SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

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

                 FOR THE QUARTERLY PERIOD ENDING MARCH 31, 1997

                                       OR

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

         For the transition period from              to
                                       --------------   -----------------


Commission file number 1-6788

                         THE UNITED ILLUMINATING COMPANY

             (Exact name of registrant as specified in its charter)

            CONNECTICUT                               06-0571640
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)                 

157 CHURCH STREET, NEW HAVEN, CONNECTICUT                       06506
 (Address of principal executive offices)                     (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-499-2000


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


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

                                                 YES  X  NO
                                                     ---   ---

     The  number of shares  outstanding  of the  issuer's  only  class of common
stock, as of March 31, 1997, was 14,101,291.


                                     - 1 -
<PAGE>




                                      INDEX

                          PART I. FINANCIAL INFORMATION

                                                                          PAGE
                                                                         NUMBER
                                                                         ------

Item 1.  Financial Statements.                                              3

         Consolidated Statement of Income for the three months ended
           March 31, 1997 and 1996.                                         3
         Consolidated Balance Sheet as of March 31, 1997 and
           December 31, 1996.                                               4
         Consolidated Statement of Cash Flows for the three months ended
           March 31, 1997 and 1996.                                         6

         Notes to Consolidated Financial Statements.                        7
           -   Statement of Accounting Policies                             7
           -   Capitalization                                               8
           -   Income Taxes                                                10
           -   Short-term Credit Arrangements                              11
           -   Supplementary Information                                   12
           -   Fuel Financing Obligations and Other Lease Obligations      13
           -   Commitments and Contingencies                               13
               -  Capital Expenditure Program                              13
               -  Nuclear Insurance Contingencies                          13
               -  Other Commitments and Contingencies                      14
                  - Connecticut Yankee                                     14
                  - Hydro-Quebec                                           14
                  - Voluntary Early Retirement and Separation Programs     14
                  - Property Taxes                                         14
                  - Site Decontamination, Demolition and Remediation Costs 15
           -   Nuclear Fuel Disposal and Nuclear Plant Decommissioning     15

Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.                                      17
           -   Major Influences on Financial Condition                     17
           -   Capital Expenditure Program                                 19
           -   Liquidity and Capital Resources                             20
           -   Subsidiary Operations                                       21
           -   Results of Operations                                       21
           -   Looking Forward                                             22

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.                                                26

Item 6.  Exhibits and Reports on Form 8-K.                                 27

         SIGNATURES                                                        28



                                     - 2 -
<PAGE>
<TABLE>
                          PART I: FINANCIAL INFORMATION
                          ITEM I: FINANCIAL STATEMENTS
                         THE UNITED ILLUMINATING COMPANY
                        CONSOLIDATED STATEMENT OF INCOME
                      (Thousands except per share amounts)
                                   (Unaudited)

<CAPTION>
                                                                                          Three Months Ended
                                                                                              March 31,
                                                                                       1997               1996
                                                                                       ----               ----

<S>                                                                                    <C>                 <C>     
OPERATING REVENUES (NOTE G)                                                            $180,325            $170,860
                                                                                   -------------      --------------
OPERATING EXPENSES
  Operation
     Fuel and energy                                                                     54,921              31,636
     Capacity purchased                                                                  10,917              10,639
     Early retirement program charge                                                       -                  7,227
     Other                                                                               37,290              36,388
  Maintenance                                                                             9,235               8,899
  Depreciation                                                                           17,092              16,292
  Amortization of cancelled nuclear project and deferred return                           3,440               3,440
  Income taxes (Note E)                                                                  11,315              12,612
  Other taxes (Note G)                                                                   13,965              14,685
                                                                                   -------------      --------------
       Total                                                                            158,175             141,818
                                                                                   -------------      --------------
OPERATING INCOME                                                                         22,150              29,042
                                                                                   -------------      --------------
OTHER INCOME AND (DEDUCTIONS)
  Allowance for equity funds used during construction                                       204                 182
  Other-net (Note G)                                                                        781                (207)
  Non-operating income taxes                                                              1,417               1,269
                                                                                   -------------      --------------
       Total                                                                              2,402               1,244
                                                                                   -------------      --------------
INCOME BEFORE INTEREST CHARGES                                                           24,552              30,286
                                                                                   -------------      --------------
INTEREST CHARGES
  Interest on long-term debt                                                             16,372              16,490
  Interest on Seabrook obligation bonds owned by the company                             (1,691)                  -
  Other interest (Note G)                                                                   766                 585
  Allowance for borrowed funds used during construction                                    (486)               (392)
                                                                                   -------------      --------------
                                                                                         14,961              16,683
  Amortization of debt expense and redemption premiums                                      678                 679
                                                                                   -------------      --------------
       Net Interest Charges                                                              15,639              17,362
                                                                                   -------------      --------------

MINORITY INTEREST IN PREFERRED SECURITIES                                                 1,203               1,203
                                                                                   -------------      --------------

NET INCOME                                                                                7,710              11,721
Discount on preferred stock redemptions                                                     (19)               -
Dividends on preferred stock                                                                 51                 131
                                                                                   -------------      --------------
INCOME APPLICABLE TO COMMON STOCK                                                        $7,678             $11,590
                                                                                   =============      ==============

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                                              14,101              14,100

EARNINGS PER SHARE OF COMMON STOCK                                                        $0.54               $0.82

CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK                                         $0.72               $0.72
</TABLE>


                The   accompanying    Notes   to   Consolidated
    Financial  Statements  are an  integral  part  of the financial statements.


                                     - 3 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                           CONSOLIDATED BALANCE SHEET

                                     ASSETS
                             (Thousands of Dollars)

<CAPTION>
                                                            March 31,          December 31,
                                                               1997               1996*
                                                            --------            ----------
                                                           (Unaudited)
<S>                                                           <C>                 <C>
Utility Plant at Original Cost
  In service                                                  $1,848,052          $1,843,952
  Less, accumulated provision for depreciation                   600,835             585,646
                                                          ---------------     ---------------
                                                               1,247,217           1,258,306

Construction work in progress                                     41,468              40,998
Nuclear fuel                                                      29,931              23,010
                                                          ---------------     ---------------
     Net Utility Plant                                         1,318,616           1,322,314
                                                          ---------------     ---------------


Other Property and Investments                                    27,353              26,081
                                                          ---------------     ---------------

Current Assets
  Cash and temporary cash investments                             29,688               6,394
  Accounts receivable
   Customers, less allowance for doubtful
     accounts of $1,900 and $2,300                                60,196              63,722
   Other                                                          29,216              38,367
  Accrued utility revenues                                        24,459              29,139
  Fuel, materials and supplies, at average cost                   22,085              22,010
  Prepayments                                                      6,822               3,608
  Other                                                              209                 110
                                                          ---------------     ---------------
     Total                                                       172,675             163,350
                                                          ---------------     ---------------

Deferred Charges
  Unamortized debt issuance expenses                               6,388               6,580
  Other                                                              535               1,485
                                                          ---------------     ---------------
     Total                                                         6,923               8,065
                                                          ---------------     ---------------

Regulatory Assets (future amounts due from customers
                   through the ratemaking process)
  Income taxes due principally to book-tax differences           286,841             289,672
  Connecticut Yankee                                              61,617              64,851
  Deferred return - Seabrook Unit 1                               34,610              37,757
  Unamortized redemption costs                                    25,726              25,063
  Unamortized cancelled nuclear projects                          13,004              13,297
  Uranium enrichment decommissioning cost                          1,345               1,377
  Other                                                            7,162               9,068
                                                          ---------------     ---------------
     Total                                                       430,305             441,085
                                                          ---------------     ---------------

                                                              $1,955,872          $1,960,895
                                                          ===============     ===============
</TABLE>
*Derived from audited financial statements

                The   accompanying   Notes   to   Consolidated   Financial
                Statements are an integral part of the financial statements.

