<PAGE 1>

             UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                       Washington, D. C. 20549-1004

                                 Form 10-K

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

(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [FEE REQUIRED]

      For the fiscal year ended December 31, 1995

                                    OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

      For the transition period from _______________ to _______________

                      Commission file number 2-30057

                          CANAL ELECTRIC COMPANY
          (Exact name of registrant as specified in its charter)

         Massachusetts                                 04-1733577    
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                     Identification No.)

One Main Street, Cambridge, Massachusetts              02142-9150    
(Address of principal executive offices)               (Zip Code)

                              (617) 225-4000                  
           (Registrant's telephone number, including area code)

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

    Title of each class       Name of each exchange on which registered
         None                                  None

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

                              Title of Class
                                   None

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                            Outstanding at
          Class of Common Stock             March 15, 1996 
Common Stock, $25 par value                1,523,200 shares

The Company meets the conditions set forth in General Instruction J(1)(a) and
(b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.

Documents Incorporated by Reference        Part in Form 10-K
               None                         Not Applicable

List of Exhibits begins on page 33 of this report.
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<PAGE 2>

                          CANAL ELECTRIC COMPANY
                       FORM 10-K  DECEMBER 31, 1995

                             TABLE OF CONTENTS

                                  PART I
                                                                   PAGE

Item  1. Business..........................................          3

           General.........................................          3

           New England Power Pool..........................          3

           Regulation......................................          4

           Electric Industry Restructuring.................          4

           Potential Impact of Regulatory Restructuring....          5

           Fuel Supply.....................................          5

           Power Contracts.................................          6

           Power Supply Commitments and
             Support Agreements............................          7

           Construction and Financing......................          7

           Employees.......................................          7

Item  2. Properties........................................          7

Item  3. Legal Proceedings.................................          8

                                  PART II

Item  5. Market for the Registrant's Common Stock and
           Related Stockholder Matters.....................          9

Item  7. Management's Discussion and Analysis of
           Results of Operations...........................         10

Item  8. Financial Statements and Supplementary Data.......         13

Item  9. Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure.............         13

                                  PART IV

Item 14. Exhibits, Financial Statement Schedules and
           Reports on Form 8-K.............................         33


Signatures...................................................       42
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                          CANAL ELECTRIC COMPANY

                                  Part I.

Item 1.  Business

      General

      Canal Electric Company (the Company) is a wholesale electric generating
 company organized in 1902 under the laws of the Commonwealth of Massachu-
 setts.  The Company assumed its present corporate name in 1966 after the
 sale to an affiliated company of its electric distribution and transmission
 properties together with the right to do business in the territories served. 
 The Company is a wholly-owned subsidiary of Commonwealth Energy System
 ("System"), which together with its subsidiaries is collectively referred to
 as "the system."

      The Company's generating station is located in Sandwich, Massachusetts
 at the eastern end of the Cape Cod Canal.  The station consists of two oil-
 fired steam electric generating units: Canal Unit 1, with a rated capacity
 of 569 MW, wholly-owned by the Company; and Canal Unit 2, with a rated
 capacity of 580 MW, jointly-owned by the Company and Montaup Electric
 Company (Montaup) (an unaffiliated company).  Canal Unit 2 is operated by
 the Company under an agreement with Montaup which provides for the equal
 sharing of output, fixed charges and operating expenses.  Canal Units 1 and
 2 commenced operation in 1968 and in 1976, respectively.

      The Company also has a 3.52% interest in the Seabrook 1 nuclear power
 plant located in Seabrook, New Hampshire, to provide for a portion of the
 capacity and energy needs of Cambridge Electric Light Company (Cambridge)
 and Commonwealth Electric Company (Commonwealth Electric), each of which are
 retail distribution companies and wholly-owned subsidiaries of the System. 
 The plant has a rated capacity of 1,150 MW.

      For additional information pertaining to the Company's relationship with
 the system's retail distribution companies, together with more extensive
 information on the Company's participation in the Seabrook plant and on
 other sources of power procurement, refer to the "Power Contracts" and
 "Power Supply Commitments and Support Agreements" sections of this Item 1.

      New England Power Pool

      The Company, together with other electric utility companies in the New
 England area, is a member of the New England Power Pool (NEPOOL), which was
 formed in 1971 to provide for the joint planning and operation of electric
 systems throughout New England.

      NEPOOL operates a centralized dispatching facility to ensure reliability
 of service and to dispatch the most economically available generating units
 of the member companies to fulfill the region's energy requirements.  This
 concept is accomplished by use of computers to monitor and forecast load
 requirements.  In the past, this has required that Canal Unit 1 operate
 whenever possible since it is one of the most efficient oil-fired units in
 the country.  Canal Unit 2 is designed for cycling operation which provides
 for economic changes in unit load permitting reduced generation during 
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                          CANAL ELECTRIC COMPANY

 nights and weekends when demand is lowest.  It has performed as one of New
 England's most efficient units in this type of service. 

      The Company and the System's other electric subsidiaries are also
 members of the Northeast Power Coordinating Council (NPCC), an advisory
 organization which includes the major power systems in New England and New
 York plus the provinces of Ontario and New Brunswick in Canada.  NPCC
 establishes criteria and standards for reliability and serves as a vehicle
 for coordination in the planning and operation of these systems.

      Regulation

      The Company is a "public utility" within the meaning of Part II of the
 Federal Power Act and is subject to regulations thereunder by the FERC as to
 rates, accounting and other matters.  The Company is subject to regulation
 by the DPU as to the issuance of securities.

      Electric Industry Restructuring

      On August 16, 1995, the DPU issued an order calling for the
 restructuring of the electric utility industry in Massachusetts.  The stated
 purpose of the restructuring effort is to allow customers more flexibility
 in choosing their electric service provider and to develop an efficient
 industry structure and regulatory framework that minimizes long-term costs
 to consumers while maintaining the safety and reliability of electric
 services with a minimum impact on the environment.  The electric utility
 industry will ultimately be functionally separated into three segments to
 help meet this objective: generation, transmission and distribution.

      In February 1996, certain utilities submitted required proposals
 detailing how they plan to move into a competitive market structure.  Since
 that time, the DPU has given notice of a generic proceeding that will focus
 on many of the policy issues raised in the DPU's original order.  Each of
 the state's electric utilities, together with other interested parties, will
 participate in this proceeding.  The purpose of this generic proceeding is
 to establish a set of rules governing the restructuring of the electric
 industry in Massachusetts.  These generic rules would set the basis for the
 DPU's review of each of the utility-specific restructuring proposals.  The
 proposal to be submitted jointly by Cambridge and Commonwealth Electric is
 due in September 1996.  Management is unable to predict the ultimate outcome
 of these proceedings.

      On February 15, 1996, in response to the DPU's initial restructuring
 order, Cambridge and Commonwealth Electric announced one element of the
 proposal entitled "Competitive Challenge" in which they would voluntarily
 put their power capacity entitlements (1,140 MW) to a market test in an
 effort to develop a competitive market whereby customers would have the
 flexibility of choosing their electric supplier.  The proposal calls for the
 auctioning in a competitive market of entitlements in all twenty-one
 contracts, including contracts between Cambridge and Commonwealth Electric
 and the Company.  The proposal provides for total recovery of the difference
 between the current market value of the Companies' power contracts and their
 original unavoidable costs. 
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                          CANAL ELECTRIC COMPANY

      The auction approach has received initial positive reviews from the
 Commonwealth of Massachusetts Division of Energy Resources and the Office of
 the Attorney General.

      Potential Impact of Regulatory Restructuring

      Based on the current regulatory framework, the Company accounts for the
 economic effects of regulation in accordance with the provisions of
 Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
 the Effects of Certain Types of Regulation."  The Company has established
 various regulatory assets in cases where the FERC has permitted or is
 expected to permit recovery of specific costs over time.  The regulatory
 assets amounted to $25.4 million (7.3% of total assets) as of December 31,
 1995.  In March 1995, the Financial Accounting Standards Board issued SFAS
 No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
 Lived Assets to be Disposed Of."  SFAS 121 imposes stricter criteria for
 regulatory assets by requiring that such assets be probable of future
 recovery at each balance sheet date.  Management does not expect that the
 effects of SFAS 121, which the Company adopted on January 1, 1996, will have
 a material impact on its financial position or results of operations. 
 However, this conclusion may change in the future as changes are made in the
 current regulatory framework pursuant to the aforementioned electric utility
 restructuring order issued by the DPU.

      Fuel Supply

      Effective October 1, 1995, the Company executed a nine-month contract
 with Coastal Refining and Marketing, Inc. (Coastal) for the purchase of
 residual fuel oil.  The contract provides for delivery of a set percentage
 of the Company's fuel requirement, the balance (a maximum of 30%) to be met
 by spot purchases or by Coastal at the discretion of the Company.  Through
 December 1995, 14.4% of the Company's total requirements have been met by
 lower-cost, spot purchases resulting in savings to its customers.

      Energy Supply and Credit Corporation (ESCO Massachusetts, Inc.) operates
 the Company's fuel oil terminal and manages the receipt and payment for the
 fuel oil under assignment of the Company's supply contracts to ESCO
 Massachusetts, Inc.  Oil in the terminal's shore tanks is held in inventory
 by ESCO Massachusetts, Inc. and delivered upon demand to the Company's two
 day tanks.

      Fuel oil storage facilities at the Canal site have a capacity of
 1,199,000 barrels, representing approximately 60 days of normal operation of
 the two units.  During 1995, ESCO Massachusetts, Inc. maintained an average
 daily inventory of 554,000 barrels of fuel oil which represents 28 days of
 normal operation of the two units.  This supply is maintained by tanker
 deliveries.

      In October 1993, the Company reached an agreement with Montaup and
 Algonquin Gas Transmission Company (AGT) to build a new natural gas pipeline
 that will serve Unit 2, which will be modified to burn gas in addition to
 oil.  The first phase of the project was completed in July 1995 when a 1,400
 foot gas pipeline was installed 80 feet below the surface of the Cape Cod
 Canal.  The second phase involves the construction of a four-mile pipeline
 that will ultimately connect Unit 2 to the AGT pipeline system.  The project
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                          CANAL ELECTRIC COMPANY

 will improve air quality on Cape Cod, enable the plant to exceed the
 stringent 1995 air quality standards established by the Massachusetts
 Department of Environmental Protection and will strengthen the Company's
 bargaining position as it seeks to secure the lowest-cost fuel for its
 customers.  Plant conversion and pipeline construction are expected to be
 completed in mid-1996.

