============================================================================
                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D. C.  20549

                            --------------------

                                  FORM 10-K

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

                 For the fiscal year ended December 31, 1997

                                      OR

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

           For the Transition Period from __________ to __________

                        Commission file number 0-493

                           CONSUMERS WATER COMPANY
           (Exact name of registrant as specified in its charter)

                            --------------------

                  Maine                        01-0049450
      (State or other jurisdiction         (I.R.S. Employer
    of incorporation or organization)      Identification No.)

          THREE CANAL PLAZA, PORTLAND, MAINE  04101 (207-773-6438)
        (Address and telephone number of principal executive offices)

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

                  COMMON SHARES, PAR VALUE $1.00 PER SHARE
                  (Title of class of Securities registered
                    pursuant to Section 12(g) of the Act)

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

      The aggregate market value of all voting shares held by non-affiliates 
as of March 11, 1998 was $190,005,010. As of March 11, 1998, there were 
8,994,320 Common Shares outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE

      The "Nominees for Election as Directors," "Other Executive Officers," 
"Executive Compensation," "Section 16(a) Ownership Reporting Delinquencies," 
and "Common Stock Ownership of Certain Beneficial Owners and Management" 
sections of the registrant's proxy statement for its 1998 annual meeting 
filed pursuant to Regulation 14A are incorporated in Part III of this Form 
10-K by reference.

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                                   PART I

Item 1. Business.

Consumers Water Company (Consumers or the Company) is a holding and 
management company whose principal business is the ownership and operation 
of water utility subsidiaries. Consumers owns directly or indirectly at 
least 95% of the voting stock of 8 water companies (the Consumers Water 
Subsidiaries) which operate 28 divisions providing water service to 
approximately 232,000 customers in six states. The Company also owns 100% of 
Consumers Applied Technologies, Inc. (CAT), which formerly provided services 
primarily in the areas of meter installation, corrosion engineering, 
contract operations and water conservation. On April 29, 1997, the Company 
announced its intention to dispose of Consumers Applied Technologies, Inc. 
CAT substantially shut down its operations during 1997. CAT continues to be 
responsible for certain long-term contracts, however.

Consumers was incorporated under the laws of Maine in 1926. The address of 
its executive offices is Three Canal Plaza, Portland, Maine 04101, and the 
Company's telephone number is (207) 773-6438.

The Company had at December 31, 1997, subsidiaries as noted on Exhibit 21 
attached hereto, the accounts of which are included in the consolidated 
financial statements in this report.

Consumers Water Subsidiaries

The Consumers Water Subsidiaries operate 28 divisions in six states for the 
collection, treatment and distribution of water for public use to 
residential, commercial and industrial customers, to other water utilities 
for resale and for private and municipal fire protection purposes. In 1997, 
65% of the revenue of the Consumers Water Subsidiaries was generated from 
residential accounts while sales for commercial users, industrial users, 
fire protection and miscellaneous uses accounted for 13%, 8%, 8%, and 6% of 
revenues respectively. Water utility revenues for the three years ended 
December 31, 1997, 1996 and 1995 were $98,337,000, $93,587,000, and 
$89,143,000, respectively. At December 31, 1997, the Consumers Water 
Subsidiaries owned in the aggregate 3,428 miles of mainline pipe of which 
approximately 84% was 6-inches or larger in diameter.

Of the 28 divisions, 14 use primarily surface supplies (lakes, ponds, rivers 
and streams) as their source of supply; 12 obtain water principally or 
entirely from wells; and 2 purchase their supplies from adjacent systems. 
Less than 5% of the Consumers Water Subsidiaries' water usage is purchased 
from other systems. In general, the Company considers the surface and well 
supplies at the Consumers Water Subsidiaries to be adequate for anticipated 
average daily demand and normal peak demand.

All of the systems (except one system serving solely industrial users in 
Ohio and a few small developer built systems in New Hampshire) provide 
customers with water which has been subjected to disinfection treatment and 
some of which has been subjected to additional treatment such as softening, 
sedimentation, filtration, chemical stabilization, iron and/or manganese 
removal and taste and odor control. Nine systems own and operate full scale 
water treatment plants. In addition, Consumers Illinois Water Company 
(Consumers Illinois) operates 4 wastewater treatment facilities.

The water treatment, pumping and distribution capacities of the systems are 
generally considered by management to be adequate to meet the present 
requirements of residential, commercial and industrial customers. On a 
continuing basis, the Consumers Water Subsidiaries make system improvements 
and additions to capacity in response to changing regulatory standards, 
changing patterns of consumption and increases in the number of customers. 
See "Environmental Regulation." Operating and capital costs associated with 
these improvements are normally recognized by the various state regulatory 
commissions in setting rates. See "Rate Regulation."

Consumers' water utility business is seasonal because the demand for water 
during the warmer months is generally greater than during the cooler months 
due to additional requirements for industrial and residential cooling 
systems, private and public swimming pools and lawn sprinklers.

The following table indicates, for each of the Consumers Water Subsidiaries, 
the number of customers, revenues and net utility plant as of December 31, 
1997:

<TABLE>
<CAPTION>

                                          Number       Number of    Utility    Net Utility
Subsidiary                             of Divisions    Customers    Revenue     Plant (1)
------------------------------------------------------------------------------------------
      (Dollars in Thousands)

<S>                                         <C>         <C>         <C>          <C>
Consumers Ohio Water Company                 5           75,617     $31,746      $122,731
Consumers Illinois Water Company             7           59,698      21,342        98,985
Consumers Pennsylvania Water Company-
  Shenango Valley Division (2)               1           18,655       7,689        30,963
  Roaring Creek Division                     1           17,645       8,648        37,701
  Susquehanna Division                       1            4,576       1,825         6,332
Consumers New Jersey Water Company           3           31,491      12,404        59,158
Consumers New Hampshire Water Company        1            8,229       6,543        32,318
Consumers Maine Water Company                9           15,598       8,140        31,807
  Inter-Company Eliminations                 -                -           -        (3,271)
                                            ---------------------------------------------
                                            28          231,509     $98,337      $416,724
                                            =============================================

--------------------
<F1>  Includes construction work in progress.
<F2>  Includes Masury Water Company, wholly-owned by the Shenango Valley 
      Division.

</TABLE>

The properties of the Consumers Water Subsidiaries consist of transmission 
and distribution mains and conduits, purification plants, pumping 
facilities, wells, tanks, meters, supply lines, dams, reservoirs, buildings, 
land, easements, rights and other facilities and equipment used for the 
collection, purification, storage and distribution of water. Substantially 
all of the property and all rights and franchises of the Consumers Water 
Subsidiaries are owned by the subsidiaries and are subject to liens of 
mortgages or indentures. For the most part, such liens are imposed to secure 
bonds, notes and/or other evidences of long-term indebtedness of the 
respective companies.

Management considers that the Consumers Water Subsidiaries' water 
collection, treatment and distribution systems, facilities and properties 
are well maintained and structurally sound. In addition, Consumers carries 
replacement cost insurance coverage on substantially all of its and its 
subsidiaries' above-ground properties, as well as liability coverage for 
risks incident to their ownership and use.

Rate Regulation

The Consumers Water Subsidiaries are subject to regulation by their 
respective state regulatory bodies. The state regulatory bodies have broad 
administrative power and authority to regulate water and other public 
utilities, including the power to regulate rates and charges, service and 
the issuance of securities. They also establish uniform systems of accounts, 
develop standards with respect to groundwater withdrawal rights, surface 
water supply, potability and adequacy of treatment, approve the terms of 
contracts and relations with affiliates and customers, and approve purchases 
and sales of property and loans.

The profitability of the operations of the Consumers Water Subsidiaries is 
influenced to a great extent by the timeliness and magnitude of rate 
allowances by regulatory authorities in various states. Accordingly, 
Consumers maintains a rate case management capability to ensure that the 
tariffs of the Consumers Water Subsidiaries reflect, to the extent possible, 
current costs of operations, capital, taxes, energy, materials and 
compliance with environmental regulations. This process also addresses other 
factors bearing on rate determinations, such as the quantity of rainfall and 
temperature in a given period of time, system expansion and industrial 
demand.

The approximate amount of annual rate increases allowed for the last three 
years was $2,769,000 for 1997, $4,510,000 for 1996, and $6,938,000 for 1995, 
represented by four, eight, and six, rate decisions, respectively.

The Company currently has two rate filings pending totaling $4.8 million of 
requested annualized new revenue. Decisions on these cases are expected 
during 1998. 

Rates for some divisions of Consumers Ohio Water Company (Consumers Ohio) 
are fixed by negotiated agreements with the political subdivisions that are 
served, instead of through a filing with the Public Utility Commission of 
Ohio. Currently, two of the four regulated divisions of Consumers Ohio are 
operating under rate ordinances.

Water Utility Competition

In general, the Company believes that the Consumers Water Subsidiaries have 
valid operating rights, free from unduly burdensome restrictions, sufficient 
to enable them to carry on their businesses as presently conducted. They 
derive their rights to install and maintain mains in streets, highways and 
other public places, from the acts under which they were incorporated, 
municipal consents and ordinances, permits granted for an indefinite period 
of time by states and permits from state highway departments and county and 
township authorities. In most instances, such operating rights are non-
exclusive. In certain cases, permits from state highway departments and 
county and township authorities have not been received for service in 
unincorporated areas, but service is being rendered without assertion or 
lack of authority by the governmental body concerned.

Each of the Consumers Water Subsidiaries serves an area or areas in which it 
is sole operator of the public water supply system. In some instances 
another water utility provides service to a separate and sometimes 
contiguous area within the same township or other political subdivision 
served by one of the Consumers Water Subsidiaries.

In the states in which the operations of the Consumers Water Subsidiaries 
are carried on, there exists the right of municipal acquisition by one or 
more of the following methods: eminent domain, the right of purchase given 
or reserved by a municipality or other political subdivision in granting a 
franchise, and the right of purchase given or reserved under the law of the 
state in which the subsidiary was incorporated or from which it received its 
permit. The price to be paid upon acquisition is usually determined in 
accordance with both federal law and the laws of the state governing the 
taking of lands or other property under eminent domain statutes; in other 
instances, the price may be negotiated, fixed by appraisers, selected by the 
parties or computed in accordance with a formula prescribed in the law of 
the state or in the particular franchise or special charter. The Company has 
sold five divisions, with customers totaling approximately 15,000 under 
threat of eminent domain in the last several years. The gain on those sales 
totaled over $7 million. In addition, the Town of Hudson has recently 
completed requirements for acquiring the assets of Consumers New Hampshire 
Water Company pursuant to the New Hampshire condemnation statute. The 
Company expects the Town to acquire the assets in the first quarter of 1998. 
The Company is working with the local communities in its service areas in an 
effort to prevent future eminent domain proceedings.

Environmental Regulation

The primary federal laws affecting the provision of water and wastewater 
treatment services by the Consumers Water Subsidiaries are the Clean Water 
Act (the CWA), the Safe Drinking Water Act (the SDWA) and the regulations 
promulgated pursuant thereto by the United States Environmental Protection 
Agency (EPA), as well as federal and state regulations affecting dams. These 
laws and regulations establish criteria and standards, including those for 
drinking water and for liquid discharges into waters of the United States. 
The States have the right to establish criteria and standards stricter than 
those established by the EPA, and some of the states in which the Consumers 
Water Subsidiaries operate have done so. Numerous federal and state 
environmental laws other than the SDWA, the CWA and Dam Safety Regulations, 
affect the operations of the Consumers Water Subsidiaries.

Safe Drinking Water Act

The Federal SDWA established criteria and procedures for the EPA to develop 
minimum national quality standards for drinking water. EPA regulations 
promulgated pursuant to the SDWA set standards on the amount of certain 
inorganic and organic chemical contaminants, microbials and radionuclides in 
drinking water. The Federal 1996 Safe Drinking Water Act Amendments require 
the EPA to put more emphasis on the benefits versus costs of compliance when 
considering new or stricter finished water quality criteria and standards. 
Stricter drinking water standards currently under consideration may result 
in additional capital expenditures being required by the Company's Water 
Subsidiaries. Estimated capital costs for the projects described below are 
in 1998 dollars.

In order to eliminate and/or inactivate microbials in the finished water, 
improved disinfection and/or filtration is required under the EPA Surface 
Water Treatment Rule (SWTR) adopted pursuant to the SDWA. Except for one 
location, the necessary improvements to comply with the SWTR have been 
completed. The estimated cost for 1997 and beyond to comply with the SWTR, 
replace aged infrastructure, increase capacity and address other SDWA items 
at the one location, is estimated at $32 million with completion in year 
2000. Costs related to dealing with future regulations for increased removal 
and/or inactivation of microbials such as cryptosporidium cannot be 
estimated at the present time.