                                     - 4 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                           CONSOLIDATED BALANCE SHEET

                         CAPITALIZATION AND LIABILITIES
                             (Thousands of Dollars)

<CAPTION>
                                                             March 31,          December 31,
                                                                1997               1996*
                                                             --------           -----------
                                                            (Unaudited)
<S>                                                            <C>                 <C>
Capitalization (Note B)
  Common stock equity
    Common stock                                                 $284,579            $284,579
    Paid-in capital                                                   772                 772
    Capital stock expense                                          (2,182)             (2,182)
    Retained earnings                                             154,372             156,847
                                                           ---------------     ---------------
                                                                  437,541             440,016
  Preferred stock                                                   4,421               4,461
  Minority interest in preferred securities                        50,000              50,000
  Long-term debt
    Long-term debt                                                726,550             826,527
    Investment in Seabrook obligation bonds                       (66,847)            (66,847)
                                                           ---------------     ---------------
      Net Long-term debt                                          659,703             759,680

          Total                                                 1,151,665           1,254,157
                                                           ---------------     ---------------

Noncurrent Liabilities
  Connecticut Yankee contract obligation                           51,071              54,752
  Pensions accrued                                                 49,742              49,205
  Obligations under capital leases                                 17,111              17,193
  Nuclear decommissioning obligation                               13,966              12,851
  Other                                                             4,865               4,815
                                                           ---------------     ---------------
          Total                                                   136,755             138,816
                                                           ---------------     ---------------

Current Liabilities
  Current portion of long-term debt                               137,500              69,900
  Notes payable                                                    54,589              10,965
  Accounts payable                                                 48,915              68,058
  Dividends payable                                                10,204              10,205
  Taxes accrued                                                    11,032                 503
  Interest accrued                                                 16,229              13,835
  Obligations under capital leases                                    321                 315
  Other accrued liabilities                                        36,665              36,091
                                                           ---------------     ---------------
          Total                                                   315,455             209,872
                                                           ---------------     ---------------

Customers' Advances for Construction                                1,863               1,888
                                                           ---------------     ---------------

Regulatory Liabilities   (future amounts owed to customers
                          through the ratemaking process)
  Accumulated deferred investment tax credits                      16,957              17,147
  Other                                                             2,032               1,811
                                                           ---------------     ---------------
          Total                                                    18,989              18,958
                                                           ---------------     ---------------

Deferred Income Taxes   (future tax liabilities owed              331,145             337,204
                         to taxing authorities)
Commitments and Contingencies (Note L)
                                                           ---------------     ---------------
                                                               $1,955,872          $1,960,895
                                                           ===============     ===============
</TABLE>

* Derived from audited financial statements

                The   accompanying   Notes   to   Consolidated   Financial
                Statements are an integral part of the financial statements.

                                     - 5 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Thousands of Dollars)
                                   (Unaudited)

<CAPTION>
                                                                              Three Months Ended
                                                                                  March 31,
                                                                            1997              1996
                                                                            ----              ----
<S>                                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                                  $7,710           $11,721
                                                                        -------------      ------------
  Adjustments  to  reconcile  net  income  to net  cash  provided
    by  operating activities:
     Depreciation and amortization                                            18,354            17,350
     Deferred income taxes                                                    (3,228)           (3,727)
     Deferred investment tax credits - net                                      (190)             (190)
     Amortization of nuclear fuel                                              1,568               900
     Allowance for funds used during construction                               (690)             (574)
     Amortization of deferred return                                           3,147             3,147
     Early retirement costs accrued                                             -                7,227
     Changes in:
                   Accounts receivable - net                                  12,677             2,304
                   Fuel, material and supplies                                   (75)              433
                   Prepayments                                                 3,214            (4,516)
                   Accounts payable                                          (19,143)          (17,401)
                   Interest accrued                                            2,394             1,722
                   Taxes accrued                                              10,529            12,423
                   Other assets and liabilities                                  742            (7,979)
                                                                        -------------      ------------
     Total Adjustments                                                        29,299            11,119
                                                                        -------------      ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                     37,009            22,840
                                                                        -------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Notes payable                                                               43,624            20,000
  Securities redeemed and retired:
    Long-term debt                                                           (32,585)          (10,800)
    Preferred stock                                                              (40)                -
  Discount on preferred stock redemption                                          19                 -
  Lease obligations                                                              (76)              (70)
  Dividends
    Preferred stock                                                              (52)             (131)
    Common stock                                                             (10,153)           (9,941)
                                                                        -------------      ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                              737              (942)
                                                                        -------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Plant expenditures, including nuclear fuel                                (14,452)          (11,154)
                                                                        -------------      ------------
NET CASH USED IN INVESTING ACTIVITIES                                        (14,452)          (11,154)
                                                                        -------------      ------------

CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD                                                     23,294            10,744
BALANCE AT BEGINNING OF PERIOD                                                 6,394             5,070
                                                                        -------------      ------------
BALANCE AT END OF PERIOD                                                     $29,688           $15,814
                                                                        =============      ============

CASH PAID DURING THE PERIOD FOR:
  Interest (net of amount capitalized)                                       $11,005           $15,001
                                                                        =============      ============
  Income taxes                                                                $3,700            $4,175
                                                                        =============      ============
</TABLE>

             The accompanying Notes to Consolidated Financial Statements
                 are an integral part of the financial statements.

                                     - 6 -
<PAGE>


                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

     The consolidated  financial  statements of the Company and its wholly-owned
subsidiary, United Resources, Inc., have been prepared pursuant to the rules and
regulations of the Securities and Exchange  Commission.  The statements  reflect
all  adjustments  that are, in the opinion of  management,  necessary  to a fair
statement of the results for the periods presented.  All such adjustments are of
a normal recurring nature. Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  The Company believes that the disclosures are adequate to make the
information  presented not misleading.  These consolidated  financial statements
should be read in conjunction with the consolidated financial statements and the
notes to consolidated financial statements included in the annual report on Form
10-K for the year  ended  December  31,  1996.  Such notes are  supplemented  as
follows:

(A)  STATEMENT OF ACCOUNTING POLICIES

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)

     The weighted  average AFUDC rates applied in the first three months of 1997
and 1996 were 8.0% and 8.5%, respectively, on a before-tax basis.

CASH AND CASH EQUIVALENTS

     For cash flow  purposes,  the  Company  considers  all highly  liquid  debt
instruments  with a maturity of three  months or less at the date of purchase to
be cash equivalents.

NUCLEAR DECOMMISSIONING TRUSTS

     External  trust  funds  are   maintained  to  fund  the  estimated   future
decommissioning  costs of the nuclear  generating units in which the Company has
an  ownership  interest.  These  costs are  accrued as a charge to  depreciation
expense over the estimated service lives of the units and are recovered in rates
on a current  basis.  The Company paid  $643,000 and $532,000 in the first three
months of 1997 and 1996, respectively,  into the decommissioning trust funds for
Seabrook Unit 1 and Millstone Unit 3. At March 31, 1997, the Company's shares of
the trust fund balances,  which included accumulated earnings on the funds, were
$9.9  million  and  $4.1  million  for  Seabrook  Unit 1 and  Millstone  Unit 3,
respectively.   These  fund  balances  are  included  in  "Other   Property  and
Investments"  and  the  accrued   decommissioning   obligation  is  included  in
"Noncurrent Liabilities" on the Company's Consolidated Balance Sheet.

INTEREST RATE AND FUEL PRICE MANAGEMENT

     The  Company   utilizes   interest  rate  and  fuel  oil  price  management
instruments to manage interest rate and fuel oil price risk.  Interest rate swap
agreements  have been entered into to effectively  convert the interest rates on
$225 million of variable  rate term loan  borrowings  to fixed rate  borrowings.
Amounts  receivable  or payable  under  these swap  agreements  are  accrued and
charged  to  interest  expense.  The  Company  enters  into basic fuel oil price
management instruments to help minimize fuel oil price risk by fixing the future
price for fuel oil used for  generation.  Amounts  receivable  or payable  under
these instruments are recognized in income when realized.

     At March 31, 1997, the Company  entered into swap  agreements for 1,040,000
barrels of fuel oil, which  effectively  limits the exposure to upward swings in
the  weighted  average  price to $15.78.  The Company  also has call options for
449,997 barrels of fuel oil at $19.25 per barrel.



                                     - 7 -
<PAGE>




                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NEW ACCOUNTING STANDARDS

     In February 1997, the Financial  Accounting Standards Board issued SFAS No.
128,  "Earnings  per Share".  This  statement,  which is effective for financial
statements issued for periods ending after December 15, 1997,  including interim
periods,  establishes simplified standards for computing and presenting earnings
per share (EPS).  It requires dual  presentation of basic and diluted EPS on the
face of the income  statement for entities with complex  capital  structures and
disclosure  of the  calculation  of  each  EPS  amount.  The  Company  does  not
anticipate  that  adoption of the  standard  will have a  significant  impact on
reported EPS.

(B)  CAPITALIZATION

     (A) COMMON STOCK

     The number of shares  outstanding  of the Company's  common  stock,  no par
value, at March 31, 1997 was 14,101,291.

     In 1990, the Company's  Board of Directors and the  shareowners  approved a
stock  option plan for  officers  and key  employees  of the  Company.  The plan
provides  for the  awarding of options to  purchase up to 750,000  shares of the
Company's common stock over periods of from one to ten years following the dates
when the options are  granted.  The  Connecticut  Department  of Public  Utility
Control  (DPUC) has approved the issuance of 500,000 shares of stock pursuant to
this plan.  The  exercise  price of each  option  cannot be less than the market
value of the stock on the date of the grant.  Options to purchase  17,799 shares
of stock at an exercise  price of $30 per share,  190,600  shares of stock at an
exercise price of $30.75 per share,  600 shares of stock at an exercise price of
$31.1875 per share,  4,000  shares of stock at an exercise  price of $35.625 per
share,  34,332 shares of stock at an exercise  price of $39.5625 per share,  and
5,000  shares of stock at an  exercise  price of  $42.375  per  share  have been
granted by the Board of Directors and remain outstanding at March 31, 1997.

