========================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

	(Mark One)
 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1998

OR

	(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......................to.....................



			    Registrant, State or other Jurisdiction
    Commission         of Incorporation or Organization,       I.R.S. Employer
    File Number         Address and Telephone Number         Identification 
No.


    333-47925   Yorkshire Power Group Limited           84-1393785
	Wetherby Road
	Scarcroft
	Leeds LS14 3HS
	United Kingdom
	011-44-113-289-2123

======================================================


Securities registered pursuant to Section 12(b) of the Act:  8.08% Trust 
Securities *

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


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

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

* Issued by Yorkshire Capital Trust I and guaranteed by Yorkshire Power Group 
Limited
Aggregate market value of voting and non-voting common equity held by non-
affiliates: None

A description of the registrant's common stock follows:


				Description of                  Shares Outstanding
Registrant                      Common Stock                     at May 31, 1998


Yorkshire Power Group         Par Value (POUND)1 Per Share           440,000,002
Limited
				Table of Contents

	      PART I

Item 1        Business
                 Yorkshire Group and its US Parents
                 Yorkshire's Businesses
                 The Electric Utility Industry in Great Britain
                 UK Environmental Legislation
                 UK and EU Competition Law
                 Employees
                 Presentation of Certain Information and Exchange Rates
Item 2        Properties
Item 3        Legal Proceedings
Item 4        Submission of Matters to a Vote of Security Holders

	       PART II

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

	       PART III

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

	       PART IV

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


Signatures

<PAGE>
FORWARD LOOKING STATEMENTS

Certain statements in this Form 10-K under the captions "Management's 
Discussion and Analysis of Results of Operations and Financial Condition", 
"Business" and elsewhere constitute forward looking statements.  Such forward 
looking statements involve known and unknown risks, uncertainties and other 
important factors that could cause the actual results, performance or 
achievements of the Yorkshire Group or any of its subsidiaries or industry 
results, to differ materially from any future results, performance or achieve
ments expressed or implied by such forward looking statements. Such risks, 
uncertainties and other important factors include, among others: general 
economic and business conditions in the UK, the Franchise Area (as defined 
under Yorkshire Business - Distribution Business) and elsewhere; currency 
fluctuations; governmental, statutory, regulatory or administrative initiatives 
affecting Yorkshire Group, Yorkshire or the UK electric and gas utilities 
industries; general industry trends; competition; the cost and availability of 
electricity, gas and other alternative energy sources; hedging costs; changes in
business strategy, development plans or vendor relationships; availability, 
terms and deployment of capital; availability of qualified personnel; 
increased rates of taxes or other changes in tax law; changes in, or the
failure or inability to comply with, governmental regulation, including, 
without limitation, environmental regulations; and other factors 
referenced in this Form    10-K.  These forward looking statements 
speak only as of the date of this Form 10-K.


<PAGE>
					    SELECTED DEFINITIONS

	   When used in this report, the following terms will have the meanings 
indicated.

"1935 Act" means Public Utility Holding Company Act of 1935, as 
amended

	"Acquisition" means acquisition of Yorkshire, indirectly, by Yorkshire 
Group, effective April 1, 1997  

	"AEP" means American Electric Power Company, Inc.

	"AEP Resources" means AEP Resources, Inc.

	"British Energy" means British Energy plc               

	"Calendar Year" means a year ended December 31

	"CCGT" means combined cycle gas turbine
	
	"Centrica" means Centrica plc, the former supply business of British 
Gas plc

	"CFDs" means contracts for differences

	"CHP" means combined heat and power

	"Control Party" means a wholly owned subsidiary of Yorkshire Power 
Group Limited   which holds the Control Certificate of Yorkshire Trust
	
	"CSW" means Central and South West Corporation

	"DAMS" means Distribution Asset Management System 

		"Electricity Act" means the Electricity Act 1989

		"EMFs" means electromagnetic fields

	"Energy Group" means The Energy Group plc

	"ESPS" means Electricity Supply Pension Scheme

	"EU" means European Union

		"Fiscal Year" means a year ended March 31

		"Fossil Fuel Levy" means a levy system instituted to reimburse the 
generators and the RECs for the extra costs involved in generating 
electricity from non-fossil fuel plants as compared to generating 
electricity from fossil fuel plants

"Franchise Area" means Yorkshire's service area as determined by its 
PES license
<PAGE>
"Franchise Supply Customers" means customers within the Franchise 
Area, who within the most recent twelve month period have an average 
peak demand ("Peak Demand") of not more than 100 kW in the three 
months of highest demand during such period

"Grid" means the UK's national grid transmission system

''GWh'' means gigawatt hours

"Hydro Electric" means Scottish Hydro Electric plc

"km" means kilometers

"kV" means kilovolts

"kW" means kilowatts

"kWh" means kilowatt hours

"Lv" means low volts

"March Green Paper'' means the UK Government's Green Paper of 
March 1998 entitled ''A Fair Deal For Consumers: Modernizing the 
Framework for Utility Regulation"

		"MMC" means the UK Monopolies and Mergers Commission

	''MW'' means megawatt

		"National Power" means National Power plc
 
		"NCE" means New Century Energies, Inc.

		"NFFOs" means the obligations of the RECs to obtain a specified 
amount of       generating capacity from non-fossil fuel sources

		"NGC" means the National Grid Company plc, which is wholly-owned 
by NGG

		"NGG" means the National Grid Group plc

"Non-Franchise Supply Customers" means customers who within the 
most recent twelve month period have an average peak demand (''Peak 
Demand'') of more than 100 kW in the three months of the highest 
maximum demand during such period

	"OFFER" means the Office of Electricity Regulation, the body 
appointed by the Government of the UK to regulate the electricity 
industry in Great Britain

	"OFGAS" means the Office of Gas Regulation, the body appointed by 
the Government of the UK to regulate the gas industry in Great Britain

"Outage" means a disruption to the supply of electricity

<PAGE>
"Own-generation limits" means the limit imposed by the PES license 
on the extent of generation capacity in which a REC may hold an 
interest

"PES" means public electricity supplier

		"Pool" means the wholesale trading market for electricity in England 
and Wales

		"Pooling and Settlement Agreement" means the agreement which 
governs the     constitution and operation of the Pool and the 
calculation of payments to and from     generators and suppliers

	"PowerGen" means PowerGen plc

		"Predecessor Company" means Yorkshire prior to its acquisition, 
indirectly, by Yorkshire Group

"Pro Forma Fiscal Year 1997" means unaudited pro forma information 
for the fiscal year ended March 31, 1997

	"PSB" means NGG's pumped storage electricity generation business

	"REC" means one of the 12 regional electricity companies in England 
and Wales licensed to distribute and supply electricity

		"Regulator" means The Director General of Electricity Supply in Great 
Britain

	"RPG" means Regional Power Generators Limited, a 75% owned 
subsidiary of Yorkshire

"Scottish Power" means Scottish Power plc

		"SEC" means the Securities and Exchange Commission

		"SFAS" means US Statement of Financial Accounting Standards

		"Successor Company" means Yorkshire Power Group Limited and its  
subsidiaries

		"UK" means the United Kingdom

		"UK GAAP" means accounting principles generally accepted in the UK

		"Unit'' means kWh

			"US" means the United States of America
<PAGE>
			"US GAAP" means accounting principles generally accepted in the US

	"US Parents" means AEP and NCE
	
		"YCL" means Yorkshire CoGen Limited, a subsidiary of Yorkshire

		"YEPL" means Yorkshire Electric Power Limited, a subsidiary of 
Yorkshire

		"Yorkshire" means Yorkshire Electricity Group plc and its subsidiaries

	"Yorkshire Finance" means  Yorkshire Power Finance Limited, a 
subsidiary of Yorkshire Group 

		"Yorkshire Group" means Yorkshire Power Group Limited and its 
subsidiaries

	"Yorkshire Holdings" means Yorkshire Holdings plc, a subsidiary of 
Yorkshire Group         

		"Yorkshire Trust" means Yorkshire Capital Trust I

<PAGE>
PART I
Item 1.       BUSINESS

YORKSHIRE GROUP AND THE US PARENTS 

Yorkshire Group

	Yorkshire Group was incorporated as a private company with limited 
liability under the laws of England and Wales in July 1996. In 1997, Yorkshire 
Group was utilized in connection with the joint acquisition by the US Parents of
Yorkshire, one of the twelve RECs in England and Wales. Yorkshire Group 
gained effective control of Yorkshire on April 1, 1997. Yorkshire Group's 
primary asset is the outstanding shares of Yorkshire Holdings, a public limited 
company incorporated under the laws of England and Wales, which in turn 
beneficially owns all of the outstanding shares of Yorkshire. Yorkshire Holdings
was organized as a wholly-owned subsidiary of Yorkshire Group solely for 
holding the share capital of Yorkshire and has no other significant operations. 

	Each of the US Parents holds an indirect 50% interest in Yorkshire Group. 
AEP holds such interest through its wholly-owned subsidiary, AEP Resources. 
NCE holds its 50% indirect interest in Yorkshire Group through its wholly-
owned subsidiary, NC Enterprises, Inc., a Delaware corporation, which in turn 
wholly-owns New Century International.


Yorkshire Finance 

	Yorkshire Finance was incorporated under the laws of the Cayman Islands 
in August 1997. Yorkshire Finance exists solely for the purpose of operating as 
a financing vehicle for Yorkshire Group and its affiliates. 


Yorkshire 

	Yorkshire's principal businesses are the distribution of electricity to 
approximately two million customers in its Franchise Area and the supply of 
electricity primarily within its Franchise Area. As discussed below under ''
 ---Business Restructuring'', beginning in Fiscal Year 1999, Yorkshire
will operate the distribution and supply businesses as self-sufficient
 businesses. 

<PAGE>

Yorkshire Trust

	The Trust is a statutory business trust created under Delaware law pursuant 
to the filing of a certificate of trust with the Delaware Secretary of State on 
February 4, 1998. The Trust will terminate in 2043, but may dissolve earlier, as
provided in the agreement. The Trust exists exclusively to act as a financing 
vehicle for Yorkshire Group, through its holding certain debt instruments issued
by Yorkshire Finance and the issuance of its Trust Securities.

The US Parents 

	AEP 

	AEP is an electric utility holding company registered under the 1935 Act. 
AEP owns all of the outstanding common stock of AEP Generating Company, 
Appalachian Power Company, Columbus Southern Power Company, Indiana 
Michigan Power Company, Kentucky Power Company, Kingsport Power 
Company, Ohio Power Company and Wheeling Power Company. These eight 
utility subsidiaries are engaged in the generation, purchase, transmission, 
distribution and sale of electricity to over 2.9 million retail customers in
portions of the states of Indiana, Kentucky, Michigan, Ohio, Tennessee,
Virginia and West Virginia. AEP also owns all the outstanding common
stock of AEP Resources and AEP Resources International Limited, whose 
primary businesses are the development of, and investment in, 
exempt wholesale generators, foreign utility companies, qualifying 
cogeneration facilities and other power projects. In 
the year ended December 31, 1997, AEP generated consolidated operating 
revenues of $6.2 billion and had consolidated assets of approximately $16.6 
billion. 

	On December 22, 1997, AEP announced the signing of a merger agreement 
with CSW, a Dallas, Texas based electric utility holding company that is 
registered under the 1935 Act. CSW owns four electric operating subsidiaries 
serving 1.7 million customers in Texas, Oklahoma, Louisiana and Arkansas. 
CSW also owns SEEBOARD plc, a REC which serves the southeast coast of 
England. Under the merger agreement, each share of CSW common stock will 
be converted into 0.6 share of AEP common stock. Based on the price of AEP's 
common stock on December 19, 1997, the transaction would be valued at $6.6 
billion. The combined company will be named American Electric Power 
Company, Inc. and will be based in Columbus, Ohio. The merger is conditioned 
upon, among other things, the approvals of the shareholders of AEP and CSW 
and various state and federal regulatory agencies. Assuming the receipt of all 
required approvals, the merger is currently expected to be consummated within 
twelve to eighteen months of its announcement.

<PAGE>
	NCE 

	NCE is also an electric utility holding company registered under the 1935 
Act. NCE owns all the outstanding common stock of Public Service Company 
of Colorado, Cheyenne Light, Fuel and Power Company and Southwestern 
Public Service Company, which serve approximately 1.6 million retail electric 
customers in portions of the states of Colorado, Texas, New Mexico, Oklahoma, 
Kansas and Wyoming and approximately 1 million retail gas customers in 
portions of the states of Colorado and Wyoming. These three electric and gas 
utility subsidiaries are principally engaged in the generation, purchase, 
transmission, distribution and sale of electricity and in the purchase, 
transmission, distribution, sale and transportation of natural gas. In the year 
ended December 31, 1997, NCE generated consolidated operating revenues of 
$3.3 billion and had consolidated assets of approximately $7.3 billion. 

YORKSHIRE'S BUSINESSES

	Yorkshire's principal businesses are the distribution of electricity and the 
supply of electricity to approximately two million customers. Yorkshire also 
conducts ancillary business activities apart from the distribution and supply 
businesses that are not subject to price regulation, such as owning an interest
in an off-shore gas field, supplying gas in the competitive market and holding 
interests in power generation. See '' ---Business Restructuring''. 


Distribution Business 

	Yorkshire's distribution business consists of the ownership, management 
and operation of the electricity distribution network within Yorkshire's 
Franchise Area. The primary activity of the distribution business is the receipt
of electricity from the Grid and the distribution of electricity to end users 
connected to Yorkshire's power lines. Because Yorkshire's distribution business 
is substantially a regulated monopoly, virtually all electricity supplied
(whether by Yorkshire's supply business or by other suppliers) to consumers
in the Franchise Area is transported through its distribution network, thus
providing Yorkshire with a stable distribution volume unaffected by customer
choice of supplier. As a holder of a PES License, Yorkshire is subject to a
price cap regulatory framework providing economic incentives to operate in 
a cost effective manner and, to a limited extent, to increase the volume of
electricity distributed. See ''The Electric Utility Industry in Great
Britain''. 

	Distribution Business Customers, Units Distributed, Revenues and Operating 
Profit 

	Yorkshire's Franchise Area covers approximately 10,000 square km (3,860 
square miles) from the Pennine uplands in the west, and the cities of Leeds, 
Bradford and Sheffield, to the City of Hull, the ports of the Humber estuary and
the eastern coastline. It encompasses the counties of West Yorkshire, East 
Yorkshire and almost all of South Yorkshire, together with parts of North 
Yorkshire, Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The 
regional economy is diverse. The traditional heavy industries of iron and steel,
coal mining, textiles and engineering continue to contribute to the regional 
economy, but their overall significance has declined, particularly in the last 
decade. During this period, other industries, such as chemicals and food and 
drink, have expanded, as have service sector activities such as finance,
retailing and leisure. The region is well served by road and rail networks,
has three regional airports, and the ports of the Humber estuary provide 
access to European markets. 

	The following table sets out details of Yorkshire's distribution customers 
and the volume of electricity distributed, as well as distribution operating 
revenues and operating income at the dates and for the periods presented: 

	                                                   	At March 31,            
	                                         1996          1997          1998     
Number of customers connected
                                  
	Residential        . . . . . . . .  1,896,470     1,910,752     1,930,719
	Commercial         . . . . . . . .    125,827       126,003       126,812
	Industrial         . . . . . . . .     21,924        21,889        21,455	
	     	     
	  Total            . . . . . . . .  2,044,221     2,058,644     2,078,986	
	     
	     	                                          		 Fiscal Year                 
	
                                          1996          1997          1998     
Electricity distributed (GWh)
	Residential        . . . . . . . .      7,110        7,196          7,149
	Commercial         . . . . . . . .      5,383        5,580          5,800
	Industrial         . . . . . . . .     10,729       10,566         10,484		    

          Total     . . . . . . . .     23,222       23,342         23,433    
	

	                                                 	(In Millions)                

Distribution operating revenues . . (POUND)334   (POUND)308     (POUND)305
Distribution operating income   . . (POUND)164   (POUND)127     (POUND)115


	Competition in the Distribution Business 

	Yorkshire has not experienced significant competition in its distribution 
business. Yorkshire believes that the cost of providing a duplicate distribution
network connected to the Grid would be prohibitive. To the extent a customer 
may invest in its own on-site electric generating plants, however, such 
customers would no longer require distribution and related services from 
Yorkshire except for standby connection to the Grid. The distribution business
is subject to marginal loss of income from related services, such as
metering. For a discussion of certain recently announced proposals
impacting metering, see ''The Electric Utility Industry in Great
Britain ---Distribution of Electricity  ---Price Control''. 

<PAGE>
	Strategy for the Distribution Business 

	Yorkshire's distribution strategy consists of maintaining a reliable and safe 
distribution system which meets customer expectations while maximizing its 
operating efficiencies and fulfilling its regulatory obligations. 

	To implement its strategy, Yorkshire is taking a number of steps. Yorkshire 
intends to maintain a sufficient level of investment in the distribution system
to ensure its continued reliability and safety. In Fiscal Year 1998, Yorkshire 
invested (POUND)196 million in the distribution system, of which (POUND)133
million represented capital improvements in new substations, cables and
overhead lines and (POUND)63 million represented expenditures related
to the operation, repair and maintenance of the distribution system. 
Yorkshire is currently investing in DAMS that centralizes information
currently stored in over sixty computerized 
and paper-based systems into one integrated computerized system. The 
centralization of such information is intended to improve both access to and 
quality of information which is vital to the operation of an efficient
distribution system. 

	Yorkshire is also concentrating on maintaining and improving its responses 
to system faults. In Fiscal Year 1998, Yorkshire restored services to 93.9% of
all customers affected by faults within three hours and on average a Yorkshire 
customer was without power for only 59.1 minutes. Furthermore, Yorkshire has 
introduced a new toll-free phone number available for customers who have lost 
power. Such direct access is intended to permit Yorkshire to respond more 
effectively and rapidly to power loss situations. Finally, Yorkshire publishes
a Quality of Supply Report which details the manner in which Yorkshire intends 
to improve both the availability and quality of electricity supply in its region
in order to inform both its customers and OFFER as to its plans for the
period to April 2000. 


	Distribution Facilities 

	Electricity is transported across the Grid at 400 kV or 275 kV to 21 grid 
supply points within Yorkshire's distribution network, where NGC transforms 
the voltage to 132 kV, 66 kV and 33 kV for entry into Yorkshire's distribution 
system. 

	At March 31, 1998, Yorkshire's distribution system consisted of: 

                                            Lv            11 kV     Above 11 kV
	Number of metered supplies. . . . .    2,077,306         1,655            25
	Total length of circuits  . . . . .    29,854 km     20,175 km      4,914 km
	Percentage underground    . . . . .          91%           51%            29%

	The primary distribution system consists of 21 grid supply points from the 
Grid, an additional 68 supply points and 357 primary substations. At March 31, 
1998, the installed transformer capacity with a secondary voltage higher than 
650 volts at these substations was 22,480,000 kVA. Remote control facilities 
enable the real time monitoring and operation of most of these larger 
substations from one central control room. 

	Yorkshire's distribution substations amount to 12,928 indoor substations, 
2,611 outdoor substations and 16,336 pole mounted substations. At March 31, 
1998, the installed transformer capacity with a secondary voltage less than 650
v was 9,548,940 kVA. 

Supply Business 

	Yorkshire's supply business consists of selling electricity to end users, 
purchasing such electricity and arranging for its distribution to those end
users. Under its PES License, Yorkshire has an exclusive right to supply 
electricity to Franchise Supply Customers. This exclusive right is
currently scheduled to continue until September 1998. The supply business
to Non-Franchise Supply Customers, both inside and outside Yorkshire's 
Franchise Area, is open to competition. 

	The following table sets forth the volume of electricity sold, by Non-
Franchise Supply Customer and Franchise Supply Customer, as well as supply 
operating revenues and operating income (loss): 

	
                                         	           Fiscal Year          
                                       	  1996          1997           1998  
	Volume (GWh):
		Non-Franchise Supply Customers        12,046        10,627          9,747
		Franchise Supply Customers   . . .    10,345        10,489         10,489
					Total   . . . . . . . . . . . .    22,391        21,116         20,236	
	                                                  
                                                   (In Millions)         

	Supply operating revenues   . . .(POUND)1,309   (POUND)1,178  (POUND)1,118
	Supply operating income (loss)  .   (POUND)30    (POUND)(132)    (POUND)25

	Competition in the Supply Business 


	The supply business is currently divided between Franchise Supply 
Customers within the Franchise Area, and Non-Franchise Supply Customers, 
inside and outside the Franchise Area. The non-franchise threshold was lowered 
to 100 kW in April 1994 allowing competition in supply for these customers 
while Franchise Supply Customers remained subject to regulation. Competition 
in supply to Franchise Supply Customers is currently scheduled to be phased in 
over a six-month period commencing in September 1998, at which time the 
exclusive right of Yorkshire to supply the Franchise Area will cease. The 
Regulator, however, proposed transitional price regulation for smaller 
consumption Franchise Supply Customers for an initial period of two years until 
an adequate level of competition is established. Yorkshire subsequently 
indicated its acceptance of such proposals. The proposals (when taken together 
with the reduction in the Fossil Fuel Levy which became effective on April 1, 
1998) have resulted in the implementation of small reductions, effective April
1, 1998, in the tariffs for Yorkshire's residential and small business 
customers in its Franchise Area compared to the corresponding tariffs in 
effect in August 1997. 

The proposals also require an additional 3% below inflation reduction effective 
April 1, 1999. See ''The Electric Utility Industry in Great Britain ---
Industry Structure'' and '' ---Supply of Electricity''. 


	Strategy for the Supply Business 

	Yorkshire's supply strategy consists of (i) protecting and sustaining 
Yorkshire's electricity market position within the Franchise Area, (ii) cross-
selling gas to its existing customer base, (iii) securing market share for gas
and electricity supply outside the Franchise Area to the extent that such
contracts are profitable and (iv) seeking marketing and strategic alliances
in the supply business. 

	To implement its strategy, Yorkshire is taking a number of steps. Yorkshire 
is endeavoring to retain its existing Non-Franchise Supply Customers in the 
Franchise Area by purchasing electricity at competitive rates from power 
generators in the UK and providing high quality customer service. In doing so, 
in Fiscal Year 1998, Yorkshire maintained a significant portion of its existing 
business. Yorkshire has also applied this strategy to Non-Franchise Supply 
Customers outside of its Franchise Area and to gas customers. For example, in 
Fiscal Year 1998, Yorkshire was awarded new contracts with such entities as 
Booker plc, William Cook Cast Products, NHS, Asda and Staffordshire County 
Council. Furthermore, in addition to marketing gas and electricity under the 
Yorkshire brand name, Yorkshire intends to enter into channel partnerships with 
various business and commercial entities (a "channel partner") whereby 
Yorkshire markets energy to customers outside of its Franchise Area under the 
name of the channel partner or in the joint name of Yorkshire and the channel 
partner. Yorkshire has negotiated to establish a channel partnership with a
chain of retail appliance stores. Yorkshire expects to maintain this strategy
for all business customers and potential business customers after competition 
commences for both gas and electricity and to extend this approach to the 
residential market. There is no assurance that Yorkshire will be able to 
enter into such channel partnerships and, if it does, that they will be 
successful.

	As discussed under '' ---Affiliate Businesses and Other Investments ---
Gas Sourcing and Supply'', Yorkshire has taken significant steps toward
developing its gas supply capabilities. Currently, gas may be sold to
residential customers in selected regional markets that have been opened to
competition. By retaining its existing customer base and, eventually, expanding
into new markets which will be open to competition, Yorkshire intends to be
in a position to offer those customers both electricity and gas. In offering
such flexibility, Yorkshire intends to solidify its relationship with these
customers and provide an established market base for its developing gas
supply business. 

	In a joint statement issued in January 1998, the Regulator and OFGAS 
asked each of the PESs and Centrica to give undertakings to stop ''dual fuel'' 
offers to supply gas and electricity. In addition, OFGAS asked the PESs to 
undertake not to market gas to residential customers in areas where their 
respective markets are not open to competition except where contracts have 
already been signed. The regulators also made proposals concerning competition 
in meter reading. Following discussions with the regulators, it was announced 
that the PESs had agreed only to provide additional dual fuel benefits to 
customers once their individual franchise area is opened to electricity 
competition and that OFGAS had agreed that PESs' gas supply businesses 
should be permitted to continue to compete in the gas market both within and 
outside their franchise areas on the basis that there are no undue restrictions
or distortions in the gas market in those areas. The PESs also agreed to
work with the Regulator and OFGAS to ensure measures to limit distortion of
the meter reading market. 



Affiliate Businesses and Other Investments 

	Yorkshire's ancillary business activities have primarily included, among 
other things, gas sourcing and supply and holding interests in power generation.



	Gas Sourcing and Supply 

	Recognizing the long-term opportunities in the competitive gas supply 
market, in April 1994, Yorkshire acquired a 6.97% equity stake in the Armada 
off-shore gas field (the ''Armada Field'') for approximately 
(POUND)27.8 million. As of March 31, 1998, the Armada Field, which has a
production life of approximately 15 years, had proven resources of
approximately 1.2 trillion cubic feet (84 billion cubic feet net to 
Yorkshire) of gas and 68 million barrels of oil and oil 
equivalents (4.8 million barrels net to Yorkshire). Delivery of such gas from 
the Armada Field to Yorkshire began, on schedule, in October 1997. The 
development costs associated with the Armada Field have been lower than 
originally anticipated. As of March 31, 1998, Yorkshire had invested (POUND)60 
million in the Armada Field. 

	Yorkshire markets gas to industrial and commercial customers and, with 
the gradual removal of the residential franchise of Centrica, has recently
started marketing gas to residential customers. By the end of March 1998, 
Yorkshire had entered into contracts for the supply of gas to more than 200,000
residential customers. Gas is sourced from Yorkshire's interest in the
Armada Field and through swing contracts and purchases on the spot markets
which are designed to give Yorkshire a balanced purchase portfolio. 
Yorkshire utilizes risk management methods, in relation to gas purchasing 
and supply, similar to electricity purchasing and supply, which are
designed to maximize its return consistent with an acceptable level of risk. 

	The Regulator and OFGAS recently proposed to restrict the ability of the 
PESs, including Yorkshire, to provide ''dual fuel'' offers to supply gas and 
electricity to residential customers in areas which are not open to 
competition. See '' ---Supply Business ---Strategy for the Supply
 Business''. 


	Power Generation 

	Through its wholly-owned subsidiary, YEPL, Yorkshire has invested in 
various power generation projects. Yorkshire's PES License currently enables it 
and its affiliates to make investments in up to 800 MW of electricity 
generation. Currently, Yorkshire and its subsidiaries own, or have committed
to, investments in 519 MW of power generation assets. See '' ---Business 
Restructuring'' for a discussion of the proposed transfer of Yorkshire's
current ownership interests in generation assets. 

	The centerpiece of Yorkshire's generation activities is a 272 MW CCGT 
generating station at Brigg in north Lincolnshire developed and operated by 
RPG. YEPL owns a 75% interest in RPG with IVO Energy Limited holding the 
remaining 25%. Yorkshire holds a power purchase agreement for 100% of the 
output of the station. 

	YCL, a YEPL subsidiary, constructed and currently operates CHP plants at 
St. James's Hospital, Leeds (4.5 MW), A.H. Marks, a chemical company based 
in Bradford (4.5 MW) and Queen's Medical Centre, Nottingham (4.9 MW). 
YCL is also constructing a 56 MW CHP plant at the premises of Hays 
Chemicals, a Cheshire based company, and is nearing completion of a 50 MW 
CCGT plant at Thornhill. YCL also owns and operates 52.6 MW of diesel fired 
peaking plants. All of the above plants provide an opportunity for Yorkshire's 
electricity supply business to purchase the power offtake and a partial 
strategic hedge in the event that electricity prices rise and reduce profit
margins of Yorkshire's supply business. 

	In addition, YEPL owns a 50% interest in a company which owns two 
windfarms at Ovenden Moor (9.2 MW) and at Royd Moor (6.5 MW). All of the 
output from these windfarms is sold to The Non-Fossil Fuel Purchasing Agency 
under an agreement which expires on December 31, 1998. 

	YCL's generation portfolio has concentrated on smaller scale projects 
which export less than 50 MW, principally because in doing so YCL is not 
required to obtain a generation license and such smaller scale projects are not 
required to trade in the Pool. Trading outside the Pool means that the export 
power has a higher value and provides YCL with increased operational 
flexibility. 