      The nuclear fuel contract and inventory information for Seabrook 1 has
 been furnished to the Company by North Atlantic Energy Services Corporation
 (NAESCO), the plant manager responsible for operation of the unit. 
 Seabrook's requirement for nuclear fuel components are 100% covered through
 1999 by existing contracts.

      There are no spent fuel reprocessing or disposal facilities currently
 operating in the United States.  Instead, commercial nuclear electric gener-
 ating units operating in the United States are required to retain high level
 wastes and spent fuel on-site.  As required by the Nuclear Waste Policy Act
 of 1982 (the Act), as amended, the joint-owners entered into a contract with
 the Department of Energy for the transportation and disposal of spent fuel
 and high level radioactive waste at a national nuclear waste repository or
 Monitored Retrievable Storage (MRS) facility.  Owners or generators of spent
 nuclear fuel or its associated wastes are required to bear all of the costs
 for such transportation and disposal through payment of a fee of
 approximately 1 mill/KWH based on net electric generation to the Nuclear
 Waste Fund.  Under the Act, a temporary storage facility for nuclear waste
 was anticipated to be in operation by 1998; a reassessment of the project's
 schedule requires extending the completion date of the permanent facility
 until at least 2010.  Seabrook 1 is currently licensed for enough on-site
 storage to accommodate all spent fuel expected to be accumulated through at
 least the year 2010.

      Power Contracts

      The Company is a party to substantially identical life-of-the-unit power
 contracts with Boston Edison Company, Montaup Electric Company and New
 England Power Company (unaffiliated utilities), under which each is
 severally obligated to purchase one-quarter of the capacity and energy of
 Canal Unit 1.  Commonwealth Electric and Cambridge are jointly obligated to
 purchase the remaining one-quarter of the unit's capacity and energy. 
 Similar contracts are in effect between the Company and Commonwealth
 Electric and Cambridge under which those companies are jointly obligated to
 purchase the Company's entire share of the capacity and energy of Canal Unit
 2.  The price of power is based on a two-part rate consisting of a demand
 charge and an energy charge.  The demand charge covers all expenses except
 fuel costs and includes recovery of the original investment.  It also
 provides for any adjustments to that investment over the economic lives of
 the units.  The energy charge is based on the cost of fuel and is billed to
 each purchaser in proportion to its purchase of power.  Purchasers are
 billed monthly.  The power contracts are on file with the FERC.

      The Company acts as agent for Commonwealth Electric and/or Cambridge in
 the procurement of additional capacity, or, to sell a portion of each
 company's entitlement in Unit 2.  Exchange agreements are in place with
 several utilities whereby, in certain circumstances, it is possible to
 exchange capacity so that the mix of power improves the pricing for dispatch
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                          CANAL ELECTRIC COMPANY

 for both the seller and purchaser.  Commonwealth Electric and Cambridge thus
 secure cost savings for their respective customers by planning for bulk
 power supply on a single system basis.  A Capacity Acquisition and
 Disposition Agreement, which has been accepted for filing as a rate schedule
 by the FERC, enables the Company to recover costs incurred in connection
 with any transaction covered by such Agreement.  Commonwealth Electric and
 Cambridge, in turn, bill charges to retail customers through rates subject
 to DPU regulation.  Currently, Agreements are in effect for Seabrook 1,
 Phase I and Phase II of the Hydro-Quebec Project and a 50 MW exchange with
 New England Power Company through April 1997.  An agreement for a 50 MW
 exchange with Central Vermont Public Service expired on October 31, 1995.
 
      Power Supply Commitments and Support Agreements

      In response to solicitations by NU and other utilities, the Company, on
 behalf of Commonwealth Electric and Cambridge, purchased entitlements
 through short-term contracts in various selected generating units.  These
 and other bulk electric power purchases are necessary in order to fulfill
 the system's NEPOOL obligation and for the Company to acquire and deliver
 electric generating capacity to meet Commonwealth Electric and Cambridge
 requirements.  For additional information, refer to "Transactions with
 Affiliates" in Note 2(c) of Notes to Financial Statements and to
 "Management's Discussion and Analysis of Results of Operations" filed under
 Items 8 and 7, respectively, of this report.

      The Company is party to support agreements for Phase I and Phase II of
 the Hydro-Quebec Project and is thereby obligated to pay its share of
 operating and capital costs for Phase II over a 25 year period ending in
 2015.  Future minimum lease payments for Phase II have an estimated present
 value of $13.1 million at December 31, 1995.  In addition, the Company has
 an equity interest in Phase II which amounted to $3.4 million in 1995 and
 $3.8 million in 1994. 

      Construction and Financing

      Information concerning the Company's financing and construction programs
 is contained in Note 5 of Notes to Financial Statements filed under Item 8
 of this report.

      Employees

      The Company has 121 regular employees, 90 (74%) are represented by the
 Utility Workers' Union of America, A.F.L.-C.I.O.  The existing collective
 bargaining agreement expires on May 31, 1997.  Employee relations have
 generally been satisfactory.

Item 2.  Properties

      The Company operates a generating station located at the eastern end of
 the Cape Cod Canal in Sandwich, Massachusetts.  The station consists of two
 oil-fired steam electric generating units: Canal Unit 1 with a rated
 capacity of 569 MW, wholly-owned by the Company; and Canal Unit 2, with a
 rated capacity of 580 MW, jointly-owned by the Company and Montaup Electric
 Company, a wholly-owned subsidiary of Eastern Utilities Associates.  In
 addition, the Company has a 3.52% joint-ownership interest (40.5 MW of
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                          CANAL ELECTRIC COMPANY

 capacity) in Seabrook 1.  Refer to Note 4 of Notes to Financial Statements
 filed under Item 8 of this report for encumbrances relative to the Company's
 property.


 Item 3.  Legal Proceedings

      The Company is subject to legal claims and matters arising from its
 normal course of business, including its ownership interest in the Seabrook
 plant.
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                          CANAL ELECTRIC COMPANY

                                 PART II.

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

 (a)    Principal Market

        Not applicable.  The Company is a wholly-owned subsidiary of
        Commonwealth Energy System.

 (b)    Number of Shareholders at December 31, 1995

        One

 (c)    Frequency and Amount of Dividends Declared in 1995 and 1994

                      1995                              1994              
                            Per Share                            Per Share
        Declaration Date     Amount        Declaration Date       Amount  

        January 25, 1995     $ 2.25        April 25, 1994         $ 2.00
        April 21, 1995         2.10        July 18, 1994            2.00
        July 24, 1995          2.00        October 24, 1994         3.00
        November 14, 1995      2.65                               $ 7.00
                             $ 9.00

        Reference is made to Note 6 of Notes to Financial Statements filed
        under Item 8 of this report for restrictions against the payment of
        cash dividends.

 (d)    Future dividends may vary depending upon the Company's earnings and
        capital requirements as well as financial and other conditions
        existing at that time.
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                          CANAL ELECTRIC COMPANY

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

        The following is a discussion of certain significant factors which
have affected operating revenues, expenses and net income during the periods
included in the accompanying statements of income and is presented to
facilitate an understanding of the results of operations.  This discussion
should be read in conjunction with the Notes to Financial Statements filed
under Item 8 of this report.

        A summary of the period to period changes in the principal items
included in the statements of income for the years ended December 31, 1995 and
1994 is shown below:
                                     Years Ended           Years Ended
                                     December 31,          December 31,
                                    1995 and 1994         1994 and 1993
                                            Increase (Decrease)
                                           (Dollars in Thousands)

Electric Operating Revenues      $(51 432)  (25.9)%  $  (4 674)     (2.3)%

Operating Expenses:
 Fuel used in production          (33 157)  (40.5)        (760)     (0.9)
 Electricity purchased for resale (12 628)  (45.7)        (350)     (1.2)
 Other operation and maintenance     (648)   (1.6)      (1 998)     (5.2)
 Depreciation                       2 934    21.7          178       1.3
 Taxes -
   Federal and state income        (7 781)  (92.7)        (503)     (5.7)
   Local property and other           (12)   (0.3)          12       0.3
                                  (51 292)  (29.4)      (3 421)     (1.9)

Operating Income                     (140)   (0.6)      (1 253)     (5.0)

Other Income                          124    90.5         (163)    (54.3)

Income Before Interest Charges        (16)   (0.1)      (1 416)     (5.6)

Interest Charges                       10     0.1         (452)     (4.4)

Net Income                       $    (26)   (0.2)   $    (964)     (6.4)

Unit Sales Decrease (MWH)      (1 959 307)  (45.2)     (85 345)     (1.9)

The following is a summary of unit sales for the periods indicated:

                                   Unit Sales (MWH)                    
Period Ended                            Seabrook  Purchased
December 31,       Unit 1      Unit 2    Unit 1   For Resale     Total
    1995           942 574     830 827   295 264    309 714    2 378 379
    1994         2 594 406   1 047 214   218 560    477 506    4 337 686
    1993         2 382 716   1 275 305   318 694    446 316    4 423 031

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                          CANAL ELECTRIC COMPANY

 Revenue, Fuel and Purchased Power

      During 1995, operating revenues decreased nearly 26% or $51.4 million
 primarily due to the 45.2% decrease in unit sales.  The significant decrease
 in unit sales was due to a combination of scheduled maintenance and other
 repairs to the turbine which kept Unit 1 out of service for the first seven
 months of the year and an additional inspection outage of nearly one month
 during the fourth quarter.  Also contributing to the decline in unit sales
 was the decreased availability of Unit 2 and a lower level of purchases made
 on behalf of affiliated retail distribution companies.  Somewhat offsetting
 these items was an increase in power available from Seabrook 1.

      Operating revenues for 1994 declined by approximately $4.7 million or
 2.3% due to a decrease in unit sales.  The 1.9% decrease in unit sales was
 caused by the reduced availability of Seabrook 1 due to the timing of a
 scheduled refueling outage which began in early April and was extended
 through early August 1994 for unscheduled maintenance.  Somewhat offsetting
 the decline was an increase in purchases made on behalf of affiliated retail
 distribution companies.  Also reflected in the change in unit sales was the
 increased availability of Unit 1 that was offset by the decline in
 generation from Unit 2 due to scheduled and unscheduled maintenance on the
 units.