     In October 1995, the Financial  Accounting  Standards Board issued SFAS No.
123,  "Accounting  for  Stock-Based  Compensation".  This  statement,  which  is
effective beginning in calendar year 1996,  establishes financial accounting and
reporting standards for stock-based  employee  compensation plans, such as stock
purchase plans, stock options,  restricted stock, and stock appreciation rights.
The statement  defines the methods of determining  the fair value of stock-based
compensation  and  requires the  recognition  of  compensation  expense for book
purposes.  However,  the  statement  allows  entities  to  continue  to  measure
compensation expense in accordance with the prior authoritative literature,  APB
No. 25,  "Accounting for Stock Issued to Employees",  but requires pro forma net
income and  earnings  per share be  disclosed  for each year for which an income
statement  is  presented  as if  SFAS  No.  123  were  applied.  The  accounting
requirements  of this  statement  are effective  for  transactions  entered into
beginning  January 1, 1996.  However,  pro forma  disclosures  must  include the
effects of all awards granted after January 1, 1995. As of March 31, 1997, there
were no options granted to which this statement would apply. The Company has not
elected to adopt the expense recognition provisions of SFAS No. 123.

     (B) RETAINED EARNINGS RESTRICTION

     The indenture under which $200 million principal amount of Notes are issued
places  limitations  on the payment of cash dividends on common stock and on the
purchase or redemption of common stock. Retained earnings in the amount of $96.2
million were free from such limitations at March 31, 1997.



                                     - 8 -
<PAGE>
                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     (C) PREFERRED STOCK

     On  February  3, 1997,  the  Company  purchased  at a discount  on the open
market, and canceled, 403 shares of its $100 par value 4.35%, Series A preferred
stock.  The shares,  having a par value of $40,300 were  purchased  for $21,271,
creating a net gain of $19,029.

     (D) LONG-TERM DEBT

     On December 30, 1996,  the Company  transferred  $51.3 million to a trustee
under an escrow  agreement.  The funds,  which were invested in Treasury  Notes,
were used to pay $50  million  principal  amount  of 7% Notes  that  matured  on
January 15, 1997 plus accrued interest.

     On February 15, 1997, the Company repaid $10.8 million  principal amount of
maturing 9.44% First  Mortgage  Bonds,  Series B, and redeemed,  at a premium of
$185,328,  the remaining  $21.6 million  outstanding  principal  amount of 9.44%
First  Mortgage  Bonds,  Series B,  issued by  Bridgeport  Electric  Company,  a
wholly-owned subsidiary of the Company that was merged with and into the Company
in September 1994.



                                     - 9 -
<PAGE>

                             THE UNITED ILLUMINATING COMPANY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(E) INCOME TAXES
<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                       March 31,
                                                                1997                1996
                                                                ----                ----
                                                                          (000's)
<S>                                                              <C>                 <C>
Income tax expense consists of:

Income tax provisions:
  Current
                    Federal                                      $10,066             $11,468
                    State                                          3,250               3,792
                                                            -------------       -------------
                      Total current                               13,316              15,260
                                                            -------------       -------------
  Deferred
                    Federal                                       (2,054)             (2,186)
                    State                                         (1,174)             (1,541)
                                                            -------------       -------------
                      Total deferred                              (3,228)             (3,727)
                                                            -------------       -------------

  Investment tax credits                                            (190)               (190)
                                                            -------------       -------------

     Total income tax expense                                     $9,898             $11,343
                                                            =============       =============

Income tax components charged as follows:
  Operating expenses                                             $11,315             $12,612
  Other income and deductions - net                               (1,417)             (1,269)
                                                            -------------       -------------

     Total income tax expense                                     $9,898             $11,343
                                                            =============       =============


The following table details the components of the
 deferred income taxes:
     Seabrook sale/leaseback transaction                         ($2,586)            ($2,622)
     Accelerated depreciation                                      1,459               1,374
     Tax depreciation on unrecoverable plant investment            1,232               1,244
     Unit overhaul and replacement power costs                    (1,203)             (1,435)
     Conservation and load management                               (930)               (137)
     Deferred fossil fuel costs                                     (686)                512
     Postretirement benefits                                        (144)                (68)
     Pension benefits                                                 57              (2,219)
     Other - net                                                    (427)               (376)
                                                            -------------       -------------

Deferred income taxes - net                                      ($3,228)            ($3,727)
                                                            =============       =============
</TABLE>

                                     - 10 -
<PAGE>
                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(F)  SHORT-TERM CREDIT ARRANGEMENTS

     The Company has a revolving credit  agreement with a group of banks,  which
currently  extends to December 10, 1997. The borrowing limit of this facility is
$75 million.  The facility  permits the Company to borrow funds at a fluctuating
interest  rate  determined  by the prime  lending  market in New York,  and also
permits the Company to borrow money for fixed  periods of time  specified by the
Company at fixed interest rates determined by the Eurodollar interbank market in
London, or by bidding,  at the Company's option. If a material adverse change in
the business, operations,  affairs, assets or condition, financial or otherwise,
or  prospects  of the Company and its  subsidiaries,  on a  consolidated  basis,
should  occur,  the banks may  decline to lend  additional  money to the Company
under this revolving credit agreement,  although  borrowings  outstanding at the
time of such an  occurrence  would not then become due and payable.  As of March
31, 1997, the Company had $45 million of short-term borrowings outstanding under
this facility.



                                     - 11 -
<PAGE>
                     THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(G)  SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                     March 31,
                                                               1997                1996
                                                               ----                ----
                                                                         (000's)

<S>                                                            <C>               <C>
Operating Revenues
------------------

     Retail                                                     $150,481          $158,558
     Wholesale - capacity                                          2,257             1,790
               - energy                                           27,078             9,796
     Other                                                           509               716
                                                          ---------------   ---------------
          Total Operating Revenues                              $180,325          $170,860
                                                          ===============   ===============

Sales by Class(MWH's)
---------------------

    Retail
     Residential                                                 498,271           524,021
     Commercial                                                  540,458           559,009
     Industrial                                                  269,134           270,952
     Other                                                        12,277            12,041
                                                          ---------------   ---------------
                                                               1,320,140         1,366,023
    Wholesale                                                    930,235           366,739
                                                          ---------------   ---------------
          Total Sales by Class                                 2,250,375         1,732,762
                                                          ===============   ===============

Other Taxes
-----------

    Charged to:
     Operating:
        State gross earnings                                      $5,732            $6,534
        Local real estate and personal property                    6,137             6,237
        Payroll taxes                                              2,096             1,914
                                                          ---------------   ---------------
                                                                  13,965            14,685
     Nonoperating and other accounts                                  93               132
                                                          ---------------   ---------------
          Total Other Taxes                                      $14,058           $14,817
                                                          ===============   ===============

Other Income and (Deductions) - net
-----------------------------------

     Interest and dividend income                                   $620              $304
     Equity earnings from Connecticut Yankee                         446               346
     Loss from subsidiary companies                                 (533)             (691)
     Miscellaneous other income and (deductions) - net               248              (166)
                                                          ---------------   ---------------
          Total Other Income and (Deductions) - net                 $781             ($207)
                                                          ===============   ===============

Other Interest Charges
----------------------

     Notes Payable                                                  $577              $328
     Other                                                           189               257
                                                          ---------------   ---------------
          Total Other Interest Charges                              $766              $585
                                                          ===============   ===============
</TABLE>

                                     - 12 -
<PAGE>

                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(K)  FUEL FINANCING OBLIGATIONS AND OTHER LEASE OBLIGATIONS

     The Company has a Fossil Fuel Supply Agreement with a financial institution
providing for financing up to $37.5 million in fossil fuel purchases. Under this
agreement,  the financing  entity may acquire and/or store natural gas, coal and
fuel oil for sale to the  Company,  and the Company may  purchase  these  fossil
fuels from the financing entity at a price for each type of fuel that reimburses
the  financing  entity for the direct  costs it has incurred in  purchasing  and
storing  the  fuel,  plus a charge  for  maintaining  an  inventory  of the fuel
determined  by  reference  to  the  fluctuating  interest  rate  on  thirty-day,
dealer-placed  commercial  paper in New York. The Company is obligated to insure
the  fuel  inventories  and  to  indemnify  the  financing  entity  against  all
liabilities,  taxes and other  expenses  incurred as a result of its  ownership,
storage and sale of fossil fuel to the Company. This agreement currently extends
to May 1998.  At March 31,  1997,  approximately  $26.8  million of fossil  fuel
purchases were being financed under this agreement.

(L)  COMMITMENTS AND CONTINGENCIES

CAPITAL EXPENDITURE PROGRAM

     The Company's continuing capital expenditure program is presently estimated
at approximately $228.9 million, excluding AFUDC, for 1997 through 2001.

NUCLEAR INSURANCE CONTINGENCIES

     The  Price-Anderson  Act, currently extended through August 1, 2002, limits
public liability  resulting from a single incident at a nuclear power plant. The
first $200 million of liability  coverage is provided by purchasing  the maximum
amount of commercially  available insurance.  Additional liability coverage will
be provided by an assessment of up to $75.5 million per incident, levied on each
of the  nuclear  units  licensed to operate in the United  States,  subject to a
maximum  assessment of $10 million per incident per nuclear unit in any year. In
addition,  if the sum of all public  liability  claims and legal costs resulting
from any nuclear  incident  exceeds the maximum amount of financial  protection,
each reactor  operator can be assessed an  additional  5% of $75.5  million,  or
$3.775 million.  The maximum assessment is adjusted at least every five years to
reflect the impact of inflation.  Based on its  interests in nuclear  generating
units,  the Company  estimates its maximum  liability would be $23.2 million per
incident. However, assessment would be limited to $3.1 million per incident, per
year. With respect to each of the nuclear  generating units in which the Company
has an  interest,  the Company will be  obligated  to pay its  ownership  and/or
leasehold share of any statutory assessment resulting from a nuclear incident at
any nuclear generating unit.