Business Restructuring

	In December 1997, Yorkshire announced a planned business restructuring 
intended to enable it to meet increased competition and react to potential 
regulatory developments in the energy markets in the UK. The restructuring will 
result in the distribution and supply businesses of Yorkshire becoming self-
sufficient businesses. As part of the restructuring, Yorkshire currently 
contemplates transferring its generating assets to an entity or entities other
than Yorkshire Group or its subsidiaries. It is expected that proceeds from
the transfer of these assets will be used to reduce debt of Yorkshire Group.
See ''Item 13. Certain Relationships and Related Transactions''. 

	Total assets less current liabilities employed by the generation business at 
March 31, 1998 were (POUND)136 million. Operating income attributable to the 
generation business in Fiscal Year 1998 was (POUND)16 million. 

	As a result of this restructuring, approximately 160 positions will be 
eliminated. A provision of approximately (POUND)10 million was recorded in
Fiscal Year 1998, to reflect the cost of these work force reductions.


Customer Service 

	As part of Yorkshire's commitment to delivering high levels of customer 
service, Yorkshire launched its Customer Service Initiative in 1995.
Virtually all of its employees have attended training sessions aimed at
developing a company culture consistent with Yorkshire's corporate mission 
to be a leader in the market of electricity distribution and electricity 
and gas supply, while consistently providing high levels of customer
service. These employees have been trained in the values and behavior 
which need to be adopted to achieve this corporate mission. 

	Improvements to customer service which have been implemented as a 
result of this initiative include the provision of a toll-free service for
account 
inquiries and fault reporting, as described under '' ---
Distribution Business ---
Strategy for the Distribution Business'', and an increase in the number of bill 
payment outlets for the convenience of customers. 

	Yorkshire continues to seek to improve the service it provides to its 
customers and, to do so, continues to train employees further. A customer 
service tracking system has been put in place to ensure that directors and 
managers of Yorkshire gain regular feedback from customers on the service they 
receive. 

Risk Management

	Yorkshire's risk management efforts are primarily focused on the supply 
business and intended to hedge the risks associated with the purchase and
sale of electricity resulting from Pool price volatility.  Virtually all
electricity generated in England and Wales is sold by generators and bought
by suppliers through the 
Pool.  The most common contracts for supply to Non-Franchise Supply 
customers are for twelve-month terms and contain fixed rates.  Yorkshire is 
exposed to purchase price risk (the risk associated with fluctuations in the
cost of purchased electricity relative to the price received from the supply
customer) to the extent that it has not hedged such risk.  Yorkshire 
substantially hedges purchasing price risk by employing a variety of risk
management tools, Including management of its supply contract portfolio,
hedging contracts and 
other means which mitigate the risk of Pool price volatility.  Yorkshire employs
risk management methods to maximize its return consistent with an acceptable 
level of risk.

	Until March 31, 1998 regulations governing the franchise supply market 
permitted the pass-through to customers of prudent purchase costs which 
included the cost of arrangements such as CFDs to hedge against Pool price 
volatility.  Under the supply price restraint proposals published by the
Regulator in October 1997, and accepted by Yorkshire, effective April 1, 1998,
such 
purchase costs are no longer automatically passed through to such customers.  
CFDs are contracts predominantly between generators and suppliers which fix 
the major elements of the price of electricity for a contracted quantity of 
electricity over a specific time period.  Differences between the actual price
set 
by the Pool and the agreed prices give rise to difference payments between the 
parties to the particular CFD.  At the present time, Yorkshire expects its
supply 
demand for the calendar year 1998 to be substantially hedged through various 
types of agreements, including CFDs.

	Yorkshire's ability to manage its purchase price risk depends, in part, on the 
continuing availability of properly priced risk management mechanisms such as 
CFDs.  No assurance can be given that an adequate, transparent market for such 
products will in fact be available.

THE ELECTRIC UTILITY INDUSTRY IN GREAT BRITAIN 

Summary 

	The electric utility industry in England and Wales is divided into various 
functions, with different companies participating in the respective functions. 
This is in contrast to the US utility industry, in which vertically integrated 
companies generally participate in all functions. 




Industry Structure 

	Great Britain has two separate but connected electricity markets, each with 
a different commercial framework. In England and Wales electricity is produced 
by generators, the largest of which are National Power, PowerGen and Nuclear 
Electric plc, a subsidiary of British Energy. Electricity is transmitted through
the 
Grid by NGC and distributed by the twelve RECs in their respective franchise 
areas. Most customers are currently supplied with electricity by their local
REC, although there are other suppliers holding second-tier supply licenses,
including other generators and RECs, who can compete to supply customers 
with higher Peak Demand in each REC's franchise area. 

	In Scotland there are two vertically integrated companies, Scottish Power 
and Hydro Electric, each generating, transmitting, distributing and supplying 
electricity within their respective franchise areas as well as competing to
supply 
electricity elsewhere. Scottish Nuclear, another subsidiary of British Energy, 
sells all the electricity it generates to Scottish Power and Hydro Electric. 

	The interconnection between the two transmission systems, owned by 
Scottish Power and NGC, is capable of transferring electricity between Scotland 
and England. There is also an interconnection with France, owned by NGC and 
Electricite de France, through which electricity can be transferred between 
France and England and Wales. 

	Virtually all electricity generated in England and Wales is sold by 
generators and bought by suppliers through the Pool. A generator which is also
a licensed supplier must nevertheless sell all the electricity it generates
into the Pool and purchase all the electricity which it supplies from the
Pool. Because Pool prices fluctuate, generators and suppliers may enter into
bilateral arrangements, such as CFDs, to provide a degree of protection
against such fluctuations.

	There is no equivalent to the Pool in Scotland, but Scottish Power and 
Hydro Electric are obligated by their licenses to offer electricity for sale to 
second-tier suppliers. They are also required to provide access to their 
transmission and distribution systems on a non-discriminatory basis to 
competing suppliers and generators. 


Industry Background 

	The industry structure described above was put in place in March 1990 in 
order to introduce competition into the generation and supply of electricity. At
the same time, a licensing regime was introduced for the electricity industry 
both in England and Wales as well as in Scotland. 

	The RECs, which at that time collectively owned NGG, NGC's holding 
company, were privatized in December 1990. National Power and PowerGen 
were partly privatized in March 1991 (with the balance of the UK government's 
holdings being sold to investors in March 1995). Scottish Power and Hydro 
Electric were privatized in June 1991 and British Energy was privatized in July 
1996. By December 1995, most of the RECs' ownership of NGG had been 
publicly sold, and NGG was listed on the London Stock Exchange. Since the 
summer of 1995, 11 of the RECs have been acquired by other companies. 
Yorkshire was indirectly acquired by Yorkshire Group in April 1997. 

	In 1990, the vast majority of generating capacity in England and Wales was 
owned by three generators. However, since that time competition in generation 
has increased as RECs and other new entrant generators have constructed new 
plants and as imports through the interconnections with Scotland and France 
have grown. In addition, pursuant to undertakings given to the Regulator, 
National Power and PowerGen have disposed of an aggregate of 6,000 MW of 
generating capacity to Energy Group. 

	Competition in supply has been progressively introduced both in England 
and Wales and in Scotland. The RECs in England and Wales, and Scottish 
Power and Hydro Electric in Scotland, are subject to competition from second-
tier suppliers for the supply of electricity to larger customers in their
respective franchise areas. In April 1990, electricity users with a Peak
Demand in excess of 1 MW became Non-Franchise Customers of a REC and 
therefore were allowed to choose their electricity supplier. In April 1994,
the Non-Franchise Customer class was expanded to include users with a Peak
Demand in excess of 100 kW. 
Currently, all electricity customers in Great Britain are scheduled to be
able to choose their electricity supplier over a six month phase in period
beginning in September 1998, according to customers' designated postal codes. 


Distribution of Electricity 

	Accessibility Requirements 

	Each of the RECs is required to offer terms for connection to its 
distribution system to any person, for use of its distribution system to any 
authorized electricity operator and for the provision of supplemental and backup
supplies to any person. In providing use of its distribution system, a REC must 
not discriminate between its own supply business and that of any other 
authorized electricity operator, or between those of other authorized 
electricity operators; nor may its charges differ except where justified by
differences in cost. Similar principles apply to the provision of 
supplemental and backup supplies of electricity, and in the carrying out 
of connection works. Disputes over the terms of offers may be determined
by the Regulator. 


	Price Control 

	Revenue from the distribution business is controlled by a formula 
principally based on P x (1+(RPI-Xd)) where Xd is currently 3% (the 
"Distribution Price Control Formula"). P is the previous year's maximum 
average price per unit of electricity distributed. Because the maximum average 
price in any year is therefore based in part on the maximum average price in the
preceding year, a price reduction in any given year has an ongoing effect on
the maximum average price for all subsequent years. RPI is a measure of
inflation, and equals the percentage change in the UK Retail Price Index 
between the six month period July to December of the two previous years.
Because RPI is based on a weighted average of the prices of goods and 
services purchased by a typical household, which bear little resemblance
to the inputs contributing to Yorkshire's business costs,
the RPI calculation may not accurately reflect the 
price changes affecting Yorkshire. The Xd factor is established by the
Regulator following review. This formula determines the maximum average 
price per unit of electricity distributed (in pence per kilowatt hour) which
a REC is entitled to charge. This price, when multiplied by the expected
number of units to be distributed, determines the expected distribution
revenues of the REC for the relevant year. The current Distribution Price 
Control Formula permits RECs to partially retain additional revenues due to
increased distributions of units and allows for a pound for pound increase 
in operating profit for efficient operations and reduction of expenses within 
a review period. However, during the next Distribution Price Control Formula
review, the Regulator may reduce any such increase in operating profit to
the extent he determines it not to be a function of efficiency savings or, 
if genuine efficiency savings have been made, he determines that customers
should benefit through lower prices in the future. 

	Upon privatization, the Regulator set different Xd factors for each of the 
RECs to permit annual price increases by the RECs of between 0% and 2.5% 
(1.3% for Yorkshire) greater than RPI for the five year period ending on March 
31, 1995. Following a scheduled distribution price review by the Regulator of
all twelve RECs in August 1994, the Regulator required an overall real
reduction in regulated distribution prices for Fiscal Year 1996 of between
11% and 17% (14% for Yorkshire) from the previous year, and set the Xd factor
for the subsequent four year period ending on March 31, 2000 to subtract 2%
from RPI in each such year. Also in connection with the August 1994
distribution price review, the Regulator, (i) halved from 100% to 50% the 
extent to which distribution revenues would be allowed to vary with the 
number of units of electricity distributed and (ii) determined numbers of
Franchise Area customers based on REC forecasts for each year through and
including Fiscal Year 2000, allowing distribution revenues to vary by 50%
of the predetermined annual change in such forecast numbers. The stated 
intention of the Regulator in introducing this change was "to remove any
artificial incentive on the companies to sell more electricity, while
retaining a general incentive for companies to seek out and meet the needs
of their customers". In light of information concerning 
the financial position of the RECs that emerged during the unsuccessful bid by 
Trafalgar House plc for Northern Electric plc (one of the RECs) and 
representations by Consumers' Committees and others, the Regulator conducted 
an unscheduled distribution price review of all twelve RECs in July 1995. As a 
result of this unscheduled review, the Regulator revised regulated distribution 
prices for the four year period ending on March 31, 2000, requiring an overall 
real reduction in regulated distribution prices for Fiscal Year 1997 of between 
10% and 13% (13% for Yorkshire) from the previous year, and resetting the Xd 
factor for the remaining three year period ending on March 31, 2000 to subtract 
3% from RPI in each such year. 

	The Distribution Price Control Formula is expected to be further reviewed 
with effect from April 1, 2000. Following the review, the Regulator will make a 
proposal for a revised formula to apply from that date. If a REC does not agree 
with the proposal the Regulator may refer the proposal to the MMC and, 
following the publication of the report of the MMC, the Regulator may make 
appropriate modifications to the REC's PES License. 

	In setting the distribution charges each year, each REC must project the 
permitted maximum average charge per unit to be distributed in that year. The 
projection will have to take account of forecasts of units distributed, 
distribution line losses, the actual change in RPI and NGC exit charges. Failure
to forecast accurately may result in overcharging or undercharging, which is 
taken into account in the following year through a correction factor in the 
Distribution Price Control Formula. If a REC has overcharged in the previous 
year, the maximum average charge per unit distributed is reduced by an amount
to reflect the excess income received, to which is added interest. In the
event of undercharging, the Distribution Price Control Formula allows
the licensee to recover the shortfall in income plus interest. 

	In certain instances, however, overcharging or undercharging by a REC 
above specific percentage thresholds may result in adjustments by the Regulator.
If, in any year, the average charge per unit distributed exceeds the permitted 
maximum average charge per unit distributed by more than 3%, then, in the next 
following year, the REC may not increase distribution charges unless it has 
satisfied the Regulator that the average charge per unit in that next following 
year is not likely to exceed the permitted maximum average charge. If, with 
respect to any two successive years, the sum of the amounts by which the 
average charge per unit distributed has exceeded the permitted maximum 
average charge per unit distributed in the second of those years is more than 4%
of that permitted maximum average charge, then, in the next following year, the 
REC may be required by the Regulator to adjust its charges so that they fall 
within the maximum permitted average charge. If, with respect to two 
successive years, the licensee undercharges by more than 10% of the maximum 
average charge, the Regulator may, by directions to the licensee, limit the 
amount by which such undercharging may be recovered. 

	Since April 1995, the Distribution Price Control Formula has been 
notionally divided into metering and non-metering components, with the 
metering component equal to about 10% of each REC's allowed revenue. 
However, the Regulator indicated when making these proposals that there 
should be no presumption that this sum would be assigned to a metering 
business. 

	Operations related to the metering of network connections to non half-
hourly metered customers (generally residential and other small customers)  are 
subject to the metering component of the Distribution Price Control Formula. 
Such price controls are scheduled to be disapplied from April 1, 2000, at which 
time competitive market pricing is scheduled to be introduced. In a joint 
statement issued in January 1998, the Regulator and OFGAS made proposals 
concerning competition in meter reading. See ''Business ---
Supply Business --- Strategy for the Supply Business''. Competitive market
pricing already exists for operations related to the metering of network 
connections to half-hourly metered customers. 

	Connection charges are levied when a customer first connects to a REC's 
distribution system or makes a material change in electricity supply 
requirements. These charges are excluded from the Distribution Price Control 
Formula. In the August 1994 distribution review, the Regulator introduced the 
concept of competition in providing connections to new customers and limited 
the extent to which, and the circumstances in which, customers wishing to be 
connected would be required to pay for the costs of reinforcement of the 
distribution system. 


	Data Management Services 

	Beginning in September 1998, the electricity supply market for Franchise 
Supply Customers is currently scheduled to be opened to competition and 
customers will be able to select the supplier of their choice. Significant 
additional costs have been, and will be, incurred by the distribution business
to develop new systems to facilitate competition. The new services, termed
"data management services" include meter operation, data retrieval, processing
and aggregation, meter point administration and distribution use of system 
billing. 	Assuming that competition in supply starts as currently scheduled in 
September 1998 for Franchise Supply Customers, Yorkshire Group presently 
estimates that costs totaling (POUND)72 million will have been incurred for re-
engineering and information technology work. Of such amount, approximately 
(POUND)19 million was expensed in Fiscal Year 1997 and (POUND)2 million in
Fiscal Year 1998. The Regulator has made proposals (which have been accepted by 
Yorkshire) to allow Yorkshire recovery of (POUND)23 million over a five year
period ending March 31, 2003. A further (POUND)7 million is expected to be 
recovered through Pool cost recovery and other national mechanisms and (POUND)8 
million is expected to be capitalized as such amount is expected to provide 
future benefits to the supply business. As a result of the above, the residual
amount of approximately (POUND)13 million, which will not be recovered or 
capitalized, will be expensed in Fiscal Year 1999 as incurred. 

	The Regulator has also made proposals (which have been accepted by 
Yorkshire) to provide an annual allowance of (POUND)3 million for the period
1998 through 2000 to cover operating costs. This allowance will be reviewed
at the time of the Distribution Price Control Formula Review in 2000. 

	Such proposals therefore will allow Yorkshire to recover up to 52% of its 
forecasted set-up and operating costs over a five year period. The shortfall
could be higher if: (i) operating costs are higher than anticipated (e.g., 
there is a higher level of customer activity); (ii) recovery of operating costs 
is disallowed or reduced when the Distribution Price Control Formula is 
reviewed for the period beginning April 1, 2000; or (iii) the integrated 
national systems do not work as contemplated or require substantial 
redevelopment. 

Supply of Electricity 

	Licensed Suppliers 

	Subject to minor exceptions, all electricity customers in Great Britain must 
be supplied by a licensed supplier. Licensed suppliers purchase electricity and 
make open access use of the transmission and distribution networks to achieve 
delivery to customers' premises. 

	There are two types of licensed suppliers: public electricity (or first-tier) 
suppliers, also known as PESs, and second-tier suppliers. PESs include the 
RECs, Scottish Power and Hydro Electric each supplying in its respective 
franchise area. Second-tier suppliers include National Power, PowerGen, 
Nuclear Electric, Scottish Power, Hydro Electric and other PESs (including 
RECs supplying outside their respective franchise areas) and a number of 
independent second-tier suppliers. 

	At present, a Franchise Supply Customer can only buy electricity from the 
REC authorized to supply the relevant franchise area. Franchise Supply 
Customers typically include residential and small commercial and industrial 
customers. Non-Franchise Supply Customers are not limited to buying 
electricity from the local REC and can choose to buy from a second-tier 
supplier. Such customers are typically larger commercial and industrial 
electricity users. Second-tier suppliers compete with one another and with the 
local REC to supply customers in this competitive (or "non-franchise") sector of
the market. 


	Price Regulation 

	The supply of electricity to Franchise Supply Customers currently remains 
subject to price control. The maximum average charge per unit of electricity 
supplied (in pence per kilowatt hour) was controlled by a formula principally 
based upon (P x (1 + (RPI-Xs)) + Y) (the "Supply Price Control Formula") 
where Xs was 2%. The initial value of Xs was set at 0 for all the RECs on 
March 31, 1990. The Supply Price Control Formula was reviewed by the 
Regulator with effect from April 1, 1994, when the Xs factor was set at 2% for 
all the RECs. This applied until March 31, 1998. P was the previous year's 
maximum average price per unit of electricity supplied (in pence per kilowatt 
hour) that relates to the REC supply business's own costs and margin. RPI was a 
measure of inflation, equaling the percentage change in the UK Retail Price 
Index between the six month period July to December of the two previous years. 
Because RPI is based on a weighted average of the prices of goods and services 
purchased by a typical household, which bear little resemblance to the inputs 
contributing to Yorkshire's business costs, the RPI calculation may not 
accurately reflect the price changes affecting Yorkshire. The Y factor was a 
pass-through of certain costs which are either largely outside the management 
control of the REC or have been regulated elsewhere. The Y factor thus covered 
the REC's electricity purchase costs, including both direct Pool purchase costs 
and costs of hedging, transmission charges made by NGC, REC distribution 
charges and the Fossil Fuel Levy (described below) or amounts equivalent 
thereto in respect of the purchase of non-leviable electricity which are 
attributable to Franchise Supply Customers. The Supply Price Control Formula 
was therefore designed to focus downward pressure on costs and working 
capital, which are viewed as being within suppliers' direct control. 

	As with the Distribution Price Control Formula, there was a correction 
factor in the Supply Price Control Formula in the event of overcharging or 
undercharging. If a REC had overcharged in the previous year, the maximum 
average charge per unit supplied is reduced by an amount to reflect the excess 
income received, to which was added interest. In the event of undercharging, the
Supply Price Control Formula allowed the licensee to recover the shortfall in 
income plus interest. 

	Under the current licensing regime, over a six-month period currently 
scheduled to commence in September 1998 all customers, including those who 
are currently Franchise Supply Customers, will be permitted to choose their 
electricity supplier. The Regulator  indicated in his supply price restraint 
proposals published in October 1997, which proposals Yorkshire accepted, that 
price regulation for supply to all residential and smaller business customers 
within Yorkshire's Franchise Area, whose annual consumption is under 12,000 
kWh, would be extended beyond March 31, 1998 until an adequate level of 
competition is established, and at least until March 31, 2000. The Regulator has
indicated that the nature and extent of possible restraints after that date will
be reviewed in the light of experience and prospects and that such review would
take place concurrently with the ongoing review of the Distribution Price 
Control Formula. 

	The license modifications that have been implemented to effect the new 
controls take the form of a series of price caps on the tariffs applicable to 
residential and small business customers. The new controls (when taken together 
with the reduction in the Fossil Fuel Levy which became effective on April 1, 
1998) have resulted in the implementation of small reductions, effective April 
1, 1998, in the tariffs for Yorkshire's residential and small business 
customers compared to the corresponding tariffs in effect in August 1997. 
See "Fossil Fuel Levy". The new controls also require an additional 3% below
inflation reduction effective April 1, 1999. The license modifications also 
discontinued the automatic pass-through of costs previously passed through to
residential and small business customers, consisting primarily of purchased 
power costs. 

	In addition, the license modifications provide for an allowable charge to 
cover the additional cost of providing data management services that will be 
required to be provided by each REC. For a discussion of the costs associated 
with these data management services, see'' ---Distribution of Electricity
 ---Data Management Services''. The duration and level of the allowances 
for operating costs are likely to be reviewed at the time of the next 
Distribution Price Control Formula review in 2000. The license modifications 
also provide for restraints on pre-payment meter charges. 

	Further, the license modifications stipulated that a REC should be 
penalized: (i) where it starts to open its market more than three months 
after the market opening by the first REC; (ii) where it opens successive 
tranches of its market more than three months after the opening of the 
corresponding tranche by the first REC; and (iii) where the market opening 
of the first REC has been delayed beyond April 1998. The penalties will be 
calculated at 1% of the operating revenues of the supply business for 
Franchise Supply Customers per month of delay, weighted by the proportion of 
customers affected and applied as a reduction in allowed distribution 
business revenue. If Yorkshire does not open its market to competition 
until after April 1999, it would incur a penalty of approximately
(POUND)6 million. It is now apparent that some penalty will be incurred 
due to the delay in the opening up of the competitive market and a 
provision of  (POUND)3 million has been included by Yorkshire Group in the
results for Fiscal Year 1998. Yorkshire Group expects that Yorkshire will
be prepared to open its Franchise Area to such competition in September 1998. 


The Pool 

	The Pool was established in April 1990 for bulk trading of electricity in 
England and Wales between generators and suppliers. The Pool reflects two 
principal characteristics of the physical generation and supply of
electricity from a particular generator to a particular supplier. First, it is 
not possible to trace electricity from a particular generator to a 
particular supplier. Second, it is not practicable to store electricity in
significant quantities, creating the need for a constant matching of supply 
and demand. Subject to certain exceptions, all electricity generated in
England and Wales must be sold andpurchased through the Pool.
All licensed generators and suppliers must become signatories to the 
Pooling and Settlement Agreement, which governs the constitution and
operation of the Pool and the calculation of payments due to and from
generators and suppliers. The Pool also provides centralized
settlement of accounts and clearing. The Pool does not itself buy or sell
electricity. 

	Prices for electricity are set by the Pool daily for each half hour of the 
following day based on the bids of the generators and a complex set of 
calculations matching supply and demand and taking account of system 
stability, security and other costs. Each day, generators inform NGC of the 
amount of electricity which each of their generating units will be able to
provide the next day and the price at which they are willing to operate each
such unit. NGC uses this information to construct a "merit order" which ranks 
each generating unit in order of increasing price. NGC then schedules the 
stations to operate according to such merit order, calling into service the 
least expensive generating units first and continuing to call generating units
into service until enough are operating to meet the demand of all suppliers. 
Factors which may constrain NGC's ability to order stations into operation 
in strict observance of the merit order include transmission system 
constraints and the inflexibility of some generating units. A computerized 
system (the settlement system) is used to calculate prices and to process 
metered, operational and other data and to carry out the other procedures
necessary to calculate the payments due under the Pool trading arrangements.
The settlement system is administered on a day to day basis by NGC 
Settlements Limited, a subsidiary of NGC, as settlement system administrator. 

	The UK government recently invited the Regulator to review these 
electricity wholesale trading arrangements, trading arrangements outside the 
Pool and price setting mechanisms. The review was launched in January 1998 
with an announcement that the Regulator and an independent panel had been 
asked to report to the Energy Minister by July 1998. 


Fossil Fuel Levy 

	All the RECs are obligated to obtain a specified amount of generating 
capacity from NFFOs. Because electricity generated from non-fossil fuel plants 
is generally more expensive than electricity from fossil fuel plants, the
Fossil Fuel Levy has been instituted. The Regulator sets the rate of the 
Fossil Fuel Levy annually. The current Fossil Fuel Levy is 0.9% of the value 
of sales of electricity made in England and Wales and 0.8% of the value of 
sales of electricity made in Scotland.


Regulation under the Electricity Act 

	The Regulator 

	The principal legislation governing the structure and regulation of the 
electricity industry in Great Britain is the Electricity Act. The Electricity 
Act established the industry structure described above so as to enable 
privatization to take place. The Electricity Act also created the 
institutional framework under which the industry is currently regulated, 
including the office of the Regulator, who is appointed by the Secretary of
State. The present Regulator, Professor Stephen Littlechild, was appointed for
a five year term commencing September 1, 1989 and he was reappointed in 1994 
for a further five year term ending on August 31, 1999, but has agreed to leave 
following the proposed appointment of an energy regulator with responsibilities 
for gas and electricity later this year. Professor Littlechild holds the formal 
title of Director General of Electricity Supply and is head of OFFER. 

	The Regulator's functions under the Electricity Act include granting 
licenses to generate, transmit or supply electricity (a function which he 
exercises under a general authority from the Secretary of State); proposing 
modifications to licenses and, in case of non-acceptance of such proposals by 
licensees, making license modification references to the MMC; enforcing 
compliance with license conditions; advising the Secretary of State in respect 
of the setting of each NFFO round; calculating the Fossil Fuel Levy rate and 
collecting the levy; determining certain disputes between electricity licensees 
and customers; and setting standards of performance for electricity licensees. 
The term "supply" as used in the context of the Electricity Act and the PES
License covers both distribution and supply activities. 

	The Regulator exercises concurrently with the Director General of Fair 
Trading certain functions relating to monopoly situations under the Fair 
Trading Act 1973 and certain functions relating to courses of conduct which
have, or are intended or likely to have, the effect of restricting, 
distorting or preventing competition in the generation, transmission or 
supply of electricity under the Competition Act 1980. 

	The Electricity Act requires the Regulator and the Secretary of State to 
exercise their functions in the manner each considers is best calculated to
ensure that all reasonable demands for electricity are satisfied, secure that 
license holders are able to finance their licensed activities and promote 
competition in the generation and supply of electricity. 

	Subject to these duties, the Secretary of State and the Regulator are 
required to exercise their functions in the manner which each considers is best 
calculated: to protect the interests of consumers of electricity supplied by 
licensed suppliers in respect of price, continuity of supply, and the quality
of electricity supply services; to promote efficiency and economy on the part
of licensed electricity suppliers and the efficient use of electricity 
supplied to consumers; to promote research and development by persons 
authorized by license to generate, transmit or supply electricity; to
protect the public from the dangers arising from the generation, transmission
or supply of electricity; and to secure the establishment and maintenance of 
machinery for promoting the health and safety of workers in the electricity 
industry. The Secretary of State and the Regulator also have a duty to take 
into account the effect on the physical environment of activities connected 
with the generation, transmission or supply of electricity. 

	In performing their duties to protect the interests of consumers in respect of 
prices and other terms of supply, the Secretary of State and the Regulator are 
required to take into account in particular the interests of consumers in rural 
areas. In performing their duties to protect the interests of consumers in
respect of the quality of electricity supply services, they are required to take
into account in particular the interests of those who are disabled or of 
pensionable age. 