      Fuel, purchased power and transmission costs (included in other
 operation) represented approximately 46% of the total revenue dollar in
 1995, 57% in 1994 and 56% in 1993 and averaged 2.83 cents per KWH in 1995 as
 compared to 2.60 cents in 1994 and 2.58 cents in 1993.  The per barrel cost
 of oil averaged $15.95 in 1995, $14.33 in 1994 and $14.02 in 1993.  In
 conformance with restrictions on air emissions, the Commonwealth of
 Massachusetts mandated a reduction in sulphur dioxide emissions requiring
 the periodic use of more expensive lower-sulphur (1%) content oil.  During
 1995, 1% oil averaged $15.96 per barrel as compared to $14.92 per barrel in
 1994 and $15.16 per barrel in 1993.  However, during 1995 virtually all
 (99.6%) of the oil used by Units 1 and 2 was 1%, while lower-sulphur oil
 displaced 70.4% of the higher sulphur (2.2%) content oil in 1994 and 57.5%
 in 1993.

 Other Operating Expenses

      Other operation includes the following:

                                           Years Ended December 31,  
                                          1995       1994      1993
                                            (Dollars in millions)

 Other operation:                        $23.2      $24.7     $23.7
  Less:       
   Seabrook 1 operations                   4.3        4.3       4.6
   Hydro-Quebec Phase II transmission      3.5        3.5       3.5
   Power purchased from affiliates         1.9        1.3       0.8
                                         $13.5      $15.6     $14.8

      After excluding the above items, other operation, net, decreased
 approximately $2.1 million or 13.5% in 1995 and increased 5.4% in 1994.  The
 decrease in 1995 was mainly due to lower insurance and benefit costs
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<PAGE 12>

                          CANAL ELECTRIC COMPANY

 including a significant decrease in liability insurance ($1.6 million)
 reflecting adjustments to insurance accruals reflecting better than
 anticipated experience.  

      The increase in maintenance expense (8.1%) in 1995 reflects the
 previously discussed major repair work done at Unit 1 offset in part by
 lower maintenance costs at Unit 2.  The decrease in maintenance expense in
 1994 was due primarily to the timing of maintenance on Unit 1 and the major
 overhaul of Unit 2 which occurred in 1993.

 Depreciation and Taxes

      Depreciation expense increased approximately $2.9 million or 21.7% due
 to the higher level of plant-in-service and an adjustment to the
 depreciation rate related to Unit 1 made during the second quarter.  The
 1.3% increase in depreciation expense in 1994 was due to a higher level of
 plant-in-service.

      Income tax expense declined 92.7% or approximately $7.8 million due to a
 second quarter tax adjustment related to the settlement of certain Seabrook-
 related tax issues ($7.6 million) and a lower level of pretax income.  The
 5.7% decrease in income tax expense (approximately $503,000) during 1994 was
 due to a lower level of pretax income.

 Other Income

      The increase in other income during 1995 was due primarily to an
 increase in interest income related to contested income tax issues
 ($97,000).  During 1994 other income decreased due primarily to lower equity
 earnings ($67,000) related to the Company's investment in Hydro-Quebec.

 Interest Charges

      Total interest charges were virtually unchanged for the year 1995
 reflecting an increase in short-term interest ($332,000) due to higher
 interest rates (6.1% as compared to 4.3% in 1994) on a higher average level
 of short-term debt, offset by a slight decline ($54,000) in interest on
 long-term debt and an increase in the debt component of the allowance for
 funds used during construction (AFUDC) ($268,000).  The increase in AFUDC
 reflects the increase in construction activity during the year.  During 1994
 total interest charges decreased 4.4% reflecting lower long-term interest
 ($984,000) due to the early redemption of the Company's Series D, 11.125%
 First Mortgage Bonds due in 2007.  Somewhat offsetting the decrease in long-
 term interest was an increase in other interest charges ($427,000) caused by
 a higher average level of short-term borrowings coupled with higher short-
 term interest rates.  

      Environmental Matters

      The Company is subject to laws and regulations administered by federal,
 state and local authorities relating to the quality of the environment. 
 These laws and regulations affect, among other things, the siting and
 operation of electric generating and transmission facilities and can require
 the installation of expensive air and water pollution control equipment.
 
 <PAGE>
<PAGE 13>

                          CANAL ELECTRIC COMPANY

      These regulations have had an impact on the Company's operations in the
 past and will continue to have an impact on future operations, capital costs
 and construction schedules of major facilities.

Item 8.  Financial Statements and Supplementary Data

      The Company's financial statements required by this item are filed
 herewith on pages 14 through 32 of this report.

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

      None

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<PAGE 14>

                          CANAL ELECTRIC COMPANY

Item 8.       Financial Statements and Supplementary Data

                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Canal Electric Company:

      We have audited the accompanying balance sheets of CANAL ELECTRIC
COMPANY, (a Massachusetts corporation and wholly-owned subsidiary of
Commonwealth Energy System) as of December 31, 1995 and 1994, and the related
statements of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1995.  These 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 Canal Electric
Company as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.

      Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The schedule listed in the index to
financial statements and schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements.  This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.



                                                   ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 16, 1996.
<PAGE>
<PAGE 15>

                          CANAL ELECTRIC COMPANY
                INDEX TO FINANCIAL STATEMENTS AND SCHEDULE



                                 PART II.


FINANCIAL STATEMENTS

  Balance Sheets at December 31, 1995 and 1994

  Statements of Income for the Years Ended December 31, 1995, 1994 and 1993

  Statements of Retained Earnings for the Years Ended December 31, 1995, 1994
  and 1993

  Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and
  1993

  Notes to Financial Statements


                                 PART IV.


SCHEDULE

  I     Investments In, Equity Earnings of, and Dividends Received From
        Related Parties for the Years Ended December 31, 1995, 1994 and 1993

SCHEDULES OMITTED

  All other schedules are not submitted because they are not applicable or
  required or because the required information is included in the financial
  statements or notes thereto.
<PAGE>
<PAGE 16>

                          CANAL ELECTRIC COMPANY
                              BALANCE SHEETS
                        DECEMBER 31, 1995 AND 1994

                                  ASSETS



                                                        1995       1994
                                                     (Dollars in Thousands)

PROPERTY, PLANT AND EQUIPMENT, at original cost      $436 531   $409 648
  Less - Accumulated depreciation
     and amortization                                 163 929    150 337
                                                      272 602    259 311
  Add - Construction work in progress                   5 759      6 250
        Nuclear fuel in process                           122        139
                                                      278 483    265 700

LEASED PROPERTY, net                                   13 128     13 844

INVESTMENTS
  Equity in corporate joint venture                     3 372      3 802

CURRENT ASSETS
  Cash                                                     12         12
  Accounts receivable -
     Affiliated companies                               9 282      7 935
     Other                                              9 520      9 100
  Unbilled revenues                                       438        -  
  Inventories, at average cost -
     Electric production fuel oil                         762        736
     Materials and supplies                             1 375      1 408
  Prepaid taxes -
     Income                                               -          132
     Property                                             874        932
  Other                                                 1 622      1 277
                                                       23 885     21 532

DEFERRED CHARGES 
  Seabrook 1                                            6 436      7 735
  Seabrook 2                                            3 343      5 140
  Other                                                20 813     12 195
                                                       30 592     25 070

                                                     $349 460   $329 948








The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 17>

                          CANAL ELECTRIC COMPANY
                              BALANCE SHEETS
                        DECEMBER 31, 1995 AND 1994

                      CAPITALIZATION AND LIABILITIES

                                                        1995        1994
                                                     (Dollars in Thousands)

CAPITALIZATION
  Common Equity -
     Common stock, $25 par value -
       Authorized - 2,328,200 shares
       Outstanding - 1,523,200 shares, wholly-owned
       by Commonwealth Energy System (Parent)         $ 38 080    $ 38 080
     Amounts paid in excess of par value                 8 321       8 321
     Retained earnings                                  52 070      51 647
                                                        98 471      98 048
  Long-term debt, including premiums, less
     current sinking fund requirements                  83 941      87 713
                                                       182 412     185 761

CAPITAL LEASE OBLIGATIONS                               12 547      13 258

CURRENT LIABILITIES
  Interim Financing - 
     Notes payable to banks                             23 425      11 325
     Advances from affiliates                            5 865       9 350
     Maturing long-term debt                             3 230         -  
                                                        32 520      20 675
  Other Current Liabilities -
     Current sinking fund requirements                     920       1 110
     Accounts payable -
       Affiliated companies                              2 049       1 932
       Other                                            19 757      14 857
     Accrued taxes -
       Local property and other                            855         977
       Income                                            3 159          71
     Capital lease obligations                             581         586
     Accrued interest and other                          3 608       4 120
                                                        30 929      23 653
                                                        63 449      44 328

DEFERRED CREDITS
  Accumulated deferred income taxes                     72 914      68 732
  Unamortized investment tax credits                    12 020      12 658
  Other                                                  6 118       5 211
                                                        91 052      86 601

COMMITMENTS AND CONTINGENCIES 

                                                      $349 460    $329 948


The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 18>

                          CANAL ELECTRIC COMPANY
                           STATEMENTS OF INCOME
           FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993


                                             1995       1994       1993
                                               (Dollars in Thousands)

ELECTRIC OPERATING REVENUES 
  Sales to affiliated companies            $ 94 447   $122 310   $133 060
  Sales to non-affiliated companies          52 507     76 076     70 000
                                            146 954    198 386    203 060

OPERATING EXPENSES
  Fuel used in production                    48 707     81 864     82 624
  Electricity purchased for resale           14 999     27 627     27 977
  Other operation                            23 153     24 731     23 694
  Maintenance                                12 456     11 526     14 561
  Depreciation                               16 473     13 539     13 361
  Amortization                                3 423      3 423      3 423
  Taxes -
    Income                                      609      8 390      8 893
    Local property                            2 777      2 793      2 720
    Payroll and other                           733        729        790
                                            123 330    174 622    178 043

OPERATING INCOME                             23 624     23 764     25 017

OTHER INCOME                                    261        137        300

INCOME BEFORE INTEREST CHARGES               23 885     23 901     25 317

INTEREST CHARGES
  Long-term debt                              8 229      8 283      9 267
  Other interest charges                      1 878      1 546        989
  Allowance for borrowed funds used
    during construction                        (354)       (86)       (61)
                                              9 753      9 743     10 195

NET INCOME                                 $ 14 132   $ 14 158   $ 15 122











The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 19>

                          CANAL ELECTRIC COMPANY
                      STATEMENTS OF RETAINED EARNINGS
           FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993





                                            1995        1994       1993
                                              (Dollars in Thousands)

Balance at beginning of year               $51 647     $48 151    $64 498

Add (Deduct)
  Net income                                14 132      14 158     15 122
  Cash dividends on common stock           (13 709)    (10 662)   (31 469)

