's retirement date.  The amounts paid under
the supplemental pension plan are unfunded and are paid from the
general assets of the Company.

     The following table illustrates the estimated normal annual
retirement benefits payable to a covered participant retiring at age
65 under the supplemental pension plan and under the defined benefit
plan based on the specified remuneration and under the Retirement
Savings Plan attributable to contributions made by the Company and,
as pertinent, one or more of its subsidiaries.  The compensation
included in the Summary Compensation Table under salary and payments
under the annual Incentive Plan qualifies as remuneration for
purposes of these plans.  The amounts shown do not reflect
reductions, which would result from joint and survivor elections.


                            Pension Table
                   15 or More Years of Service (1)
                                  
                 Remuneration     Amount of Benefits
                     Level               (2)
                  $125,000            $ 81,250
                   150,000              97,500
                   175,000             113,750
                   200,000             130,000
                   225,000             146,250
                   250,000             162,500
                   300,000             195,000
                   350,000             227,500
                   400,000             260,000
                   450,000             292,500
                   500,000             325,000
               
 (1)  The compensation covered by the plans includes the salary and
incentive payments shown on the Summary Compensation Table.  Years of
service are not used in calculating the benefit amount under the
Unfunded Supplemental Retirement Plan.  The amounts shown above are
offset by Social Security and benefits under the Retirement Savings
Plan attributable to contributions made by the Company and, as
pertinent, one or more of its subsidiaries.
                                  
  (2) Although the benefit attributable to the Savings Plan will be
paid in a single lump sum payment, it has been converted to an annual
benefit for purposes of this table.  The estimated aggregate annual
pension plan benefit may be greater than the amounts in the table to
the extent that the Savings Plan benefit, after conversion to an
annual benefit and when added to the annual benefit under the
applicable defined benefit plan, exceeds the amount specified in the
table.  Since the Savings Plan has only been in effect for a few
years, it is unlikely in the near future that the aggregated Savings
Plan benefit and defined benefit plan benefits will exceed the amount
specified in the table.
                                  
                                  
EMPLOYMENT AND TERMINATION BENEFIT AGREEMENTS
                                  
   The Company, with approval of the boards of directors, has
entered into employment agreements with four out of the five
executive officers listed in the Summary Compensation Table. Each
agreement continues unless notice of termination is given by either
party, in which event the agreement will terminate three years from
the date of the notice.  The period between notice and termination is
defined as an "employment period" under each agreement.  Each officer
is entitled to compensation consisting of the annual aggregate base
salary or salaries, and such additional compensation as the board
determines throughout the employment period.  Each agreement is also
subject to termination in the event of disability, death, or
voluntary retirement by the individual or his termination for cause.
                                  
   The Company, with approval of the board of directors, has
entered into termination benefit agreements with each of the
executive officers listed in the Summary Compensation Table.  With
the exception of Timothy M. Hewitt, the agreements provide that if
there is an acquisition of control of the Company (as defined in the
agreements), the Company is obligated to pay the termination benefits
under the following conditions:
                                  
     Within three years the Company terminates the employment of
     the executive for any reason (other than cause, death, the
     executive's attainment of age 65,or the executive's total and
     permanent disability); or
                                  
     Within three years the executive voluntarily terminates his
     employment for good reason (i.e., certain material changes in the
     terms of the executive's employment);or
                                  
     The executive voluntarily terminates his employment without
     reason during the 30-day period immediately following the first
     anniversary of the acquisition of control.
                                  
The termination benefits payment is the executive's average annual
compensation for the most recent five calendar years  multiplied by
299.99%.  The initial term of the agreements expires on October 1,
2002 and shall be automatically extended for one year periods unless
the Company notifies the executive prior to October 1 of each
succeeding year that the Agreement will terminate at the end of the
five year period that begins with October 1 following the date of
such written notice.  The agreement with Mr. Hewitt is comparable to
the agreements just described, except that the provisions of Mr.
Hewitt's agreement, including the termination benefits payment, are
predicated upon the use of one year rather than three years.
                                  
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
                                  
   Arthur Andersen, L.L.P., Indianapolis, has been selected by the
board of directors as the independent public accountants of the
Company and its subsidiaries for fiscal year 1998.  The selection was
made upon the recommendation of the Audit Committee of the board of
directors.  See "Meetings and Committees of the Board of Directors."
Arthur Andersen, L.L.P. has served as auditors for the Company since
1986 and for Indiana Gas since its organization in 1945.  A
representative of that firm will be present at the annual meeting,
will have the opportunity to make a statement and will be available
to respond to questions.
                                  
COST AND METHOD OF SOLICITATION
                                  
   The cost of preparing, assembling, printing and mailing this
proxy statement, the enclosed proxy and any other material which may
be furnished to shareholders in connection with the solicitation of
proxies for the meeting will be borne by the Company.  The Company
has retained Corporate Investor Communications, Inc. to assist in
soliciting proxies from shareholders, including brokers' accounts, at
an estimated fee of $5,000 plus reasonable out-of-pocket expenses.
In addition, some of the officers and regular employees of the
Company, who will receive no compensation therefor in addition to
their regular salaries, may solicit proxies by telephone, telegraph
or personal visits, and it is estimated that the cost of such
additional solicitation, if any, will not exceed $500, and will be
borne by the Company.  The Company expects to reimburse banks,
brokerage houses and other custodians of stock for their reasonable
charges and expenses in forwarding proxy material to beneficial
owners.
                                  