Two of the Consumers Maine Water Company divisions have unfiltered surface 
supplies pursuant to exemptions granted from the filtration requirement of 
the SDWA. If filtration were required in the future, an additional 
expenditure of $6 million would be necessary. Two of the Consumers Water 
Subsidiaries' operations have groundwater that might be found to be under 
the influence of a surface supply which could require filtration at an 
estimated cost of $9 million.

The Disinfectants/Disinfection By-Products Rule (D/DBP) adopted under the 
SDWA is expected to affect four Consumers Water Subsidiaries' operations. 
The cost to comply with what was previously proposed as Stage I and Stage II 
of this rule is expected to be $3 to $9 million. However, most of the 
necessary improvements will be for Stage II compliance which will occur 
after 2002.

An enhanced Surface Water Treatment Rule (ESWTR) is anticipated to be 
proposed by the EPA in late 1998 or early 1999. A portion of the capital 
investment indicated for compliance with the D/DBP Rule is expected also to 
meet a portion of the ESWTR requirements. Additional capital investment for 
ESWTR compliance cannot be estimated until the actual rule is in place.

The EPA has not yet established the Maximum Contaminant Level (MCL) for 
radon in drinking water pursuant to the SDWA provisions applicable to 
radionuclides. The Company anticipates the EPA will set the standard between 
1,000 and 2,000 pico curies/liter. The necessary capital expenditures for 
the lower level will be approximately $3 million and will occur after year 
2000.

If elevated levels of herbicides and/or pesticides are found in the finished 
water, existing water treatment facilities in Midwest farming areas may have 
to be modified or improved. The capital cost of these modifications and 
improvements, if required, are estimated at $8 million.

In 1992, Consumers Illinois executed a Letter of Commitment with the 
Illinois Environmental Protection Agency to comply with the MCL for nitrates 
at its Vermilion Division by 1997 and to take additional interim steps to 
address the problem. The Vermilion Division will be required to add 
treatment facilities and/or new sources of supply to reduce the level of 
nitrates in its finished water at certain times of the year for an estimated 
total project cost of $6 to $12 million, depending on the alternative 
selected. Due to project delays, it is anticipated the 1997 compliance date 
will be extended by the IEPA to the year 2000.

Most of the Water Subsidiaries' conventional water treatment facilities 
recycle their filter backwash water. Future regulations may be promulgated 
after the year 2000 that would require additional treatment for the backwash 
prior to recycling. The cost relating to this issue cannot be estimated at 
this time.

Dam Safety

The Consumers Water Subsidiaries own 10 major dams that are subject to the 
requirements of the Federal and State regulations related to dam safety. 
Most major dams undergo a comprehensive engineering inspection annually. The 
Company believes nine of the dams are structurally sound and well 
maintained. One of the dams in Pennsylvania will require repair or breaching 
at a cost of less than $500,000.

Clean Water Act

The CWA regulates the discharge of liquid effluents from drinking water and 
wastewater treatment facilities into the lakes, rivers, streams, subsurface 
or sanitary sewers. Ten of the water treatment facilities owned by the 
Consumers Water Subsidiaries generate water treatment precipitate from 
operating conventional filtration facilities used for producing drinking 
water. The water treatment precipitate is a combination of silt and 
chemicals used in the treatment process and chemicals removed from the raw 
water. For each of the ten facilities, the water treatment precipitate 
generated from the treatment facilities is disposed of either in a storage 
facility such as a lagoon owned by the subsidiary, an off-site facility not 
owned by the subsidiary, a State approved landfill, municipal sewer system 
or it is used for agricultural land application. Wastewater precipitate 
generated from a small wastewater treatment facility in Illinois is used as 
a soil additive. Additional capital expenditures and operating costs in 
connection with the management and ultimate disposal of wastewater effluent 
from water and wastewater facilities may be required in the future, 
particularly if changes are made in the requirements of the CWA or other 
applicable federal or state laws.

At Consumers Illinois, a new wastewater plant is now serving the Candlewick 
area. Pursuant to a settlement agreement entered into with a Homeowners 
Association in the area served by the Candlewick treatment plant, Consumers 
Illinois has agreed to study the possible relocation of the effluent 
discharge from the facility. As a result, the location of the discharge may 
be changed at an estimated cost of up to $500,000.

The Struthers Filtration Plant, which is operated by Consumers Ohio, has 
been disposing of treatment residuals at an inactive strip mine. The Ohio 
Environmental Protection Agency has informed Consumers Ohio that it must 
find an alternative method of disposal for the treatment precipitate. This 
issue is being studied and the cost for an alternative disposal method is 
estimated at $500,000 to $1.0 million.

Numerous federal and state environmental laws other than the SDWA, the CWA 
and Dam Safety Regulations, affect the operations of the Consumers Water 
Subsidiaries. In addition to the capital expenditures and costs currently 
anticipated, changes in environmental regulations, enforcement policies and 
practices or related matters may result in additional capital expenditures 
and costs. Capital expenditures and costs required as a result of water 
quality standards and environmental requirements generally have been 
recognized by state public utility commissions as appropriate plant 
additions in establishing rates.

Water Subsidiary Information

Consumers' five largest water subsidiaries, Consumers Ohio, Consumers 
Illinois, Consumers New Jersey, Consumers Pennsylvania - Roaring Creek 
Division (Roaring Creek), and Consumers Maine accounted for approximately 
84% of consolidated operating revenues of the water subsidiaries in 1997 and 
84% of consolidated water utility net property, plant and equipment at 
December 31, 1997.

Consumers' five largest water subsidiaries are discussed separately below.

Consumers Ohio operates five divisions in Ohio which serve 75,617 customers. 
Four of the five systems deliver treated water and one delivers partially 
treated water to industrial customers. Consumers Ohio serves portions of 
Ashtabula, Lake, Stark, Summit, and Mahoning counties in Northern Ohio. 
Consumers Ohio obtains its water supply for its customers in Lake County 
from Lake Erie. Customers in Mahoning County obtain their water from 
artificial lakes. Finally, Consumers Ohio purchases water from Ashtabula 
County to supply its Ashtabula County customers. Consumers Ohio's net 
utility plant at December 31, 1997 and utility revenues for 1997 were 
$122,731,000 and $31,746,000 respectively.

Consumers Illinois Consumers Illinois serves 49,689 customers in the City of 
Kankakee, Village of Bourbonnais, Village of Tower Lakes, and a portion of 
the Village of Bradley, as well as unincorporated areas of Kankakee, 
Bourbonnais, Aroma, Limestone, and Manteno Townships, all in Kankakee 
County; the Cities of Danville, Tilton, Westville and Catlin as well as the 
communities of Lake Boulevard and Hooton, all in Vermilion County, the 
Village of University Park and unincorporated areas of Crete and Monee 
Townships in Will County, and portions of Lee, Boone and Knox Counties, all 
in the state of Illinois.

Consumers Illinois also serves 10,009 sewer customers in the Village of 
University Park, portions of Crete and Monee Townships in Will County, and 
portions of Lee and Boone Counties, all in the state of Illinois.

Consumers Illinois obtains its water supply for its customers in Kankakee 
County from the Kankakee River and satellite wells while its customers in 
Vermilion County are supplied from Lake Vermilion. In Will, Lee, Boone and 
Knox counties, its customers are supplied from deep well systems. The 
economy of the Company's service areas is based on agriculture and diverse 
light industries. Consumers Illinois' net utility plant at December 31, 
1997, and utility revenues for 1997 were $98,985,000 and $21,342,000, 
respectively.

Consumers New Jersey  Consumers New Jersey operates three divisions in New 
Jersey which serve 31,491 customers in territories which are not contiguous. 
Each district draws its water from deep high capacity wells. The Southern 
Division serves a growing residential area, primarily in Camden County. The 
Central Division serves a growing residential area that also includes a 
small amount of light industry and agriculture, primarily in Mercer County. 
The Northern Division serves an industrial and agricultural community and 
outlying municipalities, primarily in Warren County, that are experiencing 
modest growth. Consumers New Jersey's net utility plant at December 31, 
1997, and utility revenues for 1997 were $59,158,000 and $12,404,000 
respectively.

Roaring Creek  Roaring Creek, which draws its water from artificial lakes 
within a 12,000 acre watershed, serves 17,645 residential, commercial, and 
industrial customers in the City of Shamokin and other portions of 
Northumberland, Columbia and Schuylkill Counties, all in Pennsylvania. The 
economy of the area is based on light industrial and service oriented 
employment. Roaring Creek's net utility plant at December 31, 1997, and 
utility revenue for 1997 were $37,701,000 and $8,648,000, respectively.

Consumers Maine Consumers Maine serves 15,598 customers through eleven non-
contiguous water systems across the state of Maine. Towns served include 
Camden, Rockport, Rockland, Thomaston, Owls Head, Union, Warren, Bucksport, 
Skowhegan, Oakland, Hartland, Millinocket, Greenville, Freeport, Porter, 
Parsonsfield, and Hiram. Each system has its own distinct water supply; five 
systems use groundwater, five systems use surface water, and one system 
purchases water from a neighboring municipal district. Consumers Maine's 
customer base is primarily residential with light commercial and industrial 
use. Net utility plant at December 31, 1997 and utility revenue for 1997 
were $31,807,000 and $8,140,000 respectively.

Discontinued Operations

On April 29, 1997, the Company announced its intention to dispose of its 
technical services company, Consumers Applied Technologies, Inc. The Company 
has been unsuccessful in selling CAT as an on-going business and is 
proceeding with its liquidation. Consumers established a reserve of $1.9 
million in the first quarter of 1997 that included incurred losses of 
approximately $390,000. The reserve was increased by $850,000 in the fourth 
quarter to accommodate additional expenses associated with the completion of 
certain contracts. CAT's operations were substantially shut down in 1997. 
CAT continues to be responsible for certain long-term contracts, however. 
See Note 12 to the consolidated Financial Statements for further detail.

Employees

Consumers Water Company and its subsidiaries employed 448 people as of 
December 31, 1997, of which 422 were employed by the Consumers Utility 
Subsidiaries. Non-supervisory personnel at the Consumers Water Subsidiaries 
in Ohio, Pennsylvania and Illinois are covered by collective bargaining 
agreements. Employee relations are considered by management to be 
satisfactory throughout the Company.

Foreign Operations

The Company had no foreign operations or export sales in 1997.

Item 2. Properties.

       (a)    Description

See Item 1. "Consumers Water Subsidiaries" for description of Consumers' 
principal properties and encumbrances thereon.

Consumers' properties are located as follows:

Illinois

      (1)   Consumers Illinois Water Company with seven divisions in 
            Kankakee, Danville, University Park, Sublette, Oak Run, 
            Willowbrook and Candlewick, Illinois.

Ohio

      (2)   Consumers Ohio Water Company with corporate offices in Poland 
            and five operating divisions located in Massillon, Struthers, 
            Mahoning Valley, Geneva and Mentor, Ohio.
      (3)   Masury Water Company located in Trumbull County, Ohio.

Pennsylvania

      (4)   Consumers Pennsylvania Water Company-Susquehanna Division 
            located in Sayre, Pennsylvania
      (5)   Consumers Pennsylvania Water Company-Shenango Valley Division 
            located in Sharon, Pennsylvania.
      (6)   Consumers Pennsylvania Water Company-Roaring Creek Division 
            located in Shamokin, Pennsylvania.

New Jersey

      (7)   Consumers New Jersey Water Company with corporate offices in 
            Hamilton and operating divisions in Blackwood, Hamilton Square 
            and Phillipsburg, New Jersey.

Connecticut

      (8)   Consumers Applied Technologies, Inc. located in Glastonbury, 
            Connecticut.

New Hampshire

      (9)   Consumers New Hampshire Water Company located in Londonderry, 
            New Hampshire.

Maine

      (10)  Consumers Maine Water Company with nine divisions located in 
            Kezar Falls, Freeport, Oakland, Rockport, Skowhegan, Greenville, 
            Hartland, Bucksport and Millinocket, Maine.
      (11)  Consumers' corporate headquarters located in Portland, Maine.

Item 3. Legal Proceedings.

Various environmental orders and policies affecting the Consumers Water 
Subsidiaries are described above under the caption "Environmental 
Regulation."

      (a)   Ohio Water Mercury Spill. In March, 1993, A.P. O'Horo Company, 
            an outside contractor (the "Contractor"), spilled a small amount 
            of mercury while working at a water treatment plant owned and 
            operated by Consumers Ohio Water Company, a subsidiary of the 
            Company ("Consumers Ohio"). Several areas in and around the 
            plant were contaminated by the spill, although no mercury 
            contaminated Consumers Ohio's water supply. Consumers Ohio 
            contacted all appropriate regulatory agencies regarding the 
            spill, and the clean up was completed by the end of 1994. The 
            total cost to clean up the spill was approximately $900,000. 
            Consumers Ohio received $100,000 from its insurer towards the 
            clean-up costs and had sought recovery of all of the clean-up 
            costs from the Contractor.