     The NRC requires each nuclear  generating unit to obtain property insurance
coverage  in a minimum  amount of $1.06  billion  and to  establish  a system of
prioritized  use of the insurance  proceeds in the event of a nuclear  incident.
The system  requires that the first $1.06 billion of insurance  proceeds be used
to  stabilize  the  nuclear  reactor to prevent any  significant  risk to public
health and safety and then for  decontamination  and  cleanup  operations.  Only
following completion of these tasks would the balance, if any, of the segregated
insurance  proceeds become available to the unit's owners. For each of the three
nuclear  generating  units in which the Company has an interest,  the Company is
required to pay its ownership  and/or  leasehold share of the cost of purchasing
such insurance.

     Although  each of these  units has  purchased  $2.75  billion  of  property
insurance coverage, representing the limits of coverage currently available from
conventional  nuclear  insurance  pools,  the cost of a nuclear  incident  could
exceed available insurance proceeds.  In addition,  two of the nuclear insurance
pools that provide  portions of this coverage may levy  assessments  against the
insured owner companies if pool losses exceed the accumulated funds available to
the pool. The maximum potential  assessments against the Company with respect to
losses occurring during current policy years are approximately $7.5 million.



                                     - 13 -
<PAGE>
                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

OTHER COMMITMENTS AND CONTINGENCIES

                               CONNECTICUT YANKEE

     On December  4, 1996,  the Board of  Directors  of the  Connecticut  Yankee
Atomic  Power  Company  (Connecticut  Yankee)  voted  unanimously  to retire the
Connecticut  Yankee nuclear plant (the Connecticut  Yankee Unit) from commercial
operation.  The Company has a 9.5% stock ownership  share in Connecticut  Yankee
and  relied  on the  Connecticut  Yankee  Unit  for  approximately  3.7%  of the
Company's 1995 total  generating  resources.  The power purchase  contract under
which the Company has purchased its 9.5%  entitlement to the Connecticut  Yankee
Unit's power  output  permits  Connecticut  Yankee to recover 9.5% of all of its
costs  from UI.  Connecticut  Yankee  has  filed  revised  decommissioning  cost
estimates and amendments to the power contracts with its owners with the Federal
Energy Regulatory  Commission (FERC). The preliminary  estimate of the amount of
future payments for the closing,  decommissioning  and recovery of the remaining
investment in the Connecticut Yankee Unit is approximately  $763 million.  Based
on regulatory precedent, Connecticut Yankee believes it will continue to collect
from its owners its  decommissioning  costs,  the unrecovered  investment in the
Connecticut  Yankee Unit and other costs associated with the permanent  shutdown
of the  Connecticut  Yankee Unit. UI expects that it will continue to be allowed
to recover all FERC-approved  costs from its customers through retail rates. The
Company's  estimate of its remaining  share of costs,  less return of investment
(approximately  $10  million)  and  return  on  investment  (approximately  $7.6
million) at March 31, 1997, is approximately $51.1 million. This estimate, which
is subject to ongoing review and revision, has been recorded by the Company as a
regulatory asset and an obligation on the Consolidated Balance Sheet.

                                  HYDRO-QUEBEC

     The Company is a  participant  in the  Hydro-Quebec  transmission  intertie
facility linking New England and Quebec,  Canada. Phase II of this facility,  in
which UI has a 5.45%  participating  share,  increased the capacity value of the
intertie from 690  megawatts to a maximum of 2000  megawatts in 1991. A ten-year
Firm Energy  Contract,  which provides for the sale of 7 million  megawatt-hours
per  year by  Hydro-Quebec  to the New  England  participants  in the  Phase  II
facility,  became effective on July 1, 1991. The Company is obligated to furnish
a guarantee for its  participating  share of the debt financing for the Phase II
facility.  As of March 31, 1997, the Company's guarantee liability for this debt
was approximately $7.9 million.

               VOLUNTARY EARLY RETIREMENT AND SEPARATION PROGRAMS

     In July 1996, the Company offered a Voluntary  Early  Retirement Plan and a
Voluntary  Separation  Plan to virtually  all of its  employees.  A total of 163
employees  accepted  one or the other of these  plans.  In the third  quarter of
1996,  the  Company  recognized  a charge to  earnings  of $14.9  million  ($8.7
million,  after-tax) to reflect the cost of these plans. The employees accepting
the offer will retire on or before December 30, 1997.

                                 PROPERTY TAXES

     On November 2, 1993, the Company received  "updated"  personal property tax
bills  from  the  City of New  Haven  (the  City)  for the tax  year  1991-1992,
aggregating $6.6 million,  based on an audit by the City's tax assessor.  On May
7, 1994,  the Company  received a  "Certificate  of  Correction....to  correct a
clerical  omission  or  mistake"  from the City's tax  assessor  relative to the
assessed value of the Company's  personal  property for the tax year  1994-1995,
which certificate  purports to increase said assessed value by approximately 53%
above the tax assessor's  valuation at February 28, 1994,  generating tax claims
of approximately $3.5 million. On March 1, 1995, the Company received notices of
assessment  changes  relative to the assessed  value of the  Company's  personal
property for the tax year  1995-1996,  which  notices  purport to increase  said
assessed value by approximately 48% over the valuation  declared by the Company,
generating  tax claims of  approximately  $3.5  million.  On May 11,  1995,  the
Company received  notices of assessment  changes relative to the assessed values
of the Company's  personal  property for the tax years  1992-1993 and 1993-1994,
which


                                     - 14 -
<PAGE>
                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

notices purport to increase said assessed values by  approximately  45% and 49%,
respectively, over the valuations declared by the Company, generating tax claims
of approximately $4.1 million and $3.5 million,  respectively. On March 8, 1996,
the Company  received  notices of  assessment  changes  relative to the assessed
value of the  Company's  personal  property  for the tax year  1996-1997,  which
notices  purport to increase said assessed value by  approximately  57% over the
valuations  declared by the Company and are  expected to generate  tax claims of
approximately  $3.8 million.  The Company is contesting each of these actions by
the City's tax assessor  vigorously.  In January 1996, the Connecticut  Superior
Court  granted  the  Company's  motion for  summary  judgment  against  the City
relative  to the  earliest  tax year at issue,  1991-1992,  ruling  that,  after
January  31,  1992,  the tax  assessor  had no  statutory  authority  to revalue
personal  property  listed and valued on the Company's tax list for the tax year
1991-1992.  This Superior Court decision,  which would also have been applicable
to and defeated the  assessor's  valuation  increases for the two subsequent tax
years, 1992-1993 and 1993-1994, was appealed by the City. On April 11, 1997, the
Connecticut  Supreme Court reversed the Superior  Court's  decisions in this and
two  other  companion  cases  involving  other  taxpayers,  ruling  that the tax
assessor had a three-year period in which to audit and revalue personal property
listed and valued on the  Company's tax list for the tax year  1991-1992.  It is
currently  anticipated that all of the pending cases for all of the tax years in
dispute will now be scheduled  for trial in the Superior  Court  relative to the
Company's  claim that the tax  assessor's  increases  in personal  property  tax
assessments  for the three  earliest  years were  unlawful for other reasons and
relative to the vigorously  contested issue, for all of the tax years, as to the
reasonableness  of the tax assessor's  valuation  method,  both as to amount and
methodology.  It is the present opinion of the Company that the ultimate outcome
of this dispute will not have a significant  impact on the financial position of
the Company.

             SITE DECONTAMINATION, DEMOLITION AND REMEDIATION COSTS

     The  Company  has  estimated  that the total  cost of  decontaminating  and
demolishing its decommissioned and demolished Steel Point Station and completing
requisite  environmental  remediation  of the site will be  approximately  $11.3
million,  of which  approximately $7.8 million had been incurred as of March 31,
1997, and that the value of the property  following  remediation will not exceed
$6.0 million.  As a result of a 1992  Connecticut  Department of Public  Utility
Control  retail rate decision,  beginning  January 1, 1993, the Company has been
recovering  through retail rates $1.075 million of these  remediation  costs per
year. The remediation  cost,  property value and recovery from customers will be
subject to true-up in the Company's next retail rate proceeding  based on actual
remediation costs and actual gain on the Company's disposition of the property.

(M)  NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING

     New   Hampshire   has   enacted  a  law   requiring   the   creation  of  a
government-managed  fund to finance the  decommissioning  of nuclear  generating
units  in  that  state.  The New  Hampshire  Nuclear  Decommissioning  Financing
Committee  (NDFC)  has  established  $451  million  (in  1997  dollars)  as  the
decommissioning  cost estimate for Seabrook Unit 1, of which the Company's share
would be approximately $79 million. This estimate assumes the prompt removal and
dismantling  of the Unit at the end of its estimated  36-year  energy  producing
life.  Monthly  decommissioning  payments  are being  made to the  state-managed
decommissioning  trust fund.  UI's share of the  decommissioning  payments  made
during the first quarter of 1997 was  $521,000.  UI's share of the fund at March
31, 1997 was approximately $9.9 million.