Balance at end of year                     $52 070     $51 647    $48 151



































The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 20>

                          CANAL ELECTRIC COMPANY
                         STATEMENTS OF CASH FLOWS
           FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

                                               1995      1994      1993
                                                 (Dollars in Thousands)
OPERATING ACTIVITIES
  Net income                                 $ 14 132  $ 14 158  $ 15 122
  Effects of noncash items -
     Depreciation and amortization             21 929    18 668    20 333
     Deferred income taxes                     (3 239)    1 815     1 445
     Investment tax credits                      (638)     (702)     (715)
     Earnings from corporate joint venture       (539)     (507)     (573)
  Dividends from corporate joint venture          969       566       882
  Change in working capital, exclusive
     of cash and interim financing -
       Accounts receivable                     (1 767)    4 729      (513)
       Unbilled revenues                         (438)      659       224
       Prepaid (accrued) income taxes, net      3 220       199      (990)
       Local property and other taxes, net        (64)       13       (30)
       Accounts payable and other               3 972       485     1 603
  All other operating items, net               (1 380)   (3 571)   (2 326)

Net cash provided by operating activities      36 157    36 512    34 462

INVESTING ACTIVITIES
  Additions to property, plant and
     equipment (exclusive of AFUDC)           (30 167)   (9 396)   (6 574)
  Allowance for borrowed funds used
     during construction                         (354)      (86)   (   61)

Net cash used for investing activities        (30 521)   (9 482)   (6 635)

FINANCING ACTIVITIES
  Proceeds from (payment of)
    short-term borrowings                      12 100   (16 675)    8 650
  Proceeds from (payment of)
   affiliate borrowings                        (3 485)    1 040     4 590
  Payment of dividends                        (13 709)  (10 662)  (31 469)
  Long-term debt issue refunded                   -         -      (9 300)
  Retirement of long-term debt through
     sinking funds                               (542)     (733)     (732)

Net cash used for financing activities         (5 636)  (27 030)  (28 261)

Net increase (decrease) in cash                   -         -        (434)
Cash at beginning of period                        12        12       446
Cash at end of period                        $     12  $     12  $     12

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid (net of capitalized
    amounts)                                   $9 436    $9 224    $9 704
  Income taxes paid                            $2 269    $9 055    $9 467



The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 21>

                          CANAL ELECTRIC COMPANY
                       NOTES TO FINANCIAL STATEMENTS

(1)    General Information

       Canal Electric Company (the Company) is a wholly-owned subsidiary of
 Commonwealth Energy System.  The parent company is referred to in this
 report as the "System" and together with its subsidiaries is referred to as
 "the system."  The System is an exempt holding company under the provisions
 of the Public Utility Holding Company Act of 1935 and, in addition to its
 investment in the Company, has interests in other utility companies and
 several non-regulated companies.

       The Company is a wholesale electric generating company organized in
 1902 under the laws of the Commonwealth of Massachusetts.  The Company's
 generating station which is located in Sandwich, Massachusetts consists of
 two units: Canal Unit 1 wholly-owned by the Company; and Canal Unit 2
 jointly-owned by the Company and Montaup Electric Company (Montaup) (an
 unaffiliated company).  The Company's largest customers with respect to
 output from Unit 1 and Unit 2 are affiliates Cambridge and Commonwealth
 Electric.  The Company also has a 3.52% interest in the Seabrook 1 nuclear
 power plant to provide a portion of the capacity and energy needs of
 Cambridge and Commonwealth Electric and acts as agent in the procurement of
 additional capacity for the aforementioned affiliates.

       The Company has 121 regular employees including 90 (74%) who are
 represented by the Utility Workers' Union of America, A.F.L.-C.I.O.  The
 existing collective bargaining agreement expires in 1997.  Employee
 relations have generally been satisfactory.

(2)    Significant Accounting Policies

       (a) Accounting Principles

       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.

       Certain prior year amounts are reclassified from time to time to con-
 form with the presentation used in the current year's financial statements. 

       (b) Regulatory Assets

       The Company is regulated as to rates, accounting and other matters by
 various authorities, including the Federal Energy Regulatory Commission
 (FERC) and the Massachusetts Department of Public Utilities (DPU).

       Based on the current regulatory framework, the Company accounts for
 the economic effects of regulation in accordance with the provisions of
 Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
 the Effects of Certain Types of Regulation."  The Company has established
 various regulatory assets in cases where the FERC has permitted or is
 expected to permit recovery of specific costs over time.  In March 1995, the
 Financial Accounting Standards Board issued SFAS No. 121, "Accounting for
<PAGE>
<PAGE 22>

                          CANAL ELECTRIC COMPANY

 the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
 Of."  SFAS No. 121 imposes stricter criteria for regulatory assets by
 requiring that such assets be probable of future recovery at each balance
 sheet date.  Management does not expect that the effects of SFAS No. 121,
 which the Company adopted January 1, 1996, will have a material impact on
 its financial position or results of operations.  However, this conclusion
 may change in the future as changes are made in the current regulatory
 framework pursuant to an electric utility restructuring order issued by the
 DPU in August 1995.

       The principal regulatory assets included in deferred charges at
 December 31, 1995 and 1994 were as follows:
                                                       1995        1994
                                                     (Dollars in Thousands)

       Seabrook related costs                         $ 9 511    $12 648
       Deferred income taxes                           14 106      5 537
       Postretirement benefit costs                     1 774      1 242
         Total regulatory assets                      $25 391    $19 427

       As of December 31, 1995, all of the Company's regulatory assets,
 except postretirement benefit costs, are reflected in rates charged to
 customers over a weighted average period of approximately 19 years.  In
 February 1996, FERC accepted for filing rate schedules that provide for the
 recovery of the postretirement benefit costs over a six-month period
 beginning in March 1996.

       (c) Transactions with Affiliates

       Transactions between the Company and other system companies include
 purchases and sales of electricity, including the Company's acquisition and
 resale of capacity entitlements and related energy generated by certain
 units of other New England utilities.  The Company functions as the
 principal supplier of electric generation capacity for and on behalf of
 affiliates Cambridge Electric Light Company (Cambridge) and Commonwealth
 Electric Company (Commonwealth Electric), including abandonment and
 nonconstruction costs related to the Seabrook project.  In addition,
 payments for management, accounting, data processing and other services are
 made to affiliate COM/Energy Services Company.  Transactions with other
 system companies are subject to review by the FERC and the DPU.

       The Company's operating revenues included the following intercompany
 amounts for the periods indicated:

 Period Ended      Electricity Sales                       Seabrook Units
 December 31,        (Canal Units)      Purchased Power       and Other  
                                    (Dollars in Thousands)

     1995              $39 617             $18 694            $36 136
     1994               45 906              31 288             45 116
     1993               53 174              31 777             48 109

       (d) Other Major Customers

       The Company is a wholesale electric generating company that sells 
<PAGE>
<PAGE 23>

                          CANAL ELECTRIC COMPANY

 power under life-of-the-unit contracts, approved by FERC to Boston Edison
 Company, Montaup Electric Company and New England Power Company,
 (unaffiliated utilities).  Each utility is obligated to purchase one-quarter
 of the capacity and energy of Canal Unit 1.

       (e) Equity Method of Accounting

       The Company uses the equity method of accounting for its 3.8% invest-
 ment in the New England/Hydro-Quebec Phase II transmission facilities due in
 part to its ability to exercise significant influence over operating and
 financial policies of the entity.  Under this method, it records as income
 the proportionate share of the net earnings of this project with a corre-
 sponding increase in the carrying value of the investment.  The investment
 amount is reduced as cash dividends are received.  For further information
 on this investment, refer to Schedule I in Part IV of this report.

       (f) Depreciation and Nuclear Fuel Amortization

       Depreciation is provided using the straight-line method at rates
 intended to amortize the original cost and the estimated cost of removal
 less salvage of properties over their estimated economic lives.  The
 Company's composite depreciation rate, based on average depreciable property
 in service, was 4.09% in 1995, 3.49% in 1994 and 3.47% in 1993.  In 1993,
 the depreciable life of Unit 1 was extended from 1996 to 2002 and resulted
 in a decrease in depreciation expense of approximately $1.7 million in that
 period.

       The cost of nuclear fuel is amortized to fuel expense based on the
 quantity of energy produced.  Nuclear fuel expense also includes a provision
 for the costs associated with the ultimate disposal of the spent nuclear
 fuel.

       (g) Maintenance

       Expenditures for repairs of property and replacement and renewal of
 items determined to be less than units of property are charged to
 maintenance expense.  Additions, replacements and renewals of property
 considered to be units of property, are charged to the appropriate plant
 accounts.  Upon retirement, accumulated depreciation is charged with the
 original cost of property units and the cost of removal net of salvage.

       (h) Allowance for Funds Used During Construction

       Under applicable rate-making practices, the Company is permitted to
 include an allowance for funds used during construction (AFUDC) as an
 element of its depreciable property costs.  This allowance is based on the
 amount of construction work in progress that is not included in the rate
 base on which the Company earns a return.  An amount equal to the AFUDC
 capitalized in the current period is reflected in the accompanying
 statements of income.

       While AFUDC does not provide funds currently, these amounts are
 recoverable in revenues over the service life of the constructed property. 
 The Company develops rates based upon its current cost of capital and used a
 compound rate of 6.75% in 1995, 5.25% in 1994 and 3.75% in 1993.
<PAGE>
<PAGE 24>

                          CANAL ELECTRIC COMPANY

(3)    Income Taxes

       For financial reporting purposes, the Company provides federal and
 state income taxes on a separate return basis.  However, for federal income
 tax purposes, the Company's taxable income and deductions are included in
 the consolidated income tax return of the System and it makes tax payments
 or receives refunds on the basis of its tax attributes in the tax return in
 accordance with applicable regulations.

       The following is a summary of the provisions for income taxes for the
 years ended December 31, 1995, 1994 and 1993:

                                           1995        1994       1993
                                            (Dollars in Thousands) 
 Federal:
     Current                             $ 3 637     $ 6 321    $ 7 192
     Deferred                              1 585       1 460      1 476
     Investment tax credits                 (638)       (702)      (715)
                                           4 584       7 079      7 953

 State:
     Current                                 955       1 138      1 181
     Deferred                                (11)        355        (31)
                                             944       1 493      1 150
                                           5 528       8 572      9 103

 Amortization of regulatory liability
  relating to deferred income taxes       (4 813)        -          -  

 Total                                   $   715     $ 8 572    $ 9 103

 Federal and state income taxes
     charged to:
       Operating expense                 $   609     $ 8 390    $ 8 893
       Other income                          106         182        210
                                         $   715     $ 8 572    $ 9 103

     Deferred tax liabilities and assets are determined based on the
 difference between the financial statement and tax basis of assets and
 liabilities using enacted tax rates in effect in the year in which the
 differences are expected to reverse.
 