            On December 20, 1993, the Contractor filed a Complaint against 
            Consumers Ohio in Lake County Court of Common Pleas seeking 
            recovery of the retainer of approximately $400,000 that 
            Consumers Ohio had withheld on this project. On December 30, 
            1993, Consumers Ohio filed a counterclaim against the Contractor 
            seeking recovery of all past and future costs related to the 
            spill. Consumers Ohio settled the claims brought by the 
            Contractor regarding the retainer, while continuing to pursue 
            recovery of the costs of the spill. On November 4, 1996, the 
            Court granted the Contractor's motion for a directed verdict, 
            finding that the Contractor was not liable for any of the clean-
            up costs. Consumers Ohio appealed this decision. As a result of 
            this adverse judgement, Consumers Ohio increased the reserve 
            previously taken to cover clean-up costs by $560,000, or 
            $360,000 net of taxes. On December 26, 1997 the Court of Appeals 
            for the Eleventh District, State of Ohio, County of Lake 
            overturned this adverse judgement and ordered a new trial. The 
            reserve was not adjusted, pending the outcome of the new trial. 
            The Contractor has filed an appeal of this decision with the 
            Ohio Supreme Court.

      (b)   Schiavi Homes Litigation. In 1994, the Penobscot Indian Nation 
            commenced litigation against the Company, a former subsidiary of 
            the Company, a current subsidiary of the Company, and John H. 
            Schiavi, a Director of the Company, among others, in the United 
            States District Court for the District of Maine (the "District 
            Court").  The Complaint filed in the District Court alleged, 
            among other things, that one or all of the defendants defrauded 
            the Penobscot Indian Nation by breaching their duty of good 
            faith and fair dealing and by making misrepresentations in 
            connection with the acquisition of the assets of SHC 
            Corporation, then a subsidiary of the Company, by a Maine 
            limited partnership in which the Penobscot Indian Nation held a 
            limited partnership interest. On October 25, 1995, the District 
            Court issued an order granting the summary judgement motions of 
            certain defendants, including the Company, its current and 
            former subsidiaries, and John H. Schiavi. On or about June 6, 
            1996, the Penobscot Indian Nation filed an appeal from the 
            granting of summary judgement by the District Court with the 
            United States First Circuit Court of Appeals (the First Circuit) 
            alleging that the District Court erred in granting summary 
            judgement to the Company and the other defendants. On May 5, 
            1997 the First Circuit affirmed the granting of Summary 
            Judgement to the Company, its current and former subsidiaries, 
            and its Director, John H. Schiavi, by the United States District 
            Court for the District of Maine. On or about August 1, 1997, the 
            Penobscot Indian Nation filed a petition for certiorari with the 
            United States Supreme Court seeking a review of the First 
            Circuit's affirmation of the granting of summary judgement to 
            the Company and the other defendants. On October 14, 1997, the 
            Supreme Court denied the Penobscot Indian Nation's petition.

            In connection with this litigation, John L. Palmer (no relation 
            to Director, John E. Palmer, Jr.), who was a co-defendant in the 
            suit brought by the Penobscot Indian Nation and was formerly a 
            director and officer of SHC Corporation, brought suit against 
            the Company and its former subsidiary, SHC Corporation, in 
            Cumberland County Superior Court in the State of Maine on May 
            29, 1996, seeking reimbursement of all of his legal fees 
            incurred in connection with his defense of the claims raised by 
            the Penobscot Indian Nation. This case was not affected by the 
            First Circuit's decision. In this litigation, the parties have 
            completed discovery and are awaiting trial.

      (c)   Candlewick Treatment Plant Litigation. On August 25, 1995, the 
            State of Illinois filed a Complaint in the Circuit Court of the 
            17th Judicial Court of Illinois in Boone County, Illinois 
            against the Company and its subsidiary, Consumers Illinois Water 
            Company ("Consumers Illinois"), alleging violation of the 
            effluent discharge standards under various state and federal 
            environmental regulations. The Complaint alleges that Consumers 
            Illinois' wastewater treatment plant violated such effluent 
            standards at various times since 1991 and seeks, among other 
            things, a civil penalty of $10,000 per day for each day that the 
            alleged violation continued and a civil penalty of $50,000 for 
            each alleged violation of the Illinois Environmental Protection 
            Act and the Illinois Pollution Control Board's water pollution 
            regulations.

            On or about September 20, 1995, the Candlewick Lake Association, 
            Inc., an association of owners of lots within a lake community 
            development known as Candlewick Lake and served by the Consumers 
            Illinois wastewater treatment plant (the "Association"), sought 
            to intervene in the case. In its Complaint, the Association 
            alleged that effluent from the Consumers Illinois plant had 
            interfered with and damaged the recreational use of Candlewick 
            Lake. The Complaint sought $1,000,000 in damages from Consumers 
            Illinois. On October 25, 1996, Consumers Illinois entered into 
            an agreement with the Association in which the Association 
            agreed to dismiss its action against Consumers Illinois Water 
            Company without prejudice to refile its suit. Pursuant to the 
            terms of the Settlement Agreement, Consumers Illinois agreed to 
            cooperate in a study of water quality of Candlewick Lake and the 
            possible change in the discharge point for Consumers Illinois' 
            wastewater treatment plant.

            The Settlement Agreement with the Association does not affect 
            the Complaint filed by the Illinois Attorney General, as to 
            which the Company has filed a motion to dismiss on the basis of 
            a lack of jurisdiction and as to which settlement negotiations 
            between the Illinois Attorney General and Consumers Illinois are 
            ongoing.

      (d)   Illinois Regulatory Appeal. Consumers Illinois had previously 
            filed in the Appellate Court for the Third District of Illinois 
            a Notice of Appeal and Petition for Review of an Order of the 
            Illinois Commerce Commission entered on May 8, 1996 (the 
            "Order"). The Order required the transfer of the net gain of 
            approximately $394,000 resulting from the sale of land by 
            Consumers Illinois from the shareholders of Consumers Illinois 
            to ratepayers in Consumers Illinois' Kankakee district in the 
            form of reduced rates over a 7-year period. The Notice of 
            Appeal, dated July 17, 1996, was also directed to the City of 
            Kankakee, the NutraSweet Group, Governor's State University and 
            the Village of University Park, who had intervened in the 
            underlying rate case giving rise to the Order.

            On July 8, 1997, the Court reversed the Illinois Commerce 
            Commission's decision to treat the gain from the sale of land as 
            an adjustment to water operating revenue. The Court remanded the 
            case to the Illinois Commerce Commission for purposes of 
            modifying water rates to reflect elimination of the adjustment 
            and to allow Consumers Illinois to file for new rates consistent 
            with the Court's decision. The Illinois Commerce Commission 
            decided not to appeal the Court's decision and held a hearing on 
            October 23, 1997 to review tariff changes that will increase 
            annual revenues by about $92,000. Such changes were approved on 
            November 19, 1997.

Management believes that the various matters under litigation will not have 
a significant adverse effect on either the Company's future results of 
operations, financial position or cash flows.

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

None.

                                   PART II

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

      (a)   Market Information

The common shares of Consumers trade on the Nasdaq Stock Market (Nasdaq) 
under the symbol: CONW. The following table sets forth the high and low last 
sale prices for the common shares for the periods indicated, as reported by 
Nasdaq, together with cash dividends declared per common share.

<TABLE>
<CAPTION>

                                            DIVIDENDS
      Calendar Year      HIGH      LOW      DECLARED
      -----------------------------------------------

      <S>               <C>       <C>        <C>
      1997
      First Quarter     18 3/4    16 3/4     $0.30
      Second Quarter    17 3/4    15 1/8      0.30
      Third Quarter     18 1/4    16 3/8      0.305
      Fourth Quarter    20 3/4    17          0.305
                                             ------
                                             $1.21
                                             ======

      1996
      First Quarter     19        16 1/2     $0.30
      Second Quarter    18 1/4    14 1/2      0.30
      Third Quarter     18 3/4    15 1/2      0.30
      Fourth Quarter    19 1/4    16 3/4      0.30
                                             -----
                                             $1.20
                                             =====
</TABLE>

      (b)   Holders

As of December 31, 1997, there were approximately 6,000 shareholders of 
record of the Registrant's common shares.

Item 6. Selected Financial Data.

(Dollars in Thousands Except Per Share Amounts)

<TABLE>
<CAPTION>

                                                 1997        1996        1995        1994        1993
                                               --------------------------------------------------------

<S>                                            <C>         <C>         <C>         <C>         <C>
Operating Revenue-Continuing Operations        $ 98,339    $ 93,589    $ 89,146    $ 80,397    $ 78,057
Net Income from Continuing Operations          $ 12,076    $  9,481    $ 11,913    $  9,757    $ 11,660
Earnings Per Common Share:
  Continuing Operations                        $   1.36    $   1.09    $   1.41    $    1.19   $   1.59
  Total                                        $   1.05    $    .72    $   1.34    $    1.22   $    .80
Dividends Declared Per Common Share            $   1.21    $   1.20    $   1.19    $    1.17   $   1.15
Total Assets                                   $465,699    $455,982    $429,988    $397,535    $368,886
Long-Term Debt of Continuing
  Operations (including current maturities,
   sinking fund requirements and
   redeemable preferred stock)                 $172,607    $173,562    $162,868    $132,648    $125,080

</TABLE>

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

The following discussion and analysis sets forth certain factors relative to 
the Company's financial condition at December 31, 1997 and the results of 
its operations for the three years ended December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

CONSTRUCTION PROGRAM

Capital construction expenditures totaled $21.8 million, net of 
contributions and advances in 1997, substantially all of which relates to 
the Company's utility subsidiaries. Projects included $1.5 million spent on 
the major plant replacement described below, $1.3 million spent on system 
improvements to a newly acquired system in Maine, which cost $3.0 million in 
total; and many smaller projects around the Company.

The Company expects capital expenditures for 1998 through 2000 to be $72 
million, net of contributions and advances. The capital construction budget 
is down from its peak of $103 million for the 1995-1997 planning period as a 
result of the completion of many of the improvements required by the Safe 
Drinking Water Act (SDWA), the Clean Water Act (CWA), and other regulations. 
With the reduced capital spending due to regulatory requirements, the 
Company has increased its focus on replacing aging infrastructure.

The Company is engaged in a project that will replace a major plant at 
Consumers Pennsylvania Water Company - Shenango Valley Division. The cost of 
this project is estimated at $32 million when it is completed in 2000. This 
will replace one of the Company's oldest water treatment plants. Current and 
future water quality regulations along with future demand projections 
require that the existing plant be retired and replaced with a new facility. 
The design is complete and construction has commenced. The Company expects 
to finance this project with tax exempt debt and equity.

Several of the Company's water utility subsidiaries have filed or plan to 
file rate cases in their respective jurisdictions for recovery of and return 
on capital used to fund their capital expenditure programs. Costs which have 
been prudently incurred in the judgement of the appropriate public utility 
commission have been, and are expected to continue to be, recognized in rate 
setting. Given the large rate increases in recent years, Management expects 
the current increased scrutiny of rate requests by state public utility 
commissions and delays in obtaining rate relief to continue, even with 
decreasing capital construction budgets.

FINANCING AND CAPITALIZATION

Water utilities now require higher equity ratios than in the past to 
maintain favorable debt ratings due to the recognition by Standard & Poor's 
rating system of the additional risk of the SDWA requirements and the 
uncertainty of future regulatory treatment of the cost of these 
requirements. Due to this need for higher equity ratios and the size of the 
Company's capital spending program the Company had expected to return to the 
equity market. However, the sale of Consumers New Hampshire is expected to 
generate over $17 million in cash. This will delay the Company's need to 
return to the equity market for a few years. The Company will use the cash 
from the New Hampshire sale to pay down the revolving lines of credit 
described below. The Company anticipates continuing to fund its immediate 
cash flow needs with short-term lines of credit until a subsidiary's short-
term debt level is high enough to warrant placement of long-term debt, 
generally, in the $4-6 million range. The Company's subsidiaries had unused 
lines of credit available at December 31, 1997 of $70.0 million. In 
addition, the Company has three revolving credit agreements totaling $35 
million. These agreements are committed until mid-1999. At December 31, 
1997, $17.0 million was outstanding on these agreements, which is recorded 
as long-term debt on the balance sheet. These borrowings were used primarily 
to provide equity infusions to the subsidiaries. In addition, the Company is 
using funds generated through its Dividend Reinvestment Plan. The Dividend 
Reinvestment Plan generated $3.7 million in new equity in 1997. The Company 
does not anticipate the need for cash from the Dividend Reinvestment Program 
and has instructed the Plan's independent agent to acquire shares on the 
market with dividends reinvested under the Plan. In addition to the short-
term debt, the Company's water utility subsidiaries plan to continue to use 
tax-exempt, long-term debt financing in appropriate situations. Retained 
earnings declined by $1,463,000 in 1997 as a result of dividends in excess 
of earnings.