	On June 30, 1997, the UK government announced its intention to conduct a 
comprehensive review of the regulatory framework governing the electricity 
distribution and supply businesses in England and Wales, as well as the 
regulatory framework applicable to other privatized utilities. The review 
culminated in the March Green Paper which sets forth a number of proposals of 
the UK government designated to re-examine utility regulation in the UK. 
Among the main proposals contained within the March Green Paper are the 
retention of the "RPI-X" as the fundamental basis for price regulation; 
increased transparency and consistency of regulation; the merger of OFFER and 
OFGAS; the separate licensing of the distribution and supply businesses of the 
PESs;the amendment of the statutory duties of utility regulators to provide a 
new primary duty to exercise their functions in the manner best calculated to
protect the interests of the consumers in the short and long term, wherever
possible through promoting competition; and adapting price regulation to 
distinguish between income earned through companies' own efforts and income
which results from other factors. Some of these proposals would require
primary legislation. Responses to the March Green Paper by interested
parties were to be submitted by May 31, 1998.

	Yorkshire submitted comments on the March Green Paper on May 29, 
1998. In summary, Yorkshire welcomed the review of regulation and supported 
the objectives of fairness and efficiency as the key to promoting customer 
interests and allowing the industry to develop, but suggested that the existing 
regulatory system had delivered significant benefits to customers and that any 
changes should not undermine such benefits. Yorkshire also supported the 
creation of a single energy regulator and procedural changes to foster greater 
consistency in decision making. Furthermore while agreeing with the need to 
consider the separation of the supply and distribution businesses, Yorkshire 
suggested that the licenses could be separated without forcing divestiture of 
such businesses and that the costs and overheads in putting in place any new 
arrangements should be minimized.

	On May 13, 1998 the Regulator issued a consultation paper on the 
separation of the distribution and supply businesses of PESs and the future 
treatment of metering and meter reading. The material proposals and 
recommendations set out in the consultation paper are as follows:

1. Full separation of the ownership of the supply and distribution 
businesses is recommended and appropriate interim arrangements 
should be contemplated for separate companies to comprise the 
distribution and supply activities, each acting independently of each 
other.
2. Measures should be introduced to ensure that each PES supply 
subsidiary operates at arm's length from the distribution subsidiary. 
These measures would include separate contracts between the supply 
and distribution businesses, avoiding the sharing of facilities between 
the businesses, including requiring separate management teams for the 
two businesses and minimizing corporate headquarters activities.
3. The distribution company should be responsible for the maintenance 
and operation of the network and have a statutory duty to develop and 
maintain an efficient, co-ordinated and economical system of electricity 
distribution to facilitate competition in generation and supply. It should 
connect any person to the network on reasonable terms and act as a ''last 
resort'' meter reading service, bought in from meter reading companies, 
for those suppliers not wishing to provide the service themselves.
4. All suppliers should be placed on the same legislative footing and tariff 
supply should be replaced by supply under contract. License conditions 
would be introduced to protect customers and competitors against 
dominant suppliers.
5. Metering services should be open to competition and  arrangements for 
transmission in Scotland should be brought into line with those in 
England and Wales.
	Responses to the consultation paper have been requested by June 15, 1998. 
The Regulator intends to issue a further consultation paper in July 1998. By 
September 1998, the Regulator anticipates having outline proposals on the 
separation of businesses, which outline will be considered in a consultation 
paper relating to revised price controls that is scheduled to be released in 
the Spring of 1999.

	In October 1997, the UK government invited the Regulator to consider 
parameters for a review of electricity trading arrangements. Such a review 
would focus on the wholesale electricity market in England and Wales and 
would likely cover existing trading within the Pool, trading arrangements 
outside the Pool and price setting mechanisms. The impact on, and possible need 
for change to, the framework of regulatory controls could also be considered, 
including Pool governance, regulation of and access to the Grid, licenses, the 
Electricity Act and the implications of European Union law. A review of certain 
of these issues was launched in January 1998 with an announcement that the 
Regulator and an independent panel had been asked to report to the Energy 
Minister by July 1998. 

	In December 1997, the UK government announced a review of energy 
sources for power generation, including fuel diversity, sustainable development 
and the role of coal. Representations of interested parties were to be 
submitted by mid-February 1998. While the review is underway, the Secretary
of State has deferred decisions on most outstanding or new applications for
the construction of generating stations. An Energy Select Committee Report on
the Coal Industry issued in April 1998 recommended that such deferral, as it
relates to the construction of gas fired generating stations, be lifted as 
soon as possible. The Trade and Industry Select Committee is also undertaking
an inquiry into a number of aspects of UK energy policy.

Consumers' Committee 

	The Regulator is required under the Electricity Act to establish a 
consumers' committee for the franchise area of each PES License holder (or, if 
the Secretary of State so determines, for the franchise areas of two or more
such suppliers). Each committee comprises a chairman appointed by the Regulator 
after consultation with the Secretary of State and between 10 and 20 other 
members appointed by the Regulator after consultation with the committee 
chairman. The duties of each committee are to make representations to, and 
consult with, their allocated PES License holders about matters affecting the 
interests of customers or potential customers of such supplier(s), to review 
matters affecting the interests of electricity consumers in such committee's
area, and to advise the Regulator on any other matter which warrants discussion
or which is referred to it by the Regulator. 


Licenses 

	Generation Licenses 

	Unless covered by an exemption, all electricity generators engaging in the 
construction, expansion or operation of a power station in Great Britain are 
required to have a generation license. There are currently 51 generation license
holders, including RPG, in Great Britain. Although generation is not subject to 
price control, generators are not permitted to discriminate between customers or
cross subsidize their licensed activities. The conditions attached to a 
generation license in England and Wales require the holder, among other things, 
to comply with the Grid Code, to comply with any REC's distribution code to the 
extent applicable, to be a member of the Pool and to submit relevant generating 
sets for central dispatch. The conditions attached to a generation license in 
Scotland require the holder, among other things, to comply with the Scottish 
Grid Code. Failure to comply with any of the generation license conditions may 
subject the licensee to a variety of sanctions, including enforcement orders by 
the Regulator or license revocation if the license holder is not in compliance
with an enforcement order. 


	PES Licenses 

	Each of the RECs, Scottish Power and Scottish Hydro Electric has a PES 
License for its Franchise Area and is required, under the Electricity Act, to 
supply electricity upon request to any premises in that area, except in 
specified circumstances. Each PES is also required not to discriminate 
between its own supply business and other users of its distribution system and 
the PES License prohibits cross subsidy between the various regulated 
businesses. As described above, PESs are subject to separate price controls on 
the amounts they may charge for the use of their distribution system by all 
customers in their Franchise Area and for the supply of electricity to 
Franchise Supply Customers. The PES Licenses also require the licensee to 
procure electricity at the best price reasonably obtainable having regard to 
the sources available. 

	As part of his continued monitoring of the electric utility industry, the 
Regulator published on August 15, 1996 comparative information relating to the 
RECs' economic purchasing performance. The publication, entitled "Yardstick 
of Electricity Purchase Costs", compared in yardstick value terms, the 
generation costs which RECs passed through to Franchise Supply Customers in 
Fiscal Years 1995 and 1996 under the Supply Price Control Formula. The 
Regulator has reviewed the supply price controls applicable to PES License 
holders and published in October 1997 proposals for new controls to take effect 
on April 1, 1998. He issued a consultation paper on this matter on September 5, 
1996 entitled "The Competitive Electricity Market from 1998: Price Restraints". 
He subsequently issued four further consultation papers in January, May, July 
and August, 1997. The October 1997 proposals were for maximum price 
restraints in respect of supply to residential and small business customers 
for a period of at least two years beginning April 1, 1998, which would 
eliminate the pass-through of costs to such customers, consisting primarily 
of purchased power costs. Yorkshire accepted these proposals. See '' ---
Supply of Electricity ---Price Regulation''. 

	In England and Wales, each PES License limits the extent of the generation 
capacity in which the relevant REC may hold an interest without the prior 
consent of the Regulator (''own-generation limits''). These own-generation 
limits, expressed in megawatts, currently restrict the participation of a REC
in generation to a level of approximately 15% of the simultaneous maximum 
electricity consumption in that REC's franchise area at the time of 
privatization. In the case of Yorkshire, the own-generation limit is fixed 
at 800 MW. 

	The Regulator has stated that it would be reasonable to consider a REC's 
request to increase its own-generation limit on the condition that it accepted 
explicit restrictions on the contracts it signed with its supply business, and 
that at a minimum the REC would be prohibited from entering into additional 
own-generation contracts in its franchise market. The Regulator considers that 
an increase in own-generation limits subject to such restrictions could allow a 
REC to contribute more fully to the development of competition in generation 
without the allegation that it was exploiting its captive market and local 
monopoly position. In June 1996, the Regulator stated that he had indicated to 
Energy Group, in the context of its acquisition of 6,000 MW of generating 
capacity from National Power and PowerGen, that he would be favorably
inclined to relax the own-generation limits of Energy Group subject to the 
Regulator and Energy Group agreeing to license modifications as set out in a 
consultation paper which he had published in August 1995. 

	The Regulator has made modifications to 14 PES Licenses in connection 
with the introduction of competition for Franchise Supply Customers currently 
scheduled to begin in September 1998. These modifications comprise a number 
of new obligations to offer services to all competing suppliers. These services 
are generally known as data management services, including registration, data 
collection and aggregation, meter operation and provision of prepayment meter 
infrastructure. These proposals have been accepted by Yorkshire. The Regulator 
has issued full modifications to the first-tier and second-tier licenses to 
encompass the changes. In response to respective individual requirements, the 
PESs are providing collectively a data transfer service. Preparations are being 
made to provide these services as part of a program of work and in October 
1997 the Regulator made final proposals for the recovery of the costs of this 
program which were accepted by Yorkshire in November 1997. 

	The RECs are also contributing to a program of work by the Pool to adopt 
settlement arrangements for the competitive market in 1998. It has been agreed 
that these costs, subject to a cap above which recovery would be partial, will 
be recovered from charges to be made to suppliers by the Pool over a five year 
period. 


	Second-Tier Supply Licenses 

	Other than a PES in its Franchise Area and subject to certain other 
exceptions, a supplier of electricity to premises in Great Britain must possess
a second-tier supply license. Subject to the restrictions described in '' ---
Supply of Electricity'' above, second-tier licensees may compete for the supply 
of electricity with one another and with the PES for the relevant area. There 
are currently 40 second-tier supply license holders for England and Wales, 
including Yorkshire, and 27 for Scotland. 


	Transmission Licenses 

	In England and Wales, NGC is the only transmission license holder. The 
transmission license imposes on NGC the obligation to operate the merit order 
system for the central dispatch of generating units and gives NGC
responsibility for the economic purchasing of ancillary services from
generators and suppliers. The transmission license requires NGC to offer terms 
on a non-discriminatory basis for the carrying out of works for connection to, 
and use of, the transmission system. 


	Modifications to Licenses 

	Subject to a power of veto by the Secretary of State, the Regulator may 
modify license conditions with the agreement of the license holder. He must
first publish the proposed modifications and consider representations or 
objections made. If the Regulator fails to agree to modifications with a 
license holder, he may refer a matter relating to generation, transmission
or supply of electricity under a license to the MMC. If the MMC finds that the
matter referred to it has, or may be expected to have, specified effects 
adverse to the public interest which could be remedied or prevented by a 
license modification, the Regulator is required to make modifications that 
appear to him requisite for the purpose of remedying or preventing the adverse
effects identified by the MMC. Modifications to License conditions may also be 
made by the Secretary of State as a consequence of monopoly, merger or other 
competition references under general UK competition law. 

	Following the acquisition of Yorkshire by Yorkshire Group, the Regulator 
proposed that Yorkshire's PES License be modified, by agreement, to take into 
account the fact that the PES License is now held by a subsidiary company. In 
particular, the Regulator proposed that the license be modified to provide 
that, with few exceptions, the only business activities which Yorkshire is 
permitted to undertake directly are its franchise and second-tier supply 
businesses and its distribution business. The license modifications also 
require Yorkshire to ensure that it has sufficient management resources and 
financial resources and facilities to conduct its supply and distribution 
businesses and to comply with its statutory and license obligations. Yorkshire 
is required to provide an annual certificate to the Regulator approved by the 
Yorkshire Board of Directors and signed by a Director to that effect and in the 
interim to notify the Regulator immediately of any changes threatening the 
validity of such certificates. Additionally, the license modifications require 
Yorkshire to obtain from AEP and NCE legally enforceable undertakings in favor 
of Yorkshire that they and their subsidiaries will refrain from any action 
which would be likely to cause Yorkshire to breach any of its obligations under 
the Electricity Act or the PES License. Further, the consent of the Regulator is
required for Yorkshire to create security over its assets, to incur 
indebtedness or to give guarantees, unless the transaction is on normal 
commercial and arm's length terms and for a "permitted purpose" (which refers to
the supply, distribution or generation business, or any business conducted by 
Yorkshire or its affiliates or subsidiaries on March 31, 1997) or the 
transaction involves any businesses whose aggregate revenues in any financial 
year do not exceed 5% of the aggregate turnover of the supply, second-tier 
supply and distribution businesses in the previous financial year. The consent 
of the Regulator also is required before Yorkshire may transfer assets or make 
loans to affiliates or subsidiaries except for certain specified purposes, 
including payment of dividends out of distributable reserves, repayments of 
capital, and payments on normal commercial and arm's length terms for goods, 
services or assets supplied. These provisions are subject to an overriding 
provision in the PES License which prevents any REC from disposing of (which 
would include creating a security interest in) distribution assets without the 
Regulator's express prior consent. Additionally, the license modifications 
require Yorkshire to use reasonable efforts to maintain the investment grade
credit ratings of its debt. Finally, because Yorkshire is now owned by 
Yorkshire Group, the Regulator required Yorkshire to obtain from AEP and
NCE legally enforceable undertakings to provide information to Yorkshire, as 
licensee, in order to comply with requirements of the Regulator. These 
modifications to the PES License have been agreed to by Yorkshire and took 
effect on December 15, 1997 and the required undertakings were also provided 
on December 15, 1997. 

	In February 1998, the Regulator issued, for public consultation, proposals 
for further modifications to the licenses of PESs that have been subject to 
takeovers.  The main proposals are:

(1)     to allow for a PES generation business to be carried on in an
 affiliate which is not a subsidiary and in such cases for the generation 
 business to be conducted outside the scope of the modifications to the PES 
 license which have been brought into effect to ensure that the Regulator can 
 regulate a company effectively after it has been taken over and to help ensure
 the financial stability of the PES (the "Ring-Fencing Conditions");

(2)     to restrict further the provisions of existing PES licenses allowing 
 PESs to  carry out certain otherwise restricted activities provided they do 
 not exceed  5 percent of the revenues of the supply, second-tier supply and 
 distribution  businesses, by introducing an additional test based on 
 cumulative investment;

(3)     to extend to all PESs that have been acquired the condition contained 
 in the  licenses of London Electricity plc, Northern Electric plc and 
 Yorkshire to  use reasonable endeavors to maintain an investment grade rating 
 of corporate debt;

(4)     to prohibit PESs from accepting "cross default" provisions in borrowing 
agreements; and

(5)     to make the payment of dividends and other distributions by a PES 
expressly conditional on compliance with the Ring-Fencing Conditions in 
the license.

	Comments were due with respect to the proposals in the consultation paper 
by March 27, 1998.  Yorkshire provided comments on the consultation paper on 
March 25, 1998.  Yorkshire indicated that it did not consider the proposed 
modifications described in paragraphs (1), (4), and (5) immediately above to be 
necessary.  Further proposals are expected to be made by the Regulator in the 
light of this consultation paper that may result in further modifications to 
PES licenses.  There can be no assurance that any such modifications to 
Yorkshire's PES license that result from such proposals will not have a 
material adverse effect on Yorkshire.

Term and Revocation of Licenses 

	Yorkshire's PES License will continue in effect until at least 2025 
unless revoked. Under ordinary circumstances, the license may not be revoked 
except on 25 years' prior notice, which notice may not be given until 2000. 
Otherwise, the Secretary of State may revoke a PES License by not less than 30 
days' notice in writing to the licensee in certain specified circumstances 
including any failure to comply with a final order of the Regulator requiring 
the license holder to comply with its license conditions or requirements, or 
insolvency of the licensee.


UK ENVIRONMENTAL LEGISLATION

	Yorkshire's businesses are subject to numerous regulatory requirements 
with respect to the protection of the environment. The principal laws which 
have environmental implications for Yorkshire are the Electricity Act, the 
Environmental Protection Act 1990, the New Road and Street Works Act 1991 
and the Environment Act 1995. 

	The Electricity Act requires Yorkshire to consider the preservation of 
natural beauty and the conservation of natural and man-made features of 
particular interest when it formulates proposals for development in connection 
with certain of its activities. Environmental assessments are required to be 
carried out in certain cases including overhead line constructions at higher 
voltages and generating station developments. Yorkshire has produced a 
Corporate Environmental Policy Statement and an Electricity Act Schedule 9 
Statement which sets out the manner in which it intends to comply with its 
environmental obligations. 

	Possible adverse effects of EMFs from various sources, including 
transmission and distribution lines, have been the subject of a number of
studies and increasing public discussion. The current scientific research is 
inconclusive as to whether EMFs may cause adverse health effects. There is the 
possibility that the passage of legislation and changing regulatory standards  
would require measures to mitigate EMFs, with resulting increases in capital 
and operational costs. In addition, the potential exists for public liability 
with respect to lawsuits brought by plaintiffs alleging damages caused by EMFs. 
The only UK standards for exposure to power frequency EMFs are those 
promulgated by the National Radiological Protection Board and relate to the 
levels above which physiological effects have been observed. Yorkshire fully 
complies with these standards. 

	Yorkshire believes that it has taken, and intends to continue taking, 
measures to comply with the applicable law and government regulations for the 
protection of the environment. There are no material legal or administrative 
proceedings pending against Yorkshire with respect to any environmental 
matter. Yorkshire spent (POUND)7 million on environmental compliance in Fiscal 
Year 1998, approximately half of which was of a capital nature. This level of 
expenditures is expected to continue in future Fiscal Years.




UK AND EU COMPETITION LAW 

	Yorkshire's businesses are subject to the competition rules of both the UK 
and the European Community. 

	The UK Restrictive Trade Practices Act 1976 stipulates that failure to 
furnish to the Office of Fair Trading an agreement that is registrable under
such Act renders unenforceable certain restrictions contained in such 
agreement. Briefly stated, the Fair Trading Act 1973 and the Competition Act 
1980 both regulate the activities of companies with market power. UK 
competition law, particularly the law relating to restrictive agreements, is in 
the process of reform and is likely to follow the approach of European 
Community law. 

	The Treaty of Rome contains provisions which prohibit anti-competitive 
agreements and practices, including the abuse of a dominant position within the 
EU or a substantial part of it. Penalties for violation of these provisions
include fines, third party damages and infringing contractual provisions being 
unenforceable. 

	A new Competition Bill has been introduced to bring the UK law into line 
with EU Competition Rules. It is prohibition legislation and also gives 
stronger powers to the  Regulator.

	In January 1993, the UK implemented the EU Utilities Directive on the 
procedures to be followed for the award of supply and works contracts by
utility companies, including electricity utilities. This directive was replaced
by EU Directive 93/36, which was implemented by the UK in December 1996 and 
which covers service contracts as well as supply and work contracts. Those 
contracts that exceed the relevant financial thresholds have to be advertised
in the Official Journal of the European Communities. Suppliers and contractors 
who believe they have suffered harm from failure to implement the correct 
procedure in awarding the contract are able to institute proceedings in the 
English High Court. The European Commission also has the power to intervene 
prior to the award of a contract. Yorkshire Group believes that Yorkshire has 
complied with any obligations it may have under those regulations but the 
interpretation and application of those regulations and of the European Union 
directives which they implement is not free from doubt and no assurance can be 
given that any claim for damages against Yorkshire for breach of the rules 
would be unsuccessful. 


EMPLOYEES

	Yorkshire had approximately 4,147 employees (approximately 4,025 full-
time equivalent) at the end of Fiscal Year 1998. Yorkshire Group has no 
employees because it is a holding company with no operations. Approximately 
61% of Yorkshire's employees are represented by labor unions. All Yorkshire 
employees who are not party to a personal employment contract are subject to a 
collective bargaining agreement called The Electricity Business Agreement. 
This Agreement may be amended by agreement between Yorkshire and the 
unions and is terminable with 12 months' notice by either side. Yorkshire 
believes that its relations with its employees are favorable. See '' ---
Business Restructuring'' for a discussion of planned staffing reductions. 



PRESENTATION OF CERTAIN INFORMATION AND EXCHANGE 
RATES

	Solely for the convenience of the reader, this document contains 
translations of certain pounds sterling amounts into US dollars amounts at the 
Noon Buying Rate in New York City for cable transfers in pounds sterling as 
certified for customs purposes by the Federal Reserve Bank of New York on 
March 31, 1998 of $1.6765 = (POUND)1.  See note 1 ''Summary of Significant 
Accounting Policies'', to Yorkshire Group's consolidated financial statements 
for  Fiscal Year 1998 included elsewhere in this document.


Item 2.       PROPERTIES

	Yorkshire owns the freehold of its principal offices north of Leeds. 
Yorkshire has both network and non-network land and buildings. 


	Network Land and Buildings 

	At March 31, 1998, Yorkshire had interests in approximately 15,000 
network properties, comprising principally sub-station sites. 


	Non-Network Land and Buildings 

	At March 31, 1998, Yorkshire had freehold and leasehold interests in non-
network properties comprising chiefly offices, depots, warehouses, workshops 
and a number of former retail outlets. The net book value of total non-network 
land and buildings at March 31, 1998 was (POUND)37 million. 


Item 3.       LEGAL PROCEEDINGS

	Yorkshire Group is routinely a party to legal proceedings arising in the 
ordinary course of business which are not material, either individually or in 
the aggregate. Yorkshire Group currently is not a party to any material legal 
proceedings nor is it aware of any threatened material legal proceedings. 

	On May 18, 1998, Optimum Solutions Limited (''Optimum''), a company 
that conducts research and development in the UK electric industry, entered a 
claim in the UK High Court of Justice, Chancery Division, against Yorkshire, 
Eastern Electricity plc, which is also a REC, NGC (as defined herein) and 
Logica plc alleging, in the case of Yorkshire, that Yorkshire breached a 
confidentiality agreement with Optimum regarding the use of confidential 
information in Yorkshire's preparation for the competitive changes to the 
electricity supply market in and after 1998.  Optimum requests an injunction 
against the continued use of, and the return of, such confidential information,
an unspecified amount of damages relating to breach of contract and equitable 
compensation for misuse of such confidential information.  Yorkshire is 
currently assessing its response to this claim.  The final outcome of this 
matter cannot now be determined.

	Litigation is ongoing with respect to another corporation's use of actuarial 
surpluses declared in the ESPS. The Pension Ombudsman (a UK arbitrator 
appointed by statute) has issued a "final determination" in favor of complaints 
made by members of the ESPS relating to another corporation's use of the ESPS 
surplus to offset such corporation's additional costs of early payment of 
pensions as a result of reorganization or redundancy, together with additional 
contributions required after a valuation. Under that determination, the Pension 
Ombudsman directed such corporation to pay into ESPS the amount of that use 
of the surplus plus interest. The Pension Ombudsman's final determination has 
been successfully challenged in the courts. At the same time, the courts also 
considered other areas of uncertainty relating to the uses made of actuarial 
surpluses arising in the ESPS, including the ability to reduce or suspend 
standard employer contributions to reduce such surpluses. The courts ruled that 
such reductions were permissible. The final decisions of the courts are subject
to appeal. If any of the decisions are reversed on appeal they may have an 
adverse effect on Yorkshire, which has made similar use of its actuarial 
surplus, but no assurance can be given as to the extent of that effect. 


Item 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY 
HOLDERS

None



PART II


Item 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND 
RELATED STOCKHOLDER MATTERS
		
	There is no established public trading market for Yorkshire Group's 
common stock, all of which is owned indirectly by AEP and NCE.


Item 6.       SELECTED FINANCIAL DATA

	The consolidated income statement data and other consolidated data of the 
Predecessor Company for each of the four Fiscal Years ended March 31, 1997 
and the consolidated balance sheet data and certain business segment data of 
the Predecessor Company at the end of each such Fiscal Year presented below
have been derived from the audited consolidated financial statements of the 
Predecessor Company. The consolidated income statement data and other 
consolidated data of the Successor Company for Fiscal Year 1998 and the 
consolidated balance sheet data of the Successor Company at the end of such 
Fiscal Year presented below have been derived from the audited consolidated 
financial statements of the Successor Company. The consolidated balance sheet 
data and certain business segment data of the Successor Company as of April 1, 
1997 presented below have been derived from the audited consolidated balance 
sheet of the Successor Company. The selected consolidated financial data 
presented below was derived from the audited consolidated financial statements 
of the Predecessor Company and the Successor Company that have been 
prepared in accordance with US GAAP. See ''Item 7. Management's Discussion 
and Analysis of Results of Operations and Financial Condition'' and the 
consolidated financial statements and notes thereto of the Predecessor Company 
and the Successor Company included elsewhere in this document.  

	The unaudited pro forma consolidated data for the Successor Company for 
Fiscal Year 1997 presented below reflect the Acquisition as if it had 
occurred as of April 1, 1996. Such data has been prepared by the Successor 
Company based upon assumptions deemed proper in accordance with the purchase 
method of accounting for business combinations and have been adjusted to 
reflect (i) interest expense of (POUND)74 million incurred as a result of the 
financingof the Acquisition, (ii) amortization of (POUND)24 million related to 
goodwill recorded in connection with the Acquisition, (iii) additional 
depreciation expense of (POUND)6 million as a result of the revaluation of
certain fixed assets in connection with the Acquisition and (iv) removal of 
the effect of recording the provision of (POUND)78 million for certain
uneconomic gas and electricity contracts, the loss of (POUND)7 million on
certain interest rate swap agreements and the write-down of (POUND)6 million
relating to non-operational property. Such data are shown for illustrative 
purposes only and are not necessarily indicative of the future results of 
operations of the Successor Company or of the results of operations of the 
Successor Company that would have actually occurred had the Acquisition 
occurred at the beginning of the period presented. Such data should be read in 
conjunction with the unaudited pro forma consolidated statement of income and 
notes thereto of the Successor Company included elsewhere in this document. 

<PAGE>

                            Predecessor Company 
                                              		 Fiscal Year            
                                1994        1995        1996        1997
                              (POUND)     (POUND)     (POUND)     (POUND)   
  (Amounts in Millions) 
Consolidated Income Statement Data:

		Operating revenues           1,308       1,464       1,431        1,331 
		Operating income (1)           156         215         214           52 
		Other income (loss), net (2)    (8)         16         313           20 
		Interest expense, net           (5)        (12)        (20)         (33)
 	Provision for income taxes (3) (50)        (78)       (114)         (13)

		Net income                      93         141         393           26 

                                              		March 31,                   
                               1994         1995        1996         1997 
                             (POUND)      (POUND)     (POUND)      (POUND)     
(Amounts in Millions) 
Consolidated Balance Sheet Data:

		Fixed assets                   701         747         769          796
		Total assets                 1,241       1,367       1,408        1,375 
		Total shareholders' equity     612         517         399          359 
		Long-term debt                 126         305         424          419 		
  Short-term debt and current 
   portion of long-term debt      99          91          90           87 

					
    		                                         Fiscal Year                   
                               1994         1995        1996         1997      
                             (POUND)      (POUND)     (POUND)      (POUND)     
(Amounts in Millions, Except Ratios) 
Other Consolidated Data:
		EBIT (4)                       148         231         527           72 
		EBITDA (4)                     182         272         569          122
 
		Cash flow from operations      237         201         222           96 		
  Cash used in investing
    activities                  (201)       (101)         (8)         (51)
		Cash used in financing
    activities                  (139)        (67)       (114)         (76)
		Ratio of earnings
    to fixed charges (5)         6.8        10.5         12.0         1.8 

<PAGE> 
                               Successor Company 

                                  Successor             Successor
                                  Pro Forma 
                                 Fiscal Year            Fiscal Year
                                     1997                  1998

                                  (POUND)               (POUND)      $(6)    
                                      (Amounts in Millions) 
Consolidated Income 
Statement Data:

	 Operating revenues    . . . . . 1,331 	                1,285       2,154
		Operating income (1)    . . . .  	106                   	161         270
		Other income (loss) 
     net (2) .	. . . . . . . . . .   20                   	(39)       	(66)
		Interest expense, net   .	. . . .(100)                 	(106)      	(178)
		Provision for income taxes   .	. .(17)	                    1          	2
		Income before extraordinary item .	 9                    	17         	28
		Extraordinary loss (7) . . . . . .  -                  	(134)      	(225)
	
		Net income (loss)     . . . . . .   9                  	(117)      	(197)


      
                               Successor                     Successor  
                              April 1, 1997               March 31, 1998
                                (POUND)              (POUND)           $(6)
       
                                        (Amounts in Millions) 
Consolidated Balance 
Sheet Data:

		Fixed assets    .	. .     . .   939                 1,060             1,777
		Total assets    .	            2,591                 2,462             4,126
		Total shareholders' equity  .	    -                   323               541
		Long-term debt  .	. . . . . .   433                 1,026             1,720
		Accrued liability 
  to purchase Yorkshire . . . . 1,496                     -                 -
		Short-term debt and 
  current portion of
  long-term debt. . . . . . . .	   87                   324               542
		Short-term debt 
  refinanced June 1998..            -                   164               275

                                                             Successor
                                  Successor                    Year
                                  Pro Forma                    Ended
                                 Fiscal Year                  March 31,
                                    1997                        1998
                                    (POUND)           (POUND)           $(6)    
 
                                        (Amounts in Millions, Except Ratios) 
Other Consolidated 
Data:

		EBIT before 
extraordinary 
item (4) / (7)   . . . . . . . . .   126             	122                204
		EBITDA before 
extraordinary item 
(4)/(7) . . . . . . . . . . . . . . 	206             	200               	335
		Cash flow from 
operations     . . . . . . . .  . .                   	62               	103
		Cash used in 
investing activities    .	 . . . 	                 (1,639)           	(2,747)
		Cash provided by  
financing activities    . . . .                    	1,391             	2,332
		Ratio of earnings to 
fixed charges (5)       . . . . .     1.2                      1.1             
     
 (1)    Notable operating expenses include: 

Fiscal Year 1998 --- provision of (POUND)5 million for committed costs arising
from delays in opening up the competitive market and (POUND)10 million 
restructuring charges.