     In May 1995, the Company refunded certain unprotected excess deferred
 taxes to Commonwealth Electric and Cambridge Electric resulting in a
 reduction to the 1995 tax provision.
<PAGE>
<PAGE 25>

                          CANAL ELECTRIC COMPANY

     Accumulated deferred income taxes consisted of the following in 1995 and
 1994:
                                                  1995        1994
                                                (Dollars in Thousands)
        Liabilities
           Property-related                     $79 918     $77 587
           Seabrook nonconstruction               3 089       4 504
           All other                              2 327       1 291
                                                 85 334      83 382
        Assets
           Investment tax credit                  7 758       8 170
           Regulatory liability                   2 335       5 189
           All other                              1 443       1 247
                                                 11 536      14 606
     
     Accumulated deferred income taxes, net     $73 798     $68 776
     
     The net year-end deferred income tax liability above includes a current
 deferred tax liability of $884,000 and $44,000 in 1995 and 1994,
 respectively, which are included in accrued income taxes in the accompanying
 balance sheets.

       The total income tax provision set forth on the previous page
 represents 5% in 1995 and 38% in 1994 and 1993, of income before such taxes
 in each year.  The following table reconciles the statutory federal income
 tax rate to these percentages:
                                                  1995     1994      1993

 Federal statutory rate                            35%      35%       35%

 Federal income tax expense at statutory levels  $5 196   $7 956  $ 8 479
 Increase (Decrease) from statutory rate:
   Tax versus book depreciation                   1 227    1 311    1 318
   State tax, net of federal tax benefit            613      970      748
   Amortization of investment tax credits          (638)    (689)    (671)
   Excess deferred reserves                      (4 813)     -        -
   Reversals of capitalized expenses               (556)    (555)    (555)
   Other                                           (314)    (421)    (216)
                                                 $  715   $8 572  $ 9 103

 Effective federal tax rate                         5%      38%      38%

(4)    Long-Term Debt and Interim Financing

       (a) Long-Term Debt

       Long-term debt outstanding, exclusive of current sinking fund
 requirements and related premiums, collateralized by substantially all of
<PAGE>
<PAGE 26>

                          CANAL ELECTRIC COMPANY

 the Company's property, is as follows:

                                      Original    Balance December 31,
                                       Issue        1995         1994
                                            (Dollars in Thousands)
 First Mortgage Bonds -
   Series A, 7%, due 1996             $19 000     $   -        $ 3 800
   Series B, 8.85%, due 2006           35 000      34 650       34 650
   Series E, 7 3/8%, due 2020          10 000      10 000       10 000
   Series F, 9 7/8%, due 2020          40 000      40 000       40 000
                                                  $84 650      $88 450

       The Series A First Mortgage Bonds require an annual sinking fund
 payment of $760,000 with an option to retire an additional $95,000 per
 quarter.

       The Series B First and General Mortgage Bonds require an annual
 sinking fund payment of $350,000.  The requirement may be met by payment,
 repurchase of bonds or certification of an amount of property additions
 equal to 60% of bondable property (as that term is defined in the
 indenture).  The Company expects to certify additional bondable property in
 lieu of making sinking fund payments on these bonds.

       The Series E and Series F First and General Mortgage Bonds were issued
 in conjunction with The Industrial Development Authority of the State of New
 Hampshire issuing Solid Waste Disposal Bonds and Pollution Control Bonds,
 respectively.  The bonds were issued pursuant to a Loan and Trust Agreement
 dated December 1, 1990 among the Authority, the Company and the First
 National Bank of Boston, the Trustee. 

       (b) Notes Payable to Banks

       The Company and other system companies maintain both committed and
 uncommitted lines of credit for the short-term financing of their
 construction programs and other corporate purposes.  As of December 31,
 1995, system companies had $80 million of committed lines of credit that
 will expire at varying intervals in 1996.  These lines are normally renewed
 upon expiration and require annual fees of up to .1875% of the individual
 line.  At December 31, 1995, the system's uncommitted lines of credit
 totaled $70 million.  Interest rates on the Company's outstanding borrowings
 generally are at an adjusted money market rate and averaged 6.1% and 4.3% in
 1995 and 1994, respectively.  The Company's notes payable to banks totaled
 $23,425,000 and $11,325,000 at December 31, 1995 and 1994, respectively.

       (c) Advances from Affiliates

       The Company had short-term notes payable to the System totaling
 $555,000 and $9,350,000 at December 31, 1995 and 1994, respectively.  These
 notes are written for a term of up to 11 months and 29 days.  Interest is at
 the prime rate and is adjusted for changes in that rate during the terms of
 the notes.  This rate averaged 8.8% and 7.3% in 1995 and 1994, respectively.

       The Company is a member of the COM/Energy Money Pool (the Pool), an
 arrangement among the subsidiaries of the System, whereby short-term cash
 surpluses are used to help meet the short-term borrowing needs of the 
<PAGE>
<PAGE 27>

                          CANAL ELECTRIC COMPANY

 utility subsidiaries.  In general, lenders to the Pool receive a higher rate
 of return than they otherwise would on such investments, while borrowers pay 
 a lower interest rate than that available from banks.  Interest rates on the
 outstanding borrowings are based on the monthly average rate the Company
 would otherwise have to pay banks, less one-half the difference between that
 rate and the monthly average U.S. Treasury Bill weekly auction rate.  The
 borrowings are for a period of less than one year and are payable upon
 demand.  Rates on these borrowings averaged 5.8% and 4.3% in 1995 and 1994,
 respectively.  The Company notes payable to the Pool of $5,310,000 at
 December 31, 1995 and had no notes payable to the Pool at December 31, 1994.

       (d) Disclosures About Fair Value of Financial Instruments

       The fair value of certain financial instruments included in the
 accompanying balance sheets as of December 31, 1995 and 1994 are as follows:

                                1995                 1994   
                                   (Dollars in Thousands)

                         Carrying    Fair      Carrying    Fair  
                           Value    Value        Value    Value  

     Long-term Debt       $88 091  $105 197     $88 823   $91 020

     The carrying amount of cash, notes payable to banks and advances from
 affiliates approximates the fair value because of the short maturity of
 these financial instruments.

     The estimated fair value of long-term debt is based on quoted market
 prices of the same or similar issues or on the current rates offered for
 debt with the same remaining maturity.  The fair values shown above do not
 purport to represent the amounts at which those obligations would be
 settled.

(5)    Commitments and Contingencies

       (a) Construction

       The Company is engaged in a continuous construction program presently
 estimated at $57.2 million for the five-year period 1996 through 2000.  Of
 that amount, $19.1 million is estimated for 1996.  The program is subject to
 periodic review and revision because of factors such as changes in business
 conditions, rates of customer growth, effects of inflation, maintenance of
 reliable and safe service, equipment delivery schedules, licensing delays,
 availability, and cost of capital and environmental factors.  The Company
 expects to finance these expenditures on an interim basis with internally
 generated funds and short-term borrowings that are ultimately expected to be
 repaid with proceeds from sales of long-term debt and equity securities.

       (b) Seabrook Nuclear Power Plant

       The system's 3.52% interest in the Seabrook nuclear power plant is
 owned by the Company to provide for a portion of the capacity and energy
 needs of Cambridge and Commonwealth Electric.  The Company is recovering
 100% of its Seabrook 1 investment through power contracts pursuant to FERC
<PAGE>
<PAGE 28>

                          CANAL ELECTRIC COMPANY

 approval.

       Pertinent information with respect to the Company's joint-ownership
 interest in Seabrook 1 and information relating to operating expenses which
 are included in the accompanying financial statements, are as follows:

                                       1995              1994
                                       (Dollars in Thousands)

     Utility plant-in-service        $232 547          $232 374
     Nuclear fuel                      20 138            18 500
     Accumulated depreciation
       and amortization               (50 230)          (41 654)
     Construction work in progress        946               651
                                     $203 401          $209 871

                                    1995      1994        1993
                                       (Dollars in Thousands)
     Operating expenses:
      Fuel                       $ 2 353    $ 1 939     $ 3 853
      Other operation              4 292      4 340       4 580
      Maintenance                  1 376      1 688         893
      Depreciation                 6 542      6 531       6 522
      Amortization                 1 319      1 320       1 319
                                 $15 882    $15 818     $17 167

       Plant capacity (MW)         1,150       In-service date    1990
       Canal's share:                          Operating license
        Percent interest            3.52%       expiration date   2026
        Entitlement (MW)            40.5

       The Company and the other joint-owners have established a
 decommissioning fund to cover decommissioning costs.  The estimated cost to
 decommission the plant is $431.6 million in current dollars.  The Company's
 share of this liability (approximately $15.2 million), less its share of the
 market value of the assets held in a decommissioning trust (approximately
 $1.5 million), is approximately $13.7 million at December 31, 1995.

       (c) Environmental Matters

       The Company is subject to laws and regulations administered by
 federal, state and local authorities relating to the quality of the
 environment.  These laws and regulations affect, among other things, the
 siting and operation of electric generating and transmission facilities and
 can require the installation of expensive air and water pollution control
 equipment.  These regulations have had an impact on the Company's operations
 in the past and will continue to have an impact on future operations,
 capital costs and construction schedules of major facilities.

(6)    Dividend Restriction

       At December 31, 1995, approximately $41,683,000 of retained earnings
 was restricted against the payment of cash dividends by terms of the
 Indenture of Trust securing long-term debt.
<PAGE>
<PAGE 29>

                          CANAL ELECTRIC COMPANY

(7)    Employee Benefit Plans

       (a) Pension

       The Company has a noncontributory pension plan covering substantially
 all regular employees who have attained the age of 21 and have completed one
 year of service.  Pension benefits are based on an employee's years of
 service and compensation.  The Company makes monthly contributions to the
 plan consistent with the funding requirements of the Employee Retirement
 Income Security Act of 1974.