DISCONTINUED OPERATIONS

On April 29, 1997, the Company announced its intention to dispose of its 
technical services company, Consumers Applied Technologies, Inc. (CAT).  The 
Company has been unsuccessful in selling CAT as an on-going business and is 
proceeding with its liquidation. Estimated losses on the disposal equal 
$2,350,000, net of tax benefits of $1,200,000. This estimated loss includes 
an additional $850,000 net of tax loss recorded in the fourth quarter due to 
anticipated cost overruns on CAT's last two remaining contracts. The 
operating results of CAT prior to the date of discontinuance are shown under 
Discontinued Operations on the accompanying consolidated statements of 
income and all financial statements of prior periods have been restated.

ACQUISITIONS AND DISPOSITIONS

Over the past five years, the Company has acquired five water systems. 
Management anticipates continuing the acquisition policy of recent years. 

The Company has sold five divisions with customers totaling approximately 
15,000 under the threat of eminent domain since 1991. The gain on these 
sales totaled over $7 million. The Town of Hudson, New Hampshire, initiated 
eminent domain proceedings to acquire the distribution system assets of 
Consumers New Hampshire Water Company (Consumers New Hampshire), located in 
Hudson. In order to settle the condemnation proceeding, the Company has 
agreed to a $34.5 million sales price for all the assets of Consumers New 
Hampshire. This represents about 8% of the Company's total assets. A 
purchase and sale agreement was signed by the Town and Consumers New 
Hampshire on October 24, 1997. The sale was approved by the New Hampshire 
Public Utilities Commission on October 24, 1997. The voters of the Town of 
Hudson approved the acquisition on January 13, 1998. The Town has completed 
the steps required under New Hampshire's condemnation statute, and the sale 
is expected to close during the first quarter of 1998 with a gain of 
approximately $3.5 million or $0.40 per share. The Company continues to work 
with the local communities in its service areas in an effort to prevent 
future eminent domain proceedings.

OTHER

Gains (losses) net of taxes equaled $425,000 or $0.05 per share, ($240,000) 
or ($0.03) per share and $1,108,000 or $0.13 per share in 1997, 1996, and 
1995, respectively. These gains (losses) were due to several small land 
sales in Ohio, Illinois, Pennsylvania, New Hampshire and Maine plus the more 
significant sales described below.

In 1994, Consumers Illinois Water Company (Consumers Illinois) recorded a 
gain, net of taxes of $394,000 from the sale of nine acres of land. In 1996, 
as part of a rate hearing, the Illinois Commerce Commission ordered 
Consumers Illinois to return the gain from this sale to customers through 
reduced rates. Therefore, the gain was reversed in the second quarter of 
1996. Consumers Illinois challenged this decision in court. On July 8, 1997, 
the Appellate Court for the Third District of Illinois reversed the Illinois 
Commerce Commission's decision to treat the gain from the sale of land as an 
adjustment to water operating revenue. Therefore, Consumers Illinois 
recorded a gain in the third quarter of 1997.

On June 5, 1995, the Company's Consumers Ohio Water Company subsidiary 
closed on the sale of Girard Lake and Liberty Lake. These two lakes once 
supplied raw water to the area's steel industry. The lakes have not been 
needed as a source of supply for several years. The lakes were sold for $2.5 
million and generated a gain, net of taxes, of $724,000.

On October 20, 1994, the Damariscotta division of Consumers Maine Water 
Company (Consumers Maine) was taken by the local communities by eminent 
domain for $600,000 or approximately 75% of rate base. Consumers Maine 
prepared to challenge the purchase price in court, but, instead, on February 
21, 1995, reached an out of court settlement for $1,552,000. This sale 
generated a gain which was recorded in 1995 of approximately $363,000, net 
of taxes.

In 1985, the Company's subsidiary, Consumers Maine Water Company, started 
construction of a transmission main to Fish and Hobbs ponds, which are 
located in Hope, Maine, to increase the available water supply of its Camden 
and Rockland Division. Due to local opposition related to the uncertainty 
about the environmental impact of withdrawing water from these ponds, the 
project was delayed. In 1989, final legislation was passed that imposed a 
moratorium on the withdrawal of water from these ponds. The Maine Public 
Utilities Commission (MPUC) ordered Consumers Maine to defer the costs of 
the project, the legal costs of defending its water rights and carrying 
costs until its first rate case after June 1, 1997. Consumers Maine 
currently has approximately $600,000 on its balance sheet related to this 
project and expects to file a rate case with the MPUC in 1998 seeking 
recovery of these costs.

The State of Maine has assessed the Company for additional taxes based on a 
unitary method. The Company has appealed this assessment and does not expect 
that it will have a material impact on the financial position or results of 
operations of the Company.

The Company has completed a review of the computer programs used in its 
business to determine the risk that those systems might fail due to the so-
called "millennium bug" which causes computer systems to fail or malfunction 
as a result of their inability to distinguish dates after December 31, 1999 
using a two digit entry field. The Company's computer systems can be divided 
into three categories: the Financial Information System, the Customer 
Information System, and other systems. The Company plans on replacing the 
Financial Information System during 1998 due primarily to the age of the 
system. The new system is expected to cost approximately $2.5 million in 
total. Most of the costs of the new system pertain to hardware or software 
and therefore will be capitalized. Training, data conversion, and other 
costs will be expensed. It is expected that efficiency gains from the new 
system will offset many of these costs. The Company has completed updates to 
the Customer Information System and has begun testing. This work was 
completed with in-house resources and therefore added no significant 
incremental costs. The Company is continuing to evaluate its other systems 
but does not expect the cost of updating these systems to be material. The 
Company believes that its plan minimizes the risk of failure in its computer 
systems due to the millennium bug.

The Company recently announced that it intended to form Consumers Services 
Company to provide financial support services to the Company's water 
utilities beginning in 1998. These services are now provided by the Company 
in part and by each water utility subsidiary in part. Other support services 
such as engineering and human resources may be added in the future.

RESULTS OF OPERATIONS
1997 Compared to 1996

UTILITY REVENUE

Utilities revenues were $4,750,000 or 5.0% greater in 1997 compared to 1996, 
due primarily to $2,916,000 in rate increases, and increased consumption due 
to drier weather throughout the areas served by Consumers Water 
Subsidiaries. During 1997, the Company settled four rate cases providing 
additional annual revenues of $2.8 million. Currently, the Company has two 
rate cases pending which request additional annual revenues of $4.8 million.

OPERATING EXPENSES

Operating expenses were approximately $1,696,000 or 2.6% greater in 1997 
than in 1996. Depreciation increased $1,142,000 due to higher plant balances 
and depreciation rates. Taxes other than income increased $629,000 
predominantly due to increases in property taxes due to higher plant 
balances. Operations and maintenance expense decreased by $75,000 due to the 
Company's cost control efforts.

OTHER

Interest expense increased $1,024,000 or 7.4% in 1997 compared to 1996, due 
primarily to higher debt balances.

RESULTS OF OPERATIONS
1996 Compared to 1995

UTILITY REVENUE

Revenues increased $4,443,000 or 5.0% in 1996 compared to 1995, primarily 
due to $5,256,000 in rate increases offset by reduced consumption. The 
reduced consumption was due to a wet 1996 compared to a dry 1995 and reduced 
industrial usage. The causes for the remainder of the reduced consumption 
are difficult to determine, but Management believes that some decreased 
usage may have been attributable to increased conservation due to the large 
percentage rate increases.

OPERATING EXPENSES

Operating expenses increased approximately $4,500,000 or 7.5%. Expenses 
increased due to increased depreciation of $1,293,000 and increased taxes 
other than income of $1,009,000 predominately due to increased property 
taxes due to higher plant balances. The remainder of the increase was due to 
increased operating expense of $400,000 at the new treatment plant at the 
Consumers Pennsylvania Water Company - Roaring Creek Division, which went on 
line in May, 1995, and normal expense increases.

OTHER

Interest expense increased $1,116,000 or 8.8%, due primarily to increased 
debt balances.

Item 8. Financial Statements and Supplementary Data.

Report of Management

Report of Independent Public Accountants

Consolidated Statements of Income for Years Ended
 December 31, 1997, 1996 and 1995

Consolidated Balance Sheets at 
 December 31, 1997 and 1996

Consolidated Statements of Capitalization 
 and Interim Financing at  December 31, 1997 and 1996

Consolidated Statements of Cash Flow 
 for Years Ended December 31, 1997, 1996 and 1995

Consolidated Statements of Change in 
 Common Shareholders' Investment for 
 Years Ended December 31, 1997, 1996 and 1995

Notes to Consolidated Financial Statements

Quarterly Information Pertaining to the 
 Results of Operations for the Years 
 Ended December 31, 1997 and 1996

                  Consumers Water Company and Subsidiaries

                            REPORT OF MANAGEMENT

The accompanying consolidated financial statements of Consumers Water 
Company and its subsidiaries were prepared by management, which is 
responsible for the integrity and objectivity of the data presented, 
including amounts that must necessarily be based on judgements or estimates. 
The consolidated financial statements were prepared in conformity with 
generally accepted accounting principles and financial information appearing 
throughout this annual report is consistent with these statements.

In recognition of its responsibility, management maintains and relies upon 
systems of internal accounting controls, which are reviewed and evaluated on 
an ongoing basis. The systems are designed to provide reasonable assurance 
that transactions are executed in accordance with management's authorization 
and properly recorded to permit preparation of reliable financial 
statements, and that assets are safeguarded. Management must assess and 
balance the relative cost and expected benefits of these controls.

These financial statements have been audited by Arthur Andersen LLP, the 
Company's independent public accountants. Their audit, in accordance with 
generally accepted auditing standards, resulted in the expression of their 
opinion. Arthur Andersen LLP's audit does not limit management's 
responsibility for the fair presentation of the financial statements and all 
other information in this annual report.

The Audit Committee of the Board of Directors, composed solely of outside 
directors, meets periodically with management, internal audit personnel, and 
Arthur Andersen LLP to review the work of each and to discuss areas relating 
to internal accounting controls, audits, and financial reporting. Arthur 
Andersen LLP and the Company's internal auditor have free access to meet 
individually with the Committee, without management present, at any time, 
and they periodically do so.

/s/ John F. Isacke
John F. Isacke
Senior Vice President
Chief Financial Officer
Treasurer


                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders and Board of Directors
of Consumers Water Company:

We have audited the accompanying consolidated balance sheets and the 
consolidated statements of capitalization and interim financing of CONSUMERS 
WATER COMPANY (a Maine corporation) and subsidiaries (the Company) as of 
December 31, 1997 and 1996, and the related consolidated statements of 
income, change in common shareholders' investment and cash flows for each of 
the three years in the period ended December 31, 1997. These consolidated 
financial statements and the schedule referred to below are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements and schedule 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, the financial statements referred to above present fairly, 
in all material respects, the financial position of Consumers Water Company 
and subsidiaries as of December 31, 1997 and 1996, and the results of their 
operations and their cash flows for each of the three years in the period 
ended December 31, 1997, in conformity with generally accepted accounting 
principles.

Our audit was made for the purpose of forming an opinion on the basic 
financial statements taken as a whole. Schedule II, Valuation and Qualifying 
Accounts for the years ended December 31, 1997, 1996, and 1995 is presented 
for purposes of complying with the Securities and Exchange Commission's 
rules and is not a required part of the basic financial statements. This 
schedule has been subjected to the auditing procedures applied in our audit 
of the basic financial statements and, in our opinion, is fairly stated in 
relation to the basic financial statements taken as a whole.