Fiscal Year 1997 --- (i) a provision of (POUND)78 million for uneconomic
gas and 
electricity contracts (the effect of which is removed from the Successor 
Company's unaudited pro forma consolidated statement of income for 
Fiscal Year 1997), which resulted in a charge of (POUND)125 million to the 
supply business offset by an intrabusiness elimination of (POUND)47 million and 
(ii) a charge of (POUND)50 million for information system development costs to 
prepare for the opening of the competitive electricity market in 1998 for 
Franchise Supply Customers, of which (POUND)37 million was charged to the 
supply business and (POUND)13 million was charged to the distribution business. 

Fiscal Years 1994 and 1995 ---reorganization costs of (POUND)44 million and 
(POUND)8 million, respectively. 

(2)     Other income (loss) principally represents income from Yorkshire's 
investment in NGG and, in Fiscal Year 1996, a gain resulting from the 
NGG Transaction and earnings and losses from Yorkshire's investments in 
joint ventures and minority holdings. Notable items include: 

Fiscal Year 1998 ---an unrealized loss (POUND)41 million before taxes was
charged following the reduction in fair value of Yorkshire Group's investment 
in Ionica Group plc (Ionica).

Fiscal Year 1997 ---gain on sale of Yorkshire's investment in Torch 
Telecom of (POUND)15 million. 

Fiscal Year 1996 ---income from investment in NGG and gain in respect of 
the NGG Transaction as described under ''Item 7. Management's 
Discussion and Analysis of Results of Operations and Financial Condition 
---Introduction ---NGG Transaction''. 

Fiscal Year 1995 ---one-time termination payment received from Stockholm 
Stadshus AB of (POUND)17 million. 

Fiscal Year 1994 ---loss on sale of Yorkshire's investment in Homepower 
Retail Limited of (POUND)18 million. 

(3)     Fiscal Year 1996 includes a tax charge of (POUND)38 million relating to
the NGG Transaction. 

(4)     EBIT represents income before the sum of net interest expense and 
income taxes. EBITDA represents income before the sum of net interest expense, 
income taxes, depreciation and amortization. EBIT and EBITDA are 
provided for informational purposes only and such measures should not be 
construed as alternatives to operating income (as determined in accordance 
with US GAAP) as indicators of operating performance, or as alternatives 
to cash flows from operating activities (as determined in accordance with 
US GAAP) as measures of liquidity. EBIT and EBITDA are widely 
accepted financial indicators of a company's ability to incur and service 
debt. However, the measures of EBIT and EBITDA presented herein may 
not be comparable to similar measures presented by other companies. 

(5)     The ratio of earnings to fixed charges is computed as the sum of
pre-tax income (before extraordinary item) plus fixed charges divided by fixed 
charges. Fixed charges consist of interest expense and amortization of debt 
expense. 

(6)     Solely for the convenience of the reader, pounds sterling amounts have 
been translated into US dollar amounts at the Noon Buying Rate on March 
31, 1998 of $1.6765= (POUND)1. See ''Note 1. Summary of Significant Accounting 
Policies'' to the Consolidated Financial Statements of the Successor for 
Year Ended March 31, 1998.

(7)     Represents the windfall tax imposed by the UK government, which was not 
deductible for UK corporation tax purposes. 


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS 
OF OPERATIONS AND FINANCIAL CONDITION

	The following discussion should be read in conjunction with the 
consolidated financial statements and the notes thereto of the Successor 
Company and with the consolidated  financial statements and the notes thereto 
of the Predecessor Company and ''Selected Consolidated Financial Data'' 
included elsewhere in this document. The consolidated financial statements of 
the Successor Company and the Predecessor Company discussed herein are 
presented in accordance with US GAAP. 


Introduction 

	Background 

	Yorkshire Group is indirectly equally owned by AEP and NCE. Yorkshire 
Group was incorporated as a limited company under the laws of England and 
Wales in July 1996. Effective April 1, 1997, Yorkshire Group, through its 
wholly owned subsidiary Yorkshire Holdings, gained effective control of 
Yorkshire. Yorkshire Group's primary asset is the stock of Yorkshire Holdings. 
Yorkshire Holdings, which owns all the outstanding stock of Yorkshire, has no 
significant operations outside of its investment in Yorkshire. 


	Financing the Acquisition 

	Yorkshire Group indirectly acquired ownership of Yorkshire by means of a 
cash offer commenced on February 24, 1997 and declared wholly unconditional 
on April 1, 1997. The Acquisition was completed through the payment of cash 
consideration of (POUND)1,457 million and the issuance of loan notes in the 
amount of (POUND)22 million. The total consideration, including acquisition
costs, was (POUND)1,496 million. The Acquisition was financed by cash 
contributions of (POUND)220 million from each of AEP and NCE and from 
borrowings under a (POUND)1,140 million five year term loan and revolving 
facility agreement dated February 24, 1997. On July 31, 1997, this term loan 
and revolving facility agreement was replaced by a new credit facility 
(the ''1997 Credit Facility''). 



	Accounting for the Acquisition 

	The recorded assets and liabilities of Yorkshire at March 31, 1997 were 
(POUND)1,375 million and (POUND)1,016 million, respectively. In accordance 
with the purchase method of accounting, the assets and liabilities acquired 
have been recorded based on an allocation of the purchase price. Effective 
April 1, 1997, Yorkshire's assets were increased by (POUND)222 million to their
fair value of (POUND)1,597 million, reflecting principally: (a) an increase of
(POUND)138 million in the value of Yorkshire's distribution network in excess of
its depreciated cost basis; (b) an increase in the pension asset for the defined
benefit pension plan of (POUND)55 million; and (c) an increase in the value of 
an equity investment in Ionica Group plc (''Ionica'') of (POUND)23 million. 
Yorkshire's liabilities were increased by (POUND)79 million to their fair value 
of (POUND)1,095 million, reflecting principally: (a) an increase in the 
deferred tax liability of (POUND)67 million; and (b) an increase of (POUND)14 
million in the market value of long-term borrowings. The excess of the purchase 
price plus Acquisition costs, totaling (POUND)1,496 million, over the fair 
value of assets acquired net of liabilities assumed, totaling (POUND)502 
million, resulted in goodwill of (POUND)994 million which is being amortized 
over a 40 year period. The consolidated financial statements of the Predecessor 
Company discussed below do not reflect the foregoing adjustments. 


	NGG Transaction 

	During Fiscal Year 1996, Yorkshire, together with the other 11 RECs in the 
UK, distributed the majority of its shares in NGG to its shareholders. This 
transaction, together with certain related transactions (collectively, the 
''NGG Transaction''), had a material impact on Yorkshire's financial results
 for that year. The related transactions included: (a) Yorkshire's receipt of
 special and ordinary dividends; (b) the receipt by each Yorkshire 
residential customer of a one-time discount pursuant to an agreement among 
the shareholders of NGG; and (c) Yorkshire's receipt of an in-kind dividend of 
approximately 9.2% of the shares of PSB which shares were subsequently 
converted to cash upon PSB's liquidation. 


Significant Factors and Known Trends 

	Competition and Industry Challenges 

	On April 1, 1995 and 1996, certain reductions in allowed distribution 
revenues were made by the Regulator. Yorkshire's allowed distribution revenues 
were impacted by a 14% below inflation reduction and a 13% below inflation 
reduction on April 1, 1995 and 1996, respectively, following reviews by the 
Regulator. On April 1, 1997 and April 1, 1998, Yorkshire's allowed distribution 
revenues were decreased by another 3% below inflation reduction, and there will 
be a further 3% below inflation reduction on April 1, 1999. 

	The potential exists for additional distribution price reductions based upon 
further review by the Regulator. The next scheduled Distribution Price Control 
Formula review will be in 2000. Future cost efficiency initiatives may not 
result in sufficient savings to offset price reductions. Price reductions are
mitigated by the inclusion of the UK Retail Price Index in the determination of
the Distribution Price Control Formula. Because the maximum average price in
any year is based in part on the maximum average price in the preceding year, 
a price reduction in any given year has an ongoing effect on the maximum 
average price for all subsequent years. See ''The Electric Utility Industry in 
Great Britain ---Distribution of Electricity ---Price Control''. 

	Yorkshire currently has an exclusive right to supply electricity to its 
Franchise Supply Customers. Competition in supply to such customers was 
scheduled to be phased in over a six month period commencing on April 1, 
1998. In October 1997, the Regulator published proposals for new transitional 
supply price restraints to apply from April 1, 1998 to residential and small 
business customers for an initial period of two years and until an adequate
level of competition is established. Yorkshire subsequently indicated its 
acceptance of such proposals. The proposals (when taken together with the 
reduction in the Fossil Fuel Levy, which  became effective on April 1, 1998)
resulted in the implementation of small reductions, effective April 1, 1998, in 
the tariffs for Yorkshire's residential and small business customers in its 
Franchise Area 
compared to the corresponding tariffs in effect in August 1997. The proposals 
also require an additional 3% below inflation reduction effective April 1, 1999.
See ''The Electric Utility Industry in Great Britain ---Supply of Electricity
 ---Price Regulation''. 

	Following an announcement in January 1998 by the Regulator, competition 
in supply to Franchise Supply Customers has been delayed until September 
1998. Assuming that such competition starts as currently scheduled in 
September 1998 for Franchise Supply Customers, Yorkshire Group presently 
estimates that costs totaling (POUND)72 million will have been incurred for re-
engineering and information technology work. Of such amount, approximately 
(POUND)19 million was expensed in Fiscal Year 1997 and (POUND)2 million in 
Fiscal Year 1998. The Regulator has made proposals (which have been accepted by 
Yorkshire) to allow Yorkshire recovery of (POUND)23 million over a five year
period ending March 31, 2003. A further (POUND)7 million is expected to be
recovered through Pool cost recovery and other national mechanisms and 
(POUND)8 million is expected to be capitalized as such amount is expected to 
provide future benefits to the supply business. As a result of the above, the 
residual amount of approximately (POUND)13 million, which will not be recovered 
or capitalized, will be expensed in Fiscal Year 1999 as incurred.

	The Regulator has also made proposals (which have been accepted by 
Yorkshire) to provide an annual cost recovery of (POUND)3 million for the 
period 1998 through 2000 to cover operating costs. The allowance will be 
reviewed at the time of the Distribution Price Control Formula review in 2000. 

	The October 1997 proposals therefore will allow Yorkshire to recover up to 
52% of its forecasted set-up and operating costs over a five year period. The 
shortfall could be higher if: (i) operating costs are higher than anticipated 
(e.g., there is a higher level of customer activity); (ii) recovery of operating
costs is disallowed or reduced when the Distribution Price Control Formula is 
reviewed for the period beginning April 1, 2000; or (iii) the integrated 
national systems do not work as contemplated or require substantial
redevelopment. 

	The Regulator's proposals also provided that a REC should be penalized: (i) 
where it starts to open its market more than three months after the market 
opening by the first REC; (ii) where it opens successive tranches of its market 
more than three months after the opening of the corresponding tranche by the 
first REC; and (iii) where the market opening of the first REC has been delayed 
beyond April 1, 1998. The penalties will be calculated at 1% of the operating 
revenues of the supply business for Franchise Supply Customers per month of 
delay, weighted by the proportion of customers affected and applied as a 
reduction in allowed distribution business revenues. If Yorkshire does not open 
its market for Franchise Supply Customers to competition until after April 1, 
1999, it would incur a penalty of approximately (POUND)6 million. It is now
apparent that some penalty will be incurred due to the delay in the opening 
of the competitive market for Franchise Supply Customers until September 1998 
and a provision of  (POUND)3 million has been  included in the results for 
Fiscal Year 1998. Yorkshire Group expects that Yorkshire will be prepared to 
open its Franchise Area to such competition in September 1998. 


	Factors Affecting Revenues 

	Two principal factors determine the amount of revenues produced by the 
distribution business: the unit price of electricity distributed (which is
controlled by the Distribution Price Control Formula) and the number of 
electricity units distributed (which depends upon customer demands as 
influenced in part by economic activity and weather conditions). 

	Two principal factors determine the amount of revenues produced by the 
supply business: the unit price of the electricity supplied (which, in the case
of the Franchise Supply Customers, is controlled by the Supply Price Control 
Formula) and the number of electricity units supplied. Yorkshire is currently 
expected to have the exclusive right to supply all Franchise Supply Customers
in its Franchise Area until September 1998. 


	UK Tax Law Changes 

	On July 2, 1997, the UK government enacted certain changes in tax law, 
including a one-time windfall tax on privatized industries and a reduction in 
rates of corporation tax on income from 33% to 31%. The windfall tax on 
Yorkshire is (POUND)134 million and is not deductible for UK corporation tax
purposes. The windfall tax has been recorded as an extraordinary charge in
Fiscal Year 1998. The tax is payable in two equal installments on December 1, 
1997 and 1998. During Fiscal Year 1998, Yorkshire Group estimated the impact
of the reduction in corporation tax rates, which resulted in a one-time 
reduction in deferred income tax liabilities and a corresponding reduction in 
income tax expense of approximately (POUND)12 million. 


	Business Restructuring 

	In December 1997, Yorkshire announced a planned business restructuring 
intended to enable it to meet increased competition and react to potential 
regulatory developments in the energy markets in the UK. The restructuring will 
result in the distribution and supply businesses becoming self-sufficient 
businesses. As part of the restructuring, an alternative ownership structure
will be pursued for the generation business. Yorkshire currently contemplates 
transferring such assets to an entity or entities other than Yorkshire Group 
or its subsidiaries. It is expected that proceeds from the transfer of these
assets will be used to reduce debt of Yorkshire Group. See ''Certain 
Relationships and Related Transactions''. 

	Total assets less current liabilities employed by the generation business at 
March 31, 1998 were (POUND)136 million. Operating income attributable to the 
generation business in Fiscal Year 1998 was (POUND)16 million. 

	As a result of this restructuring, approximately 160 positions will be 
eliminated. A provision of approximately (POUND)10 million was recorded in 
Fiscal Year 1998 to reflect the cost of these workforce reductions. 


	Investment in Ionica 

	Yorkshire Group's investment in Ionica was initially included in its 
consolidated balance sheet at its fair value at acquisition on April 1, 1997 of 
(POUND)54 million plus a subsequent additional investment of (POUND)1 million. 
Management have written down the book value of the investment to their 
estimate of fair value by charging an unrealized loss of (POUND)41 million 
before taxes in Fiscal Year 1998. The reduction in fair value of the investment 
was recognized by management as '' other than temporary '' following an 
announcement by Ionica on May 22, 1998 that Ionica had been unsuccessful in 
negotiating release of credit lines from existing providers of bank finance and 
had been advised to obtain further equity investment prior to seeking further 
bank funding. Management expects to take an additional charge of (POUND)6 
million before taxes in the first quarter of Fiscal Year 1999.

	Derivative Financial Instruments and Interest Rates 

	Derivative financial instruments are used by Yorkshire on a limited basis 
and are utilized only to mitigate business risks and not for speculative 
purposes. 

	Yorkshire Group maintains its cash balances in pounds sterling. However, 
Yorkshire Group's obligations related to the issuance of the Senior Notes is 
payable in US dollars.  Upon issuance of the Senior Notes, cross currency swap 
agreements were taken out to hedge a portion of the currency risk exposure. 

	Changes in interest rates have not had a significant impact on Yorkshire in 
the last three years. However, Yorkshire has entered into debt facilities which 
bear interest at variable rates. As part of its risk management policy and to 
mitigate the effects of interest rate changes, Yorkshire Group enters into 
interest rate swap agreements under which counterparties have agreed to pay 
amounts to Yorkshire Group equal to variable interest obligations in 
consideration of amounts payable by Yorkshire Group equivalent to fixed rates
of interest. If the counterparty to the interest rate swap was to default on 
contractual payments, Yorkshire Group could be exposed to increased costs 
related to replacing the original agreement. 

	See Note 7, ''Financial Instruments'', to Yorkshire's consolidated financial 
statement for Fiscal Year 1997 and Note 9, ''Financial Instruments'' to 
Yorkshire Group's consolidated financial statements for Fiscal Year 1998 
included elsewhere in this document for additional information on such 
agreements. 


	Environmental Factors 

	Yorkshire's businesses are subject to numerous regulatory requirements 
with respect to the protection of the environment. The principal laws which
have environmental implications for Yorkshire are the Electricity Act, the 
Environmental Protection Act 1990, the New Road and Street Works Act 1991 
and the Environment Act 1995. Yorkshire believes that it has taken, and intends 
to continue taking, measures to comply with the applicable law and government 
regulations for the protection of the environment. There are no material 
legal or administrative proceedings pending against Yorkshire with respect to 
any environmental matter. 


	Inflation 

	Inflation neither has had a significant impact on Yorkshire in the last three 
years, nor is expected to do so in the foreseeable future. Yorkshire's revenues 
from regulated activities are adjusted based on factors which include an index 
for inflation in costs of operations. 


	Year 2000 Issues 

	Yorkshire Group is currently evaluating its business systems to determine 
the extent to which modifications are required to prevent problems related to 
the year 2000, and the resources which will be required to make such 
modifications. Yorkshire Group has established a dedicated team to coordinate 
and control all date conformity work within a structured program framework. 
Yorkshire Group estimates that the costs associated with year 2000
modifications will be approximately (POUND)26 million, of which 
(POUND)17 million will be expensed as incurred, and (POUND)9 million will be 
capitalized.  The amount expensed in the Fiscal Year 1998 was (POUND)2m.


Results of Operations 

	Fiscal Year  1998 for the Successor Company Compared with Fiscal Year  
1997 for the Predecessor Company 


	Earnings 

	Income from operations increased by (POUND)109 million (210%) from (POUND)52 
million for Fiscal  Year  1997 to (POUND)161 million for Fiscal Year 1998. 
The increase was largely due to the effect of the following items included in 
income from operations for Fiscal year 1997: (i) a (POUND)78 million 
provision for uneconomic gas and electricity contracts, which resulted in a 
charge of (POUND)125 million to the supply business offset by an intrabusiness 
elimination of (POUND)47 million; (ii) a (POUND)50 million charge for 
information system development costs to prepare for the opening of the 
competitive electricity market in 1998 and to replace billing and collection 
systems, of which (POUND)37 million was charged to the supply business and 
(POUND)13 million was charged to the distribution business; (iii) a (POUND)8 
million charge incurred for advisers' fees in respect of the Acquisition; and  
(iv) a (POUND)6 million write-down of the value of non-operational property.  
The favorable effect on the comparative income from operations was partly 
offset by the following items included in income from operations for Fiscal 
Year 1998:  (i) a provision of (POUND)10 million for restructuring costs; (ii) 
a provision of (POUND)5 million for committed costs arising from delays in 
opening up the competitive market, (iii) amortization of goodwill of (POUND)25 
million;  (iv) additional marketing costs of (POUND)8 million; and (v) 
additional depreciation of (POUND)7 million arising from the revaluation of 
distribution network assets in connection with the Acquisition. These 
additional costs were mitigated by a decrease in net periodic pension costs of 
(POUND)13 million, due to an increase in the market value of the pension fund 
and a change in respect of identifying the element of costs to be capitalized 
within the distribution network reducing operating expenses by (POUND)15 
million. 

	Income from operations by segments for Fiscal Year  1998 was (POUND)115 
million, (POUND)25 million and (POUND)24 million for the distribution, supply 
and other segments, respectively. Income (loss) from those segments in Fiscal 
Year 1997 was (POUND)127 million, (POUND)(132) million and (POUND)10 
million, respectively. 

	An unrealized loss of (POUND)41 million before taxes was charged in Fiscal Year
1998 following the reduction in fair value of Yorkshire Group's investment in 
Ionica Group plc.

Net interest expense rose from (POUND)33 million for Fiscal Year 1997 to 
(POUND)106 million for Fiscal Year 1998 principally as a result of the financing
costs associated with the increased amount of debt incurred in connection with
the Acquisition. 

Net income decreased by (POUND)143 million, from (POUND)26 million in Fiscal 
Year 1997 to a loss of (POUND)117 million in Fiscal Year 1998. In addition to
the variances discussed above, the net loss for Fiscal Year 1998 includes an 
extraordinary charge of (POUND)134 million for the windfall tax enacted by
the UK government in July 1997. The windfall tax is not deductible for UK
corporation tax purposes. Net income before this extraordinary charge for Fiscal
Year 1998 was (POUND)17 million. 


	Revenues 

	Operating revenues decreased by (POUND)46 million (3%) from 
(POUND)1,331 million in Fiscal Year 1997 to (POUND)1,285 million during 
Fiscal  Year 1998 as follows: 
 
	
                                    Operating Revenues
                                    Increase (Decrease)
                                    from  Fiscal Year 1997
                                    to Fiscal Year  1998
                                    	(POUND) millions
 
	Distribution     . . . . . . . . . . . . ..(3)
	Supply   . . . . . . . . . . . . . . . . .(60)
	Other.. . . . . . . . . . . . . . . . . . .17

	Total operating revenues        . . . . . (46)

	Revenues from the distribution business decreased by (POUND)3 million from
(POUND)308 million for Fiscal Year 1997 to (POUND)305 million for Fiscal 
Year 1998 due to a decrease in the maximum allowable average price of units 
distributed as a result of the application of the revised Distribution Price
Control Formula. Units distributed increased by 0.4% in Fiscal Year 1998 
partially offsetting such decrease. 

	Franchise Supply Customers, who are generally residential and small 
commercial customers, comprised 52% of total sales volume for Fiscal Year 
1998. The volume of unit sales of electricity for Franchise Supply Customers is 
influenced largely by the number of customers in the Franchise Area, weather 
conditions and prevailing economic conditions. Unit sales to Non-Franchise 
Supply Customers, who are typically large commercial and industrial 
businesses, constituted 48% of total sales volume for Fiscal Year 1998. Sales
to Non-Franchise Supply Customers are determined primarily by the success of
the supply business in contracting to supply electricity to customers who
are located both inside and outside the Franchise Area. 

	During Fiscal Year 1998, the number of electricity units supplied decreased 
by 4% and total revenues produced by the supply business decreased by (POUND)60 
million (5%) to (POUND)1,118 million from (POUND)1,178 million for Fiscal Year 
1997. Revenues decreased partly due to a reduction of 8% in sales volume to 
Non-Franchise Supply Customers as a result of increased competition and partly
due to reduced cost of sales, the benefits of which are passed on to customers. 

	Other revenues increased by (POUND)17 million mainly as a result of increased 
gas revenues.

	Cost of Sales 

	Cost of sales decreased by (POUND)50 million (5%) from (POUND)932 million in
Fiscal Year 1997 to (POUND)882 million in Fiscal Year 1998. This decrease was
due principally to the reduction in units supplied and reductions in the Fossil
Fuel Levy. 


	Operating Expenses 

	Operating expenses decreased by (POUND)105 million (30%) from (POUND)347 
million in Fiscal Year 1997 to (POUND)242 million in Fiscal Year 1998. The 
reduction in operating expenses was mostly as a result of the following expenses
included in Fiscal Year 1997: (i) a (POUND)78 million provision for uneconomic
gas and electricity contracts made for the net present value of expected future 
payments in excess of anticipated recoverable amounts, reflecting expectations 
of market prices for electricity following the opening of the competitive
electricity market in 1998 and future gas prices; (ii) a (POUND)50 million 
charge for information system development costs, including (POUND)19 million 
relating to the opening of the competitive electricity market in 1998 and a 
(POUND)31 million charge relating to the replacement of billing and collection 
systems; (iii) a (POUND)8 million charge incurred for advisers' fees in respect 
of the Acquisition; and (iv) a (POUND)6 million write-down of the value of
non-operational property. The comparative decrease in operating expenses was
lessened by the following  operating expenses included in Fiscal Year 1998: 
(i) a provision of (POUND)10 million for restructuring costs; (ii) a 
provision of (POUND)5 million for committed costs arising from delays 
in opening up the competitive market; (iii) amortization of goodwill of 
(POUND)25 million; (iv) additional marketing costs of (POUND)8 million; and 
(v) additional depreciation of (POUND)7 million arising from the revaluation
of distribution network assets in connection with the Acquisition.  The 
decrease in net periodic pension costs of (POUND)13 million and the increase 
in capitalized distribution costs of (POUND)15 million partly offset the above
increases in operating expenses for Fiscal Year 1998.

	Other Income Expense - Loss on Investment in Ionica

An unrealized loss of (POUND)41 million before taxes was charged in Fiscal
Year 1998 following the reduction in fair value of Yorkshire Group's 
investment in Ionica Group plc. See Significant Factors and Known 
Trends - Investment in Ionica.




	Net Interest Expense 

	Net interest expense increased by (POUND)73 million from (POUND)33 million
during Fiscal Year 1997 to (POUND)106 million in Fiscal Year 1998, principally 
as a result of the financing costs associated with the 1997 Credit Facility
entered into to finance the Acquisition.  To partially refinance the 
Acquisition, Yorkshire entered into short-term borrowing arrangements 
totaling (POUND)1,034 million, a portion of which was replaced by 
(POUND)593 million of long-term debt issued in January and February 1998. 


	Income Taxes 

	Yorkshire Group's effective income tax rate, excluding the windfall tax, 
decreased from 33% for Fiscal  Year 1997 to (6)% for Fiscal Year 1998. The 
effective rate in Fiscal Year 1998 was affected by the (POUND)12 million 
favorable impact of the reduction in the UK corporation tax rate from 33%
to 31% as discussed above, partially offset by the amortization of goodwill,
which is not deductible for UK income tax purposes. 


	Windfall Tax 

	Yorkshire Group recorded an extraordinary charge of (POUND)134 million during 
Fiscal Year  1998 for the windfall tax enacted by the UK government in July 
1997. This windfall tax is not deductible for UK corporation tax purposes. 


Fiscal Year 1997 Compared with Fiscal Year 1996 

	Earnings 

	Income from operations was (POUND)52 million in Fiscal Year 1997, a decrease 
of (POUND)162 million from (POUND)214 million in Fiscal Year 1996. The following
items reduced Fiscal Year 1997 income from operations: (i) a (POUND)78 million 
provision for uneconomic gas and electricity contracts, which resulted in a 
charge of (POUND)125 million to the supply business offset by an intrabusiness 
elimination of (POUND)47 million; (ii) a (POUND)50 million charge for 
information system development costs to prepare for the opening of the 
competitive electricity market in 1998 for Franchise Supply Customers and to
replace billing and collection systems, of which (POUND)37 million was charged 
to the supply business and (POUND)13 million was charged to the distribution 
business; (iii) a (POUND)26 million decrease in distribution revenues as a 
consequence of price reductions imposed by the Regulator; (iv) a (POUND)8 
million charge incurred for advisers' fees in respect of the Acquisition; and 
(v) a (POUND)6 million write-down of the value of non-operational property. 