ANNUAL REPORT
                                  
   A copy of the Company's annual report, including consolidated
financial statements for the fiscal year ended September 30, 1997,
was mailed to shareholders on or about December 5, 1997.
                                  
REVOCATION RIGHTS
                                  
   A shareholder executing and delivering the enclosed proxy may
revoke it by written notice delivered to the secretary of the
Company, or in person at the annual meeting, at any time before the
authority granted by it is exercised.
                                  
SHAREHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
                                  
   Under Rule 14a-8 under the Securities Exchange Act of 1934,
shareholders of the Company may present proper proposals for
inclusion in the Company's proxy statement and for consideration at
the 1999 annual meeting of its shareholders by submitting their
proposals to the Company in a timely manner.  In order to be so
included for the 1999 annual meeting, shareholder proposals must be
received at the Company's principal office, 1630 North Meridian
Street, Indianapolis, Indiana 46202-1496, Attention:  Corporate
Secretary, no later than August 7, 1998, and must otherwise comply
with the requirements of Rule 14a-8.
                                  
   If a shareholder desires to bring business before the meeting
which is not the subject of a proposal timely submitted for inclusion
in the proxy statement, the shareholder must follow procedures
outlined in the Company's Code of By-Laws.  A copy of these
procedures is available upon request from the Corporate Secretary at
the address referenced above.  One of the procedural requirements in
the Company's Code of By-Laws is timely notice in writing of the
business the shareholder proposes to bring before the meeting.  To be
timely a shareholder's notice must be delivered to, or mailed and
received at, the principal office of the Company not less than 50
days nor more than 90 days prior to the meeting, provided, however,
that if less than 60 days' notice of the meeting date is given,
notice by the shareholder must be so received by the Company not
later than the tenth day following the day on which the notice is
given.
                                  
   By order of the board of directors.
                                  
                                          INDIANA ENERGY, INC.
                                  
                                  
                                  
                                  
                                          By RONALD E. CHRISTIAN
                                          Secretary and General Counsel
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
Indianapolis, Indiana
December 5, 1997
                                  
                                  
                                  
                                  
Please fill in, date and sign the enclosed proxy and return it
in the accompanying addressed envelope. No further postage is
required if mailed in the United States.  If you attend the annual
meeting and wish to vote your shares in person, you may do so.  Your
cooperation in giving this matter your prompt attention will be
appreciated.
                                  
                              [SIDE 1]

INDIANA ENERGY, INC.                    PROXY/VOTING INSTRUCTION CARD
COMMON STOCK

This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting on January 28, 1998.

ANTHONY E. ARD, CARL L. CHAPMAN and RONALD E. CHRISTIAN and each of
them, are hereby appointed proxies of the undersigned, with power of
substitution, to vote all of the shares of Common Stock of INDIANA
ENERGY, INC., owned by the undersigned, at the Annual Meeting of 
Shareholders to be held on January 28, 1998, and at any adjournments
thereof, on the matters and in the manner specified on the reverse side
of this proxy.

Receipt of Notice of Annual Meeting of Shareholders, dated December
5, 1997, and Proxy Statement attached thereto is hereby acknowledged.

This proxy will be voted as directed.  If no direction is given, this
proxy will be voted FOR the proposals.

1.  Election of Directors (three-year term):

       Nominees:  Paul T. Baker, Otto N. Frenzel III, Don E. Marsh and
                  Richard P. Rechter.

2.  Amendment to the Articles of Incorporation to increase the authorized
    Common Stock from 64,000,000 to 200,000,000 shares.

You are encouraged to specify your choices by marking the appropriate
box on the reverse side.

PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE.
                              [SIDE 2]

    x
Please mark your votes as in this example.
                                  
     This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s).  If no direction
is made, this proxy will be voted FOR the proposal.
                                  
                                      
     The Board of Directors recommends a vote FOR the
           Election of Directors and vote FOR the
         Amendment to the Articles of Incorporation.
                                      

                   FOR  WITHHELD authority for all Nominees

1.  Election of                  To withhold authority to vote
    Directors                    for any specific nominee(s), mark
                                 the "WITHHELD" box and write the
                                 name of each nominee for whom
                                 you are withholding authority to
                                 vote on the line provided below.


                    		   FOR  AGAINST  ABSTAIN
	
2.  Amendment to the Articles
    of Incorporation
 


3.  In their discretion, the proxies are authorized to vote upon such
    business as may properly come before the meeting.



                              Please sign exactly as your name(s)
                              appears hereon.  All joint tenants
                              should sign.  When signing  as
                              attorney,    executor,   administrator,
                              trustee or guardian, give full title as
                              such.  If a corporation, sign the  full
                              corporate   name   by   an   authorized
                              officer.   If  a partnership,  sign  in
                              partnership name by authorized person.



                              Signature(s)                   Date