/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 5, 1998


                  Consumers Water Company and Subsidiaries
                      Consolidated Statements of Income

<TABLE>
<CAPTION>

For the Years Ended December 31,                                 1997         1996         1995
-------------------------------------------------------------------------------------------------
(Dollars in Thousands Except per Share Amounts)

<S>                                                            <C>          <C>          <C>
Operating Revenue                                              $ 98,339     $ 93,589     $ 89,146
Costs and Expenses:
  Operations and maintenance                                     42,659       42,734       40,536
  Depreciation                                                   11,270       10,128        8,835
  Taxes other than income                                        12,452       11,823       10,814
                                                               ----------------------------------
Operating Expenses                                               66,381       64,685       60,185
                                                               ----------------------------------
Operating Income                                                 31,958       28,904       28,961
                                                               ----------------------------------
Other Income and (Expense):
  Interest expense                                              (15,277)     (14,635)     (13,725)
  Construction interest capitalized                                 398          780          986
  Preferred dividends and minority interest of subsidiaries        (166)        (143)        (156)
  Gains (losses) on sales of properties                             690         (342)       2,042
  Other                                                           1,032          296          690
                                                               ----------------------------------
                                                                (13,323)     (14,044)     (10,163)
                                                               ----------------------------------
Earnings from Continuing Operations Before Income Taxes          18,635       14,860       18,798
Income Taxes (Note 2)                                             6,559        5,379        6,885
                                                               ----------------------------------
Earnings from Continuing Operations:
  Income from continuing operations                              12,076        9,481       11,913
                                                               ----------------------------------
Loss From Discontinued Operations:
  Before discontinuance                                            (387)      (3,230)        (610)
  Provision for loss on disposal of discontinued operations      (2,350)           -            - 
                                                               ----------------------------------
  Total from discontinued operations                             (2,737)      (3,230)        (610)
                                                               ----------------------------------
Net Income                                                     $  9,339     $  6,251     $ 11,303
                                                               ==================================
Weighted Average Shares Outstanding                               8,857        8,625        8,385

Basic Earnings (Loss) per Common Share:
  Continuing Operations                                        $   1.36     $   1.09     $   1.41
                                                               ----------------------------------
  Discontinued Operations-
    Before discontinuance                                      $  (0.04)    $  (0.37)    $  (0.07)
    Loss from disposal of discontinued operations              $  (0.27)    $   0.00     $   0.00
                                                               ----------------------------------
    Total Discontinued Operations                              $  (0.31)    $  (0.37)    $  (0.07)
                                                               ----------------------------------
Total Basic Earnings per Common Share                          $   1.05     $   0.72     $   1.34
                                                               ==================================
Diluted Earnings (Loss) per Common Share:
  Continuing Operations                                        $   1.36     $   1.09     $   1.41
                                                               ----------------------------------
  Discontinued Operations-
    Before discontinuance                                      $  (0.04)    $  (0.37)    $  (0.07)
    Loss from disposal of discontinued operations              $  (0.27)    $   0.00     $   0.00
                                                               ----------------------------------
    Total Discontinued Operations                              $  (0.31)    $  (0.37)    $  (0.07)
                                                               ----------------------------------
Total Diluted Earnings per Common Share                        $   1.05     $   0.72     $   1.34
                                                               ==================================
Dividends declared per common share                            $   1.21     $   1.20     $   1.19
                                                               ==================================

</TABLE>

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


                  Consumers Water Company and Subsidiaries
                         Consolidated Balance Sheets

<TABLE>
<CAPTION>

December 31,                                                                 1997        1996
-----------------------------------------------------------------------------------------------
(Dollars in Thousands)

<S>                                                                        <C>         <C>
Assets
Property, Plant and Equipment, at cost (Note 1):
  Plant in service                                                         $499,087    $476,067
  Less-Accumulated depreciation                                              92,787      83,833
                                                                           --------------------
                                                                            406,300     392,234
  Construction work in progress                                              11,843      12,567
                                                                           --------------------
      Net property, plant and equipment                                     418,143     404,801
                                                                           --------------------
Assets of Discontinued Operations, Net                                        2,679       5,213
                                                                           --------------------
Investments, at cost                                                          1,520       1,706
                                                                           --------------------
Current Assets:
  Cash and cash equivalents (Note 1)                                          2,694       1,775
  Accounts receivable, net of reserves of $924 in 1997 and $982 in 1996       8,695       8,971
  Unbilled revenue                                                            5,077       5,015
  Inventories (Note 1)                                                        2,068       2,054
  Prepayments and other                                                       6,585       6,848
                                                                           --------------------
      Total current assets                                                   25,119      24,663
                                                                           --------------------
Other Assets:
  Funds restricted for construction activity (Note 3)                         1,079       2,380
  Deferred charges and other assets                                          17,159      17,219
                                                                           --------------------
                                                                             18,238      19,599
                                                                           --------------------
                                                                           $465,699    $455,982
                                                                           ====================

Shareholders' Investment and Liabilities
Capitalization (See Separate Statement):
  Common shareholders' investment                                          $108,657    $106,015
  Preferred shareholders' investment                                          1,044       1,054
  Minority interest                                                           2,370       2,352
  Long-term debt                                                            171,771     172,917
                                                                           --------------------
      Total capitalization                                                  283,842     282,338
                                                                           --------------------
Contributions in Aid of Construction                                         77,297      73,208
                                                                           --------------------
Current Liabilities:
  Interim financing (See Separate Statement)                                 19,666      17,999
  Accounts payable                                                            5,177       5,871
  Accrued taxes (Note 2)                                                      9,945       8,103
  Accrued interest                                                            3,919       3,873
  Dividends payable                                                           2,754       2,629
  Accrued expenses and other                                                 10,310      10,395
                                                                           --------------------
      Total current liabilities                                              51,771      48,870
                                                                           --------------------
Commitments and Contingencies (Note 10)
Deferred Credits:
  Customers' advances for construction                                       22,049      22,378
  Deferred income taxes (Note 2)                                             26,246      24,506
  Unamortized investment tax credits                                          4,494       4,682
                                                                           --------------------
                                                                             52,789      51,566
                                                                           --------------------
                                                                           $465,699    $455,982
                                                                           ====================

</TABLE>

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


                  Consumers Water Company and Subsidiaries
       Consolidated Statements of Capitalization and Interim Financing

<TABLE>
<CAPTION>

December 31,                                                          1997        1996
----------------------------------------------------------------------------------------
(Dollars in Thousands)

<S>                                                                 <C>         <C>
Capitalization (Notes 3 and 5)
Common Shareholders' Investment:
  Common stock, $1 par value
  Authorized: 15,000,000 shares
   Issued: 8,967,894 shares in 1997 and 8,732,202 shares in 1996    $  8,968    $  8,732
  Amounts in excess of par value                                      79,555      75,686
  Reinvested earnings                                                 20,134      21,597
                                                                    --------------------
                                                                     108,657     106,015
                                                                    --------------------

Preferred Shareholders' Investment:
  Preferred stock, $100 par value                                      1,044       1,054
                                                                    --------------------
Minority Interest:
  Common stock, at equity                                                692         674
  Preferred stock                                                      1,678       1,678
                                                                    --------------------
                                                                       2,370       2,352
                                                                    --------------------

Long-term Debt:
  First mortgage bonds, debentures and promissory notes-
    Maturities    Interest Rate Range
      1997          5.94% to 6.10%                                         -           7
      1998          5.94%                                                  1      17,069
      1999          5.99% to 8.50%                                    17,027          45
      2000          8.59%                                                  8          11
      2001          -                                                      -           -
      2002          -                                                      -           -
      2003-2007     8.00% to 10.55%                                   14,735      15,440
      2008-2012     1.00% to 10.54%                                    4,899       4,959
      2013-2017     0.00% to 9.50%                                     9,126       9,139
      Thereafter    5.60% to 10.40%                                  126,811     126,892
                                                                    --------------------
  Total first mortgage bonds, debentures and notes                   172,607     173,562
  Less-Sinking fund requirements and current maturities                  836         645
                                                                    --------------------
                                                                     171,771     172,917
                                                                    --------------------
      Total capitalization                                           283,842     282,338
                                                                    --------------------
Interim Financing (Note 4):
  Notes payable                                                       18,830      17,354
  Sinking fund requirements and current maturities                       836         645
                                                                    --------------------
      Total interim financing                                         19,666      17,999
                                                                    --------------------
Total capitalization and interim financing                          $303,508    $300,337
                                                                    ====================

</TABLE>

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


                  Consumers Water Company and Subsidiaries
                    Consolidated Statements of Change in
                       Common Shareholders' Investment

<TABLE>
<CAPTION>

                                                        Number of Shares,    (Dollars in Thousands)
                                                          $1 par value,      ----------------------
                                                           Issued and        Excess of   Reinvested
For the years ended December 31, 1997, 1996 and 1995       Outstanding       Par Value    Earnings
---------------------------------------------------------------------------------------------------

<S>                                                         <C>                <C>        <C>
Balance, December 31, 1994                                  8,259,685          $68,084    $ 24,584
  Net income                                                                                11,303
  Cash dividends:
    Common shares                                                                          (10,044)
    Preferred shares                                                                           (56)
  Dividend Reinvestment Plan                                  212,149            3,280
  Employee benefit plans                                       22,852              371
  Other                                                             -              (17)         (1)
Balance, December 31, 1995                                  8,494,686           71,718      25,786
  Net income                                                                                 6,251
  Cash dividends:
    Common shares                                                                          (10,386)
    Preferred shares                                                                           (55)
  Dividend Reinvestment Plan                                  215,128            3,571
  Employee benefit plans                                       22,388              384
  Other                                                             -               13           1
                                                            --------------------------------------
Balance, December 31, 1996                                  8,732,202           75,686      21,597
  Net income                                                                                 9,339
  Cash dividends:
    Common shares                                                                          (10,748)
    Preferred shares                                                                           (54)
  Dividend Reinvestment Plan                                  211,886            3,463
  Employee benefit plans                                       23,806              404
  Other                                                             -                2           -
                                                            --------------------------------------
Balance, December 31, 1997                                  8,967,894          $79,555    $ 20,134
                                                            ======================================

</TABLE>

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


                  Consumers Water Company and Subsidiaries
                    Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

For the years ended December 31,                                               1997        1996        1995
-------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)

<S>                                                                          <C>         <C>         <C>
Operating activities:
  Net income                                                                 $  9,339    $  6,251    $ 11,303
  Adjustments to reconcile net income to net cash provided 
   by operating activities:
    Depreciation and amortization                                              13,397      11,944      10,268
    Deferred income taxes and investment tax credits                            1,556       2,466       1,967
    (Gains) losses on sales of properties                                        (689)        342      (2,028)
    Changes in assets and liabilities:
      Decrease (increase) in accounts receivable and unbilled revenue             214        (544)     (1,112)
      (Increase) decrease in inventories                                          (14)        (19)        232
      Decrease (increase) in prepaid expenses                                     263      (1,015)          8
      Increase in accounts payable and accrued expenses                         2,447         578       2,919
    Change in other assets, net of change in other liabilities of 
     continuing operations                                                     (1,226)     (3,188)     (2,437)
    Change in assets, net of change in liabilities of
     discontinued operations                                                      184       1,082      (1,867)
    Loss on disposal of discontinued operations                                 2,350           -           -
                                                                             --------------------------------
      Total adjustments                                                        18,482      11,646       7,950 
                                                                             --------------------------------
      Net cash provided by operating activities                                27,821      17,897      19,253
                                                                             --------------------------------
Investing activities:
  Capital expenditures                                                        (27,605)    (34,946)    (40,313)
  Payment received on a note receivable                                             -       1,330           - 
  Decrease (increase) in funds restricted for construction activity             1,301      (2,093)      2,216
  (Decrease) increase in construction accounts payable                           (813)        205         126
  Net cash cost of acquisitions (Note 6)                                            -      (1,988)     (1,300)
  Net proceeds from sales of properties (Note 7)                                  437         990       4,861
                                                                             --------------------------------
      Net cash used in investing activities                                   (26,680)    (36,502)    (34,410)
                                                                             --------------------------------
Financing activities:
  Net borrowing (repayment) of short-term debt                                  1,476       6,724     (14,176)
  Proceeds from issuance of long-term debt                                          -      11,410      48,349
  Repayment of long-term debt                                                    (955)       (716)    (18,029)
  Proceeds from issuance of stock                                               4,095       4,182       3,876
  Advances and contributions in aid of construction                             7,010       8,437       6,189
  Repayments of advances                                                       (1,167)     (1,294)       (966)
  Taxes paid by developers on advances and contributions in
   aid of  construction                                                            (4)       (383)       (513)
  Cash dividends paid                                                         (10,677)    (10,397)     (9,962)
                                                                             --------------------------------
      Net cash (used in) provided by financing activities                        (222)     17,963      14,768
                                                                             --------------------------------
  Net increase (decrease) in cash and cash equivalents                            919        (642)       (389)
  Cash and cash equivalents at beginning of year                                1,775       2,417       2,806
                                                                             --------------------------------
  Cash and cash equivalents at end of year                                   $  2,694    $  1,775    $  2,417
                                                                             ================================
Supplemental disclosures of cash flow information from continuing 
 operations
  Cash paid during the year for:
    Interest (net of amounts capitalized)                                    $ 14,525    $ 13,306    $ 12,319
    Income taxes                                                             $  2,782    $  4,538    $  2,868
Noncash investing and financing activities for the year:
  Assets acquired by stock issuance and/or assumption of debt of acquired
   company                                                                   $      -    $      -    $    150
  Property advanced or contributed                                           $  2,083    $  1,543    $  1,230

</TABLE>

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


                  Consumers Water Company and Subsidiaries
                 Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Business

Consumers Water Company (Consumers or the Company) is a holding and 
management company whose principal business is the ownership and operation 
of water utility subsidiaries. Consumers owns directly or indirectly at 
least 95% of the voting stock of 8 water companies (the Consumers Water 
Subsidiaries) which operate 28 divisions providing water service to 
approximately 232,000 customers in six states. The Company also owns 100% of 
Consumers Applied Technologies, Inc. (CAT), which formerly provided services 
primarily in the areas of meter installation, corrosion engineering, 
contract operations and water conservation. On April 29, 1997, the Company 
announced its intention to dispose of CAT.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of 
Consumers and its water utility and utility services subsidiaries. All 
significant intercompany balances and transactions have been eliminated in 
consolidation. The consolidated financial statements and related footnotes 
have been restated to reflect the Company's utility services subsidiary, 
Consumers Applied Technologies, Inc., as a discontinued operation. See Note 
12.