       Components of pension expense and related assumptions to develop
 pension expense were as follows:

                                       1995      1994     1993
                                        (Dollars in Thousands)

 Service cost                        $   435   $   457  $   384
 Interest cost                         1 151       995      960
 Return on plan assets - (gain)/loss  (3 113)      220   (1 741)
 Net amortization and deferral         2 045    (1 139)     913
 Total pension expense                   518       533      516
 Transfers from affiliates, net          324       279      270
 Less: Amounts capitalized and other     193       181      160
 Net pension expense                 $   649   $   631  $   626


 Discount rate                         8.50%     7.25%    8.50%
 Assumed rate of return                9.00      8.50     8.50
 Rate of increase in future
   compensation                        5.00      4.50     5.50

     Pension expense reflects the use of the projected unit credit method
 which is also the actuarial cost method used in determining future funding
 of the plan.  The funded status of the Company's pension plan (using a
 measurement date of December 31) is as follows:

                                              1995        1994
                                           (Dollars in Thousands)
 Accumulated benefit obligation:
       Vested                              $(10 208)    $ (8 698)
       Nonvested                             (1 910)      (1 641)
                                           $(12 118)    $(10 339)

 Projected benefit obligation              $(15 287)    $(12 579)
 Plan assets at fair market value            15 452       12 479
 Projected benefit obligation
    (greater) less than plan assets             165         (100)
 Unamortized transition obligation              102          120
 Unrecognized prior service cost                534          588
 Unrecognized gain                           (1 239)      (1 057)
 Accrued pension liability                 $   (438)    $   (449)

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<PAGE 30>

                          CANAL ELECTRIC COMPANY

       The following actuarial assumptions were used in determining the
 plan's year-end funded status:
                                              1995        1994

 Discount rate                                7.25%       8.50%
 Rate of increase in future compensation      4.25        5.00

       Plan assets consist primarily of fixed-income and equity securities. 
 Fluctuations in the fair market value of plan assets will affect pension
 expense in future years.

       (b) Other Postretirement Benefits

       Historically, the Company provided postretirement health care and life
 insurance benefits to eligible retired employees.  Employees became eligible
 for these benefits if their age plus years of service at retirement equaled
 75 or more.  However, as of January 1, 1993, the Company eliminated
 postretirement health care benefits for those non-bargaining employees who
 were less than 40 years of age or had less than 12 years of service at that
 date.

       The Company adopted the provisions of Statement of Financial
 Accounting Standards No. 106 "Employers' Accounting for Postretirement
 Benefits Other Than Pensions" (SFAS No. 106) as of January 1, 1993 and the
 cumulative effect of implementation of SFAS No. 106 was approximately $5
 million, which is being amortized over 20 years.  Prior to 1993, the cost of
 postretirement benefits was recognized as the benefits were paid.

       The Company makes contributions to various voluntary employees'
 beneficiary association (VEBA) trusts that were established pursuant to
 section 501(c)(9) of the Internal Revenue Code (the Code).  The Company also
 makes contributions to a subaccount of its pension plan pursuant to section 
 401(h) of the Code to satisfy a portion of its postretirement benefit
 obligation.  The Company contributed approximately $693,000, $740,000 and
 $684,000 to these trusts during 1995, 1994 and 1993, respectively.

       The net periodic postretirement benefit cost for the years ended
 December 31, 1995, 1994 and 1993 includes the following components and
 related assumptions:
                                             1995     1994     1993
                                              (Dollars in Thousands)

    Service cost                           $  131    $ 164    $ 169
    Interest cost                             441      409      428
    Return on plan assets                    (383)     (11)     (35)
    Amortization of transition
      obligation over 20 years                248      248      249
    Net amortization and deferral             261      (66)       1
    Total postretirement benefit cost         698      744      812
    Transfers from affiliates, net            447      426      374
    Less: Amounts capitalized and other       867      892      857
      Net postretirement benefit cost      $  278    $ 278    $ 329
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<PAGE 31>

                          CANAL ELECTRIC COMPANY

                                             1995     1994     1993

    Discount rate                            8.50%    7.25%    8.50%
    Assumed rate of return                   9.00     8.50     8.50
    Rate of increase in future compensation  5.00     4.50     4.50

    The funded status of the Company's postretirement benefit plan using a
 measurement date of December 31, 1995 and 1994 is as follows:

                                                      1995       1994
                                                    (Dollars in Thousands)
    Accumulated postretirement benefit obligation:
      Retirees                                      $(2 829)  $(2 710)
      Fully eligible active plan participants        (1 028)     (553)
      Other active plan participants                 (2 409)   (2 250)
                                                     (6 266)   (5 513)
    Plan assets at fair market value                  2 048     1 187
    Accumulated postretirement benefit obligation
      greater than plan assets                       (4 218)   (4 326)
    Unamortized transition obligation                 4 226     4 474
    Unrecognized gain                                    (8)     (148)
                                                    $   -     $   -  

    The following actuarial assumptions were used in determining the plan's
 estimated accumulated postretirement benefit obligation (APBO) and the
 funded status for 1995 and 1994:
                                                      1995       1994

    Discount rate                                     7.25%      8.50%
    Rate of increase in future compensation           4.25       5.00
    Medicare part B premiums                         12.20      12.30
    Medical care                                      8.00       8.50
    Dental care                                       5.00       5.00

    The above rates, with the exception of the dental rate, which remains
 constant, decrease to five percent in the year 2007 and remain at that level
 thereafter.  A one percent change in the medical trend rate would have an
 $87,000 impact on the Company's annual expense and would change the APBO by
 approximately $834,000.

    Plan assets consist primarily of fixed-income and equity securities.
 Fluctuations in the fair market value of plan assets will affect
 postretirement benefit expense in future years.

    In February 1996, FERC accepted for filing rate schedules that provide
 for the recovery of the Company's SFAS No. 106 expense effective with its
 March 1996 contract billings, including the recovery of previously deferred
 costs over a six-month period.

    (c) Savings Plan

    The Company has an Employees Savings Plan that provides for Company
 contributions equal to contributions by eligible employees up to four
 percent of each employee's compensation rate.  Effective January 1, 1993,
 the rate was increased to five percent for those employees no longer 
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<PAGE 32>

                          CANAL ELECTRIC COMPANY

eligible for postretirement health benefits.  The Company's contribution was
$258,000 in 1995, $250,000 in 1994 and $234,000 in 1993.

(8) Lease Obligations

    The Company leases equipment and office space under arrangements that are
 classified as operating leases.  These lease agreements are for terms of one
 year or longer.  Leases currently in effect contain no provisions that
 prohibit the Company from entering into future lease agreements or
 obligations.

    The Company has entered into support agreements with other participating
 New England utilities for 3.8% of the Hydro-Quebec Phase II transmission
 facilities and makes monthly support payments to cover depreciation and
 interest costs.

    Future minimum lease payments, by period and in the aggregate, of capital
 leases and noncancelable operating leases consisted of the following at
 December 31, 1995:
                                     Operating Leases  Capital Leases
                                          (Dollars in Thousands)

 1996                                    $  468        $ 1 997
 1997                                       468          1 932
 1998                                       424          1 869
 1999                                       412          1 806
 2000                                       412          1 744
 Beyond 2000                              1 181         20 671
 Total future minimum lease payments     $3 365         30 019
 Less:Estimated interest element
   included therein                                     16 891
 Estimated present value of future
   minimum lease payments                              $13 128

       Total rent expense for all operating leases, except those with terms
 of a month or less, amounted to $431,000 in 1995, $421,000 in 1994 and
 $438,000 in 1993.  There were no contingent rentals and no sublease rentals
 for the years 1995, 1994 and 1993.
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<PAGE 33>

                          CANAL ELECTRIC COMPANY

                                 PART IV.

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

(a) 1.   Index to Financial Statements

     Financial statements and notes thereto of the Company together with the
     Report of Independent Public Accountants, are filed under Item 8 of this
     report and listed on the Index to Financial Statements and Schedules
     (page 15).

(a) 2.   Index to Financial Statement Schedules

     Filed herewith at page indicated are financial statement schedules of
     the Company:

     Schedule I - Investments in, Equity Earnings of, and Dividends Received
     from Related Parties - Years Ended December 31, 1995, 1994 and 1993
     (page 41).

(a) 3.   Exhibits:

              Notes to Exhibits - 

    a. Unless otherwise designated, the exhibits listed below are
       incorporated by reference to the appropriate exhibit numbers and the
       Securities and Exchange Commission file numbers indicated in
       parentheses.

    b. The following is a glossary of Commonwealth Energy System and
       subsidiary companies' acronyms that are used throughout the following
       Exhibit Index:

       CES.................... Commonwealth Energy System
       CE..................... Commonwealth Electric Company
       CEL.................... Cambridge Electric Light Company
       CEC.................... Canal Electric Company
       NBGEL.................. New Bedford Gas and Edison Light Company

                               Exhibit Index

Exhibit 3.Articles of incorporation and by-laws.

 3.1.     Articles of incorporation of CEC (Exhibit 1 to CEC's 1990 Form 10-
          K, File No. 2-30057).

 3.2.     By-laws of CEC, as amended (Exhibit 2 to the CEC 1990 Form 10-K,
          File No. 2-30057).
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<PAGE 34>

                          CANAL ELECTRIC COMPANY

Exhibit 4.Instruments defining the rights of security holders, including
          indentures

4.2.1     Indenture of Trust and First Mortgage between CEC and State Street
          Bank and Trust Company, Trustee, dated October 1, 1968 (Exhibit
          4(b) to the CEC Form S-1, File No. 2-30057).

4.2.2     First and General Mortgage Indenture between CEC and Citibank,
          N.A., Trustee, dated September 1, 1976 (Exhibit 4(b)(2) to the CEC
          Form S-1, File No. 2-56915).

4.2.3     First Supplemental dated October 1, 1968 with State Street Bank
          and Trust Company, Trustee, dated September 1, 1976 (Exhibit
          4(b)(3) to the CEC Form S-1, File No. 2-56915).

4.2.4     Third Supplemental dated September 1, 1976 with Citibank, N.A.,
          New York, NY, Trustee, dated December 1, 1990 (Exhibit 3 to the
          CEC 1990 Form 10-K, File No. 2-30057).

4.2.5     Fourth Supplemental dated September 1, 1976 with Citibank, N.A.,
          New York, NY, Trustee, dated December 1, 1990 (Exhibit 4 to the
          CEC 1990 Form 10-K, File No. 2-30057).

Exhibit 10. Material Contracts

10.1      Power contracts.

10.1.1    Power contracts between CEC and NBGEL and CEL dated December 1,
          1965 (Exhibit 13(a)(1-4) to the CEC Form S-1, File No. 2-30057).

10.1.2.1  Agreement between CEC and Montaup Electric Company (MEC) for use of
          common facilities by Canal Units I and II and for allocation of
          related costs, executed October 14, 1975 (Exhibit 1 to the CEC 1985
          Form 10-K, File No. 2-30057).