	Income (loss) from operations by segments for Fiscal Year 1997 were (POUND)127 
million, (POUND)(132) million and (POUND)10 million for the distribution, supply
and other segments, respectively. Income from operations from those segments 
in Fiscal Year 1996 were (POUND)164 million, (POUND)30 million and
(POUND)20 million, respectively. 

	Net income was (POUND)26 million in Fiscal Year 1997, a decrease of (POUND)367 
million from (POUND)393 million in Fiscal Year 1996, principally due to the NGG 
Transaction in Fiscal Year 1996 and the charges recorded in Fiscal Year 1997 
discussed above. 

	Revenues 

	Operating revenues decreased by (POUND)100 million (7%) from 
(POUND)1,431 million in Fiscal Year 1996 to (POUND)1,331 million in Fiscal 
Year 1997 as follows: 

	       
                                             Operating Revenues
                                             Increase (Decrease)
                                             from Fiscal Year 1996            
                                             to Fiscal Year 1997           
 	                                           
                                             (POUND) millions

 
	Distribution    . . . . . . . .  . . . . . . . . . 	(26)
	Supply  . . . . . . . . . . . . . . . . . . . . . 	(131)
	Other   . . . . . . . . . . . . . . . . . . . . . .  57 

		Total operating revenues   . . . . . . . . . . . .(100)	


	Revenues from the distribution business decreased by (POUND)26 million (8%) 
from (POUND)334 million for Fiscal Year 1996 to (POUND)308 million for Fiscal 
Year 1997, principally due to a decrease in the maximum allowable average price
of units distributed as a result of the application of the revised Distribution 
Price Control Formula. Units distributed increased by 0.5% in Fiscal Year 1997
partially offsetting such decrease. 

	During Fiscal Year 1997, the number of electricity units supplied decreased 
by 6% while total revenues produced by the supply business decreased by
(POUND)131 million (10%) to (POUND)1,178 million from (POUND)1,309 million
for Fiscal Year 1996. The reduction was partly due to a decrease of 12% in 
units supplied to Non-Franchise Supply Customers, which was largely offset by a 
corresponding reduction in cost of sales, and partly due to reduced charges 
from the distribution business, the benefits of which are passed on to 
customers, resulting in lower average unit prices. Franchise Supply Customers 
and Non-Franchise Supply Customers each comprised 50% of total sales volume
in Fiscal Year 1997. 


	Cost of Sales 

	Cost of sales decreased by (POUND)81 million (8%) from (POUND)1,013 million
in Fiscal Year 1996 to (POUND)932 million in Fiscal Year 1997. This reduction
was the result of a decrease in supply business sales volumes and reduced
charges from the distribution business. 


	Operating Expenses 

	Operating expenses increased by (POUND)143 million (70%) from (POUND)204
million in Fiscal Year 1996 to (POUND)347 million in Fiscal Year 1997.
Operating costs in Fiscal Year 1997 included: (i) a (POUND)78 million
provision for uneconomic gas and electricity contracts made for the net
present value of expected future payments in excess of anticipated 
recoverable amounts, reflecting expectations of market prices for electricity 
following the opening of the competitive electricity market in 1998 for 
Franchise Supply Customers and future gas prices; (ii) a (POUND)50 million 
charge for information system development costs, including (POUND)19 million 
relating to the opening of the competitive electricity market in 1998 for
Franchise Supply Customers and a (POUND)31 million charge relating to the
replacement of billing and debt collection systems; (iii) a (POUND)8 million
charge incurred for advisers' fees in respect of the Acquisition; and (iv) a 
(POUND)6 million write-down of the value of non-operational property. 


	Other Income 

	Other income was (POUND)20 million in Fiscal Year 1997, a decrease of 
(POUND)293 million from (POUND)313 million in Fiscal Year 1996. During  
Fiscal Year 1996, Yorkshire, together with the other 11 RECs in the UK, 
distributed the majority of its shares in NGG to its shareholders in connection 
with the NGG Transaction.  The NGG Transaction had a material impact on 
Yorkshire's financial results for that year and included the following:

	(a)     Yorkshire received special dividends totaling (POUND)118 million;

	(b)     at April 1, 1995, Yorkshire held 9.2% of the issued share capital 
of NGG, which was recorded on its balance sheet at (POUND)72 million. 
Additional share capital of NGG totaling (POUND)16 million,  was subscribed for 
by Yorkshire during Fiscal Year 1996.  In December 1995, when NGG 
became a company listed on the London Stock Exchange, Yorkshire 
revalued its interest in NGG to its market value of (POUND)321 million.  
Also in December 1995, Yorkshire made a distribution in-kind to its 
shareholders of  approximately 90% of its interest in NGG.  A further 2% 
approximately was distributed to Yorkshire's optionholders.  The aggregate gain 
arising from these distributions totaled (POUND)215 million;

	(c)     each Yorkshire residential customer received a one-time discount 
as part of an agreement among the shareholders of NGG, which stipulated 
that each REC would provide such discount.  The net cost of such discount 
was (POUND)85 million;

	(d)     Yorkshire received an in-kind dividend of approximately 9.2% of 
the shares of PSB, which shares were subsequently converted to cash upon 
PSB's liquidation, resulting in a gain of (POUND)56 million; and

	(e)     legal and other expenses related to these transactions totaled
 (POUND)4 million.

	Following the NGG Transaction, ordinary dividends received from NGG 
decreased from (POUND)21 million in Fiscal Year 1996 to (POUND)2 million in
Fiscal Year 1997. Other income for Fiscal Year 1997 also includes the effect of
the (POUND)15 million gain on disposal by Yorkshire of its share of a joint
venture investment. 


	Net Interest Expense 

	Net interest expense increased by (POUND)13 million from (POUND)20 million in 
Fiscal Year 1996 to (POUND)33 million in Fiscal Year 1997, including a (POUND)7 
million charge in relation to the termination of interest rate swap agreements.
Increased financing costs arising from the payment of a special dividend of
(POUND)185 million in January 1996 were partly mitigated by the effects of 
asset sales. 



	Income Taxes 

	The effective income tax rate of 22% in Fiscal Year 1996 increased to 33% 
for Fiscal Year 1997. The effective income tax rate in Fiscal Year 1996 was 
reduced principally due to the lower tax rate on gains arising from the NGG 
Transaction. See Note 6, "Income Taxes", to Yorkshire's consolidated financial 
statements for the two years ended March 31, 1997 included elsewhere in this 
document for additional information. 


Liquidity and Capital Resources 

	Yorkshire Group's sole investment and only significant asset is the entire 
share capital of Yorkshire Holdings, which, in turn, owns the entire share
capital of Yorkshire. Yorkshire Group is therefore dependent upon dividends
from Yorkshire for its cash flow. 

	At March 31, 1998, in addition to cash flow from Yorkshire's operations 
available for distribution indirectly to Yorkshire Group, Yorkshire Group had 
(POUND)300 million available under existing bank facilities, including 
(POUND)50 million under the 1997 Credit Facility, as its primary source of
liquidity. 

	Yorkshire Group will be required to refinance the 1997 Credit Facility, 
which matures on July 30, 1998. For a discussion of the 1997 Credit Facility, 
see Note 13, ''Short-term Debt'', to Yorkshire Group's consolidated financial 
statements included elsewhere in this document.  The 1997 Credit Facility has 
been refinanced through a series of transactions including the February 1998 
issuance of (POUND)197 million guaranteed Eurobonds, the February 1998
issuance of (POUND)400 million of senior notes, the June 1998 issuance of 
(POUND)164 million Trust Securities and the planned entering into of 
additional credit facilities. Yorkshire Group expects that the proceeds of
the currently contemplated transfer of Yorkshire Group's generation assets to
an entity or entities other than Yorkshire Group or its subsidiaries will
be used to reduce the additional credit facilities.  Yorkshire Group is 
currently in negotiations with respect to the replacement of the 1997 Credit 
Facility.

	Yorkshire Group also will be required to fund its ongoing capital 
expenditures, fund its debt service and the final windfall tax payment and
cover its seasonal working capital needs. Yorkshire Group expects to fund these 
ongoing cash requirements through a combination of available cash flow from 
Yorkshire's operations and amounts available under the committed bank 
facilities of (POUND)300 million. 

	The principal sources of funds of the Successor Company during Fiscal 
Year 1998 were (POUND)62 million from operations, which reflects interest paid
of (POUND)132 million and tax paid of (POUND)77 million, including the first
installment of the windfall tax of (POUND)67 million. Yorkshire Group raised
(POUND)1,034 million from the 1997 Credit Facility and (POUND)440 million in
equity. During this period, Yorkshire Group utilized (POUND)1,474 million to
acquire Yorkshire, (POUND)191 million for capital expenditures and raised
(POUND)593 million from the issue of bonds.  Proceeds from asset sales
totaled (POUND)20 million.

	The principal sources of funds of Yorkshire during Fiscal Year 1997 were 
(POUND)96 million from operations, which reflects interest paid of (POUND)42
million and tax paid of (POUND)30 million. During Fiscal Year 1997, Yorkshire
invested (POUND)121 million in capital expenditures and long-term investments 
and paid dividends of (POUND)71 million. Proceeds from asset sales totaled 
(POUND)73 million. 

	The principal sources of funds of Yorkshire during Fiscal Year 1996 were 
(POUND)222 million from operations, which reflects interest paid of 
(POUND)46 million and tax paid of (POUND)98 million. During Fiscal Year 1996,
Yorkshire invested (POUND)126 million in capital expenditures and long-term
investments and paid dividends of (POUND)243 million, including a special
dividend of (POUND)185 million. Proceeds from asset sales, including PSB, 
totaled (POUND)119 million. Yorkshire raised (POUND)150 million from the 
issuance of Eurobonds. 

	At March 31, 1998 the Successor Company had net current liabilities of 
(POUND)538 million, primarily as a result of the initial financing structure
of the Acquisition. To meet short-term cash needs, the Successor Company had
(POUND)35 million of cash and cash equivalents at March 31, 1998. 

	Yorkshire's capital expenditures are primarily related to the distribution 
business and include expenditures for load-related, non-load-related and non-
operational capital assets. Load-related capital expenditures are largely 
required by new business growth. Customer contributions are normally 
received where capital expenditures are made to extend or upgrade service to
customers (except to the extent that such capital expenditures are made to
enhance Yorkshire's distribution network generally). Non-load-related capital
expenditures include asset replacement which is expected to continue until at
least the next decade.  Other non-load-related expenditures include system 
upgrade work that provides for load growth and has the additional benefit of 
improving network security and reliability. Non-operational capital 
expenditures are for assets such as fixtures and equipment. For Fiscal Years 
1997 and 1998 capital expenditures, net of customer contributions, were 
(POUND)126 million and (POUND)191 million, respectively. Yorkshire is required 
to file five year projections with the Regulator for gross capital 
expenditures related to its regulated distribution network and updates of 
such projections annually. The most recent projection was for the 
five year period ended March 31, 2000 and was filed in July 1997. This filing
indicated Yorkshire's current projection of approximately (POUND)575 million
in capital expenditures for the five year period. Approximately
(POUND)308 million has already been spent in Fiscal Years 1996, 1997 and
1998 related to this five year projection. 

	Demand for electricity in the UK, including the Franchise Area, is seasonal, 
with demand being higher in the winter months and lower in the summer 
months. Yorkshire bills its Franchise Supply Customers on a staggered quarterly 
basis while it is generally required to pay related expenses (principally the
cost of purchased electricity) on 28-day terms. However, approximately 50%
of the Franchise Supply Customers settle their accounts using regular 
payment plans based on prepayment or spreading of the cost of their annual
bill evenly throughout the year. A majority of Yorkshire's supply revenues 
are based on a fixed price per unit. The cost of supply to Yorkshire from the
Pool, if not covered by hedging mechanisms, varies throughout the year, 
generally being higher in winter months and lower in summer months. 
Yorkshire balances the effect of these influences on its working capital 
needs with drawings under its available credit facilities. 

	Yorkshire's supply business to Non-Franchise Supply Customers generally 
involves entering into fixed price contracts to supply electricity to its
customers. The electricity is obtained primarily by purchases from the Pool.
Because the price of electricity purchased from the Pool can be volatile due
to the fact that the price is set every half hour, Yorkshire is exposed to 
risk arising from differences between the fixed price at which it sells
electricity and the fluctuating prices at which it purchases electricity
unless it can effectively hedge such exposure. To mitigate its exposure to
volatility, Yorkshire utilizes CFDs with major UK power generators to fix
the price of electricity. Yorkshire had entered into CFDs and power purchase
contracts for 20,010 GWh of electricity at March 31, 1998. Yorkshire's 
electricity sales volumes were 21,116 GWh and 20,236 GWh for Fiscal Year 
1997 and Fiscal Year 1998, respectively. 

	Management believes that cash flow from operations, together with its 
existing sources of credit and the refinancing of the 1997 Credit Facility,
will provide sufficient financial resources to meet Yorkshire Group's projected 
capital needs and other expenditure requirements for the foreseeable future. 
Following the Acquisition, Yorkshire agreed to an amendment to its PES 
License to the effect that it will use all reasonable endeavors to ensure
that it maintains an investment grade credit rating on its long-term debt. 


Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Yorkshire Power Group Limited and Subsidiaries (Successor Company) 
and Yorkshire Electricity plc and Subsidiaries (Predecessor Company)

Index to Consolidated Financial Statements

Yorkshire Electricity Group plc and Subsidiaries
Independent Auditors' Report
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements

Yorkshire Power Group Limited and Subsidiaries
	Unaudited Pro Forma Consolidated Statements of Income

Yorkshire Power Group Limited and Subsidiaries
Independent Auditors' Report
Consolidated Statement of Income
Consolidated Balance Sheets
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT 

TO THE SHAREHOLDERS AND BOARD OF 
DIRECTORS
OF YORKSHIRE ELECTRICITY GROUP PLC

We have audited the accompanying consolidated balance sheets of Yorkshire 
Electricity Group plc and its subsidiaries (the "Company") as of March 31, 
1997, and the related consolidated statements of income, changes in 
shareholders' equity and cash flows for each of the two years in the period 
ended March 31, 1997 (all expressed in pounds sterling).  These financial 
statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial statements  based on 
our audits.

We conducted our audits in accordance with generally accepted auditing 
standards in the United States of America.  Those standards require that we 
plan and perform the audit to obtain reasonable assurance about whether the 
financial statements are free of material misstatement.  An audit includes 
examining, on a test basis, evidence supporting the amounts and disclosures 
in the financial statements.  An audit also includes assessing the accounting 
principles used and significant estimates made by management, as well as 
evaluating the overall financial statement presentation.  We believe that our 
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all 
material respects, the financial position of Yorkshire Electricity Group plc 
and its subsidiaries as of March 31, 1997, and the results of their operations 
and their cash flows for each of the two years in the period ended March 31, 
1997 in conformity with generally accepted accounting principles in the 
United States of America.

Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
(December 31, 1997 as to note 14


(PAGE)
YORKSHIRE ELECTRICITY GROUP PLC AND 
SUBSIDIARIES
(Predecessor Company)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
(In Millions)


                                              Year Ended March 31,
 
                                        1997                        1996
                                       (POUND)                    (POUND)

OPERATING REVENUES                      1,331                      1,431
COST OF SALES                             932                      1,013

GROSS MARGIN                              399                        418
OPERATING EXPENSES
Maintenance                                76                         77
Depreciation                               50                         42
Provision for uneconomic 
gas and electricity contracts              78                          -
Selling, general and 
administrative                             93                         85
Systems development costs (Note 9)         50                          -

Income from operations                     52                        214


OTHER INCOME (EXPENSE)
National Grid transaction (Note 12):
     Realized gain on sale of 
      National Grid Group plc               1                        215
     Realized gain on sale of 
     PSB Holdings Limited                   6                         56
     Special dividend                       -                        118
     Customer discounts awarded             -                        (85)
     Administrative costs                   -                         (4)
Dividend income                             2                         21
Equity in loss of associates               (4)                        (6)
Gain on sale of associate                  15                          -
Loss on sale of subsidiary                  -                         (2)

Total other income, net                    20                        313

Interest expense                          (55)                       (46)
Interest income                            22                         26

Net interest expense                      (33)                       (20)

INCOME BEFORE INCOME TAXES                 39                        507

PROVISION FOR INCOME TAXES                 13                        114
 
NET INCOME                                 26                        393


The accompanying notes are an integral part of these consolidated financial 
statements.

(PAGE)
YORKSHIRE ELECTRICITY GROUP PLC AND 
SUBSIDIARIES
(Predecessor Company)
CONSOLIDATED BALANCE SHEET
(In Millions, Except Share and Per Share Amounts)




                                  ASSETS                       March 31,
                                                                 1997
                                                                (POUND)

FIXED ASSETS

Property, plant and equipment, net of 
accumulated depreciation  of  (POUND)500                          765
Construction work in progress                                      31

Total fixed assets                                                796

CURRENT ASSETS

	Cash and cash equivalents                                        221
	Investments                                                       29
	Customer receivables, less provision for uncollectible accounts 
      of (POUND)6                                                  90
 Unbilled revenue                                                  84
 Other receivables                                                 21
 Other                                                             19

	Total current assets                                             464

OTHER ASSETS
 Investments, long term                                           109
 Prepaid pension asset                                              6

	 Total other assets                                              115

Total assets                                                    1,375




The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>

YORKSHIRE ELECTRICITY GROUP PLC AND 
SUBSIDIARIES
(Predecessor Company)
CONSOLIDATED BALANCE SHEET
(In Millions, Except Share and Per Share Amounts)




SHAREHOLDERS' EQUITY AND 
LIABILITIES                                            March 31,
                                                         1997
                                                       (POUND)

SHAREHOLDERS' EQUITY
Share capital, 68 2/11 pence  par value 
common shares, 220,000,000 shares, 
authorized, 159,131,326 in 1997 issued and  
outstanding                                               108
Additional paid-in capital                                 92
Unrealized gain on available-for-sale 
investments                                                13
Retained earnings                                         146

Total shareholders' equity                                359


LONG-TERM DEBT                                            419


OTHER NON-CURRENT LIABILITIES

Deferred income taxes                                     136
Provision for uneconomic electricity and gas contracts     78
Other                                                      15

Total other non-current liabilities                       229

CURRENT LIABILITIES
Current portion of long-term debt                           5
Short-term debt                                            82
Accounts payable                                           15
Electricity purchaSes payable                              64
Payments received in advance                               14
Accrued liabilities and deferred income                    69
Income taxes payable                                       51
Other current liabilities                                  68

Total current liabilities                                 368

Total liabilities                                       1,016

COMMITMENTS AND 
CONTINGENCIES (NOTE 4)

Total shareholders' equity and liabilities              1,375


The accompanying notes are an integral part of these consolidated financial 
statements.

(PAGE)
<TABLE>
YORKSHIRE ELECTRICITY GROUP PLC AND 
SUBSIDIARIES
(Predecessor Company)
CONSOLIDATED STATEMENTS OF CHANGES IN 
SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
(In Millions, Except Shares and Per Share Amounts)
(CAPTION)

                                                                Unrealized
                                                                Gain on
                                     Additional                 Available 
                   Share Capital     Paid-in    Retained        for Sale
                   Shares Amount     Capital    Earnings        Investments   Total
<C>            <S>          <S>       <S>        <S>            <S>           <S>    
                            (POUND)   (POUND)    (POUND)        (POUND)       (POUND)
Balance, April 
 1, 1995       183,898,175   104       77         336              -           517
Common shares 
issued           5,537,644     4       12           -              -            16
Reduction in 
shares from 
reverse shares
 split (1)     (30,880,719)    -        -           -               -            -
Revaluation of
 NGG shares 
 to fair 
 market value            -     -        -           -             233          233
Realization of
 gain on 
 distribution
 of NGG shares           -     -        -           -            (215)        (215)
Deferred tax on
 revaluation
 of NGG shares           -     -        -           -              (4)          (4)
Revaluation of
 PSB shares to
 fair market value       -     -        -           -              56           56
Realization of
 gain on sale of PSB     -     -        -           -             (56)         (56)
Net income               -     -        -         393               -          393
NGG special dividend     -     -        -        (298)              -         (298)
Dividends declared       -     -        -        (243)              -         (243)

Balance, March
 31, 1996      158,555,100   108       89         188              14          399
Common shares 
 issued            576,226     -        3           -               -            3 
Gain on sale of
 NGG shares              -     -        -           -              (1)          (1)
Revaluation of
 PSB shares to 
 fair market value       -     -        -           -               6            6
Realization of 
 gain on sale of PSB     -     -        -           -              (6)          (6)
Net income               -     -        -          26               -           26
Dividends declared       -     -        -         (68)              -          (68)

Balance, March 
31, 1997       159,131,326   108       92         146              13          359

(1) In January 1996 the share capital was consolidated on the basis of 5
 new 68 2/11 pence ordinary shares for every 6 existing  56 9/11 pence shares.

The accompanying notes are an integral part of these consolidated financial 
statements.
</TABLE>

(PAGE)

               YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
                          (Predecessor Company)
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
                             (In Millions)



                                                 Year Ended March 31,

                                                  1997            1996
                                                  (POUND)         (POUND)

Cash flows from operating 
activities:

Net income                                          26              393
Adjustments to reconcile net 
income to net cash provided 
by operating activities:
Depreciation                                        50               42
Write off of capitalized system 
costs                                               22                -
Deferred income taxes                              (24)              23
Gain on disposal of 
 investments                                        (7)            (271)
Equity in loss of associates                         4                6
Gain on sale of associate                          (15)               -
Changes in assets and liabilities:

    Receivables                                     14               21
    Provisions for uneconomic 
     electricity and gas contracts                  78                -
    Electricity purchases                          (11)              15
    Payments received in advance                   (41)              25
    Other                                            -              (32)
Net cash provided by operating activities           96              222

Cash flows from investing activities:
Capital expenditures                              (103)            (101)
Proceeds from sale of fixed assets                  29               33
Proceeds from sale of subsidiary                     -               33
Proceeds from sale of associate                     26                -
Loans (advanced to) repaid by associate             (3)               2
Purchases of long-term investments                 (18)             (25)
Proceeds from sale of PSB                           10               53
Sale (purchases) of short-term investments           8               (3)
Net cash used in investing activities              (51)              (8)

Cash flows from financing activities:

Proceeds from issuance of long-term debt             -              163
Proceeds from issuance of common stock               3               11
Repayments of long-term debt                        (5)             (47)
Net change in short-term debt                       (3)               2
Dividends paid                                     (71)            (243)
Net cash used in financing activities              (76)            (114)

(Decrease) increase in cash and cash equivalents   (31)             100
Beginning of period cash and cash equivalents      252              152
End of period cash and cash equivalents            221              252

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND 
SUBSIDIARIES
(Predecessor Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
(In Millions)


                                      Year Ended March 31,
                                         1997       1996
                                       (POUND)    (POUND)


SUPPLEMENTAL DISCLOSURE OF CASH 
FLOW INFORMATION:
Cash paid for interest                    42         46
Cash paid for income taxes                30         98

The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Yorkshire Electricity Group plc ("YEG" or the "Company") 
is one of the twelve regional electricity companies 
("RECs") in England and Wales licensed to supply, 
distribute, and to a limited extent, generate electricity.  The 
RECs were created as a result of the privatization of the UK 
electricity industry in 1990 after the state owned low 
voltage distribution networks were allocated to the then 
existing twelve regional boards.  The Company's main 
business, the distribution and supply of electricity to 
customers in its franchise area (the "Franchise Area") in the 
North of England, is regulated under the terms of a Public 
Electricity Supply License ("PES License") by the Office of 
Electricity Regulation (''OFFER'').
The Company operates primarily in its Franchise Area in 
Northern England.  The Franchise Area covers 
approximately 10,000 square kilometers, encompassing 
parts of the counties of West Yorkshire, Humberside, South 
Yorkshire, Derbyshire, Nottinghamshire, Lincolnshire and 
Lancashire.  The Franchise Area has a resident population 
of approximately 4.4 million.
The Company purchases power primarily from the 
wholesale trading market for electricity in England and 
Wales (the ''Pool''). The Pool monitors supply and demand 
between generators and suppliers, sets prices for generation 
and provides for centralized settlement of accounts due 
between generators and suppliers.

Basis of presentation
The consolidated financial statements of the Company are 
presented in pounds sterling ((POUND)) and in conformity with 
accounting principles generally accepted in the United 
States of America. The Company is not subject to rate 
regulation but rather, is subject to price cap regulation and, 
therefore, the provisions of Statement of Financial 
Accounting Standards No. 71, ''Accounting for the Effects 
of Certain Types of Regulation''  do not apply. 

Principles of consolidation
The consolidated financial statements include the accounts 
of the Company and its wholly-owned and majority-owned 
subsidiaries and have been prepared from records 
maintained by the Company in the UK. Significant 
intercompany items are eliminated in consolidation.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)

Use of estimates
The preparation of financial statements in conformity with 
generally accepted accounting principles requires 
management to make estimates and assumptions that affect 
the reported amounts of assets and liabilities and 
disclosures of contingent assets and liabilities at the date of 
the financial statements and reported amounts of revenues 
and expenses during the reporting  period.  Actual results 
could differ from those estimates.

Unbilled revenue
The Company records revenue net of value added tax 
("VAT") and accrues revenues for service provided but 
unbilled at the end of each reporting period.

Recovery of Regulated Income
Charges for distribution of electricity and supply to 
customers with a maximum demand under 100 kW are 
subject to a price control formula set out in the Company's  
PES license which allows a maximum charge per unit of 
electricity. Differences in the charges, or in the purchase 
cost of electricity, can result in the under or overrecovery of 
revenues in a particular period.
Where there is an overrecovery of supply or distribution 
business revenues against the regulated maximum 
allowable amount, revenues are deferred in an amount 
equivalent to the overrecorded amount. The deferred 
amount is deducted from operating revenues and included 
in other current liabilities.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)

Financial instruments
The Company enters into contracts for differences 
("CFDs") primarily to hedge its supply business against the 
price risk of electricity purchases from the Pool. Use of 
these CFDs is carried out within the framework of the 
Company's purchasing strategy and hedging guidelines. 
CFDs are accounted for as hedges and consequently, gains 
and losses are deferred and recognized over the same 
period as the item hedged. The Company recognizes gains 
(losses) on CFDs when settlement is made, which is 
generally monthly. Gains (losses) on CFDs are recognized 
as a decrease (increase) to cost of sales based upon the 
difference between fixed prices in the CFD compared to 
variable prices paid to the Pool for the period. Gains 
(losses) based upon the difference between fixed prices in 
the CFD compared to variable prices paid to the Pool for 
future electricity purchases are not recognized until the 
period of such settlements.
The Company enters into interest rate swaps as a part of its 
overall risk management strategy and does not hold or issue 
material amounts of derivative financial instruments for 
trading purposes. The Company accounts for its interest 
rate swaps in accordance with Statement of Financial 
Accounting Standards No. 80, ''Accounting for Futures 
Contracts''  and various Emerging Issues Task Force 
pronouncements. If the interest rate swaps were to be sold 
or terminated, any gain or loss would be deferred and 
amortized over the remaining life of the debt instrument 
being hedged by the interest rate swap. If the debt 
instrument being hedged by the interest rate swaps were to 
be extinguished, any gain or loss attributable to the swap 
would be recognized in the period of the transaction.
The Company considers the carrying amounts of financial 
instruments classified as current assets and liabilities to be a 
reasonable estimate of their fair value because of the short 
maturity of these instruments.

Cash and cash equivalents
The Company considers all short-term investments with an 
original maturity of three months or less to be cash 
equivalents.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)

Property, plant and equipment
Property, plant and equipment is stated at original cost, 
which includes materials, labor and appropriate overhead 
costs, and the estimated cost of  borrowed funds used 
during construction. The cost of maintenance, repairs and 
replacement of minor items of property is charged to 
maintenance expense.