Regulation

The rates, operations, accounting and certain other practices of the 
Company's utility subsidiaries are subject to the regulatory authority of 
State Public Utility Commissions.

Property, Plant and Equipment

The utility subsidiaries generally capitalize interest at current rates on 
short-term notes payable used to finance major construction projects. 
Utility plant construction costs also include payroll, related fringe 
benefits and other overhead costs associated with construction activity. 
Depreciation is provided principally at straight-line composite rates. 
Depreciation rates are based on the estimated useful lives of the assets 
which range from 2 to 100 years. The consolidated provision, based on 
average amounts of depreciable utility plant (which excludes contributions 
in aid of construction and customers' advances for construction for most 
subsidiaries), approximated 2.9% in 1997, 2.8% in 1996, and 2.7% in 1995. 
Under composite depreciation, when property is retired or sold in the normal 
course of business, the entire cost, including net cost of removal, is 
charged to accumulated depreciation, and no gain or loss is recognized.

Use of Estimates in the Preparation of Financial Statements

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 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates.

Revenue Recognition

All of the utility subsidiaries accrue estimated revenue for water 
distributed but not yet billed as of the balance sheet date. 

Cash Flows  

For purposes of the consolidated statements of cash flows, the Company 
considers all highly liquid instruments with an original maturity of three 
months or less, which are not restricted for construction activity, to be 
cash equivalents.

Disclosures about Fair Value of Financial Instruments

The carrying amount of cash, temporary investments, notes receivable and 
preferred stock approximate their fair value. The fair value of long-term 
debt based on borrowing rates currently available for loans with similar 
terms and maturities is approximately $188 million.

Inventories

Inventories generally consist of materials and supplies. They are stated at 
the lower of cost (average cost method) or market.

Other Assets

Deferred charges consist primarily of financing charges, rate case, other 
expenses, and notes receivable totaling $158,890.

The expenses related to rate proceedings are deferred and amortized over 
periods that generally range from one to three years, as permitted by the 
governing regulatory authority. Other assets also include preliminary survey 
and investigation costs and certain items amortized, subject to regulatory 
approval, over their anticipated period of recovery. Deferred financing 
charges are amortized over the lives of the related debt issues.

Customers' Advances/Contributions in Aid of Construction

The water subsidiaries periodically receive property or cash to reimburse 
the subsidiary for installing property for or on behalf of the customers 
subject to written agreements. The terms of these agreements indicate 
whether and under what circumstances these amounts are refundable. Amounts 
that are not refundable are recorded as contributions in aid of 
construction. For most of the subsidiaries, contributions in aid of 
construction remains on the balance sheet until the property is retired. 
Contributed property generally is not depreciated. Certain of the 
subsidiaries do depreciate contributed property and amortize contributions 
in aid of construction at the composite rate of the related property based 
on specific orders of their governing regulatory authorities.

In accordance with Internal Revenue Code Section 118(b), the Company's water 
subsidiaries have been required to report as taxable income all 
contributions in aid of construction and customer advances received after 
1986, and to make corresponding additions to the tax basis of its 
depreciable property for such amounts. However, pursuant to the Small 
Business Job Protections Act of 1996, which added IRC Section 118(c), water 
utilities are not required to recognize contributions in aid of construction 
or customer advances in taxable income after June 12, 1996.

Income Taxes

The Company and its subsidiaries file a consolidated federal income tax 
return. The rate-making practices followed by most regulatory agencies allow 
the utility subsidiaries to recover, through customer rates, federal and 
state income taxes payable currently and deferred taxes related to certain 
temporary differences between pretax accounting income and taxable income. 
The income tax effect of temporary differences not allowed currently in 
rates is recorded as deferred taxes with an offsetting regulatory asset or 
liability. The Company expects that these regulatory assets will be 
recovered through customer rates in the future when such taxes become 
payable.

Investment Tax Credits

Investment tax credits of utility subsidiaries are deferred and amortized 
over the estimated useful lives of the related properties. Effective January 
1, 1986, investment tax credits were eliminated by the Tax Reform Act of 
1986 except for property meeting specific transitional rules. 

Earnings (Loss) Per Common Share

Earnings (loss) per common share are based on the annual weighted average 
number of shares outstanding and common share equivalents. The effect of 
employee stock options, which are included as common share equivalents in 
the diluted earnings per share calculation, is not significant.

Inpairment of Long-Lived Assets

SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of," requires impairment losses on long-lived 
assets to be recognized when an asset's book value exceeds its expected 
future cash flows (undiscounted). This statement imposes stricter criteria 
for regulatory assets by requiring that such assets be probable of future 
recovery at each balance sheet date. The Company adopted this standard in 
1996. The adoption of SFAS No. 121 did not have a material impact on the 
financial position or results of operations of the Company.

New Accounting Pronouncements

SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, 
"Disclosures About Segments of an Enterprise and Other Related Information," 
require certain disclosures and presentations in the financial statements. 
While these standards apply to other utilities, management has determined 
they do not apply to the Company.

(2) Income Tax Expense

The Company uses the liability method in accounting for income taxes. Under 
the liability method, deferred income taxes are recognized at currently 
enacted income tax rates to reflect the tax effect of temporary differences 
between the financial reporting and tax bases of assets and liabilities. 
Such temporary differences are the result of provisions in the income tax 
law that either require or permit certain items to be reported on the income 
tax return in a different period than they are reported in the financial 
statements. To the extent such income taxes are recoverable or payable 
through future rates, regulatory assets and liabilities have been recorded 
in the accompanying Consolidated Balance Sheets. Net regulatory assets of 
approximately $4.2 million and $3.9 million at December 31, 1997 and 1996 
respectively are reflected in the balance sheet.

Accumulated deferred taxes consisted of tax assets of $1,972,000, $565,000, 
and $599,000 related to alternative minimum tax and are offset by 
liabilities of $27,836,000, $23,655,000, and $22,347,000, which are 
predominantly related to depreciation and other plant related differences in 
1997, 1996 and 1995, respectively. Deferred tax assets are expected to be 
realized in the future; therefore, no valuation allowance has been recorded.

The components of income tax expense from continuing operations reflected in 
the Consolidated Statements of Income are as follows:

<TABLE>
<CAPTION>

                                                      For the Years Ended December 31,
                                                      --------------------------------
(Dollars in Thousands)                                  1997        1996        1995
--------------------------------------------------------------------------------------

<S>                                                    <C>         <C>         <C>
Federal:
  Currently payable                                    $4,738      $3,072      $4,960
  Deferred                                              1,269       1,994       1,459
  Investment tax credit amortization                     (187)       (185)       (190)
                                                       ------------------------------
                                                        5,820       4,881       6,229
                                                       ------------------------------
State:
  Currently payable                                       287         202         356
  Deferred                                                450         292         271
  State investment tax credit, net of amortization          2           4          29
                                                       ------------------------------
                                                          739         498         656
                                                       ------------------------------
      Total provision                                  $6,559      $5,379      $6,885
                                                       ==============================
</TABLE>

The table below reconciles the federal statutory rate to a rate computed by 
dividing income tax expense, as shown in the previous table, by income from 
continuing operations before income tax expense.
 
<TABLE>
<CAPTION>

                                                                  1997     1996     1995
-----------------------------------------------------------------------------------------

<S>                                                               <C>      <C>      <C>
Statutory rate                                                    34.0%    34.0%    34.0%
State taxes, net of federal benefit                                2.6      2.2      2.3
Effect of decrease in statutory rate on reversing timing items    ( .5)    ( .4)    ( .2)
Investment tax credit amortization                                (1.0)    (1.3)    ( .9)
Other                                                               .2      1.4      1.3
                                                                  ----------------------
                                                                  35.3%    35.9%    36.5%
                                                                  ======================
</TABLE>

(3) Long-Term Debt

Maturities and sinking fund requirements of the first mortgage bonds, 
debentures and notes, including capitalized leases, are $836,000 in 1998, 
$17,826,000 in 1999, $2,010,000 in 2000, $2,010,000 in 2001, $2,010,000 in 
2002 and $147,915,000 thereafter.

Substantially all of the Company's water utility plant is pledged as 
security under various indentures or mortgages. The indentures restrict cash 
dividends and repurchases of the Company's subsidiary's common stocks. The 
various water utility subsidiaries' indentures generally prohibit the 
payment of dividends on common shares in excess of retained earnings plus a 
stated dollar amount. Approximately $37.7 million of reinvested earnings 
were not so restricted at December 31, 1997. The parent Company has no cash 
dividend restrictions on its retained earnings of $20.1 million.

Funds restricted for construction activity were obtained through the 
issuance of tax exempt bonds, the use of which is restricted for utility 
plant construction. At December 31, 1997, there was $1.1 million of 
restricted funds remaining. Interest income earned is included in Other in 
the accompanying Consolidated Statements of Income.

(4) Notes Payable

Notes payable are incurred primarily for temporary financing of plant 
expansion. It is the subsidiaries' intent to repay these borrowings with the 
proceeds from the issuance of long-term debt or equity securities. Certain 
information related to the borrowings of the continuing operations is as 
follows:

<TABLE>
<CAPTION>

(Dollars in Thousands)                                                    1997       1996       1995
-----------------------------------------------------------------------------------------------------

<S>                                                                     <C>        <C>        <C>
Unused lines of bank credit                                             $69,970    $72,646    $43,670
Borrowings outstanding at year-end                                       18,830     17,354     10,630
                                                                        -----------------------------
Total lines of bank credit                                              $88,800    $90,000    $54,300
                                                                        =============================
Monthly average borrowings during the year                              $18,914    $17,071    $22,272
                                                                        =============================
Maximum borrowings at any month-end during the year                     $20,430    $20,615    $31,815
                                                                        =============================
Weighted average annual interest rate during the year                       6.9%       7.0%       7.7%
                                                                        =============================
Weighted average interest rate on borrowings outstanding at year-end        6.9%       6.7%       7.3%
                                                                        =============================
</TABLE>

(5) Shareholders' Investment

As of December 31, 1997, the Company reserved issuable common shares for the 
following purposes:

<TABLE>

      <S>                             <C>
      401(k) Savings Plan             405,511
      Stock Option Plans              120,000
      Long-term Incentive Plan        400,000
                                      -------
                                      925,511
                                      =======
</TABLE>

The stock option plans approved by stockholders in 1988 and 1993 provide for 
the sale of shares to eligible key employees of the Company and its 
subsidiaries. The plans provide that option prices shall not be less than 
100% of the fair market value on the date of the grant. The options expire 
after five years. During 1997, 0 options were granted, 2,000 options were 
exercised, and 20,600 options lapsed and were canceled.  During 1996, 30,000 
options were granted, 1,300 options were exercised, and 19,654 options 
lapsed and were canceled. During 1995, 27,000 options were granted, no 
options were exercised and 38,493 options lapsed and were canceled. At 
December 31, 1997, options for 97,400 shares were exercisable at prices of 
$18.25, $17.25, $16.75, and $17.50 per share. Stock options were exercised 
in 1997 at $16.75. Stock options were exercised in 1996 at $16.50. No 
options were exercised in 1995.