     Connecticut has enacted a law requiring the operators of nuclear generating
units  to file  periodically  with  the  DPUC  their  plans  for  financing  the
decommissioning  of the units in that state.  The current  decommissioning  cost
estimate for Millstone  Unit 3 is $463 million (in 1997  dollars),  of which the
Company's share would be  approximately  $17 million.  This estimate assumes the
prompt removal and  dismantling of the unit at the end of its estimated  40-year
energy producing life.  Monthly  decommissioning  payments,  based on these cost
estimates,  are being made to a decommissioning  trust fund managed by Northeast
Utilities (NU). UI's share of the Millstone Unit 3 decommissioning payments made
during the first quarter of 1997 was  $122,000.  UI's share of the fund at March
31, 1997 was approximately $4.1 million. The decommissioning  trust fund for the
Connecticut  Yankee Unit is also  managed by NU.



                                     - 15 -
<PAGE>
                         THE UNITED ILLUMINATING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

For the Company's 9.5% equity ownership in Connecticut  Yankee,  decommissioning
costs of $355,000 were funded by UI during the first  quarter of 1997,  and UI's
share  of  the  fund  at  March  31,  1997  was  $20.3   million.   The  current
decommissioning  cost  estimate for the  Connecticut  Yankee Unit,  assuming the
prompt removal and  dismantling of the unit commencing in 1997, is $436 million,
of which UI's share would be $41 million.

                                     - 16 -
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.


                     MAJOR INFLUENCES ON FINANCIAL CONDITION

     The  Company's  financial  condition  will  continue to be dependent on the
level of  retail  and  wholesale  sales and the  Company's  ability  to  control
expenses.  The two  primary  factors  that  affect  sales  volume  are  economic
conditions  and  weather.  Annual  growth  in total  operation  and  maintenance
expense,  excluding  one-time items and  cogeneration  capacity  purchases,  has
averaged less than 1.5%.  The Company hopes to continue to restrict this average
to less than the rate of inflation in future years (see "Looking Forward").

     The Company's financial status and financing capability will continue to be
sensitive to many other factors, including conditions in the securities markets,
economic conditions,  interest rates, the level of the Company's income and cash
flow,  and  legislative  and  regulatory  developments,  including  the  cost of
compliance with increasingly stringent environmental legislation and regulations
and competition within the electric utility industry.

     A major factor affecting the Company's  earnings prospects beyond 1996 will
be the success of the Company's  efforts to implement the  regulatory  framework
ordered by the DPUC at the end of 1996. On December 31, 1996, the DPUC completed
a  financial  and  operational  review of the  Company  and  ordered a five-year
incentive  regulation plan for the years 1997-2001.  The DPUC did not change the
retail base rates charged to customers.  Its order increased amortization of the
Company's conservation and load management program investments during 1997-1998,
accelerated  the recovery of  unspecified  regulatory  assets during  1999-2001,
reduced the level of conservation adjustment mechanism revenues in retail rates,
provided a reduction in customer  bills  through a surcredit in each of the five
plan years,  and accepted the Company's  proposal to modify the operation of the
fossil fuel clause mechanism.  The Company's  authorized return on common equity
was reduced from 12.4% to 11.5%.  Earnings above 11.5%, on an annual basis,  are
to be utilized  one-third  for customer bill  reductions,  one-third to increase
amortization of regulatory assets, and one-third retained as earnings.  The DPUC
did not order the  accelerated  depreciation  of the  Company's  Seabrook Unit 1
plant investment costs and the establishment of a  performance-based  regulation
mechanism measured by customer  satisfaction  surveys and reliability of service
indices,  which the  Company  had  proposed.  As a result of the  DPUC's  order,
customer  bills are expected to be reduced on average by 3% in 1997-1999,  4% in
the year 2000,  and 5% in the year 2001 (all compared to 1996).  Also,  earnings
from  utility  operations  will be  reduced  from the  levels  requested  by the
Company,  such that it is unlikely  that the Company will be able to achieve its
4% growth goal going forward.

     The FERC has stated that state  regulatory  commissions  should address the
issue of recovery by electric utilities of the costs of existing facilities that
would be stranded by retail access. The legislatures and regulatory  commissions
in several states have considered or are considering  "retail access".  This, in
general terms,  means the transmission by an electric utility of energy produced
by another entity over the utility's  transmission and distribution  system to a
retail  customer  in the  utility's  own  service  territory.  A  retail  access
requirement  would have the effect of  permitting  retail  customers to purchase
electric  capacity  and  energy,  at the  election of such  customers,  from the
electric  utility  in whose  service  area  they are  located  or from any other
electric  utility  or  independent  power  producer.  In 1995,  the  Connecticut
Legislature  established  a task  force  to  review  these  issues  and to  make
recommendations on electric industry restructuring within Connecticut.  The task
force  concluded  its work in  December  1996,  and issued a report and  related
recommendations.   Several  electric  industry  restructuring  bills  have  been
introduced  in the  Connecticut  Legislature.  The primary bill would  introduce
retail  access to 20% of the Company's  customers on July 1, 1999,  and open the
entire market to competitive  energy supply on July 1, 2000.  Existing  electric
utility  base rates would be capped  through  July 1, 1999,  at which time a 10%
price reduction would be instituted for any customer receiving full requirements
service.  Costs not otherwise  recoverable in the market,  including  generating
unit net investments, would be recovered through a competitive transition charge
over time.  A major  portion of such costs could be  financed,  or  securitized,
through  bonding  issued by a new State  authority  created by the  legislation.
Savings generated by securitization and reduced taxes would be passed through to
consumers in the form of rate  reductions.  The Company  currently  expects that
this  legislation,  in its  current or a modified  form,  will be enacted by the
Connecticut  legislature and become law in


                                     - 17 -
<PAGE>

the Summer of 1997. Among many other factors,  decisions and actions  concerning
retail  access  in  other  states  could  impact  the  timing  and  form of this
transition.

     Although the Company is unable to predict the future effects of competitive
forces in the electric utility industry, competition could result in a change in
the regulatory structure of the industry, and costs that have traditionally been
recoverable through the ratemaking process may not be recoverable in the future.
This  effect  could have a material  impact on the  financial  condition  and/or
results of operations of the Company.

     Currently,  the Company's  electric service rates are subject to regulation
and are based on the Company's costs. Therefore, the Company, and most regulated
utilities,  are subject to certain accounting  standards (Statement of Financial
Accounting  Standards  No. 71,  "Accounting  for the Effects of Certain Types of
Regulation")  that are not  applicable  to other  businesses  in general.  These
accounting  rules allow regulated  utilities,  where  appropriate,  to defer the
income  statement  impact of certain  costs that are expected to be recovered in
future  regulated  service rates and to establish  regulatory  assets on balance
sheets for such costs.  The effects of competition or a change in the cost-based
regulatory  structure could cause the operations of the Company, or a portion of
its assets or operations, to cease meeting the criteria for application of these
accounting  rules.  While the Company expects to continue to meet these criteria
in the  foreseeable  future,  if the  Company,  or a  portion  of its  assets or
operations,  were to cease  meeting  these  criteria,  accounting  standards for
businesses in general would become  applicable and immediate  recognition of any
previously  deferred costs, or a portion of deferred costs, would be required in
the year in which the criteria  are no longer met. If this change in  accounting
were to occur, it would have a material adverse effect on the Company's earnings
and retained  earnings in that year and could have a material  adverse effect on
the Company's ongoing financial condition as well.

                                     - 18 -
<PAGE>

                           CAPITAL EXPENDITURE PROGRAM

The Company's  1997-2001 capital  expenditure  program,  excluding allowance for
funds used during construction (AFUDC) and its effect on certain capital related
items, is presently budgeted as follows:

<TABLE>
<CAPTION>
                                        1997           1998         1999          2000         2001          TOTAL
                                        ----           ----         ----          ----         ----          -----
                                                                     (000's)
<S>                                <C>            <C>          <C>           <C>            <C>            <C>    
Production                           $18,137        $20,026      $28,363       $12,241      $19,062        $97,829
Distribution                          13,207         11,961       11,992        12,870       13,113         63,143
Transmission                           4,430          2,520        4,491         4,736        2,515         18,692
Other                                  6,813          5,387        1,245         1,296        1,239         15,980
                                  ----------     ----------   ----------    ----------  -----------     ----------
SUBTOTAL                              42,587         39,894       46,091        31,143       35,929        195,644
Nuclear Fuel                           7,891         11,282        1,200        12,323          529         33,225
                                  ----------     ----------   ----------    ----------  -----------     ----------

 TOTAL EXPENDITURES                  $50,478        $51,176      $47,291       $43,466      $36,458       $228,869
                                 ===========     ==========   ==========    ==========  ===========     ==========

AFUDC (Pre-tax)                        2,314          2,096        2,431         1,886        1,230
Depreciation
  Book Plant                          55,486         57,737       59,295        52,297       52,996
  Conservation                        10,223         10,223        8,906         6,312        4,332
  Decommissioning                      2,238          2,328        2,435         2,547        2,660
Additional Required
  Amortization (net of tax) (1)        4,100          8,500       11,600        29,700       32,800
Amortization of Deferred
  Return on Seabrook Unit 1
  Phase-In (after tax)                12,586         12,586       12,586             0            0

Estimated Rate Base
  (end of period)                  1,173,607      1,124,299    1,057,428     1,014,621      940,764
</TABLE>

(1)  Additional   amortization   of  pre-1997   conservation   costs  and  other
     unspecified  regulatory  assets, as ordered by the DPUC in its December 31,
     1996  Order,  provided  that  common  equity  return on utility  investment
     exceeds 10.5% after recording the additional amortization.