The Company records book depreciation expense on a 
straight-line basis, except for distribution network assets 
which are charged at 3% for 20 years and 2% for the 
remaining 20 years.  Assets are depreciated using the 
following estimated useful lives:
                                           Years
Distribution network                        40
Generation                                  20
Buildings                             Up to 60
Fixtures and equipment                Up to 10
Vehicles and mobile plant             Up to 10

Investments
The Company accounts for investments in debt and equity 
securities in accordance with Statement of Financial 
Accounting Standards No. 115, "Investments in Certain 
Debt and Equity Securities'' (''SFAS 115''). The Company's 
investments are classified as available-for-sale under SFAS 
115. Securities whose fair market values are readily 
determinable are reported at fair value. Securities whose 
fair market values are not readily determinable are recorded 
at the lower of cost or net realizable value.

Income taxes
The Company accounts for income taxes in accordance 
with Statement of Financial Accounting Standards No. 109, 
''Accounting for Income Taxes''. This standard requires that 
deferred income taxes be recorded for temporary 
differences between the financial statement basis and the 
tax basis of assets and liabilities and loss carryforwards and 
that deferred tax balances be based on enacted tax laws at 
rates that are expected to be in effect when the temporary 
differences reverse.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.      RETIREMENT BENEFITS
Pension plans
The Company operates two schemes, one based on defined 
contributions and a second based on defined benefits.
Defined contribution
The defined contribution plan was established on December 
1, 1991. From April 1, 1995 new employees are only 
eligible to join this plan. The assets of the defined 
contribution plan are held and administered by an 
independent trustee. The cost recognized for this plan was 
less than (POUND)1 million for each of the two Fiscal Years ended 
March 31, 1997.
Defined benefits
The Company participates in the Electricity Supply Pension 
Scheme, which provides pension and other related defined 
benefits, based on final pensionable pay, to substantially all 
employees throughout the electricity supply industry in the 
UK.
The Company uses the projected unit credit actuarial 
method for accounting purposes. Amounts funded to the 
pension are primarily invested in equity and fixed income 
securities.
Statement of Financial Accounting Standards No. 87 
''Employers' Accounting For Pensions'' (''SFAS 87'') was 
effective for fiscal years beginning after December 15, 
1988. The provisions of SFAS No. 87 were initially 
adopted by the Company on April 1, 1992. The amount of 
the unrecognized net transition obligation on April 1, 1992 
was (POUND)51 million.
The following table sets forth the plan's funded status and 
amounts recognized in the Company's consolidated balance 
sheet (in millions):
                                              March 31,1997
                                                 (POUND)
Accumulated benefit obligation:
Vested benefits                                   590
Non-vested benefits                                35
                                                  625

Fair value of plan assets                         725
Projected benefit obligation                     (664)
Assets in excess of projected benefit obligation   61
Unrecognized net transition obligation             37
Unrecognized prior service cost                    10
Other unrecognized net gain                      (102)

Prepaid pension asset                               6

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.      RETIREMENT BENEFITS (continued)

The weighted average rates assumed in the actuarial 
calculations as of the following dates were:

                                                             March 31,
                                                          1997       1996
                                                            %          %
Discount rate	                                             8.0        8.5
Annual salary rate increase	                               6.0        6.5
Long-term rate of return on plan assets	                   9.0        9.0

	The components of the plan's net periodic pension cost during the 
periods are shown below (in millions):
                                                         Year Ended March 31,
                                                           1997      1996
     
                                                         (POUND)    (POUND)

Service cost (benefits earned during the period)            10          9
Interest cost on projected benefit obligation               52         49
Actual return on plan assets                               (89)      (113)
Net amortization and deferral                               33         65
Net periodic pension cost                                    6         10

3.      REGULATORY MATTERS
The distribution business of the Company is regulated under 
its PES license, pursuant to which revenue of the distribution 
business is controlled by the Distribution Price Control 
Formula ("DPCF"). The DPCF determines the maximum 
average price per unit of electricity (expressed in kilowatt 
hours) that the Company can charge. The DPCF is usually 
set for a five-year period, subject to more frequent 
adjustments as determined necessary by the Director General 
of Electricity Supply (the "Regulator").  At each review, the 
Regulator can adjust the value of certain elements in the 
DPCF. The Company's allowed distribution revenues were 
reduced by a 14% below inflation reduction and a 13% 
below inflation reduction on April 1, 1995 and 1996, 
respectively, following a review by the Regulator. On April 
1, 1997, the Company's allowed distribution revenues were 
decreased by a 3% below inflation reduction, and there will 
be further annual 3% below inflation reductions on April 1, 
1998 and April 1, 1999. 

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.      REGULATORY MATTERS (continued)
The Company's supply business is also regulated by the 
Regulator, and prices are established based upon the Supply 
Price Control Formula which is similar to the DPCF; 
however, it currently allows full pass through for all 
properly incurred costs.
The non-franchise supply market, which typically includes 
larger commercial and industrial customers was opened to 
competition for all customers with usage above 1MW upon 
privatization of the industry in 1990. The non-franchise 
supply markets of 100 kW or more were opened to full 
competition in April 1994.
Currently, the Company, under its PES license, has the 
exclusive right to supply residential and small commercial 
and industrial customers within its Franchise Area. 
However, it is anticipated that the supply market will 
become fully competitive over a several month period 
beginning September 1998.

4.      COMMITMENTS AND CONTINGENCIES
Electricity and Gas Purchase Agreements
The Company and its subsidiaries have entered into 
contracts for purchases of electricity and gas for a period of 
up to 2009. A provision of (POUND)78 million has been made for 
the net present value of expected future payments in excess 
of anticipated recoverable amounts, reflecting 
management's current expectations of market prices for 
electricity following the opening of the competitive market 
for franchise supply customers and future gas prices. The 
actual net costs are highly sensitive to movements in future 
prices. The Company's provision includes amounts in 
respect of contracts with  a non wholly-owned subsidiary.
The Company has additional contracts with unaffiliated 
parties relating to the purchase of gas which expire by 
October 2005, the terms of which are immaterial with 
respect to quantity and price, both annually and in the 
aggregate.
Legal proceedings
The Company is a party to legal proceedings arising in the 
ordinary course of business which are not material, either 
individually or in the aggregate, nor is it currently aware of 
any threatened material legal proceedings.
Operating leases
The Company has commitments under operating leases 
with various terms and expiration dates.  At March 31, 
1997 estimated minimum rental commitments for 
noncancelable operating leases were (POUND)2 million and  (POUND)1 
million for Fiscal Years 1998 and 1999, respectively. 
Rental expenses incurred for operating leases were  (POUND)4 
million and (POUND)5 million, during Fiscal Years 1997 and 1996 
respectively.

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.      COMMITMENTS AND CONTINGENCIES (continued)
Labor subject to collective bargaining agreements
The majority of the Company's employees are subject to one 
of three collective bargaining agreements. Such agreements 
are ongoing in nature, and the Company's employees' 
participation level is consistent with that of the electric utility 
industry in the UK.
5.      SEGMENT REPORTING
The Company is primarily engaged in two electric industry 
segments; distribution, which involves the transmission of 
electricity across its network to its customers, and supply, 
which involves bulk purchase of electricity from the Pool for 
delivery to the distribution networks.  Included in ''Other'' are 
insignificant operating subsidiaries of the Company as well as 
various corporate activities, and non-allocated corporate 
assets. Intersegment sales primarily represent sales from 
distribution to supply for use of the distribution networks. A 
summary of information about the Company's operations by 
segments follows (in millions):


                                        Year Ended March 31, 1997
                     Distribution    Supply  Other   Eliminations   Consolidated
                     (POUND)         (POUND) (POUND) (POUND)        (POUND)
Operating revenues    308             1,178   172    (327)           1,331
Operating income      127              (132)   10      47               52
Depreciation           30                 1    19       -               50
Total assets employed
 at period end        643               178   554       -            1,375
Capital expenditures   87                 8    31       -              126

                                        Year Ended March 31, 1996
                   Distribution     Supply  Other   Eliminations   Consolidated
                   (POUND)          (POUND) (POUND) (POUND)        (POUND)
Operating revenues  334              1,309   163    (375)           1,431
Operating income    164                 30    20       -              214
Depreciation         28                  1    13       -               42
Total assets 
employed at
 period end         589                212   607       -            1,408
Capital expenditures 70                  8    13       -               91

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.      INCOME TAXES
The Company's income tax expense consists of the 
following (in millions):
                                                  Year Ended March 31, 
                                                  1997             1996
                                                 (POUND)          (POUND)
Current                                             37              91
Deferred                                           (24)             23
Total                                               13             114


The following is a reconciliation of the difference between 
the amount of income taxes computed by multiplying book 
income before income taxes by the statutory rate, and the 
amount of income taxes reported (in millions):

                                                 Year Ended March 31, 
                                                  1997             1996
                                                (POUND)           (POUND)
Pre-tax income                                      39              507

Income taxes computed at statutory rate             13              167
National Grid transactions:
Gain on sale of PSB excluded from taxable income    (2)             (19)
Effect of difference between statutory rate (33%)
 and rate on dividends received (20%)                -              (21)
Permanent differences                                6              (11)
Other                                               (4)              (2)

Total income tax expense                             13             114

The tax effect of temporary differences between the carrying 
amounts of assets and liabilities in the consolidated balance 
sheets and their respective tax bases, which give rise to 
deferred tax assets and liabilities are as follows (in millions):

                                                      March 31, 1997
                                                          (POUND)
Deferred tax liabilities:
	Property related temporary differences	                     172
 Provision for uneconomic electricity and gas contracts	     (26)
 Other	                                                       (6)
 Net deferred tax liability	                                 140
 Portion included in current liabilities	                     (4)
 Long term deferred tax liability	                           136

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.      INCOME TAXES (continued)
The tax years since Fiscal Year 1993 are currently under 
review by the Inland Revenue in the UK. In the opinion of 
management, the final settlement of open years will not 
have a material effect on the financial position or results of 
operations.
7.      FINANCIAL INSTRUMENTS
The Company utilizes CFDs to mitigate its exposure to 
volatility in the prices of electricity purchased through the 
Pool.  Such contracts allow the Company to effectively 
convert the majority of its anticipated Pool purchases from 
market prices to fixed prices.  CFDs are in place to hedge a 
portion of electricity purchases on approximately 30,662 
GWh through the year 2009.  Accordingly, the gains and 
losses on such contracts are deferred and recognized as 
electricity is purchased. Management's estimate of the fair 
value of CFDs outstanding at March 31, 1997 is a net 
liability of (POUND)22 million. This estimate is based on 
management's projections of future prices of electricity. 
The net liability will be recovered through electricity costs 
passed through to franchise customers during Fiscal Year 
1998. 
The Company is exposed to losses in the event of non-
performance by counterparties to its CFDs.  To manage this 
credit risk, the Company selects counterparties based on 
their credit ratings, limits its exposure to any one 
counterparty under defined guidelines, and monitors the 
market position of the programs and its relative market 
position with each counterparty.
As part of its risk management policy, the Company enters 
into interest rate swap agreements under which 
counterparties have agreed to pay amounts to the Company 
equal to variable interest obligations in consideration of 
amounts payable by the Company equivalent to fixed rates 
of interest. If the counterparty to the interest rate swap was 
to default on contractual payments, the Company could be 
exposed to increased costs related to replacing the original 
agreement. At March 31, 1996, the Company was party to 
interest rate swap agreements with a notional value of  (POUND)89 
million which were at fixed interest rates varying between 
6.64% and 10.98%. During Fiscal Year 1997, the Company 
terminated these agreements at a cost of (POUND)7 million.
The estimated fair value of the Company's financial 
instruments are as follows (in millions):

                                       March 31, 1997
                                Carrying Amount         Fair Value
                                 (POUND)                 (POUND)
Long-term debt                     424                     438

The fair value of long-term debt is estimated based on 
quoted market prices for the same or similar issues or the 
current rates offered to the Company for debt of the same 
maturities.

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8.      PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the 
following (in millions):

                                           March 31, 1997
                                             (POUND)
Distribution network                          1,163
Generation                                      132
Non-network land and buildings                   72
Other                                           154
Consumer contributions                         (256)

                                              1,265
Accumulated depreciation                       (500)
Property, plant and equipment, net              765



Arrangements have been put in place to entitle the British 
Government to a proportion of any property gain (above 
certain thresholds) accruing as a result of disposals, or 
events treated as disposals for these purposes, occurring 
after March 31, 1990 in relation to land in which the 
Company had an interest at that date (and, in certain 
circumstances, land in which the Company acquires an 
interest thereafter from other members of the electricity 
industry) and any buildings on that land.  These 
arrangements will last until  March 31, 2000.
A provision  in respect of these property disposals is made 
only to the extent that it is probable that a liability will be 
incurred.
9.      SYSTEMS DEVELOPMENT COSTS
During the Fiscal Year 1997, a (POUND)50 million charge to 
earnings was recorded for costs incurred related to 
information systems development costs pertaining to the 
opening up of the competitive electricity market in 1998. It 
is management's opinion that, at this stage in the 
development of the future commercial and regulatory 
environment, it would not be prudent to capitalize these 
costs.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10.     LONG-TERM DEBT
Long-term debt consisted of the following (in millions):
                                           March 31,1997
                                               (POUND)
8.625% Eurobonds, due 2005                     149
9.25% Eurobonds, due 2020                      197

European Investment Bank:
7.52% credit facility, due 1999-2002            15
6.55% credit facility, due 1997-2000            15
8.05% amortizing term loan, due 2009            48

Total                                          424
Less current maturities                         (5)
Long-term debt, net of current maturities      419



Long-term debt outstanding at March 31, 1997 is payable as 
follows (in millions):

For the Fiscal Years                         (POUND)
1998                                            5
1999                                            6
2000                                           11
2001                                           12
2002                                            7
Thereafter                                    383
Total                                         424

<PAGE>

YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11.     SHORT-TERM DEBT
Short-term debt consisted of the following (in millions):

                                              March 31,1997
                                                 (POUND)
Commercial paper                                    81
Bank loans and overdrafts                            1
Total                                               82

Year-end weighted average interest rate            6.2%

At March 31, 1997 unused committed bank facilities were 
available to the Company in the amount of (POUND)250 million. 
Commitment fees of approximately  1/10 of 1% of the 
unused committed bank facilities are required to maintain the 
facilities which have expiration dates between 2000 and 
2002. In addition, the Company has commercial paper 
programs (denominated in US dollars) which provide for the 
issuance of up to $550 million in commercial paper with 
short-term maturities (up to 364 days) issued at a discount to 
face value.

12.     DISTRIBUTION OF NATIONAL GRID INVESTMENT
At April 1, 1995, the  Company's investment in the issued share capital of 
National Grid Group plc (''NGG''), formerly National Grid Holdings plc, 
was recorded at (POUND)72 million, the estimated fair value at privatization. 
During December 1995 the following transactions relating to the 
Company's NGG investment occurred: 
a) Special dividends of (POUND)118 million (pre-tax) were paid by NGG to the 
Company and recognized in other income. The Company reinvested 
(POUND)16 million of this dividend in additional NGG shares.
b) NGG became listed on the London Stock Exchange and therefore, 
the Company revalued its investment in NGG to its fair market value 
of (POUND)321 million.
c) The Company distributed, in kind, approximately 90% of its NGG 
shares to its shareholders and recognized a gain of (POUND)210 million 
within other income.
d) A (POUND)50 discount to each of the Company's residential customers was  
provided. The net effect of the customer discount in the amount of 
(POUND)85 million has been recorded as other expense during the year 
ended March 31, 1996.
In November 1995, NGG also distributed to the RECs its ownership 
shares in PSB Holdings Limited ("PSB") based on their respective 
ownership percentages of NGG. The PSB shares were revalued at their 
estimated market value of (POUND)56 million. In December 1995 this investment 
was sold and a gain on sale of  (POUND)56 million was recognized. In the year to
March 31, 1997 further consideration of (POUND)6 million was received.

<PAGE>

YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12.     DISTRIBUTION OF NATIONAL GRID INVESTMENT 
(continued)

In order that holders of options in the Company's shares were not 
disadvantaged by the NGG transactions, the Company's Directors 
established a new employee share trust. The Company contributed  (POUND)9 
million to the trust which was used to purchase NGG shares from the 
Company. This contribution was recorded as a dividend. A corresponding 
gain of (POUND)5 million was recognized upon distribution of NGG shares from 
the trust to option holders during Fiscal Year 1996.

13.     EMPLOYEE OPTION AND SHARE PLANS
The Company operates various employee option and share plans. During 
Fiscal Year 1995, an Executive Long Term Share Incentive Scheme for 
certain eligible Executive Directors was introduced. Under the scheme 
amounts (as determined by the earnings per share and market value 
growth of YEG) were paid to a trust to be utilized to purchase Company 
shares. After the final determination of the amounts in the first cycle of 
1998, the shares were to have been released to participants. Amounts 
transferred were expensed. 54,025 shares were held in trust at March 31, 
1997.

On July 1, 1996 a trust related to the Company's Profit Sharing Scheme 
purchased 243,356 ordinary shares of the Company for (POUND)1,769,198  or 
(POUND)7.27 per share. 64 shares were allocated to each eligible employee. The 
net cost of acquiring the shares and maintaining the trust were borne by 
the Company.

In connection with the acquisition (note 14), all shares held in the above 
trusts were transferred to employees in accordance with the provisions of 
the schemes.

The Company had two option plans, the Executive Share Option Scheme 
and the Savings-Related Share Option Scheme. The Executive Share 
Option Scheme provides for the granting of stock options to purchase 
ordinary shares to certain key executives of the Company at the discretion 
of the Remuneration Committee of the Company. The options vest three 
years from the date of grant and expire ten years after the date of grant. 
Options to purchase ordinary shares of the Company have been granted to 
employees under the Savings-Related Share Option Schemes adopted in 
1996 and 1997. The options vest five years from date of grant and expire 
five and a half years after the date of grant.

The following table summarizes the transactions of the share option 
scheme for the two year period ended March 31, 1997:

<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13.     EMPLOYEE OPTION AND SHARE PLANS (continued)
                                                         Weighted  
                                   Number of             Average
                                    Share                Exercise
                                                          Price
                                                         (POUND)
Unexercised options outstanding
 - March 31, 1995                  6,444,151              2.26
Granted                            1,650,259              5.58
Exercised                          5,536,659              1.99
Forfeited                            105,934              1.75

Unexercised options outstanding
 - March 31, 1996                  2,451,817              5.13
Granted                            1,059,218              5.97
Exercised                            576,226              4.05
Forfeited                            118,865              4.01
Expired                                  642              1.75
Unexercised options outstanding
 - March 31, 1997                  2,815,302              5.72
Exercisable options
 - March 31, 1997                    129,781              4.78
Exercisable options
 - March 31, 1996                    590,379              4.64

In connection with the acquisition, holders of any outstanding options 
were given the opportunity to exercise their options and sell their shares 
to Yorkshire Holdings plc at a price of (POUND)9.27 per share. If the holders of
the options did not exercise their options, such options were cash 
canceled and the holders were paid (POUND)9.27 per share less the option's 
exercise price.

The Company accounts for its stock-based compensation schemes in 
accordance with Accounting Principles Board Opinion No. 25, 
''Accounting for Stock Issued to Employees''. Compensation expense of 
(POUND)1 million was recognized in 1997 and 1996. Because of the change in 
control of the Company and the immaterial impact on net income of 
applying the fair value method, the disclosures required by Statement of 
Financial Accounting Standard No 123, ''Accounting for Stock-Based 
Compensation, '' have not been presented.
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(Predecessor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14.     SUBSEQUENT EVENTS
On February 24, 1997 the Boards of American Electric 
Power Company, Inc. ("AEP") and Public Service Company 
of Colorado ("PS Colorado") announced the terms of a cash 
offer for Yorkshire Electricity Group plc to be made by 
Yorkshire Holdings plc, a subsidiary of Yorkshire Power 
Group Limited. The offer was declared wholly unconditional 
on April 1, 1997. On April 16, 1997 notices were issued by 
Yorkshire Holdings plc in accordance with section 429 of the 
Companies Act 1985 to acquire all those Yorkshire 
Electricity Group plc shares  outstanding at the end of the 
requisite notice period. Yorkshire Holdings plc completed its 
purchase of the shares of YEG during April and May 1997 
through payment of cash consideration of (POUND)1.457 billion and 
the issuance of loan notes to former YEG shareholders in the 
amount of (POUND)22 million.

Windfall tax
On July 2, 1997 the British Government announced a 
'windfall tax' to be applied at that date to companies 
privatized by flotation and regulated by relevant privatization 
statutes. A decrease in the UK statutory income tax rate from 
33% to 31% was also included in the legislation. The 
Company will record a charge to income of (POUND)134 million for 
the windfall tax and an income tax benefit as a result of the 
change in the UK statutory income tax rate of approximately 
(POUND)12 million during the quarter ending September 30, 1997. 
The windfall tax is not deductible for UK income tax 
purposes and is payable in two equal installments on or 
before December 1, 1997 and 1998.

Business restructuring
On December 4, 1997 a planned business restructuring was 
announced.  The restructuring will result in the company's 
main divisions (electricity distribution and energy supply) 
becoming self sufficient businesses within the group 
structure.  A separate ownership structure will be pursued for 
the generation business.  As a result of the restructuring 
approximately 160 positions will no longer be required.  The 
estimated cost of this restructuring is (POUND)10 million.

Ionica
Following a profits warning issued by Ionica Group plc (''Ionica'') in 
November 1997, the fair value of the Company's investment in Ionica 
decreased from (POUND)54 million at April 1, 1997 to (POUND)30 million at 
December 31, 1997.  The reduction is not regarded by management as a permanent 
diminution in value.

15.     UNAUDITED QUARTERLY FINANCIAL INFORMATION


                                          Quarterly Periods Ended 1996/97
(in (POUND) millions)             June 30  September 30  December 31  March 31
Operating revenues                 307        298           369         357
Operating income (loss)             46         49            25         (68)
Net income (loss)                   25         28            24         (51)

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor Company) 
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR
 THE YEAR ENDED MARCH 31, 1997 

The following unaudited pro forma consolidated statement of income is based 
upon the consolidated statement of income for the year ended March 31, 1997 of 
Yorkshire Electricity Group plc (the "Predecessor Company") adjusted to reflect 
the items described in notes (1) through (4) below as if the indirect
acquisition of the Predecessor Company (the "Acquisition") by Yorkshire
Power Group Limited (the "Successor Company") had occurred at April 1, 1996. 
<TABLE>
<CAPTION>
			                                                      (In Millions)                           
                              Predecessor                                    Pro Forma for      
                               Period                                         the Year Ended   
                              April 1, 1996            Adjustments            March 31, 1997    
                              to March 31, 1997                                            
                               (POUND)           (1)     (2)    (3)    (4)    (POUND) $(5)
<C>                            <S>               <S>     <S>    <S>    <S>     <S>    <S>
Operating revenues . . . . .   1,331              -       -      -      -      1,331  2,231
Income from operations     .      52              -      (24)   (6)    84        106    178
Other income
	Gain on sale of associate .      15              -       -      -      -         15     25
Other     . . . . . . . . ..       5              -       -      -      -          5      8
	Total other income  . . . .      20              -       -      -      -         20     33
Interest expense       . . .     (55)           (74)      -      -      7       (122)  (205)
Interest income  . . . . . .      22              -       -      -      -         22     37
Net interest expense   . . .     (33)           (74)      -      -      7       (100)   168
Income before income taxes .      39            (74)     (24)   (6)    91         26     43
Provision for income taxes .     (13)            24       -      2    (30)       (17)   (28)
Net income  . . . . . . . .       26            (50)     (24)   (4)    61          9     15

(1)     To reflect the interest expense recorded in connection with the
Acquisition financed by (POUND)22 million loan notes issued by Yorkshire
Holdings plc (''Yorkshire Holdings'') and (POUND)1,034 million in
short-term debt incurred by the Successor Company and share capitalization
of (POUND)440 million. The loan notes issued by Yorkshire Holdings are 
redeemable at the option of the bond holder until 2000. An interest rate of
7% has been assumed for both types of debt. The impact of a 1/8% change in
the assumed interest rate would affect net income by (POUND)1 million. 

(2)     Amortization of goodwill recorded in connection with the Acquisition. 

(3)     Additional depreciation expense that would have been recorded in
connection with the Acquisition. 

(4)     To remove the effect of recording the provision for uneconomic gas 
and electricity contracts ((POUND)78 million), loss on interest rate swap 
agreements ((POUND)7 million) and write-down of non-operational properties
((POUND)6 million). If the Acquisition had occurred on April 1, 1996, these
items would have been accounted for as fair value adjustments at that date. 

(5)     Solely for convenience of the reader, UK pound sterling amounts have
 been translated into US dollars at the Noon Buying Rate on March 31, 1998 of 
$1.6765.=(POUND)1. See Note 1 ''Summary of Significant Accounting Policies'' to 
Yorkshire Group's consolidated financial statements for the year ended March
31, 1998 included elsewhere in this document .

During the pro forma Fiscal Year 1997, the Predecessor Company incurred 
expenses of (POUND)8.0 million relating to the Acquisition.

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT 

TO THE SHAREHOLDERS AND BOARD OF 
DIRECTORS
OF YORKSHIRE POWER GROUP LIMITED

We have audited the accompanying consolidated balance sheets of Yorkshire 
Power Group Limited and its subsidiaries (the "Company") as of March 31, 
1998 and April 1, 1997, and the related consolidated statements of income, 
changes in shareholders' equity and cash flows for the year ended March 31, 
1998 (all expressed in pounds sterling).  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to 
express an opinion on these financial statements  based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all 
material respects, the financial position of Yorkshire Power Group Limited 
and its subsidiaries as of March 31, 1998 and April 1, 1997, and the results 
of their operations and their cash flows for the Fiscal Year 1998 in 
conformity with generally accepted accounting principles.

Our audit also comprehended the translation of the pounds sterling amounts 
into US dollar amounts and, in our opinion, such translation has been made 
in conformity with the basis stated in Note 1. The translation of the financial 
statement amounts into US dollars has been made solely for the convenience 
of readers in the United States of America.


Deloitte & Touche LLP
Columbus, Ohio
June 10, 1998

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor Company)
CONSOLIDATED STATEMENT OF INCOME
 (In Millions, except shares and per share amounts)

                                                      Year Ended March 31,1998
                                                    (POUND)     $ (See Note 1)

OPERATING REVENUES                                   1,285      2,154
COST OF SALES                                          882      1,479
GROSS MARGIN                                           403        675
OPERATING EXPENSES
  Maintenance                                           64        107
  Depreciation and amortization                         78        131
  Selling, general and administrative                   90        150
  Restructuring charges                                 10         17

Income from operations                                 161        270

OTHER INCOME EXPENSE
Loss on investment in Ionica                           (41)       (69)
Other income, net                                        2          3
                                                       (39)       (66)

NET INTEREST EXPENSE
Interest expense                                      (121)      (203)
Interest income                                         15         25
Net interest expense                                  (106)      (178)
INCOME BEFORE INCOME TAXES                              16         26
PROVISION FOR INCOME TAXES                              (1)        (2)
INCOME BEFORE EXTRAORDINARY ITEM                        17         28
Extraordinary loss - UK windfall tax                  (134)      (225)
NET LOSS                                              (117)      (197)

The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND 
SUBSIDIARIES 
(Successor Company)
CONSOLIDATED BALANCE SHEETS
 (In Millions, Except Shares and Per Share Amounts)

                                                                April 1,
ASSETS                                March 31, 1998              1997
                                      (POUND)     $             (POUND)
                                               (See Note 1)
FIXED ASSETS
Property, plant and equipment, 
net of accumulated depreciation
of (POUND)53 ($89) and (POUND)0        992     1,663              908
Construction work in progress           68       114               31

Total fixed assets                   1,060     1,777              939

CURRENT ASSETS
	Cash and cash equivalents              35        59              221
	Investments                            41        69               29
	Accounts receivable, less provision for 
  uncollectibles of (POUND)6 ($10) 
  and (POUND)6                          62       104               90
 Unbilled revenue                       78       130               84
 Other                                  50        84               40

	Total current assets                  266       446              464

OTHER ASSETS
Goodwill, net of accumulated amortization 
of (POUND)25 ($42) and (POUND)0        969     1,625              994
Investments, long-term                  73       121              133
Prepaid pension asset                   75       126               61
Other non-current assets                19        31                -

	Total other assets                  1,136     1,903            1,188

	Total assets                        2,462     4,126            2,591
The accompanying notes are an integral part of this consolidated balance 
sheet.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor Company)
CONSOLIDATED BALANCE SHEETS
 (In Millions, Except Shares and Per Share Amounts)


SHAREHOLDERS' EQUITY AND LIABILITIES
                                   March 31, 1998            April 1, 1997
                                    (POUND)     $               (POUND)
                                            (See Note 1)
SHAREHOLDERS' EQUITY
  Share capital, (POUND)1 par
value common shares, 
440,000,100 in 1998 and 436,000,100 in 
1997, authorized, 440,000,002 in
1998 and 2 in 1997 issued
and outstanding                         440     738                 -
   Retained deficit                    (117)   (197)                -
  Total shareholders' equity            323     541                 -


LONG-TERM DEBT                        1,026   1,720                433

SHORT-TERM DEBT REFINANCED 
JUNE 1998                               164     275                 -

OTHER NON-CURRENT LIABILITIES
  Deferred income taxes                 208     348                204
  Provision for uneconomic 
    electricity and gas contracts        84     141                 78
  Other                                  15      26                 13

  Total other non-current liabilities   307     515                295

CURRENT LIABILITIES
  Current portion of long-term debt       5       8                  5  
  Short-term debt                       319     534                 82
  Accounts payable                       82     137                 79
  Accrued liabilities and deferred
   income                                63     106                 69
  Income taxes payable                   40      67                 51
  Windfall tax payable                   67     112                  -
  Accrued liability to purchase 
    Yorkshire Electricity Group plc       -       -              1,496
  Other current liabilities              66     111                 81

  Total current liabilities             642   1,075              1,863

Total liabilities                     2,139   3,585              2,591

COMMITMENTS AND CONTINGENCIES (NOTE 5)

Total shareholders' equity and
 liabilities                          2,462   4,126              2,591

The accompanying notes are an integral part of this consolidated balance 
sheet.