Information regarding outstanding preferred stock $(100 par value) of the 
Company and its subsidiaries is as follows:

<TABLE>
<CAPTION>

                                                                                              Par Value
                                                                                              of Shares
                                    Cumulative      Current                      Shares      Outstanding
                                     Dividend     Call Price      Shares       Issued and    (Dollars in
                                       Rate%       Per Share    Authorized    Outstanding     Thousands)
--------------------------------------------------------------------------------------------------------

<S>                                    <C>          <C>           <C>            <C>            <C>
Consumers Pennsylvania-
 Shenango Valley Division              5             $110          10,000         9,964         $  996
Consumers Illinois Water Company       5 1/2          107           5,000         3,577            358
Consumers Maine Water Company          5              105           4,000         2,739            274
Consumers Water Company                5 1/4          105          30,000        10,438          1,044
Consumers Water Company                -             None         120,000             -              - 

</TABLE>

In addition to the shares listed above, Consumers Water Company owns 36 
preferred shares of Consumers Pennsylvania Water Company-Shenango Valley 
Division, 423 preferred shares of Consumers Illinois Water Company and 11 
preferred shares of Consumers Maine Water Company.

Of the total 30,000 Consumers Water Company preferred shares authorized with 
voting rights, 15,925 shares have been designated 5-1/4% Cumulative 
Preferred Stock Series A. The remaining 14,075 shares are undesignated. The 
difference between par value and acquisition price was credited to amounts 
in excess of par value.

The Company adopted the disclosure-only option under SFAS No. 123, 
"Accounting for Stock-Based Compensation," as of December 31, 1996. The 
Company issued no stock options in 1997 and does not plan to issue any in 
the future. If the fair value based accounting had been used, 1996 net 
income would have been $6,243,000 compared to $6,251,000 as reported. Net 
income in 1995 would have been $11,291,000 compared to $11,303,000 as 
reported. Earnings per share would not change from the reported amounts. The 
fair value for these options was estimated at the date of grant using the 
Black-Scholes option-pricing model with the following weighted average 
assumptions for the years ended December 31, 1996 and 1995, respectively: 
expected volatility of 6.57% and 4.37%; risk-free interest rates of 5.54% 
and 7.76% expected life of 5 years and dividend yields of 6.89% for both 
years. The weighted average fair value of each option granted during the 
years ended December 31, 1996 and 1995 was $.40 and $.75 respectively.

(6) Acquisitions

On November 18, 1996, the Company, through its subsidiary, Consumers Maine 
Water Company, acquired the stock of the Bucksport Water Company for 
$1,079,000. Bucksport Water Company was subsequently merged into Consumers 
Maine Water Company.

On September 10, 1996, the Company, through its subsidiary, Consumers Maine 
Water Company, acquired the assets of Hartland Water Company for $148,000.

On September 23, 1996, the Company, through its subsidiary, Consumers 
Pennsylvania Water Company-Shenango Valley Division, acquired the assets of 
Mercer Water Company for $761,000.

On September 14, 1995, the Company, through its subsidiary, Consumers New 
Jersey Water Company, acquired the water utility assets of Lakeland County 
Hospital for $1,450,000.

All of these acquisitions were accounted for using the purchase method of 
accounting, and the results of their operations have been included in the 
consolidated financial statements since the date of acquisition.

(7) Dispositions

Gains (losses) net of taxes equaled $425,000 or $0.05 per share, $(240,000) 
or $(0.03) per share and $1,108,000 or $0.13 per share in 1997, 1996, and 
1995, respectively. These gains (losses) were due to several small land 
sales in Ohio, Illinois, Pennsylvania, New Hampshire, and Maine plus the 
more significant sales described below.

In 1994, Consumers Illinois recorded a gain, net of taxes of $394,000 from 
the sale of nine acres of land. In 1996, as part of a rate hearing, the 
Illinois Commerce Commission ordered Consumers Illinois to return the gain 
from this sale to the customer through reduced rates. Therefore, the gain 
was reversed in the second quarter of 1996. On July 17, 1996, Consumers 
Illinois filed in the Appellate Court for the Third District of Illinois a 
Notice of Appeal and Petition for Review of the Commission's Order. On July 
8, 1997, the Appellate Court reversed the Illinois Commerce Commission's 
decision to treat the gain from the sale of land as an adjustment to water 
operating revenue. Therefore, Consumers Illinois recorded a gain in the 
third quarter of 1997.

On June 5, 1995, the Company's Consumers Ohio Water Company subsidiary 
closed on the sale of Girard Lake and Liberty Lake. These two lakes once 
supplied raw water to the area's steel industry. The lakes have not been 
needed as a source of supply for several years. The lakes were sold for $2.5 
million and generated a gain, net of taxes, of $724,000.

On October 20, 1994, the Damariscotta division of Consumers Maine Water 
Company was taken by the local communities by eminent domain for $600,000 or 
approximately 75% of rate base. Consumers Maine prepared to challenge the 
purchase price in court, but instead, on February 21, 1995, reached an out 
of court settlement for $1,552,000. This sale generated a gain which was 
recorded in 1995 of approximately $363,000, net of taxes.

(8) Retirement Plan

The Company has a defined benefit pension plan covering substantially all of 
its employees. Pension benefits are based on years of service and the 
employee's average salary during the last five years of employment. The 
Company's funding policy is to contribute an amount that will provide for 
benefits attributed to service to date and for those expected to be earned 
in the future by current participants, to the extent deductible for income 
tax purposes.

The funded status of the plan as of December 31 is as follows:

<TABLE>
<CAPTION>

(Dollars in Thousands)                                           1997       1996
----------------------------------------------------------------------------------

<S>                                                             <C>        <C>
Actuarial present value of benefit obligations:
  Accumulated benefit obligations
    Vested                                                      $26,740    $24,167
    Nonvested                                                     1,849      1,651
                                                                ------------------
Total                                                            28,589     25,818
  Effect of future salary increases                               7,570      6,594
                                                                ------------------
Projected benefit obligations for services provided to date      36,159     32,412
Market value of plan assets, primarily invested in stocks,
 bonds and short-term funds                                      42,660     38,112
                                                                ------------------
Plan assets in excess of projected benefit obligations            6,501      5,700
Unrecognized net asset existing as of January 1, 1987, being
 amortized over 22 years                                         (2,481)    (2,690)
Unrecognized prior service cost                                   1,747      1,959
Unrecognized net gain                                            (8,082)    (7,258)
                                                                ------------------
Accrued pension cost at year-end                                $(2,315)   $(2,289)
                                                                ==================
</TABLE>

Net pension cost included the following items:

<TABLE>
<CAPTION>

(Dollars in Thousands)                             1997       1996       1995
-------------------------------------------------------------------------------

<S>                                               <C>        <C>        <C>
Service cost-benefits earned during the year      $ 1,082    $ 1,142    $   980
Interest cost on projected benefit obligations      2,527      2,430      2,236
Actual return on plan assets                       (6,106)    (5,869)    (6,555)
Net amortization and deferral                       2,523      2,946      4,127
                                                  -----------------------------
Net periodic pension cost                         $    26    $   649    $   788
                                                  =============================

</TABLE>

The expected long-term rate of return on plan assets was 9.0% in 1997, 1996 
and in 1995. The salary increase assumption was 4.5% in 1997 and 1996, and 
5.0% in 1995. The discount rate used to determine the actuarial present 
value of the projected benefit obligations was 7.5% in 1997, 8.0% in 1996, 
and 8.0% in 1995.

The Company also has a 401(k) Plan, which covers substantially all its 
employees. The Company matches up to 40% of an employee's contributions in 
Company stock, subject to a $1,040 limitation. The value of the match was 
$371,000, $394,000, and $364,000 in 1997, 1996, and 1995, respectively.

In addition, the Company has a Long-Term Incentive Plan, which covers 
eligible members of Senior Management. Awards are at the discretion of the 
Board of Directors. No amounts were earned in the current year.

(9) Postretirement Benefits

Employees retiring from the Company in accordance with the retirement plan 
provisions are entitled to postretirement health care and life insurance 
coverage. These benefits are subject to deductibles, co-payment provisions 
and other limitations. The Company may amend or change the plan 
periodically. In 1997, the Company established a Voluntary Employee Benefit 
Association. The Company contributed $336,000 to the Plan in December 1997.

The Company has adopted the delayed recognition method under which the 
unrecorded SFAS 106 liability as of January 1, 1993, will be amortized to 
expense on a straight-line basis over a 20-year period.

The following table sets forth the postretirement health and life insurance 
plans' combined funded status.

<TABLE>
<CAPTION>

(Dollars in Thousands)                                                      1997       1996
--------------------------------------------------------------------------------------------

<S>                                                                       <C>        <C>
Accumulated postretirement benefit obligation                             $(3,480)   $(3,226)
Plan assets at fair value invested in a money market fund                     336          -
                                                                          ------------------
Accumulated postretirement benefit obligation in excess of plan assets    $(3,144)   $(3,226)
Unrecognized net gain from past experience different from that 
 assumed and from changes in assumptions                                   (1,236)    (1,337)
Unrecognized transition obligation                                          2,406      2,567 
                                                                          ------------------
Accrued postretirement benefit cost                                       $(1,974)   $(1,996)
                                                                          ==================

</TABLE>

The accumulated postretirement benefit obligation for health insurance is 
$2,559,000 and for life insurance is $921,000.

Net periodic postretirement benefit cost included the following components:

<TABLE>
<CAPTION>

(Dollars in Thousands)                                            1997    1996     1995
---------------------------------------------------------------------------------------

<S>                                                               <C>     <C>      <C>
Service cost-benefits attributed to service during the period     $ 96    $132     $148
Interest cost on accumulated postretirement benefit obligation     254     272      292
Amortization of transition obligation over 20 years                160     160      160
Net amortization and deferral                                      (63)    (30)      (6)
                                                                  ---------------------
Net periodic postretirement benefit cost                          $447    $534     $594
                                                                  =====================
</TABLE>

The weighted average discount rate used in determining the accumulated 
postretirement benefit obligation was 7.5% in 1997 and 8.0% in 1996 and in 
1995. An 8% annual rate of increase in the per capita cost of covered health 
care benefits is assumed for 1997, 1996 and 1995. The health care cost trend 
rate is assumed to decrease annually through the year 2001 to an ultimate 
rate of 5%.

Increasing the assumed health care cost trend rates by 1% would increase the 
accumulated postretirement benefit obligation by $266,000 as of September 
30, 1997, $77,000 as of September 30, 1996, and $123,000 as of September 30, 
1995. The effect of this increase in trend rate assumptions on the sum of 
the service cost and interest cost components of the net periodic 
postretirement benefit cost for the year ended December 31, 1997, would be 
an increase of $12,000.

(10) Commitments and Contingencies

The Company is a party in or may be affected by various matters under 
litigation.  Many of the improvements required by the Safe Drinking Water 
Act have been completed. The Company expects that some of its subsidiaries 
will need to make significant additional improvements, however, including, 
but not limited to, construction of treatment plants, new wells and 
replacement of water mains, to stay in compliance with environmental 
regulations and to replace aging plant. Management believes that the 
ultimate treatment of these expenditures and the various matters under 
litigation will not have a significant adverse effect on either the 
Company's future results of operations, financial position or cash flows. 
Estimated losses including the expected cost of legal fees are recorded for 
any litigation where a loss is probable and can be reasonably estimated.

The Company has operating leases for buildings, vehicles, water meters and 
office equipment. Rental expenses relating to these leases for the years 
ended December 31, 1997, 1996 and 1995 were approximately $832,000, 
$1,333,000, and $1,344,000, respectively. At December 31, 1997, minimum 
future lease payments under noncancelable operating leases are $760,000 in 
1998, $613,000 in 1999, $490,000 in 2000, $336,000 in 2001, $301,000 in 2002 
and $579,000 thereafter.

The State of Maine has assessed the Company for additional taxes based on a 
unitary method. The Company has appealed this assessment and does not expect 
that it will have a material impact on the financial position or results of 
operations of the Company.

In March, 1993, an outside contractor spilled a small amount of mercury 
while working at Consumers Ohio's water treatment plant. Several areas in 
and around the plant were contaminated by the spill, although no mercury 
contaminated Consumers Ohio's water supply. The cleanup has been completed 
at a total cost of approximately $900,000. Consumers Ohio Water has received 
$100,000 from its insurer and has sought recovery of all the cleanup costs 
from the contractor. Management believed it probable that Consumers Ohio 
would recover cleanup costs from the contractor and/or the contractor's 
insurer and, therefore, had recorded a long-term receivable for the costs 
incurred in connection with the spill. However, due to the progress of the 
case and to the expected cost of the litigation, Consumers Ohio reserved 
$375,000 in 1995 for probable losses on this claim. In November, 1996, the 
contractor obtained a judgement in its favor, from which Consumers Ohio has 
appealed. As a result of this adverse judgement, Consumers Ohio increased 
the reserve previously taken to cover the clean up and legal costs by 
$560,000 or $370,000, net of taxes. On December 26, 1997 the Court of 
Appeals, Eleventh District overturned the judgement in favor of the 
contractor and ordered a new trial. The Contractor has filed an appeal of 
this decision with the Ohio Supreme Court.