10.1.2.2  Agreement between CEC and MEC for joint-ownership of Canal Unit II,
          executed October 14, 1975 (Exhibit 2 to the CEC 1985 Form 10-K,
          File No. 2-30057).

10.1.2.3  Agreement between CEC and MEC for lease relating to Canal Unit II,
          executed October 14, 1975 (Exhibit 3 to the CEC 1985 Form 10-K,
          File No. 2-30057).

10.1.3    Contract between CEC, NBGEL and CEL, affiliated companies, for the
          sale of specified amounts of electricity from Canal Unit 2 dated
          January 12, 1976 (Exhibit 7 to the CES Form 10-K for 1985, File No.
          1-7316).

10.1.4    Power contract, as amended to February 28, 1990, superseding the
          Power Contract dated September 1, 1986 and amendment dated June 1,
          1988, between CEC (seller) and CE and CEL (purchasers) for seller's
          entire share of the Net Unit Capability of Seabrook 1 and related
          energy (Exhibit 1 to the CEC Form 10-Q (March 1990), File No. 2-
          30057).
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                          CANAL ELECTRIC COMPANY

10.1.5    Purchase and Sale Agreement together with an implementing Addendum
          dated December 31, 1981 between CEC and CE for the purchase and
          sale of the CE 3.52% joint-ownership interest in the Seabrook
          units, dated January 2, 1981 (Exhibit 1 to the Company's Form 8-K
          (January 13, 1982), File No. 2-30057).

10.1.6    Agreement for Joint-Ownership, Construction and Operation of the
          New Hampshire Nuclear Units (Seabrook) dated May 1, 1973 and filed
          by NBGEL as Exhibit 13(N) on Form S-1 dated October 1973, File No.
          2-49013, and as amended below:

10.1.6.1  First through Fifth Amendments to 10.1.6 dated May 24, 1974,
          June 21, 1974, September 25, 1974, October 25, 1974, and January
          31, 1975, respectively (Exhibit 13(m) to the NBGEL Form S-1
          (November 7, 1975), File No. 2-54995).

10.1.6.2  Sixth through Eleventh Amendments to 10.1.6 dated April 18, 1979,
          April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and
          December 15, 1979, respectively (Exhibit 1 to the CEC 1989 Form 10-
          K, File No. 2-30057).

10.1.6.3  Twelfth and Thirteenth Amendments to 10.1.6 dated May 16, 1980 and
          December 31, 1980, respectively ((Exhibit 1 and 2 to the CE Form
          10-Q (June 1982), File No. 2-7749).

10.1.6.4  Fourteenth Amendment to 10.1.6 dated June 1, 1982 (Exhibit 3 to the
          CE Form 10-Q (June 1982), File No. 2-7749).

10.1.6.5  Fifteenth and Sixteenth Amendments to 10.1.6 dated April 27, 1984
          and June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q
          (June 1984), File No. 2-30057).

10.1.6.6  Seventeenth Amendment to 10.1.6 dated March 8, 1985 (Exhibit 1 to
          the CEC Form 10-Q (March 1985), File No. 2-30057).

10.1.6.7  Eighteenth Amendment to 10.1.6 dated March 14, 1986 (Exhibit 1 to
          the CEC Form 10-Q (March 1986), File No. 2-30057).

10.1.6.8  Nineteenth Amendment to 10.1.6 dated May 1, 1986 (Exhibit 1 to the
          CEC Form 10-Q (June 1986), File No. 2-30057).

10.1.6.9  Twentieth Amendment to 10.1.6 dated September 19, 1986 (Exhibit 1
          to the CEC Form 10-K for 1986, File No. 2-30057).

10.1.6.10 Twenty-First Amendment to 10.1.6 dated November 12, 1987 (Exhibit 1
          to the CEC Form 10-K for 1987, File No. 2-30057).

10.1.6.11 Twenty-Second Amendment and Settlement Agreement to 10.1.6 dated
          January 13, 1989 (Exhibit 4 to the CEC 1988 Form 10-K, File No. 2-
          30057).

10.1.7    Resolutions proposed by Merrill Lynch Capital Markets and adopted
          by the Joint-Owners of the Seabrook Nuclear Project regarding
          Project financing, dated May 14, 1984 (Exhibit 1 to the CEC Form
          10-Q (March 1984), File No. 2-30057).
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<PAGE 36>

                          CANAL ELECTRIC COMPANY

10.1.8    Interim Agreement to Preserve and Protect the Assets of and
          Investment in the New Hampshire Nuclear Units by and between CEC,
          PSNH and other Participants dated April 27, 1984 (Exhibit 2 to the
          CEC Form 10-Q (June 1984), File No.2-30057).

10.1.9    Agreement for Seabrook Project Disbursing Agent establishing Yankee
          Atomic Electric Company as the disbursing agent under the Joint-
          Ownership Agreement, dated May 23, 1984 (Exhibit 4 to the CEC Form
          10-Q (June 1984), File No. 2-30057).

10.1.9.1  First Amendment to 10.1.9 dated March 8, 1985 (Exhibit 2 to the CEC
          Form 10-Q (March 1985),File No.2-30057).

10.1.9.2  Second through Fifth Amendments to 10.1.9 dated May 20, 1985, June
          18, 1985, January 2, 1986 and November 12, 1987, respectively,
          (Exhibit 4 to the CEC 1987 Form 10-K, File No. 2-30057).

10.1.10   Capacity Acquisition Agreement between CEC, CEL and CE dated
          September 25, 1980 (Exhibit 1 to the CEC 1991 Form 10-K, File No.
          2-30057).

10.1.10.1 Supplement to 10.1.10 consisting of three Capacity Acquisition
          Commitments each dated May 7, 1987, concerning Phases I and II of
          the Hydro-Quebec Project and electricity acquired from Connecticut
          Light and Power Company (CL&P) (Exhibit 1 to the CEC Form 10-Q
          (September 1987), File No. 2-30057).

10.1.10.2 Amendment to 10.1.10 as amended, and restated, June 1, 1993,
          henceforth referred to as the Capacity Acquisition and Disposition
          Agreement, whereby CEC, as agent, in addition to acquiring power
          may also sell bulk electric power which CEL and/or CE owns or
          otherwise has the right to sell (Exhibit 1 to the CEC Form 10-Q
          (September 1993), File No. 2-30057).

10.1.10.3 Capacity Disposition Commitment dated June 25, 1993 by and between
          CEC (Unit 2) and CE for the sale of a portion of CE's entitlement
          in Unit 2 to Green Mountain Power Corporation (Exhibit 1 to the CEC
          Form 10-Q (September 1993), File No. 2-30057).

10.1.11   Termination Supplement between CEC, CE and CEL for Seabrook Unit 2,
          dated December 8, 1986 (Exhibit 3 to the CEC Form 10-K for 1986,
          File No. 2-30057).

10.1.12   Agreement, dated September 1, 1985, With Respect To Amendment of
          Agreement With Respect To Use Of Quebec Interconnection, dated
          December 1, 1981, among certain NEPOOL utilities to include Phase
          II facilities in the definition of "Project" (Exhibit 1 to the CEC
          Form 10-Q (September 1985), File No. 2-30057).

10.1.12.1 Amendatory Agreement No.3 with Respect to Use of Quebec
          Interconnection dated December 1, 1981, as amended to June 1, 1990,
          among certain NEPOOL utilities (Exhibit 1 to the CEC Form 10-Q
          (September 1990), File No. 2-30057).

<PAGE>
<PAGE 37>

                          CANAL ELECTRIC COMPANY

10.1.13   Preliminary Quebec Interconnection Support Agreement - Phase II
among certain New England electric utilities dated June 1, 1984
(Exhibit 6 to the CE Form 10-Q (June 1984), File No. 2-7749).

10.1.13.1 First through Third Amendments to 10.1.13 as amended March 1, 1985,
          January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the
          CEC Form 10-Q (March 1987), File No. 2-30057).

10.1.13.2 Fifth through Seventh Amendments to 10.1.13 as amended October 15,
          1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1
          to the CEC Form 10-Q (June 1988), File No. 2-30057).

10.1.13.3 Fourth and Eighth Amendments to 10.1.13 as amended July 1, 1987 and
          August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q
          (September 1988), File No. 2-30057).

10.1.13.4 Ninth and Tenth Amendments to 10.1.13 as amended November 1, 1988
          and January 15, 1989, respectively (Exhibit 2 to the CEC 1988 Form
          10-K, File No. 2-30057).

10.1.13.5 Eleventh Amendment to 10.1.13 as amended November 1, 1989 (Exhibit
          4 to the CEC 1989 Form 10-K, File No. 2-30057).

10.1.13.6 Twelfth Amendment to 10.1.13 as amended April 1, 1990 (Exhibit 1 to
          the CEC Form 10-Q (June 1990) File No. 2-30057).

10.1.14   Agreement to Preliminary Quebec Interconnection Support Agreement -
          Phase II among Public Service Company of New Hampshire (PSNH), New
          England Power Co. (NEP), Boston Edison Co. (BECO), and CEC whereby
          PSNH assigns a portion of its interests under the original
          Agreement to the other three parties, dated October 1, 1987
          (Exhibit 2 to the CEC 1987 Form 10-K, File No. 2-30057).

10.1.15   Phase II Equity Funding Agreement for New England Hydro
          Transmission Electric Company, Inc. (New England Hydro)
          (Massachusetts), dated June 1, 1985, between New England Hydro and
          certain NEPOOL utilities (Exhibit 2 to the CEC Form 10-Q (September
          1985), File No. 2-30057).

10.1.16   Phase II Equity Funding Agreement for New England Hydro
          Transmission Corporation (New Hampshire Hydro), dated June 1, 1985,
          between New Hampshire Hydro and certain NEPOOL utilities (Exhibit 3
          to the CEC Form 10-Q (September 1985), File No. 2-30057).

10.1.16.1 Amendment No. 1 to 10.1.16 as amended May 1, 1986 (Exhibit 6 to the
          CEC Form 10-Q (March 1987), File No. 2-30057).

10.1.16.2 Amendment No. 2 to 10.1.16 as amended September 1, 1987 (Exhibit 3
          to the CEC Form 10-Q (September 1987), File No. 2-30057).