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(Successor Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 1998
(In Millions, Except Shares and Per Share Amounts)

                                          Share Capital    Retained
                                          Shares   Amount   Deficit       Total
                                                   (POUND)  (POUND)      (POUND)
Balance, April 1, 1997                        2       -        -             -
Issuance of ordinary shares         440,000,000      440       -            440
Net loss                                     -        -     (117)          (117)
Balance, March 31, 1998             440,000,002      440    (117)           323

The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR YEAR ENDED MARCH 31, 1998
(In Millions)
                                                Year Ended March 31, 1998
                                                  (POUND)            $
Cash flows from operating activities:
Net loss                                           (117)             (197)
Adjustments to reconcile net loss to net cash
 provided by operating activities:
    Depreciation                                     53                89
    Amortization                                     25                42
    Gain on sale of fixed assets                     (3)               (5)
    Loss on investment in Ionica                     41                69
    Deferred income taxes                             4                 6
Changes in assets and liabilities:
    Receivables and unbilled revenue                 34                57
    Prepaid pension asset                           (14)              (23)
    Provisions for uneconomic
      electricity and gas contracts                   6                10
    Accounts payable                                  3                 5
    Windfall tax payable                             67               112
Other current assets                                (10)              (17)
Other                                               (27)              (45)

Net cash provided by operating 
activities                                           62               103

Cash flows from investing activities:

Capital expenditures                               (191)             (320)
Proceeds from sale of property,plant and equipment   20                34
Purchase of Yorkshire Electricity Group plc      (1,474)           (2,471)
Other                                                 6                10
Net cash used in investing activities            (1,639)           (2,747)
Cash flows from financing 
activities:
Proceeds from issuance of long-term debt            593               994
Proceeds from issuance of common stock              440               738
Payments to terminate interest rate swap agreements (14)              (24)
Repayments of long-term debt                         (5)               (8)
Net change in short-term debt                       377               632

Net cash provided by financing activities         1,391             2,332

Decrease in cash and cash equivalents              (186)             (312)

Beginning of year cash and cash equivalents         221               371

End of year cash and cash equivalents                35                59

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor Company)
CONSOLIDATED STATEMENT OF CASH FLOWS 
FOR YEAR ENDED MARCH 31, 1998
(In Millions)

SUPPLEMENTAL DISCLOSURE OF CASH 
FLOW INFORMATION:

                                                 Year Ended March 31, 1998
                                                  (POUND)             $

Cash paid for interest                              132               221
Cash paid for income taxes                           77               129

Supplemental schedule of non-cash investing and financing activities
The Company issued (POUND)22 million ($37 million) of loan notes during the
year to former  shareholders  of Yorkshire Electricity Group plc (''YEG'')
(see notes 12 & 13).

The accompanying notes are an integral part of these consolidated financial 
statements.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Yorkshire Power Group Limited ("YPG" or the "Company") 
is a joint venture formed by subsidiaries of American 
Electric Power Company, Inc. and Public Service Company 
of Colorado for the purpose of acquiring the entire issued 
share capital of Yorkshire Electricty Group plc ("YEG"). The 
acquisition of YEG was made effective as of April 1, 1997 
by Yorkshire Holdings plc, a wholly-owned subsidiary of  
YPG. 
YEG is one of the twelve regional electricity companies 
("RECs") in England and Wales licensed to supply, 
distribute, and to a limited extent, generate electricity.  The 
RECs were created as a result of the privatization of the UK 
electricity industry in 1990 after the state owned low voltage 
distribution networks were allocated to the then existing 
twelve regional boards.  YEG's main business, the 
distribution and supply of electricity to customers in its 
franchise area (the ''Franchise Area''), is regulated under the 
terms of YEG's Public Electricity Supply License (''PES 
License'') by the Office of Electricity Regulation (''OFFER'').
YEG operates primarily in its Franchise Area in Northern 
England.  YEG's Franchise Area covers approximately 
10,000 square kilometers, encompassing  parts of the 
counties of West Yorkshire, Humberside, South Yorkshire, 
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire.  
The Franchise Area has a resident population of 
approximately 4.4 million.  
The Company purchases power primarily from the wholesale 
trading market for electricity in England and Wales (the 
''Pool'').  The Pool monitors supply and demand between 
generators and suppliers, sets prices for generation and 
provides for centralized settlement of accounts due between 
generators and suppliers.
Basis of presentation
On February 24, 1997, the joint venture partners of the 
Company announced the terms of a cash tender offer for 
Yorkshire Electricity Group plc to be made by Yorkshire 
Holdings plc, a subsidiary of the Company. The offer was 
declared wholly unconditional on April 1, 1997. On April 16, 
1997 notices were issued by Yorkshire Holdings plc in 
accordance with section 429 of the Companies Act 1985 to 
acquire all YEG shares outstanding at the end of the requisite 
notice period.
The acquisition was accounted for using the purchase 
method of accounting in accordance with Accounting 
Principles Board Opinion No. 16, ''Accounting for Business 
Combinations'' (''APB 16''). The purchase price of YEG has 
been allocated to the underlying assets and liabilities based 
on estimated fair values at the acquisition date (April 1, 
1997).
The Company is not subject to rate regulation but rather, is 
subject to price cap regulation and, therefore, the provisions 
of Statement of Financial Accounting Standards No. 71, 
''Accounting for the Effects of Certain Types of Regulation'' 
(''SFAS 71'') do not apply. 
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)
The consolidated financial statements of the Company are 
presented in pounds sterling ((POUND)) and in conformity with 
accounting principles generally accepted in the United States 
of America.
The consolidated balance sheet, income statement, statement 
of cashflows and certain information in the notes to the 
consolidated financial statements are presented in pounds 
sterling ((POUND)) and in US dollars ($) solely for the convenience 
of the reader, at the exchange rate of (POUND)1= $1.6765, the Noon 
Buying Rate in New York City for cable transfers in pounds 
sterling as certified for customs purposes by the Federal 
Reserve Bank of New York on March 31, 1998. This 
presentation has not been translated in accordance with 
Statement of Financial Accounting Standards No. 52, 
''Foreign Currency Translation.''  No representation is made 
that the pounds sterling amounts have been, could have been, 
or could be converted into US dollars at that or any other rate 
of exchange.
The following table sets out, for the periods indicated, certain 
information concerning the exchange rates between UK pounds sterling 
and US dollars based on the Noon Buying Rates: 

			      
   Fiscal Year                     Period End  Average(1)   High   Low
                                  	($ per (POUND)1.00)

	1994 . . . . . . .                  1.49        1.50       1.59   1.46
	1995 . . . . . . .                  1.62        1.56       1.65   1.49
	1996 . . . . . . .                  1.53        1.56       1.62   1.50
	1997 . . . . . . .                  1.65        1.60       1.71   1.50
	1998 . . . . . . .                  1.68        1.65       1.70   1.58

 (1) The average of the Noon Buying Rates in effect on the last business 
day of each month during the relevant period. 
On June 10,  1998, the Noon Buying Rate was $1.6277 = (POUND)1. 

Principles of consolidation
The consolidated balance sheet includes the accounts of the 
Company and its wholly-owned and majority-owned 
subsidiaries and has been prepared from records maintained 
by the Company in the UK.  Significant intercompany items 
are eliminated in consolidation.

Use of estimates
The preparation of the financial statements in conformity 
with generally accepted accounting principles requires 
management to make estimates and assumptions that affect 
the reported amounts of assets and liabilities and disclosures 
of contingent assets and liabilities at the date of the financial 
statements.  Actual results could differ from those estimates.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)
Unbilled revenue
The Company records revenue net of value added tax 
("VAT") and accrues revenues for service provided but 
unbilled at the end of each reporting period.

Recovery of regulated income
Charges for distribution and supply  of  electricity are 
subject to a price control formula set out in the Company's 
PES license which allows a maximum charge per unit of 
electricity. Differences in the charges, or in the purchase 
cost of electricity, can result in the under or overrecovery of 
revenues in a particular period.
Where there is an overrecovery of supply or distribution 
business revenues against the regulated maximum 
allowable amount, revenues are deferred in an amount 
equivalent to the overrecorded amount and included in 
other current liabilities.

Financial instruments
YEG enters into contracts for differences (''CFDs'') 
primarily to hedge its supply business against the price risk 
of electricity purchases from the Pool. Use of these CFDs is 
carried out within the framework of YEG's purchasing 
strategy and hedging guidelines. CFDs are accounted for as 
hedges and consequently, gains and losses are deferred and 
recognized over the same period as the item hedged. YEG 
recognizes gains (losses) on CFDs when settlement is 
made, which is generally monthly. Gains (losses) on CFDs 
are recognized as a decrease (increase) to cost of sales 
based upon the difference between fixed prices in the CFD 
compared to variable prices paid to the Pool for the period. 
Gains (losses) based upon the difference between fixed 
prices in the CFD compared to variable prices paid to the 
Pool for future electricity purchases are not recognized 
until the period of such settlements.
The Company enters into interest rate  and cross currency 
swaps  as a part of its overall risk management strategy and 
does not hold or issue material amounts of derivative 
financial instruments for trading purposes.  The Company 
accounts for these derivative financial instruments in 
accordance with Statements of Financial Accounting 
Standards No. 80, ''Accounting for Futures Contracts'' and 
various Emerging Issues Task Force pronouncements.  If 
the interest rate and cross currency swaps were to be sold or 
terminated, any gain or loss would be deferred and 
amortized over the remaining life of the debt instrument 
being hedged by the swaps.  If the debt instrument being 
hedged by the swaps were to be extinguished, any gain or 
loss attributable to the swap would be recognized in the 
period of the transaction.

(PAGE)
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company considers the carrying amounts of financial 
instruments classified as current assets and liabilities to be a 
reasonable estimate of their fair value because of the short 
maturity of these instruments. 

Cash and cash equivalents
The Company considers all short-term investments with an 
original maturity of three months or less to be cash 
equivalents.

Property, plant and equipment
Property, plant and equipment is recorded at fair market 
value as adjusted at the acquisition date in accordance with 
APB 16. Items capitalized subsequent to the acquisition are 
recorded at original cost, which includes materials, labor 
and appropriate overhead costs, and the estimated cost of 
borrowed funds used during construction.
During the year the Group changed its estimates in respect 
of identifying the element of costs to be capitalized within 
the distribution network. This change in estimate increased 
the amount capitalized by (POUND)15m.
The Company's policy is to record depreciation on a 
straight-line basis, except for distribution network assets 
which are charged at 3% for 20 years and 2% for the 
remaining 20 years.  Assets are depreciated using the 
following estimated useful lives:

                                             Years


Distribution network                           40
Generation                                     20
Buildings                                Up to 60
Fixtures and equipment                   Up to 10
Vehicles and mobile plant                Up to 10

Goodwill

The Company's policy is to amortize costs in excess of fair 
value of net assets of the business acquired using the 
straight-line method over a period of 40 years. 
Recoverability (evaluated on the basis of undiscounted 
operating cash flow analysis) is reviewed annually 
commencing March 31, 1999 or sooner if events or changes 
in circumstances indicate that the carrying amount may 
exceed fair value, in accordance with the provisions of 
Statement of Financial Accounting Standards No. 121, 
''Accounting for the Impairment of Long-Lived Assets and 
for Long-Lived Assets to be Disposed Of". Goodwill 
shown in the accompanying consolidated balance sheet 
relates to the acquisition of YEG (Note 14).

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
(continued)
Investments
The Company accounts for investments in debt and equity 
securities in accordance with Statement of Financial 
Accounting Standards No. 115, "Investments in Certain 
Debt and Equity Securities'' (''SFAS 115''). The Company's 
investments are classified as available-for-sale under SFAS 
115. Securities whose fair market values are readily 
determinable are reported at fair value. Securities whose 
fair market values are not readily determinable are recorded 
at the lower of cost or net realizable value.
Income taxes
The Company accounts for income taxes in accordance 
with Statement of Financial Accounting Standards No. 109, 
''Accounting for Income Taxes''. This standard requires that 
deferred income taxes be recorded for temporary 
differences between the financial statement basis and the 
tax basis of assets and liabilities and loss carryforwards and 
that deferred tax balances be based on enacted tax laws at 
rates that are expected to be in effect when the temporary 
differences reverse.

2.      EXTRAORDINARY LOSS
In July 1997, the British Government announced a 
''windfall tax'' to be applied at that date to companies 
privatized by flotation and regulated by relevant 
privatization statutes. The Company recorded an 
extraordinary loss of (POUND)134 million ($225 million) for this 
tax. The windfall tax is not deductible for UK corporation 
tax purposes. Half of the tax was paid on December 1, 1997 
with the final installment due on or before December 1, 
1998.
3.      RETIREMENT BENEFITS
Pension plans
The Company operates two plans, one based on defined 
contributions and a second based on defined benefits.
Defined contribution
The defined contribution plan was established on December 
1, 1991. From April 1, 1995 new employees are only 
eligible to join this plan. The assets of the defined 
contribution plan are held and administered by an 
independent trustee. The cost recognized for this plan for 
the Fiscal Year 1998 was less than (POUND)1 million.
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND 
SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL 
STATEMENTS

3.      RETIREMENT BENEFITS (continued)
Defined benefit
The Company participates in the Electricity Supply Pension 
Scheme, which provides pension and other related defined 
benefits, based on final pensionable pay, to substantially all 
employees throughout the electricity supply industry in the 
UK.
The Company uses the projected unit credit actuarial 
method for accounting purposes. Amounts funded to the 
pension are primarily invested in equity and fixed income 
securities.
The following table sets forth the plan's funded status and 
amounts recognized in the Company's consolidated balance 
sheet (in millions):

                                        March 31, 1998   April 1, 1997
                                        (POUND)   $         (POUND)
Actuarial present value of 
benefit obligation:

Accumulated benefit obligation:
Vested benefits                           690      1,157     590
Non-vested benefits                        25         42      35

                                          715      1,199     625

Fair value of plan assets                 855      1,433     725
Projected benefit obligation for 
service rendered to date                 (740)    (1,240)   (664)

Assets in excess of projected 
benefit obligation                        115       193       61
Other unrecognized net gain               (40)      (67)       -
Prepaid pension asset                      75       126       61



The weighted average rates assumed in the actuarial 
calculations as of the following dates were:

                                    March 31, 1998 April 1, 1997
                                              %          %
Discount rate                               6.0        8.0
Annual salary rate increase                 5.25       6.0
Long-term rate of return on plan assets     8.75       9.0

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.      RETIREMENT BENEFITS (continued)
	The components of the plan's net periodic pension cost during the period 
is shown below (in millions):

                                                 Year Ended March 31, 1998
                                                   (POUND)           $

Service cost (benefits earned during the period)      9             15
Interest cost on projected benefit obligation        50             84
Actual return on plan assets                       (150)          (252)
Net amortization and deferra                        l84            141

Net periodic pension credit                          (7)           (12)



4.      REGULATORY MATTERS
The distribution business of the Company is regulated under 
its PES license, pursuant to which revenue of the distribution 
business is controlled by the Distribution Price Control 
Formula ("DPCF"). The DPCF determines the maximum 
average price per unit of electricity (expressed in pence per 
kilowatt hour) that YEG can charge. The DPCF is usually set 
for a five-year period, subject to more frequent adjustments 
as determined necessary by the Director General of 
Electricity Supply (the "Regulator").  At each review, the 
Regulator can adjust the value of certain elements in the 
DPCF. YEG's allowed distribution revenues were reduced 
by a 14% below inflation reduction and a 13% below 
inflation reduction on April 1, 1995 and 1996, respectively, 
following a review by the Regulator. On April 1, 1997 and 
April 1, 1998, YEG's allowed distribution revenues were 
decreased by an additional 3% below inflation reduction, and 
there will be a further  3% below inflation reduction on April 
1, 1999.
The Company's supply business is also regulated by the 
Regulator. Until March 31, 1998 prices were established 
based upon the Supply Price Control Formula which was 
similar to the DPCF. New Price controls took effect from 
April 1,1998. These new controls apply to the supply to all 
residential and small business customers within the 
Yorkshire Franchise Area whose annual consumption is 
under 12,000 kWh. They will apply until an adequate level 
of competition is established and at least until March 31, 
2000. The new controls (when taken together with the 
reduction in the Fossil Fuel Levy which became effective on 
April 1, 1998) have resulted in the implementation of small 
reductions effective April 1, 1998 in the tariffs for the 
Company's residential and small business customers 
compared to the corresponding tariffs in effect at August 
1997. These new controls also require an additional 3% 
below inflation reduction effective April 1, 1999 and they 
have discontinued the automatic pass-through of costs to 
residential and small business customers, consisting 
primarily of purchased power costs.  The Fossil Fuel Levy is 
a levy instituted to reimburse generators and RECs for the 
extra costs involved in obtaining a specified portion of 
generation from non-fossil fuel plants.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.      REGULATORY MATTERS (continued)
Within the Franchise Area, the Company has an exclusive 
right to supply electricity to Franchise Supply Customers. 
This exclusive right will continue until September 1998 
when the supply market for these customers is currently 
scheduled to become competitive over a six month phase-in 
period. To facilitate competition the distribution business has 
incurred significant additional costs to develop "data 
management service" systems. The Regulator has made 
proposals, which the Company has accepted, whereby (POUND)23 
million of these costs shall be recovered over a 5 year period 
ending March 31, 2003. 
The supply of  electricity to Non-Franchise Supply 
Customers is currently open to competition and YEG is able 
to competitively bid or negotiate to supply electricity to such 
customers.
5.      COMMITMENTS AND CONTINGENCIES
Electricity and gas purchase agreements
The Company and its subsidiaries have entered into contracts 
for purchases of electricity and gas for a period of up to 2009.  
At March 31, 1998 and April 1, 1997, respectively,  
provisions of (POUND)84 million ($141 million) and (POUND)78 million 
have been made for the estimated net present value of 
expected future payments in excess of anticipated 
recoverable amounts, reflecting management's current 
expectations of market prices for electricity following the 
opening of the competitive market to Franchise Supply 
Customers and future gas prices.
The Company has additional contracts with unaffiliated 
parties relating to the purchase of gas which expire by 
October 2005, the terms of which are immaterial with respect 
to quantity and price, both annually and in the aggregate.
Legal proceedings
The Company is a party to legal proceedings arising in the 
ordinary course of business which are not material, either 
individually or in the aggregate, nor is it currently aware of 
any threatened material legal proceedings.
Operating leases 
The Company has commitments under operating leases with 
various terms and expiration dates.  At March 31, 1998 
estimated minimum rental commitments for noncancelable 
operating leases were (POUND)3 million ($5 million) for the fiscal 
year ending March 31, 1999. Rental expenses incurred for 
operating leases in the Fiscal Year 1998 were (POUND)3 million ($5 
million).
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.      COMMITMENTS AND CONTINGENCIES (continued)
Labor subject to Collective Bargaining Agreements
A majority of the Company's employees are subject to one 
of three collective bargaining agreements.  Such agreements 
are ongoing in nature, and the Company's employees 
participation level is consistent with that of the electric utility 
industry in the UK.
6.      SEGMENT REPORTING
The Company is primarily engaged in two electric industry 
segments; distribution, which involves the transmission of 
electricity across its network to its customers, and supply, 
which involves bulk purchase of electricity from the Pool for 
delivery to the distribution networks. Included in ''Other'' are 
insignificant operating subsidiaries of the Company as well 
as various corporate activities, and non-allocated corporate 
assets. Intersegment sales primarily represent sales from 
distribution to supply for use of the distribution networks. A 
summary of information about the Company's operations by 
segments follows (in millions):

</TABLE>
<TABLE>
<CAPTION>
                              Year Ended March 31, 1998
                  Distribution   Supply         Other        Eliminations     Consolidated
                    (POUND)  $    (POUND) $     (POUND)  $   (POUND)  $       (POUND)   $
<C>                    <S>      <S>  <S>     <S>   <S>      <S> <S>      <S>     <S>       <S>
Operating revenues     305      511  1,118   1,874 203      340 (341)    (571)   1,285      2,154
Operating income       115      193     25      42  24       40   (3)      (5)     161        270
Depreciation and
 amortization           63      106      2       3  13       22    -        -       78        131
Total assets employed
 at period end   	   1,903    3,190    157     263 402      673    -        -    2,462      4,126
Capital expenditures   121      203      9      15  61      102    -        -      191        320

The Company's assets in the individual segments as of April 1,
 1997 are as follows (in millions):

                                                         (POUND)
Distribution                                             	1,802
Supply	                                                     187
Other	                                                      602

Total                                                    	2,591

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7.      LOSS ON INVESTMENT IN IONICA
Yorkshire Group's investment in Ionica was initially included in its 
consolidated balance sheet at its fair value at acquisition on April 1, 1997 
of (POUND)54 million plus a subsequent additional investment of 
(POUND)1 million. 
Management have written down the book value of the investment to their 
estimate of fair value by charging an unrealized loss of (POUND)41 million ($69 
million) to the income statement during the year. The reduction in fair 
value of the investment was recognized by management as '' other than 
temporary '' following announcement by Ionica on May 22, 1998 that 
Ionica had been unsuccessful in negotiating release of credit lines from 
existing providers of bank finance and had been advised to obtain further 
equity investment prior to seeking further bank funding. Management 
expects to take an additional charge of (POUND)6 million ($10 million) before 
taxes in the first quarter of Fiscal Year 1999.

8.      INCOME TAXES
The Company's income tax expense consists of the 
following (in millions):

                                      Year Ended March 31,1998 
                                        (POUND)           $
Current                                   (5)            (8)
Deferred                                   4              6

Total                                     (1)            (2)

The following is a reconciliation of the difference between 
the amount of income taxes computed by multiplying book 
income before income taxes by the statutory rate, and the 
amount of income taxes reported (in millions):

                                       Year Ended March 31, 1998
                                           (POUND)          $

Income before taxes and extraordinary loss     16           26


Income taxes computed at statutory rate (31%)   5            8
Effect of change in tax rate on 
   deferred taxes                             (12)         (20)
Permanent differences                          10           17
Other                                          (4)          (7)
Total income tax                               (1)          (2)

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.      INCOME TAXES (continued)
The tax effect of temporary differences between the 
carrying amounts of assets and liabilities in the 
consolidated balance sheet and their respective tax bases, 
which give rise to deferred tax assets and liabilities, are as 
follows (in millions):

                                        March 31, 1998            April 1, 1997
                                        (POUND)     $             (POUND)
Deferred tax liabilities:

	Property related temporary differences	  230	      386	             217
	Pension	                                  22       	37              	20
	Provision for electricity and 
   gas contracts                         	(26)     	(44)            	(26)
	Other	                                   (18)     	(31)             	(3)

Net deferred tax liability	               208      	348             	208
Portion included in current liabilities    	-        	-              	(4)

Long-term deferred tax liability	         208      	348             	204

The tax years since 1993 are currently under review by the 
Inland Revenue in the UK. In the opinion of management, 
the settlement of open years will not have a material 
adverse effect on results of operations, financial position or 
cash flows of the Company.

9.      FINANCIAL INSTRUMENTS

YEG utilizes CFDs to mitigate its exposure to volatility in 
the prices of electricity purchased through the Pool.  Such 
contracts allow YEG to effectively convert the majority of 
its anticipated Pool purchases from market prices to fixed 
prices. CFDs are in place to hedge a portion of electricity 
purchases on approximately 20,010 GWh through the year 
2009. Accordingly, the gains and losses on such contracts 
are deferred and recognized as electricity is purchased. 
Management's estimate of the fair value of  CFDs 
outstanding at March 31, 1998 and April 1, 1997 is a net 
liability of (POUND)6 million ($10 million) and (POUND)22 million, 
respectively. This estimate is based on management's 
projections of future prices of electricity. The net liability 
will be recovered from franchise customers during Fiscal 
Year 1999.
The Company is exposed to losses in the event of non-
performance by counterparties to its CFDs.  To manage this 
credit risk, the Company selects counterparties based on 
their credit ratings, limits its exposure to any one 
counterparty under defined guidelines, and monitors the 
market position of the programs and its relative market 
position with each counterparty.
As part of its risk management policy, the Company enters 
into interest rate swap agreements under which 
counterparties have agreed to pay amounts to the Company 
equal to variable interest obligations in consideration of 
amounts payable by the Company equivalent to fixed rates 
of interest. If the counterparty to the interest rate swap was 
to default on contractual payments, the Company could be 
exposed to increased costs related to replacing the original 
agreement. At March 31, 1998, the Company was party to 
interest rate swap agreements with a notional value of  
(POUND)150 

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9.      FINANCIAL INSTRUMENTS (continued)

million which were at fixed interest rates varying between 
7.275% and 7.335%. At April 1, 1997 the Company was 
not party to any interest rate swaps.
In February 1998, the Company issued $350 million 
aggregate principal amount of 6.154% Senior Notes due 
2003 and $300 million aggregate principal amount of 
6.496% Senior Notes due 2008. Upon issuance of these 
notes, to hedge the currency exposure related to having 
sterling cash flows and dollar interest payments, cross 
currency swaps were taken out, maturing in 2003 and 2008.  
At March 31, 1998 the Company was party to cross 
currency swap agreements with a notional value of (POUND)400 
million. At April 1, 1997 the Company was not party to any 
cross currency swaps.
The estimated fair value of the Company's financial 
instruments are as follows (in millions):

                     March 31, 1998              April 1, 1997

                 Carrying  Amount  Fair      Value   Carrying Amount  Fair Value

                 (POUND)    $      (POUND)    $       (POUND)     (POUND)

Long-term debt   (1,031)   (1,728) (1,074)    (1,801)  (438)       (438)
Cross currency
 swap agreements     -         -      (38)       (64)    -           -
Interest rate
 swap agreements     -         -      (11)       (18)    -           -

The fair value of long-term debt is estimated based on 
quoted market prices for the same or similar issues or the 
current rates offered to the Company for debt of the same 
remaining maturities. The fair values of interest rate  and 
cross currency swap agreements are estimated by obtaining 
quotes from brokers.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10.     PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in 
millions):


                                     March 31, 1998         April 1, 1997

                                     (POUND)    $            (POUND)
Distribution network                 	1,009    	1,691	         882
Generation	                             115      	193         	112
Non-network land and buildings	          38       	64          	57
Other	                                  112      	188          	57
Consumer contributions	                (229)    	(384)       	(200)

	                                     1,045    	1,752         	908
Accumulated depreciation               	(53)     	(89)          	-
Property, plant and equipment, net	     992	    1,663         	908

Arrangements have been put in place to entitle the British 
Government to a proportion of any property gain (above 
certain thresholds) accruing as a result of disposals, or events 
treated as disposals for these purposes, occurring after March 
31, 1990 in relation to land in which the Company had an 
interest at that date (and, in certain circumstances, land in 
which the Company acquires an interest thereafter from other 
members of the electricity industry) and any buildings on 
that land.  These arrangements will last until  March 31, 
2000.