(11) Earnings Per Share

<TABLE>
<CAPTION>

(In Thousands Except per Share Amounts)                             1997       1996        1995
-------------------------------------------------------------------------------------------------

BASIC

<S>                                                                <C>        <C>         <C>
Weighted average basic shares                                        8,857      8,625       8,385
                                                                   ==============================

Income from Continuing Operations                                  $12,076    $ 9,481     $11,913
Preferred dividends                                                    (54)       (55)        (56)
                                                                   ------------------------------
                                                                   
Earnings from continuing operations applicable to common shares     12,022      9,426      11,857
Loss from Discontinued Operations                                   (2,737)    (3,230)       (610)
                                                                   ------------------------------
Net Income applicable to common shares                             $ 9,285    $ 6,196     $11,247
                                                                   ==============================

Basic earnings per common share from continuing operations         $  1.36    $  1.09     $  1.41
                                                                   ==============================
Loss per common share from discontinued operations                 $ (0.31)   $ (0.37)    $ (0.07)
                                                                   ==============================
Total basic earnings per common share                              $  1.05    $  0.72     $  1.34
                                                                   ==============================

DILUTED

Weighted average number of shares outstanding                        8,857      8,625       8,385
Net effect of dilutive common stock equivalents                          2          3           3
                                                                   ------------------------------
Weighted average diluted shares                                      8,859      8,628       8,388
                                                                   ==============================

Earnings from continuing operations applicable to common shares    $12,022    $ 9,426     $11,857
Loss from Discontinued Operations                                   (2,737)    (3,230)       (610)
                                                                   ------------------------------
Net Income applicable to common shares                             $ 9,285    $ 6,196     $11,247 
                                                                   ==============================

Diluted earnings per common share from continuing operations       $  1.36    $  1.09     $  1.41 
                                                                   ==============================
Loss per common share from discontinued operations                 $ (0.31)   $ (0.37)    $ (0.07)
                                                                   ==============================
Total diluted earnings per common share                            $  1.05    $  0.72     $  1.34 
                                                                   ==============================
</TABLE>

Basic earnings per common share were computed by dividing net income by the 
weighted average number of shares of common stock outstanding during the 
year. Diluted earnings per common share for the years 1997, 1996, and 1995 
were determined by taking employee stock options into account. In 1997, the 
Company adopted SFAS No. 128, "Earnings per Share," effective December 15, 
1997. As a result, the Company's reported earnings per share for 1996 and 
1995 were restated. The effect of this accounting change had no impact on 
the previously reported earnings per share (EPS).

(12) Discontinued Operations

On April 29, 1997, the Company announced its intention to dispose of its 
technical services company, Consumers Applied Technologies, Inc (CAT). The 
Company has been unsuccessful in selling CAT as an on-going business and is 
proceeding with its liquidation. Estimated loss on the disposal of $1.5 
million, net of tax benefits of $773,000 was recorded in the first quarter 
of 1997. In the fourth quarter an additional reserve of $850,000 net of tax 
benefits of $438,000 was recorded to reflect additional expenses associated 
with the completion of contracts. CAT's operations were substantially 
shutdown during 1997. CAT continues to be responsible for certain long-term 
contracts, however. The operating results of CAT prior to the date of 
discontinuance are shown under Discontinued Operations on the accompanying 
Consolidated Statements of Income and all financial statements of prior 
periods have been restated. Total sales for the discontinued operations for 
1997 and 1996 were $4,573,000 and $13,796,000, respectively. Net assets of 
the discontinued operations approximate realizable value. A summary of the 
net assets of discontinued operations follows:

<TABLE>
<CAPTION>

                                         December 31,    December 31,
                                             1997            1996
---------------------------------------------------------------------
   
<S>                                       <C>             <C>
Cash                                      $  332,000      $  439,000
Receivables, net                           1,815,000       5,125,000
Inventory                                          -         402,000
Income taxes receivable                    2,443,000       2,032,000
Other current assets                          16,000         371,000
Property, plant and equipment                      -         480,000
                                          --------------------------
      Total assets                        $4,606,000      $8,849,000
                                          --------------------------

Notes Payable                             $        -      $1,200,000
Accounts Payable                              17,000         554,000
Accrued expenses                           1,816,000       1,788,000
Other                                         94,000          94,000
                                          --------------------------
      Total liabilities                   $1,927,000      $3,636,000
                                          --------------------------
Net assets of discontinued operations     $2,679,000      $5,213,000
                                          ==========================
</TABLE>

(13) Subsequent Event

On January 13, 1998, the Town of Hudson, N.H. voted to acquire the Company's 
New Hampshire water utility assets for $34.5 million. This represents 
approximately 8% of the Company's total assets. The sale, pursuant to New 
Hampshire's condemnation statute, will result in a gain of approximately 
$3.5 million, or $0.40 per share, when the transaction closes, which is 
expected in March 1998. The operation generated $6.5 million in revenues and 
had 8,229 customers in 1997.

Item 9. Disagreements on Accounting and Financial Disclosure.

None.

                                  PART III

Item 10.  Directors and Executive Officers of the Registrant.

Incorporated by reference are the "Nominees for Election as Directors," 
"Section 16(a) Beneficial Ownership Reporting Compliance," and "Other 
Executive Officers," and sections of the Company's Definitive Proxy 
Statement filed pursuant to Regulation 14A.

Item 11.  Executive Compensation.

Incorporated by reference is the "Executive Compensation" section of the 
Company's Definitive Proxy Statement filed pursuant to Regulation 14A.

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

Incorporated by reference is the "Common Stock Ownership of Certain 
Beneficial Owners and Management" section of the Company's Definitive Proxy 
Statement filed pursuant to Regulation 14A.

Item 13.  Certain Relationships and Related Transactions.

Incorporated by reference is the "Executive Compensation" section of the 
Company's Definitive Proxy Statement filed pursuant to Regulation 14A.

                                   PART IV

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

      (a)   List of financial statements, schedules and exhibits.

            (1)   Consolidated financial statements and notes thereto of 
                  Consumers Water Company and its subsidiaries together with 
                  the Report of Independent Public Accountants, are listed 
                  as part of Item 8 of this Form 10-K.

            (2)   Schedules

                  II   Valuation and Qualifying Accounts for the Years Ended 
                       December 31, 1997, 1996 and 1995.

                  All other schedules have been omitted, since they are not 
                  required, not applicable or the information is included in 
                  the consolidated financial statements or notes thereto.

            (3)   Exhibits

Exhibits

2.1    Agreement for Purchase and Sale of Assets dated October 24, 1997 by 
       and between Consumers New Hampshire Water Company and the Town of 
       Hudson is incorporated by reference to Exhibit 2.1 to Consumers Water 
       Company's Quarterly Report on Form 10-Q for the Quarter ended 
       September 30, 1997.

3.1    Conformed Copy of Restated Articles of Incorporation of Consumers 
       Water Company, as amended, is incorporated by reference to Exhibit 
       3.1 to Consumers Water Company's Annual Report on Form 10-K for the 
       year ended December 31, 1996.

3.2    Bylaws of Consumers Water Company, as amended March 2, 1994, are 
       incorporated by reference to Exhibit 3.2 to Consumers Water Company's 
       Annual Report on Form 10-K for the year ended December 31, 1993.

4.1    Instruments defining the rights of security holders, including 
       Indentures. The registrant agrees to furnish copies of instruments 
       with respect to long-term debt to the Commission upon request.

10.1*  Consumers Water Company 1988 Incentive Stock Option Plan is 
       incorporated by reference to Exhibit 10.2 to Consumers Water 
       Company's Annual Report on Form 10-K for the year ended December 31, 
       1993.

10.2*  Consumers Water Company 1993 Incentive Stock Option Plan is 
       incorporated by reference to Appendix B to definitive proxy statement 
       dated April 5, 1993.

10.3*  Consumers Water Company 1992 Deferred Compensation Plan for 
       Directors, Plan A, is submitted herewith as Exhibit 10.3.

10.4*  Consumers Water Company 1992 Deferred Compensation Plan for 
       Directors, Plan B, is submitted herewith as Exhibit 10.4.

10.5   Letter Agreement between Consumers Water Company and Anjou 
       International Company dated February 7, 1986, incorporated by 
       reference to Exhibit 10.6 to Consumers Water Company's Registration 
       Statement on Form S-2 (No. 33-41113), filed with the Securities and 
       Exchange Commission on June 11, 1991.

10.6   Assignment of Rights under February 7, 1986 Agreement between 
       Consumers Water Company and Anjou International Company to Compagnie 
       Generale des Eaux, dated November 12, 1987, incorporated by reference 
       to Exhibit 10.7 to Consumers Water Company's Annual Report on Form 
       10-K for the year ended December 31, 1992.

10.7   Form of Indemnification Agreement entered into between Consumers 
       Water Company and each of its current directors and executive 
       officers, incorporated by reference to Exhibit 10.8 to Consumers 
       Water Company's Quarterly Report on Form 10-Q for the quarter ended 
       June 30, 1994.

10.8*  Consumers Water Company Executive Severance Plan is incorporated by 
       reference to exhibit 10.9 to Consumers Water Company's Annual Report 
       on Form 10-K for the year ended December 31, 1995.

10.9*  Consumers Water Company's Senior Management Long Term Incentive Plan 
       is incorporated by reference to Appendix A to the Company's 
       definitive Proxy Statement dated March 29, 1996.

11.    Statement of Computation of Per Share Earnings is submitted herewith 
       as Exhibit 11.

21.    List of Subsidiaries of the Registrant is submitted herewith as 
       Exhibit 21.

23.    Consent of Arthur Andersen LLP is submitted herewith as Exhibit 23.

27.    Financial Data Schedule is submitted herewith as Exhibit 27.

--------------------
*    Management contract or compensatory plan or arrangement required to be 
     filed as an Exhibit pursuant to Item 14(c) of Form 10-K.

      (b)   Reports on Form 8-K

            No reports of Form 8-K were filed during the fourth quarter of 
            1997.

                           CONSUMERS WATER COMPANY

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

By:    /s/ Peter L. Haynes                3/20/98
    -----------------------------      -------------
       Peter L. Haynes                      Date
       President and Director
       (Chief Executive Officer)

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

By:    /s/ John F. Isacke                 3/20/98
    -----------------------------      -------------
       John F. Isacke                       Date
       Senior Vice President
       (Chief Financial Officer)
       (Treasurer)

By:    /s/ Gary E. Wardwell               3/20/98
    -----------------------------      -------------
       Gary E. Wardwell                     Date
       Controller
       (Chief Accounting Officer)

By:    /s/ John E. Menario                3/20/98
    -----------------------------      -------------
       John E. Menario                      Date
       Chairman and Director

By:    /s/ Michel Avenas                  3/20/98
    -----------------------------      -------------
       Michel Avenas                        Date
       Director

By:    /s/ Jack S. Ketchum                3/20/98
    -----------------------------      -------------
       Jack S. Ketchum                      Date
       Director

By:    /s/ Jane E. Newman                 3/20/98
    -----------------------------      -------------
       Jane E. Newman                       Date
       Director

By:    /s/ John E. Palmer                 3/20/98
    -----------------------------      -------------
       John E. Palmer, Jr.                  Date
       Director

By:    /s/ Robert O. Viets                3/20/98
    -----------------------------      -------------
       Robert O. Viets                      Date
       Director

By:    /s/ William B. Russell             3/20/98
    -----------------------------      -------------
       William B. Russell                   Date
       Director

By:    /s/ John H. Schiavi                3/20/98
    -----------------------------      -------------
       John H. Schiavi                      Date
       Director

By:    /s/ Peter L. Haynes                3/20/98
    -----------------------------      -------------
       Peter L. Haynes                      Date
       President and Director
       (Chief Executive Officer)


                                                                 Schedule II

                  CONSUMERS WATER COMPANY AND SUBSIDIARIES

                      VALUATION AND QUALIFYING ACCOUNTS
            FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                           (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                        Additions                 Deductions
                                                ------------------------    ----------------------
                                  Balance at     Provision                                 Balance
                                  Beginning     Charged to                   Accounts       End of 
Description                         of Year     Operations    Recoveries    Written Off      Year
--------------------------------------------------------------------------------------------------

<S>                                  <C>           <C>            <C>          <C>
Allowance for 
 Doubtful Accounts

  Year ended December 31, 1997       $982          $806           $77           $941         $924

  Year ended December 31, 1996       $738          $927           $60           $743         $982
				     
  Year ended December 31, 1995       $612          $688           $59           $621         $738

</TABLE>