                                     - 19 -
<PAGE>

                       LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 1997, the Company had $29.7 million of cash and temporary cash
investments, an increase of $23.3 million from the balance at December 31, 1996.
The  components  of  this  increase,  which  are  detailed  in the  Consolidated
Statement of Cash Flows, are summarized as follows:

                                                                     (Millions)
                                                                      --------

       Balance, December 31, 1996                                        $ 6.4
                                                                         -----

       Net cash provided by operating activities                          37.0

       Net cash provided by (used in) financing activities:
       -   Financing activities, excluding dividend payments              10.9
       -   Dividend payments                                             (10.2)

       Cash invested in plant, including nuclear fuel                    (14.4)
                                                                         -----

             Net increase                                                 23.3
                                                                         -----

       Balance,  March 31, 1997                                          $29.7
                                                                         =====


     The Company's capital requirements are presently projected as follows:

<TABLE>
<CAPTION>
                                                                 1997       1998       1999       2000       2001
                                                                 ----       ----       ----       ----       ----
                                                                                     (millions)
<S>                                                             <C>       <C>        <C>        <C>         <C>
Cash on Hand - Beginning of Year                                $ 6.4     $ 18.5     $  -       $  -        $ -
Internally Generated Funds less Dividends                        95.0      115.8      116.9      110.6      107.5
                                                                -----      -----      -----      -----      -----
         Subtotal                                               101.4      134.3      116.9      110.6      107.5

Less:
Capital Expenditures                                             50.5       51.2       47.3       43.5       36.5
                                                                -----      -----      -----      -----      -----

Cash Available to pay Debt Maturities and Redemptions            50.9       83.1       69.6       67.1       71.0

Less:
Maturities and Mandatory Redemptions                             10.8      104.6      105.0      155.5       81.0
Optional Redemptions                                             21.6        -           -          -          -
                                                                -----      -----      -----      -----      -----

External Financing Requirements                                $(18.5)    $ 21.5     $ 35.4     $ 88.4      $10.0
                                                                =====      =====      =====      =====      =====
</TABLE>

Note:  Internally  Generated  Funds less  Dividends,  Capital  Expenditures  and
       External  Financing  Requirements are estimates based on current earnings
       and cash flow  projections and are subject to change due to future events
       and  conditions  that may be  substantially  different than those used in
       developing the projections.

     All of the Company's  capital  requirements that exceed available cash will
have  to be  provided  by  external  financing.  Although  the  Company  has  no
commitment to provide such financing from any source of funds,  other than a $75
million  revolving credit agreement with a group of banks,  described below, the
Company  expects to be able to satisfy its external  financing  needs by issuing
additional  short-term  and  long-term  debt and by issuing  preferred  stock or
common  stock if  necessary.  The  continued  availability  of these  methods of
financing  will  be  dependent on many

                                     - 20 -
<PAGE>

factors,  including  conditions in the securities markets,  economic conditions,
and the level of the Company's income and cash flow.

     The Company has a revolving credit  agreement with a group of banks,  which
currently  extends to December 10, 1997. The borrowing limit of this facility is
$75 million.  The facility  permits the Company to borrow funds at a fluctuating
interest  rate  determined  by the prime  lending  market in New York,  and also
permits the Company to borrow money for fixed  periods of time  specified by the
Company at fixed interest rates determined by the Eurodollar interbank market in
London, or by bidding,  at the Company's option. If a material adverse change in
the business, operations,  affairs, assets or condition, financial or otherwise,
or  prospects  of the Company and its  subsidiaries,  on a  consolidated  basis,
should  occur,  the banks may  decline to lend  additional  money to the Company
under this revolving credit agreement,  although  borrowings  outstanding at the
time of such an  occurrence  would not then become due and payable.  As of March
31, 1997, the Company had $45 million of short-term borrowings outstanding under
this facility.

                              SUBSIDIARY OPERATIONS

     UI has one wholly-owned  subsidiary,  United  Resources,  Inc. (URI),  that
serves as the parent  corporation for several  unregulated  businesses,  each of
which is incorporated  separately to participate in business  ventures that will
complement and enhance UI's electric utility business and serve the interests of
the Company and its shareholders and customers.

     URI has three wholly-owned  subsidiaries.  The largest URI subsidiary named
American  Payment  Systems,  Inc.  manages a national  network of agents for the
processing  of bill  payments  made by  customers  of other  utilities.  Another
wholly-owned subsidiary of URI, Thermal Energies,  Inc., is participating in the
development of district heating and cooling facilities in the downtown New Haven
area, including the energy center for an office tower and participation as a 62%
partner in the energy  center for a city hall and office  tower  complex.  A URI
subsidiary  named Precision Power,  Inc.  provides  power-related  equipment and
services to the owners of commercial buildings and industrial facilities.

     The Board of Directors of the Company has  authorized  the  investment of a
maximum of $27  million,  in the  aggregate,  of the  Company's  assets into its
unregulated subsidiary ventures, and, at March 31, 1997, $27 million had been so
invested.

                              RESULTS OF OPERATIONS

FIRST QUARTER OF 1997 VS. FIRST QUARTER OF 1996
-----------------------------------------------

     Earnings  for the first  quarter  of 1997 were  $7.7  million,  or $.54 per
share,  down $3.9  million,  or $.28 per share,  from the first quarter of 1996.
Earnings  from  operations,  which  exclude  one-time  items,  decreased by $8.1
million,  or $.58 per share,  in the first quarter of 1997 compared to the first
quarter of 1996.  The one-time  item recorded in the first quarter of 1996 was a
charge of $4.2 million (after-tax),  or $.30 per share, reflecting the estimated
costs of a Bargaining Unit Voluntary Early Retirement Program.

     Retail  operating  revenues  decreased  by about $8.1  million in the first
quarter of 1997 compared to the first quarter of 1996:

  .  A retail  kilowatt-hour sales decrease of 3.4% from the prior year reduced
     retail revenues by $5.1 million and sales margin (revenue less fuel expense
     and revenue-based  taxes) by $3.8 million. The kilowatt-hour sales decrease
     was due to; a warm 1997 first  quarter,  including the warmest  February in
     over 40 years,  compared to a cold 1996 first quarter, the leap year day in
     1996 and an additional  holiday in 1997.  There was no  discernible  "real"
     (i.e.  not  attributable  to  abnormal  weather,  leap  year  or  holidays)
     kilowatt-hour  sales  change in the first  quarter of 1997  compared to the
     first quarter of 1996.

                                     - 21 -
<PAGE>

  .  Reductions  in  customer  bills,  as  agreed  to by the  Company  and  the
     Department of Public Utility  Control  (DPUC) in December  1996,  decreased
     retail  revenues  by  about  $3.0  million.  This was  consistent  with the
     Company's expectations.

     Wholesale  "capacity"  revenues increased $0.5 million in the first quarter
of 1997 compared to the first quarter of 1996. Wholesale "energy" revenues are a
direct offset to wholesale energy expense and do not contribute to sales margin.
These energy revenues, as well as the associated fuel expense,  increased during
the first quarter of 1997 compared to the first quarter of 1996.

     Retail  fuel and energy  expenses  increased  by $6.0  million in the first
quarter of 1997  compared to the first  quarter of 1996.  Retail fuel and energy
expenses increased by $3.5 million from the impact of higher fossil prices that,
under current DPUC regulations,  are not passed on to customers through any fuel
recovery  mechanism.  These  expenses  increased $3.9 million due to the need to
purchase more expensive energy to replace  generation by the Connecticut  Yankee
and Millstone Unit 3 nuclear  generating units. Both the Connecticut  Yankee and
Millstone  3 Units  ran at near full  capacity  in the  first  quarter  of 1996.
Millstone  Unit 3 was taken out of  service  on March 30,  1996 and  Connecticut
Yankee was taken out of service on July 23, 1996.  For more on the status of the
Connecticut  Yankee and Millstone Unit 3 units, see the LOOKING FORWARD section.
These  expense  increases  in the first  quarter of 1997  compared  to the first
quarter of 1996 were  partly  offset by expense  decreases  from the lower sales
volume and other factors.

     Operating  expenses for  operations,  maintenance  and  purchased  capacity
charges  increased by $1.5 million in the first  quarter of 1997 compared to the
first quarter of 1996:

  .  Purchased capacity expense increased $0.3 million due to increased expense
     at the  Connecticut  Yankee  nuclear  unit.  For more on the  status of the
     Connecticut Yankee unit, see the LOOKING FORWARD section.