11.     LONG-TERM DEBT
Long-term debt  consisted of the following (in millions):


                                      March 31, 1998              April 1, 1997
                                      (POUND)      $                 (POUND)
7.25% Guaranteed Eurobonds, due 2028	   197	       330                 	-
8.625% Eurobonds, due 2005	             152       	255                	152
9.25% Eurobonds, due 2020	              208       	349                	208
6.154% Senior Notes, due 2003	          215       	360                 	-
6.496% Senior Notes, due 2008	          185       	310                 	-

European Investment Bank:
 7.52% credit facility, due 1999-2002   	15        	25                 	15
 6.55% credit facility, due 1997-2000   	13	        22                  15
 8.05% amortizing term loan, due 2009   	46        	77                 	48

Total	                                1,031     	1,728	                438
Less current maturities	                 (5)       	(8)                	(5)

Long-term debt , net of 
current maturities	                   1,026     	1,720                	433

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11.     LONG-TERM DEBT (continued)

Long-term debt outstanding at March 31, 1998 is payable as 
follows (in millions):
                                 (POUND)        $
For the Fiscal Years
1999	                               5          	8
2000	                              11         	18
2001	                              12         	20
2002                               	7         	12
2003	                             223        	374
Thereafter	                       773      	1,296

Total	                          1,031      	1,728

12.     SHORT-TERM DEBT REFINANCED JUNE 1998

Yorkshire Capital Trust I, (the "Trust"), is a statutory 
business trust created for the sole purpose of issuing trust 
securities and investing the proceeds in an equivalent amount 
of Junior Subordinated Deferrable Interest Debentures, 
Series A due 2038 issued by Yorkshire Power Finance 
Limited (YPF), a subsidiary of YPG.  On June 9, 1998 the 
Trust issued 11,000,000  8.08% Trust Securities at 
the liquidation amount of $25 per Trust Security.  The Trust 
invested the $275 million proceeds in an equivalent amount 
of 8.08% Junior Subordinated Deferrable Interest 
Debentures, Series A due 2038 of YPF. YPF  in turn loaned 
the net proceeds to YPG.  Substantially all of the Trust's 
assets will consist of the Junior Subordinated Deferrable 
Interest Debentures.  YPG considers that the mechanisms 
and obligations relating to the Trust Securities issued for its 
benefit, taken together, constitute a full and unconditional 
guarantee by it of the Trust's payment obligations with 
respect to the Trust Securities.

The issue raised net proceeds of (POUND)162 million which will be 
used for the repayment of short term debt.

13.     SHORT-TERM DEBT

Short-term debt consisted of the following (in millions):

                          March 31, 1998                 April 1, 1997
                            (POUND)     $                   (POUND)
Commercial paper	              -	       -	                     81
Term loan and revolving 
credit facility	              303     	508                     	1
Loan notes	                    16	      26                     	-

	 Total	                      319     	534                    	82

At March 31, 1998  and April 1, 1997 the weighted average 
interest rate was 7.9% and 6.2%, respectively.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13.     SHORT-TERM DEBT (continued)
The term loan and revolving credit facility agreement is a 
(POUND)1.085 billion ($1.819 billion) credit facility. This credit 
facility consists of two parts which are Facility A (term loan 
facility) for (POUND)1.035 billion ($1.735 billion) and Facility B 
(revolving credit facility) for (POUND)50 million ($84 million), both 
repayable on July  30, 1998.  The interest rates on the 
facilities are based on LIBOR plus a margin which ranges 
from 0.125% to 0.5% dependent on the time elapsed since 
the Facility became available, plus a defined margin which is 
based on a bank cost of funds.  The Facilities contain certain 
restrictive covenants which include a maximum consolidated 
net debt to capitalization ratio and minimum earnings to 
interest ratio. 
The acquisition of YEG was financed in part by the issuance 
of (POUND)22 million ($37 million) of loan notes to former YEG 
shareholders. These notes are redeemable at the option of the 
holder, on March 31, 1998 and thereafter on each March 31 
prior to March 31, 2002. (POUND)6 million of notes were redeemed 
at March 31, 1998. Any loan notes outstanding at March 31, 
2002 shall be repaid in full at that date. The interest rate on 
the notes is  1% below the rate at which National 
Westminster Bank plc is offering six month sterling deposits 
of (POUND)5 million in the London inter-bank market. At March 31, 
1998, the interest rate was 6.6%.
At March 31, 1998 and  April 1, 1997  unused committed 
bank facilities were available to the Company in the amount 
of (POUND)275 million ($461 million) and (POUND)250 million ($419 
million), respectively. Commitment fees of approximately 
1/10 of 1% of the unused committed bank facilities are 
required to maintain the facilities which have expiration 
dates between 2000 and 2002. In addition, the Company has 
commercial paper programs (denominated in US dollars) 
which provide for the issuance of up to $550 million in 
commercial paper with short-term maturities (up to 364 
days) issued at a discount to face value.

14.     ACQUISITION

On February 24, 1997 the joint venture partners of the 
Company announced the terms of a cash offer for YEG to be 
made by Yorkshire Holdings plc, a subsidiary of the 
Company. The offer was declared wholly unconditional on 
April 1, 1997. On April 16, 1997 notices were issued by 
Yorkshire Holdings plc in accordance with section 429 of the 
Companies Act 1985 to acquire all those YEG shares 
outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares 
of YEG during April and May 1997 through payment of cash 
consideration of (POUND)1.457 billion ($2.442 billion) and the 
issuance of loan notes to former YEG shareholders in the 
amount of (POUND)22 million ($37 million).
The acquisition was financed by cash contributions of (POUND)220 
million ($369 million) from each of the joint venture 
partners, against which shares in the Company were 
subsequently allotted, and short term borrowings.
The purchase price of YEG has been allocated to the 
underlying assets and liabilities based  on fair values at the 
acquisition date. The acquisition cost exceeded the fair

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

14.     ACQUISITION (continued)

market value of net assets acquired, including (POUND)17 million 
($29 million) of acquisition related costs, by (POUND)994 million 
($1.666 billion) and is considered goodwill. 
The net purchase price of (POUND)1.496 billion ($2.508 billion) was 
allocated as follows at April 1, 1997 (in millions):

                                          (POUND)              $
Property, plant and equipment               939                1,574
Prepaid pension asset                        61                  102
Current assets                              464                  778
Investments                                 133                  223
Goodwill                                    994                1,666
Current liabilities                        (367)                (615)
Other liabilities                          (728)              (1,220)

Purchase price                            1,496                2,508


The unaudited pro forma consolidated historical result is 
based upon the consolidated statements of income of YEG, 
as if YEG had been acquired at the beginning of Fiscal Year 
1997, and estimated to be (in millions):

                                                 Year ended
                                               March 31, 1997
                                            Actual      Pro forma
                                            (POUND)      (POUND)
Operating revenues                          1,331         1,331
Net income                                     26            15

The pro forma results include amortization of goodwill, 
additional depreciation expense and interest expense on debt 
issued to finance the company, as well as the reversal of 
certain provisions made by YEG which would have been 
accounted for as fair value adjustments at the date of 
acquisition. The pro forma result is not necessarily indicative 
of what actually would have occurred if the acquisition had 
been completed as of the beginning of the fiscal year, nor is 
it necessarily indicative of future consolidated results.

<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES 
(Successor  Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15.     EMPLOYEE OPTION AND SHARE PLANS
Prior to the acquisition of YEG by the Company,  employees of YEG 
were eligible to participate in the 1997 and 1996 Savings-Related Share 
Option Schemes, Executive Share Option Scheme, Profit Sharing 
Scheme and/or the Long Term Incentive Scheme. In connection with the 
acquisition, employees were given the opportunity to exercise their 
options granted under the Savings-Related Share Option Schemes and the 
Executive Share Option Scheme and sell their shares to Yorkshire 
Holdings plc at a price of (POUND)9.27 ($15.54) per share.  If the holders 
of the 
options did not exercise their options, such options were cash canceled, 
that is the holders were paid (POUND)9.27 ($15.54) per share less the option's 
exercise price.  There  were 2,815,302 options outstanding, at April 1, 
1997. During the year ended March 31, 1998, 2,675,674 options were 
cash canceled and 139,628 options were exercised. At March 31, 1998 
there are no outstanding options. 

Prior to April 1, 1997, the following shares of YEG's  stock were held in 
trust on behalf of employees:

                                  Shares
Profit Sharing Scheme             236,525
Long Term Incentive Scheme         54,025

In connection with the acquisition, all shares of  YEG issued under the  
Long Term Incentive Scheme, as well as the National Grid Group plc 
shares held in trust for the benefit of certain option holders, were 
transferred to employees in accordance with vesting rights as previously 
established and the related schemes and trusts were terminated.

16.     UNAUDITED QUARTERLY FINANCIAL INFORMATION


                                        Quarterly Periods Ended 1997/98
(in (POUND) millions)          June 30    September 30    December 31   March 31

Operating revenues               268        295              347          375
Operating income                  32         44               47           38
Net income (loss) before
 extraordinary item                5         21               16          (25)
Net income (loss)                  5       (113)              16          (25)

The quarter ended September 30, 1997 includes an extraordinary loss of 
(POUND)134 million for windfall tax.  The quarter ended March 31, 1998 
includes an unrealized loss following the reduction in fair value of 
Yorkshire Group's investment in Ionica Group plc of (POUND)41 million.
<PAGE>
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 
ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

<PAGE>
PART III

Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE 
REGISTRANT 

Management of Yorkshire Group 

	The following table sets forth certain information with respect to the 
executive officers and directors of Yorkshire Group as of  March 31, 1998: 

        Name                Age         Position            	
 Dr. E. Linn Draper, Jr.     56          Chairman and Director 
	Donald M. Clements, Jr.     48          Director	
 Armando A. Pena             53          Chief Financial Officer and Director
	Wayne H. Brunetti           55          Director
	Richard C. Kelly            51          Director
	Teresa S. Madden            42          Director

	Dr. E. Linn Draper, Jr.   Has been a Director and Chairman of Yorkshire 
Group since February 1997. Since April 1993 has been Chairman of the Board 
of Directors of AEP and all of its major subsidiaries. In March 1992, appointed 
President of AEP and President and Chief Operating Officer of American 
Electric Power Service Corporation. Serves as a Director of BCP Management, 
Inc. and CellNet Data Systems, Inc. 

	Donald M. Clements, Jr.   Has been a Director of Yorkshire Group since 
February 1997. Since October 1995, has been President of AEP Resources, Inc. 
Joined American Electric Power Service Corporation in September 1994 as 
Senior Vice President and became Executive Vice President in December 1996. 
From 1978 to 1994, was employed with Gulf States Utilities Company. 

	Armando A. Pena.    Since February 1997, has been a Director, and, since 
July 1997, has been Chief Financial Officer of Yorkshire Group. Since January 
1998, has been Chief Financial Officer, and, since March 1996, Senior Vice 
President and Treasurer of American Electric Power Service Corporation. Since 
November 1995, has been Treasurer of AEP and all of AEP's major subsidiaries. 
From 1989 to March 1996, was Vice President-Finance of American Electric 
Power Service Corporation. 

	Wayne H. Brunetti.   Has been a Director of Yorkshire Group since 
February 1997. Since August 1997, has been President and Chief Operating 
Officer of NCE. Since January 1996, has been the President and Chief Executive 
Officer of Public Service Company of Colorado. Joined Public Service 
Company of Colorado in July 1994 as President and Chief Operating Officer. 
From 1991 to July 1994, was President and Chief Executive Officer of 
Management Systems International, a management consulting firm. Serves as a 
Director of e prime, YGSC and Natural Fuels. 

	Richard C. Kelly.   Has been a Director of Yorkshire Group since February 
1997. Since August 1997, has been Executive Vice President, Finance and 
Support Services and Chief Financial Officer of NCE. From 1990 to August 
1997, was Chief Financial Officer of Public Service Company of Colorado. 

	Teresa S. Madden.   Has been a Director of Yorkshire Group since 
February 1997. Since September 1997, has been Controller and Secretary of 
NCE. From 1990 to August 1997, was Director of Corporate Accounting and 
Assistant Secretary of Public Service Company of Colorado. 

Management of Yorkshire Finance 

	The following table sets forth certain information with respect to the Board 
of Directors of Yorkshire Finance as of March 31, 1998: 

        	Name                Age    Position 
	Graham J. Hall..............54     Director
	Roger Dickinson............ 51     Director
	Andrew G. Donnelly.....     42     Director

	Graham J. Hall.   Has been a Director of Yorkshire Finance since August 
1997. Since January 1998, has been the Chief Executive of Yorkshire. From 
April 1997 to December 1997, was the Group Operations Director of Yorkshire. 
From 1990 through 1997, was the Group Executive Director, Distribution of 
Yorkshire. 

	Roger Dickinson.   Has been a Director of Yorkshire Finance since August 
1997. Since 1989, has been Group Company Secretary and Solicitor of 
Yorkshire. 

	Andrew G. Donnelly.   Has been a Director of Yorkshire Finance since 
December 1997. Since January 1998, has been Finance Director of Yorkshire. 
From January 1996 through December 1997, was Group Financial Controller of 
Yorkshire. From 1993 to 1996, was Financial Controller, System Division of 
Yorkshire. 



Item 11.       EXECUTIVE COMPENSATION

Management Compensation of Yorkshire Group 

	The officers and directors of Yorkshire Group listed above (each an 
"AEP/NCE Officer or Director", as applicable) receive no cash or non-cash 
compensation as a result of their services performed for Yorkshire Group. The 
salaries of all AEP/NCE Officers and Directors are paid by either AEP or NCE, 
as applicable, solely for the services performed by them for either AEP or NCE, 
as applicable. 

Management Compensation of Yorkshire Finance 

	The directors of Yorkshire Finance listed above receive no cash or non-
cash compensation as a result of their services performed for Yorkshire Finance.
The salaries of all directors listed immediately above are paid by Yorkshire 
solely for their services performed for Yorkshire. 
Item 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 
OWNERS AND MANAGEMENT

	Yorkshire Group is wholly owned indirectly by AEP and NCE. Yorkshire 
Finance is wholly owned by Yorkshire Group. The following table shows the 
number of shares of common stock of AEP and NCE, respectively, owned by 
the directors and executive officers of Yorkshire Group and Yorkshire Finance 
as of March 31, 1998: 



Name                     Title of Security      Number of Shares
                                                Beneficially Owned(1)
	    
Dr. E. Linn Draper, Jr. .AEP Common Stock           7,632(2)(3)
Donald M. Clements, Jr. .AEP Common Stock           1,052(2)
Armando A. Pena .        AEP Common Stock           4,666(2)
Wayne H. Brunetti       .NCE Common Stock         371,504(4)(5)(6)
Richard C. Kelly        .NCE Common Stock         128,607(4)(6)(7)
Teresa S. Madden        .NCE Common Stock          30,080(4)(6)

Directors and executive officers 
of Yorkshire Group as a group 
(6 persons)              AEP Common Stock          13,350(8)
                         NCE Common Stock         530,191(8)
(1)     "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security and/or investment power with respect to
a security. 
(2)     Includes shares of AEP common stock held in the AEP Savings Plan as 
follows: Dr. Draper 2,917 shares, Mr. Clements 1,052 shares and Mr. Pena 
3,298 shares.
(3)     Includes 4,715 shares of AEP common stock held in joint tenancy with
Dr. Draper's wife.
(4)     Includes shares of NCE common stock in the form of unexercised stock 
options awarded pursuant to the Omnibus Incentive Plan as follows: Mr. 
Brunetti 352,334, Mr. Kelly 118,050 and Ms. Madden 28,550 shares. 
(5)     Includes 18,700 shares of NCE common stock held in joint tenancy. 
(6)     Includes shares of NCE stock held in the NCE's Employee Savings and 
Stock Option Plan as follows: Mr. Brunetti 470, Mr. Kelly 2,718 and Ms 
Madden  1,125.
(7)     Includes 263 shares of NCE common stock held by Mr. Kelly's wife in the 
NCE Savings Plan.
(8)     Represents less than 1% of outstanding common stock of AEP or NCE, as 
applicable.



Item 13.       CERTAIN RELATIONSHIPS AND RELATED 
TRANSACTIONS

	As described under ''Yorkshire's Businesses---Business Restructuring'', 
Yorkshire currently contemplates that its generation assets may be transferred
to an entity or to entities other than Yorkshire Group or its subsidiaries. 
Such entity or entities may be an indirect subsidiary or may be indirect
subsidiaries of a US Parent. It is expected that proceeds from the transfer
of these assets will be used to reduce debt of Yorkshire. 

	Total assets less current liabilities employed by the generation business at 
March 31, 1998 were (POUND)136 million. Operating income attributable to the 
generation business in Fiscal Year 1998 was (POUND)16 million. 
See ''Yorkshire's Businesses---Business Restructuring''. 

Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND 
REPORTS ON FORM 8-K

(a)     The following documents are filed as a part of this report on this Form 
10-K:

(1)    Financial Statements:
The financial statements and the related reports of independent 
public accountants and auditors filed as a part of this annual report 
are listed under Item 8 herein.

	 (2)    Financial Statement Schedules:
Consolidated Valuation and Qualifying Accounts (Schedule II)

All other schedules are omitted because they are not applicable or 
the required information is contained in the financial statements or 
notes thereto.

	 (3)   Exhibits:
Exhibits are listed in the Exhibit Index on pages 111 and 112.

(b)     Reports on Form 8-K:
The registrant has not filed any reports on Form 8-K during the last 
quarter of Fiscal Year 1998.


<PAGE>
	

	SIGNATURES 

	Pursuant to the requirements of the Sections 13 or 15(d) of the 
Securities Exchange Act of 1934, the registrant, Yorkshire Power Group 
Limited, certifies that it has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized, in the City of Leeds, 
West Yorkshire, England on the June 10, 1998. 


YORKSHIRE POWER 
GROUP LIMITED 



By:  /s/ Armando A. Pena
   	______________________
    Director and Chief 
     Financial Officer 



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

			Signature                       Title                   	Date

   (i)   Principal Executive Officer:
	*Dr. E. Linn Draper, Jr.          Chairman of the Board
						and Director


   (ii) Principal Financial Officer
	and Principal Accounting Officer:

/s/ Armando A. Pena
____________________           Chief Financial Officer     June 10, 1998
	(Armando A. Pena)              and Director



   (iii)        A Majority of the Directors
	*Donald M Clements, Jr.
	*Wayne H Brunetti
	*Richard C Kelly
	*Teresa S Madden

         /s/ Armando A. Pena
 *BY     ___________________   Authorized Representative 	June 10, 1998
        	(Armando A. Pena,       in the United States
           Attorney-in-Fact)     

<PAGE>

INDEPENDENT AUDITORS' REPORT 

To The Shareholders and Board of Directors 
of Yorkshire Electricity Group plc and Subsidiaries 

	We have audited the consolidated financial statements of Yorkshire 
Electricity Group plc and its subsidiaries (the "Company") as of March 31, 1997 
and 1996, for each of the two years in the period ended March 31, 1997, and 
have issued our report thereon dated July 15, 1997. Our audits also included
the financial statement schedule of the Company, listed in Item 14. This 
financial statement schedule is the responsibility of the Company's 
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respect the information set forth therein. 


Deloitte & Touche 
Leeds 
United Kingdom 

July 15, 1997 

<PAGE>

YORKSHIRE ELECTRICITY GROUP PLC 
(Predecessor Company)

SCHEDULE II ---VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 

</TABLE>
<TABLE>
<CAPTION>
                           (In Millions) 
      Column A           Column B              Column C            Column D      Column E
                                              Additions
    		Description        Balance at    Charge to     Charges to    
                        Beginning of   Costs and     Other                     Balance at End
                          Period        Expenses     Accounts      Deductions    of Period
                           (POUND)        (POUND)       (POUND)        (POUND)    (POUND)
<C>                         <S>            <S>           <S>            <S>        <S>  

Deducted from Assets:
	Accumulated Provision for 
   Uncollectible Accounts .  7              5                           6(b)       6
		Investment Provision     .                2                      	        	      2
Year Ended March 31, 1997  . 7              7                  	        6          8

  Accumulated Provision for 
    Uncollectible Accounts .10              4                           7(b)       7
		Investment Provision     . 9                           (8)(a)         1(c)
Year Ended March 31, 1996  .19              4            (8)            8          7

(a)     Provision transferred to a liability account for liabilities assumed in 
        connection with the sale of retailing joint venture 
(b)     Uncollectible accounts written-off 
(c)     Write-off investment 
</TABLE>
 
<PAGE>

INDEPENDENT AUDITORS' REPORT 

To The Shareholders and Board of Directors 
of Yorkshire Power Group Limited and Subsidiaries 

	We have audited the consolidated financial statements of Yorkshire Power 
Group Limited and its subsidiaries (the "Company") as of March 31, 1998 and, 
for the year ended March 31, 1998, and have issued our report thereon dated 
June 10, 1998. Our audit also included the financial statement schedule of the 
Company, listed in Item 14. This financial statement schedule is the 
responsibility of the Company's management. Our responsibility is to express an 
opinion based on our audits. In our opinion, such financial statement schedule, 
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respect the information 
set forth therein. 


Deloitte & Touche LLP
Columbus, Ohio

June 10, 1998

<PAGE>
YORKSHIRE POWER GROUP LIMITED 
(Successor Company)
<TABLE>
<CAPTION>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 
                                    (In Millions) 

			       Column A               Column B               Column C              Column D     Column E
                                                        Additions    
			       Description            Balance at      Charged to    Charged to    
                                 Beginning       Cost and       Other                       Balance at     
                                 of Period       Expenses      Accounts        Deductions   End of Period
                                 (POUND)         (POUND)       (POUND)          (POUND)      (POUND)
Year ended March 31, 1998
Deducted from Assets:
<C>                                 <S>             <S>            <S>            <S>            <S>
		Accumulated Provision for:
          Uncollectible Accounts    6               6              -              6 (a)          6

                                    6               6              -              6              6  

(a)     Uncollectible accounts written-off

</TABLE>

<PAGE>
EXHIBIT INDEX

Certain of the following exhibits, designated with an asterisk (*), are filed 
herewith.  The exhibits not so designated have heretofore been filed with the 
Commission and, pursuant to 17 C.F.R. H229.10(d) and H240.12b-32, are 
incorporated herein by reference to the documents indicated in parentheses 
following the descriptions of such exhibits.

Exhibit
Number  Description

3.1     Memorandum and Articles of Association of Yorkshire Power 
Group Limited (Designated in Registration 333-47925 as Exhibit 
3.1).
3.2     Certificate of Incorporation of Yorkshire Power Group Limited
(Designated in Registration 333-47925 as Exhibit 3.2).
*4.1    Subordinated Indenture dated as of June 1, 1998 among Yorkshire 
Power Group Limited, Yorkshire Power Finance Limited, Banque 
Generale du Luxembourg, and The Bank of New York.
*4.2    First Supplemental Indenture dated as of June 1, 1998 among 
Yorkshire Power Group Limited, Yorkshire Power Finance Limited, 
Banque Generale du Luxembourg and The Bank of New York.
4.3     Certificate of Trust of Yorkshire Capital Trust I (Designated in 
Registration 333-47925 as Exhibit 4.4).
4.4     Trust Agreement of Yorkshire Capital Trust I (Designated in 
Registration 333-47925 as Exhibit 4.5).
*4.5    Amended and Restated Trust Agreement of Yorkshire Capital Trust 
I dated as of June 1, 1998.
*4.6    Trust Securities Guarantee Agreement dated as of June 1, 1998 
between Yorkshire Power Group Limited and the the Bank of 
New York.
*4.7    Deposit Agreement dated as of June 1, 1998 between Yorkshire 
Power Finance Limited and The Bank of New York.
*4.8    Indenture, dated as of February 1,1998,among Yorkshire Power 
Finance Limited, Yorkshire Power Group Limited, The Bank of 
New York and Banque Generale du Luxembourg.
*4.9    First Supplemental Indenture, dated as of February 25, 1998, among 
Yorkshire Power Finance Limited, Yorkshire Power Group Limited, 
The Bank of New York and Banque Generale du Luxembourg.
*4.10   Second Supplemental Indenture, dated as of February 25, 1998, 
among Yorkshire Power Finance Limited, Yorkshire Power Group 
Limited, The Bank of New York and Banque Generale du 
Luxembourg.
*4.11   Deposit Agreement, dated as of February 1, 1998,between the Bank 
of New York and Yorkshire Power Finance Limited. 
*4.12  Trust Deed, Dated January 17, 1995 between Yorkshire Electric 
group PLC and Bankers trust Company Limited.
*4.13  First Supplement, Dated July 27, 1995, between Yosrhshire
Electric group PLC and Bankers Trust Company Limited.
10.1    Yorkshire Electricity Group plc Public Electricity Supply License 
dated March 26, 1990 as modified by modifications dated March 
30, 1994, March 31, 1995, September 25, 1995, December 11, 
1997, December 30, 1997 and March 31, 1998 (Designated in 
Registration 333-47925 as Exhibit 10.1).
10.2    Second Tier License to Supply Electricity for England and Wales 
for Yorkshire Electricity Group plc dated June 8, 1990 (Designated 
in Registration 333-47925 as Exhibit 10.2).
10.3    Modifications to Yorkshire Electricity Group plc Second Tier 
License to Supply Electricity for England and Wales dated October 
24, 1990, April 22, 1992, March 11, 1994, April 29, 1994 and 
January 19, 1998 (Designated in Registration 333-47925 as Exhibit 
10.3).
10.4    Second Tier License to Supply Electricity for Scotland for 
Yorkshire Electricity Group plc dated March 25, 1991 (Designated 
in Registration 333-47925 as Exhibit 10.4).
10.5    Modifications to Yorkshire Electricity Group Second Tier License 
to Supply Electricity for Scotland dated June 15, 1992, June 30, 
1993, March 11, 1994 and January 20, 1998 (Designated in 
Registration 333-47925 as Exhibit 10.5).
10.6    Pooling and Settlement Agreement dated March 30, 1990 among 
Yorkshire Electricity Group plc, National Grid Company plc and 
other parties (Designated in Registration 333-47925 as Exhibit 
10.6).
10.7    Master Connection and Use of System Agreement dated as of 
March 30, 1990 among The National Grid Company plc and its 
users (including Yorkshire Electricity Group plc) (Designated in 
Registration 333-47925 as Exhibit 10.7).
10.8    Master Agreement dated as of October 25, 1995 among The 
National Grid Holding plc, The National Grid Company plc, 
Yorkshire Electricity Group plc and the other RECs (Designated in 
Registration 333-47925 as Exhibit 10.8).
10.9    Memorandum of Understanding among the National Grid Group 
plc, Yorkshire Electricity Group plc and the other RECs, dated 
November 17, 1995 (Designated in Registration 333-47925 as 
Exhibit 10.9).
10.10   Agreement for (POUND)1,085,000,000 Credit Facility for Yorkshire Power 
Group Limited between Yorkshire Power Group Limited and the 
Union Bank of Switzerland (Designated in Registration 333-47925 
as Exhibit 10.10).
*10.11  Master Registration Agreement dated as of June 1, 1998 among 
Yorkshire Electricity Group plc, Energy Pool Funds Administration 
Limited and other parties.
*12.1   Computation of ratios of earnings to fixed charges.
21.1    List of subsidiaries of Yorkshire Power Group Limited - Designated 
in Registration 333-47925 as Exhibit 21.1.
*24.1   Power of Attorney of certain officers and directors of Yorkshire 
Power Group.
*27.1   Financial Data Schedule.
--------------
Certain instruments defining the rights of holders of long-term debt of 
Yorkshire Electric Group plc have been omitted because the 
total amount of securities authorized thereunder does not exceed 
10% of the total assets of Yorkshire Power Group Limited.
Yorkshire Power Group Limited hereby agress to furnish
a copy of any such ommitted instrument to the SEC
upon request.