  .  Operation  and  maintenance  expense  increased by $1.2  million.  General
     increases at the Seabrook and Millstone  nuclear  generating  units, at the
     Company's  fossil  generating  units,  and in  uncollectible  expenses were
     partly  offset by about $1.0  million in savings  from a  reduction  in the
     number of Company employees.

     Depreciation expense increased by $0.8 million in the first quarter of 1997
compared to the first quarter of 1996.

     Other net income  increased  slightly in the first quarter of 1997 compared
to the  first  quarter  of  1996  due to  higher  interest  income  and a  small
improvement in earnings (reduction in losses) from unregulated subsidiaries. The
Company's largest unregulated  subsidiary,  American Payment Systems, lost about
$241,000  (after-tax)  in the first quarter of 1997,  but showed  improvement in
each consecutive month.

     Interest charges continued their downward trend, decreasing by $1.6 million
in the first  quarter of 1997  compared to the first quarter of 1996 as a result
of the Company's refinancing program and strong cash flow. Also, total preferred
dividends  (net-of-tax) decreased slightly in the first quarter of 1997 compared
to the first quarter of 1996 as a result of purchases of preferred  stock by the
Company in 1996.

                                 LOOKING FORWARD

(THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT
TO UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED.   READERS  ARE  CAUTIONED  NOT  TO  PLACE  UNDUE  RELIANCE  ON  THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS REPORT.)

     On December 31, 1996, the DPUC issued an order (the Order) that  instructed
the  Company to reduce  rates and  accelerate  the  recovery  of  certain  costs
associated  with  conservation  programs,  such that the  Company  could earn an


                                     - 22 -
<PAGE>

allowed return on common stock equity from its utility  investment of 11.5% over
the period 1997 to 2001, a reduction of nearly 1% (an amount equivalent to about
$.30 per share) from the  previously  allowed  (and  requested  by the  Company)
return of 12.4%.  Income  earned  from  higher  sales or reduced  expenses  that
produce a return above the 11.5% return level will be shared by one-third  being
applied  to  customer  bill   reductions,   one-third   applied  to  more  rapid
amortization of assets, and one-third retained by shareowners, also by virtue of
the Order. If the Company were to achieve an 11.5% return on common stock equity
from its utility  investment,  then earnings from utility operations would be in
the $3.30-$3.40 range for 1997 and succeeding years as well.

     There is no  assurance  that the Company  will  achieve the 11.5% return on
common  stock  equity  from its  utility  investment  allowed by the DPUC in the
Order. Utility income is greatly affected by weather-related  sales, fossil fuel
prices  and  nuclear  generating  unit  availability...all  items over which the
Company has little control.

     As a result of the Order,  it is anticipated  that retail revenues for 1997
will decrease from 1996 levels.  A reduction of about $15 million will be due to
reductions  in  customer  bills  as  agreed  to by the  Company  and the DPUC in
December 1996. (These reductions will be partially offset by about $3 million in
conservation  spending reductions.  Such new conservation  spending is no longer
being  capitalized,  and  changes  in  conservation  expense,  relative  to  the
assumptions  used by the DPUC in the Order,  will be  reflected  in retail rates
through the operation of the Conservation Adjustment Mechanism.)

     As part of the Order,  the  operation of the  Company's  longstanding  fuel
adjustment  clause  (FCA) that allowed for recovery in retail rates of increases
in fossil fuel costs was suspended within a broad range of fuel prices. Revenues
will likely decline  further by about $6 million in 1997 compared to 1996 due to
this suspension of the FCA. While the Company will stand to benefit if the price
the Company pays for its oil falls below about $15 a barrel,  current prices are
above that level.  While the Company  cannot  predict  the  direction  that fuel
prices will take in 1997 and whether it can mitigate  entirely  this loss of FCA
revenue,  it is actively  engaged in hedging  activities  to limit the Company's
exposure to increases in fossil fuel prices.

     It should be noted that,  although the Order was for the  five-year  period
1997-2001,  the Company made no commitment to agree to this multi-year  plan. In
addition, the DPUC, in the Order, acknowledged that the Order could be revisited
in the light of any new legislation.. The Connecticut legislature is expected to
pass an  electric  utility  restructuring  bill,  in some form,  in its  current
session. See Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Major Influences on Financial Condition.

     The Company's revenues are also dependent on the level of retail sales. The
two primary factors that affect retail sales volume are economic  conditions and
weather.  Overall, 1996 weather was milder than normal; however, 1996 also had a
leap  year  day.  These  two  factors  were  offsetting  in their  amounts  and,
therefore,  the actual retail sales for 1996 of 5,340  gigawatt-hours  should be
considered about "normal". This is about the same level of 1997 sales assumed by
the DPUC in its Order; so, to the extent the Company can improve upon this sales
level, sales margin (revenue less fuel expense and revenue-based taxes) relative
to the Order  would  improve and would  mitigate  any loss of FCA  revenue.  The
Company  experienced about 1% of "real" sales growth in 1996 (i.e.  exclusive of
weather and leap year factors)  over  weather-normalized  1995 sales.  A similar
level of growth in 1997 from all  customer  groups would add about $6 million to
sales  margin.  Little real growth in  kilowatt-hour  sales was  detected in the
first  quarter of 1997  compared  to the first  quarter of 1996,  although  wide
swings  in  weather  correction  factors  make  this  evaluation  difficult.  No
significant change in wholesale capacity sales revenue is anticipated for 1997.

     The Company has dealt with the  potential  loss of customers as a result of
self-generation,  relocation or discontinuation  of operations,  by successfully
negotiating 54 multi-year contracts with major customers,  including its largest
customer,  Yale University,  which is constructing a cogeneration unit that will
produce  approximately  one-half  of this  customer's  electricity  requirements
commencing sometime in early 1998.  Additional multi-year customer contracts may
be signed in the future.  While providing cost reduction and price stability for
customers and helping the Company  maintain its customer base for the long term,
new  contracts  affecting  1997 are  expected  to lead to  reductions  in retail
revenue of about $2-$3 million per year.

                                     - 23 -
<PAGE>

     The Company  expects that  generating  output from its ownership  shares in
nuclear generating units to be significantly less in 1997 than in 1996. Seabrook
Unit 1 operated at nearly a 97% capacity  factor in 1996, well above the assumed
"normal" 90% level between refueling outages; and a refueling outage is expected
in the second  quarter of 1997. A more normal level of Seabrook Unit 1 operation
in 1997 and the  downtime  for  refueling  will cause the Company to purchase or
generate energy using higher cost fuels,  leading to about a $3 million increase
in fuel  expense.  Millstone  Unit 3 was taken out of service on March 30, 1996,
and will remain shut down pending a comprehensive  Nuclear Regulatory Commission
(NRC) review of operations. The Connecticut Yankee Unit was taken out of service
on July 23, 1996 and, by decision of the Board of Directors of that company, has
been retired. Relative to 1996, the loss of low cost energy from these two units
for all of 1997 should add about $6 million to fuel expense. If Millstone Unit 3
returns to service during the year, fuel expense would decline by about $500,000
for  every  month of normal  operation.  The  increased  fuel  expense  from the
retirement of the Connecticut  Yankee Unit is expected to be offset by a ramping
down of its other expenses, which are expected to decrease by about $3.0 million
for the entire year 1997 compared to 1996.  However,  the ability of the Company
to recover the future costs  associated  with the retirement of the  Connecticut
Yankee Unit will be  dependent  upon the outcome of pending  regulatory  filings
with the Federal Energy Regulatory Commission.

     Another major factor  affecting the Company's  financial  condition will be
the Company's ability to control  operating  expenses.  The Company  implemented
voluntary early retirement programs for union and management  employees in 1996,
as well as a voluntary severance program. The cost of these programs resulted in
a 1996  pre-tax  charge  of $23  million  and  should  lead  to a 1997  employee
reduction of 230 employees from a level of approximately 1,300 employees at 1996
year-end.  A portion of the resulting  personnel cost savings  occurred in 1996,
but the  majority of the  savings  will be  realized  as the  Company's  process
re-engineering  efforts are completed over the next several  years.  Incremental
savings in personnel  costs of $4 million in 1997 and another $6 million in 1998
are expected.  Other re-engineering savings are anticipated over this time frame
as well. The Company  expects an operation and maintenance  expense  increase of
about $3 million for nuclear plant outages in 1997 above the levels  incurred or
accrued in 1996, due primarily to the planned  Seabrook Unit 1 refueling  outage
in the second quarter of 1997.

     Anticipated depreciation expense should increase by $2 million in 1997 from
1996 levels,  a slower rate of increase than in prior years because 1996 capital
spending of $45 million (excluding nuclear fuel) was at its lowest level in over
15  years,  and also  because  new  conservation  spending  is no  longer  to be
capitalized and depreciated.

     The Company expects  continued  reductions in interest  expense of about $9
million to a 1997 level of $61 million.  This  reduction is due to a refinancing
of some of the Company's debt in late 1996 described in the following paragraph,
as well as a significant  paydown of debt in 1997 made possible by the Company's
excellent cash flow position. In fact, although the Company had no net change in
retained earnings in 1996, it was able to improve its equity ratio from 31.7% to
33.2% as a result of debt paydown.  The anticipated  1997 interest expense level
is 46% below the 1989 level and would mark the  eighth  consecutive  year of net
interest expense decline.

     In the fall of 1996,  the Company was  successful in purchasing $67 million
of the approximately $200 million principal amount of outstanding Seabrook Lease
Obligation  Bonds, to hold in its own account,  using proceeds from a lower cost
bank term loan.  The  interest  income  that the Company  receives  from its $67
million investment in these bonds appears on the income statement as a credit to
interest  expense and  partially  offsets the interest  expense  incurred on the
Seabrook Lease Obligation Bonds.

     The Company  expects an improvement in unregulated  subsidiary  earnings in
1997 compared to the results of 1996, due mostly to a non-recurrence of one-time
pre-tax  charges   incurred  in  1996  totaling  $4.3  million  and,  also,  the
anticipated achievement of a near "break-even" level in earnings from subsidiary
operations, which would result in an increase in the Company's pre-tax income of
$3-$4 million. In the near term, the Company's investments in these subsidiaries
are  unlikely  to have a major  positive  effect on  earnings,  but the  Company
continues to believe that these  investments  will contribute to future earnings
growth.

                                     - 24 -
<PAGE>

     The Company  expects that the 1997 quarterly  earnings from operations will
follow  a  pattern  similar  to  that  of  1996,  with  third  quarter  earnings
contributing over half the annual total. Summer seasonal retail sales and summer
pricing are the predominant factors  contributing to this earnings pattern.  The
second and fourth quarters earnings should be similar to each other in amount.

     On February 5, 1997,  the Board of Directors  of the Company,  at a special
meeting,  voted an early  declaration  of the  quarterly  dividend  on shares of
Common Stock at 72 cents per share.  The indicated  annual dividend is $2.88 per
share, the same as the annual rate in 1996.

     Although the dividend level for 1996  represented a payout of 100% of total
earnings,  the dividend level  represented a payout of only 73% of 1996 earnings
from  operations  (i.e.,  total earnings less net one-time  charges of $1.06 per
share,  principally for non-cash restructuring charges). The Company's cash flow
remained, and is expected to remain, very strong. Net cash provided by operating
activities  was  $144.8  million  in 1996,  nearly  3.6 times the  Common  Stock
dividend  payout,  one of the  highest  such  "coverage"  levels in the  utility
industry.  The  December  31, 1996 DPUC Order will limit  earnings  from utility
operations  such that  further  dividend  increases  may have to be delayed  for
several  years.  However,  the Order should allow the Company to recover some of
its  regulatory  assets more  rapidly,  help it prepare for  competition  in the
electric  industry,  and help  maintain its cash flow at its  excellent  current
level through the end of the decade.

     All of these  factors  lead the  Company to believe  that its Common  Stock
dividends  will  continue  to be paid at the  indicated  annual  rate of  $2.88.
However,  the ability to maintain  this  dividend  level,  or to declare  future
increases for the dividend,  will depend upon the level of the Company's  future
earnings  and cash  flow,  which are  dependent  upon other  factors  and events
affecting the Company's  financial condition and outlook that cannot be known at
this time.

     One such event concerns legal proceedings  involving a property tax dispute
with the City of New Haven (the City). A recent Connecticut Supreme Court ruling
has affirmed the City's statutory  authority to revalue the Company's  equipment
for personal  property tax purposes for each of the tax years from  1991-1992 to
the  present.  However,  the  valuation  method  employed  by  the  City  in its
revaluations, both as to amount and methodology, has not been litigated and will
continue to be contested  vigorously by the Company in trial court  proceedings.
It remains the present opinion of the Company that the ultimate  outcome of this
dispute  will not have a  significant  impact on the  financial  position of the
Company.

                                     - 25 -
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     On November 2, 1993, the Company received  "updated"  personal property tax
bills  from  the  City of New  Haven  (the  City)  for the tax  year  1991-1992,
aggregating $6.6 million,  based on an audit by the City's tax assessor.  On May
7, 1994,  the Company  received a  "Certificate  of  Correction....to  correct a
clerical  omission  or  mistake"  from the City's tax  assessor  relative to the
assessed value of the Company's  personal  property for the tax year  1994-1995,
which certificate  purports to increase said assessed value by approximately 53%
above the tax assessor's  valuation at February 28, 1994,  generating tax claims
of approximately $3.5 million. On March 1, 1995, the Company received notices of
assessment  changes  relative to the assessed  value of the  Company's  personal
property for the tax year  1995-1996,  which  notices  purport to increase  said
assessed value by approximately 48% over the valuation  declared by the Company,
generating  tax claims of  approximately  $3.5  million.  On May 11,  1995,  the
Company received  notices of assessment  changes relative to the assessed values
of the Company's  personal  property for the tax years  1992-1993 and 1993-1994,
which notices purport to increase said assessed values by approximately  45% and
49%, respectively,  over the valuations declared by the Company,  generating tax
claims of approximately $4.1 million and $3.5 million, respectively. On March 8,
1996,  the  Company  received  notices of  assessment  changes  relative  to the
assessed value of the Company's  personal  property for the tax year  1996-1997,
which notices purport to increase said assessed value by approximately  57% over
the  valuations  declared by the Company and are expected to generate tax claims
of approximately  $3.8 million.  The Company is contesting each of these actions
by the City's tax assessor vigorously. In January 1996, the Connecticut Superior
Court  granted  the  Company's  motion for  summary  judgment  against  the City
relative  to the  earliest  tax year at issue,  1991-1992,  ruling  that,  after
January  31,  1992,  the tax  assessor  had no  statutory  authority  to revalue
personal  property  listed and valued on the Company's tax list for the tax year
1991-1992.  This Superior Court decision,  which would also have been applicable
to and defeated the  assessor's  valuation  increases for the two subsequent tax
years, 1992-1993 and 1993-1994, was appealed by the City. On April 11, 1997, the
Connecticut  Supreme Court reversed the Superior  Court's  decisions in this and
two  other  companion  cases  involving  other  taxpayers,  ruling  that the tax
assessor had a three-year period in which to audit and revalue personal property
listed and valued on the  Company's tax list for the tax year  1991-1992.  It is
currently  anticipated that all of the pending cases for all of the tax years in
dispute will now be scheduled  for trial in the Superior  Court  relative to the
Company's  claim that the tax  assessor's  increases  in personal  property  tax
assessments  for the three  earliest  years were  unlawful for other reasons and
relative to the vigorously  contested issue, for all of the tax years, as to the
reasonableness  of the tax assessor's  valuation  method,  both as to amount and
methodology.  It is the present opinion of the Company that the ultimate outcome
of this dispute will not have a significant  impact on the financial position of
the Company.

                                     - 26 -
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits.
<TABLE>
<CAPTION>
           Exhibit
          Table Item            Exhibit
           Number               Number                                   Description
          ----------            -------                                  -----------

            <C>                  <C>          <C>
             (3)                  3.1d        Copy of  Certificate  Amending  Certificate of  Incorporation  By
                                              Action of Board of Directors,  dated December 11,  1996, amending
                                              Exhibit 3.1a.*

            (12), (99)           12           Statement  Showing  Computation  of Ratios of  Earnings  to Fixed
                                              Charges  and Ratios of Earnings  to  Combined  Fixed  Charges and
                                              Preferred Stock Dividend  Requirements (Twelve Months Ended March
                                              31, 1997 and Twelve Months Ended  December 31,  1996, 1995, 1994,
                                              1993 and 1992).

            (27)                 27           Financial Data Schedule
</TABLE>

     -------------------
     *Filed with Annual  Report  (Form 10-K) for fiscal year ended  December 31,
      1995.


     (b) Reports on Form 8-K.

          None

                                     - 27 -
<PAGE>

                                   SIGNATURES

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

                       THE UNITED ILLUMINATING COMPANY




Date    5/13/97             Signature       /s/ Robert L. Fiscus
     ---------------                 -------------------------------------
                                                Robert L. Fiscus
                                                  President and
                                                Chief Financial Officer



                                     - 28 -
<PAGE>

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
        Exhibit
      Table Item    Exhibit
        Number      Number                                       Description                                   Page No.
      ----------    -------                                      -----------                                   -------

      <C>            <C>          <C>
          (3)         3.1d        Copy of Certificate  Amending  Certificate of  Incorporation By Action of
                                  Board of Directors, dated December 11, 1996, amending Exhibit 3.1a.*

      (12), (99)     12           Statement Showing  Computation of Ratios of Earnings to Fixed Charges and
                                  Ratios  of  Earnings  to  Combined  Fixed  Charges  and  Preferred  Stock
                                  Dividend  Requirements  (Twelve  Months  Ended  March 31, 1997 and Twelve
                                  Months Ended December 31, 1996, 1995, 1994, 1993 and 1992).

         (27)        27           Financial Data Schedule
</TABLE>

     -------------------
     *Filed with Annual  Report  (Form 10-K for fiscal year ended  December  31,
      1995.