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<PAGE 38>

                          CANAL ELECTRIC COMPANY

10.1.17   Phase II Massachusetts Transmission Facilities Support Agreement,
          dated June 1, 1985, refiled as a single agreement incorporating
          Amendments 1 through 7 dated May 1, 1986 through January 1, 1989,
          respectively, between New England Hydro and certain NEPOOL
          utilities (Exhibit 2 to the CEC Form 10-Q (September 1990), File
          No. 2-30057).

10.1.18   Phase II New Hampshire Transmission Facilities Support Agreement,
          dated June 1, 1985, refiled as a single agreement incorporating
          Amendments 1 through 8 dated May 1, 1986 through January 1, 1989,
          respectively,  between New Hampshire Hydro and certain NEPOOL
          utilities (Exhibit 3 to the CEC Form 10-Q (September 1990), File
          No. 2-30057).

10.1.19   Phase II New England Power AC Facilities Support Agreement dated
          June 1, 1985, between New England Power and certain NEPOOL
          utilities (Exhibit 6 to the CEC Form 10-Q (September 1985), File
          No. 2-30057).

10.1.19.1 Amendments Nos. 1 and 2 to 10.1.19 as amended May 1, 1986 and
          February 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
          (March 1987), File No. 2-30057).

10.1.19.2 Amendments Nos. 3 and 4 to 10.1.19 as amended June 1, 1987 and
          September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
          (September 1987), File No. 2-30057).

10.1.20   Phase II BECO AC Facilities Support Agreement, dated June 1, 1985,
          between BECO and certain NEPOOL utilities (Exhibit 7 to the CEC
          Form 10-Q (September 1985), File No. 2-30057).

10.1.20.1 Amendments Nos. 1 and 2 to 10.1.20 as amended May 1, 1986 and
          February 1, 1987, respectively (Exhibit 2 to the CEC Form 10-Q
          (March 1987), File No. 2-30057).

10.1.20.2 Amendments Nos. 3 and 4 to 10.1.20 as amended June 1, 1987 and
          September 1, 1987, respectively (Exhibit 4 to the CEC Form 10-Q
          (September 1987), File No. 2-30057).

10.1.21   Agreement Authorizing Execution of Phase II Firm Energy Contract,
          dated September 1, 1985, among certain NEPOOL utilities in regard
          to the purchase of power from Hydro Quebec (Exhibit 8 to the CEC
          Form 10-Q (September 1985), File No. 2-30057).

10.1.22   Agreement to Share Certain Costs Associated with the Tewksbury-
          Seabrook Transmission Line, by and among certain NEPOOL utilities,
          amending participants, dated May 8, 1986 (Exhibit 2 to the CEC 1986
          Form 10-K, File No. 2-30057).

<PAGE>
<PAGE 39>

                          CANAL ELECTRIC COMPANY

10.1.23   Power Exchange Contract, dated March 24, 1993, between New England
          Power Company (NEP) and CEC for an exchange of unit capacity in
          which NEP will purchase 20 MW of CEC's Unit 2 capacity in exchange
          for CEC's purchase of 20 MW of NEP's Bear Swamp Units 1 and 2 (10
          MW per unit) commencing May 31, 1993 through April 28, 1997 and NEP
          will purchase 50 MW of CEC's Unit 2 capacity in exchange for CEC's
          purchase of 50 MW of NEP's Bear Swamp Units 1 and 2 (25 MW per
          unit) commencing November 1, 1993 through April 28, 1997 (Exhibit 1
          to the CEC Form 10-Q (March 1993), File No. 2-30057).

10.2      Other agreements.

10.2.1    Employees Savings Plan of Commonwealth Energy System and Subsidiary
          Companies as amended and restated as of January 1, 1993 (Exhibit 2
          to the CES Form 10-Q (September 1993), File No. 1-7316).

10.2.2    Pension Plan for Employees of Commonwealth Energy System and
          Subsidiary Companies as amended and restated January 1, 1993
          (Exhibit 1 to the CES Form 10-Q (September 1993), File No.1-7316).

10.2.3    New England Power Pool Agreement (NEPOOL) dated September 1, 1971
          as amended through August 1, 1977, between NEGEA Service Corp. as
          agent for CEL, CEC, NBGEL, and various other electric utilities
          operating in New England, together with amendments dated August 15,
          1978 and January 31, 1979 and February 1, 1980 (Exhibit 5(c)(13) to
          the CES Form S-16 (April 1980), File No. 2-64731).

10.2.3.1  Thirteenth Amendment to 10.2.3 as amended September 1, 1981
          (Exhibit 5 to the CES Form 10-K for 1981, File No. 1-7316).

10.2.3.2  Fourteenth through Twentieth Amendments to 10.2.3 as amended
          December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983,
          August 1, 1985, August 15, 1985 and September 1, 1985, respectively
          (Exhibit 4 to the CES Form 10-Q (September 1985), File No. 1-7316).

10.2.3.3  Twenty-first Amendment to the New England Power Pool Agreement
          dated September 1, 1971, as amended January 1, 1986 (Exhibit 1 to
          the CES Form 10-Q (March 1986), File No. 1-7316).

10.2.3.4  Twenty-second Amendment to 10.2.3 as amended to September 1, 1986
          (Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316).

10.2.3.5  Twenty-third Amendment to 10.2.3 as amended to April 30, 1987
          (Exhibit 1 to the CES Form 10-Q (June 1987), File No. 1-7316).

10.2.3.6  Twenty-fourth Amendment to 10.2.3 as amended to March 1, 1988
          (Exhibit 1 to the CES Form 10-K for 1987, File No. 1-7316).
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                          CANAL ELECTRIC COMPANY

10.2.3.7  Twenty-fifth Amendment to 10.2.3 as amended to May 1, 1988 (Exhibit
          1 to the CES Form 10-Q (March 1988), File No. 1-7316).

10.2.3.8  Twenty-sixth Amendment to 10.2.3 as amended to March 15, 1989
          (Exhibit 1 to the CES Form 10-Q (March 1989), File No. 1-7316).

10.2.3.9  Twenty-seventh Amendment to 10.2.3 as amended to October 1, 1990
          (Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316).

10.2.3.10 Twenty-eighth Amendment to 10.2.3 as amended September 15, 1992
          (Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316).

10.2.3.11 Twenty-ninth Amendment to 10.2.3 as amended May 1, 1993 (Exhibit 2
          to the CES Form 10-Q (September 1994), File No. 1-7316).

10.2.4    Fuel Supply, Facilities Lease and Operating Contract by and between
          on the one side, ESCO (Massachusetts), Inc. and Energy Supply &
          Credit Corporation on the other side and CEC dated February 1, 1985
          (Exhibit 1 to the CEC Form 10-K for 1984, File No. 2-30057).

10.2.4.1  Amendments Nos. 1 and 2 to 10.2.4 as amended July 1, 1986 and
          November 15, 1989, respectively (Exhibit 3 to the CEC 1989 Form 
          10-K, File No. 2-30057).

10.2.5    Oil Supply Contract by and between CEC (buyer) and Carey Energy
          Fuels Corporation (seller) for a portion of CEC's requirements of
          No. 6 residual fuel oil, dated July 1, 1991 (Exhibit 3 to the CEC
          Form 10-Q (June 1991), File No. 2-30057).

10.2.6    Assignment Agreement between CEC and ESCO (Massachusetts), Inc.
          (ESCO-Mass) and Energy Supply and Credit Corporation whereby CEC
          assigns to ESCO-Mass rights and obligations under the Supply
          Contract with Carey Energy Fuels Corporation, dated July 1, 1991
          (Exhibit 4 to the CEC Form 10-Q (June 1991), File No. 2-30057).

10.2.7    Assignment and Sublease Agreement and CEC's Consent of Assignment
          thereto whereby ESCO-Mass assigns its rights and obligations under
          Part II of the Resupply Agreement dated February 1, 1985 to ESCO
          Terminals Inc., dated June 4, 1985 (Exhibit 4 to the CEC Form 10-Q
          (June 1985), File No. 2-30057).

Filed herewith:

Exhibit 27.
          Financial Data Schedule for the year ended December 31, 1995
          (Filed herewith as Exhibit 1)

(b) Reports on Form 8-K

          No reports on Form 8-K were filed during the three months ended
          December 31, 1995.

<PAGE>
<PAGE 41>

<TABLE>                                                                           SCHEDULE I
                                        CANAL ELECTRIC COMPANY
                                  INVESTMENTS IN, EQUITY EARNINGS OF,
                              AND DIVIDENDS RECEIVED FROM RELATED PARTIES
                         FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
                                        (Dollars in Thousands)
<CAPTION>
                                   Investment                                       Investment
                                    Balance                                           Balance
Description of Investment and     Beginning of               Equity     Dividends     End of
Name of Issuer                        Year      Shares      Earnings    Received        Year  
New England/Hydro-Quebec Phase II
HVDC Transmission Project -
                                                        YEAR ENDED DECEMBER 31, 1995                  
<S>                                <C>          <C>          <C>          <C>         <C>
 New England Hydro-Transmission
   Electric Company, Inc.          $ 2 313      136 656      $  328       $  615      $2 026

 New England Hydro-Transmission
   Corporation                       1 489      734.526         211          354       1 346
     Total                         $ 3 802                   $  539       $  969      $3 372
                                                        YEAR ENDED DECEMBER 31, 1994                  
<S>                                <C>          <C>          <C>          <C>         <C>
 New England Hydro-Transmission
   Electric Company, Inc.          $ 2 408      136 656      $  314       $  409      $2 313

 New England Hydro-Transmission
   Corporation                       1 453      785.772         193          157       1 489
     Total                         $ 3 861                   $  507       $  566      $3 802
                                                        YEAR ENDED DECEMBER 31, 1993                  
<S>                                <C>          <C>          <C>          <C>         <C>
 New England Hydro-Transmission
   Electric Company, Inc.          $ 2 580      136 656      $  361       $  533      $2 408

 New England Hydro-Transmission
   Corporation                       1 590      785.772         212          349       1 453
     Total                         $ 4 170                   $  573       $  882      $3 861
<FN>
In 1995, New England Hydro-Transmission Corporation repurchased 6.52% of their outstanding shares at
$1,834.62 per share.  The Company received $94,017 for the repurchase of 51.246 shares, and has included
this amount with dividends.
</TABLE>
<PAGE>
<PAGE 42>

                          CANAL ELECTRIC COMPANY

                   FORM 10-K          DECEMBER 31, 1995

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

                                         By: WILLIAM G. POIST         
                                             William G. Poist,
                                             Chairman of the Board and
                                             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.

Principal Executive Officers:

WILLIAM G. POIST                                     March 28, 1996
William G. Poist,
Chairman of the Board and
Chief Executive Officer

R. D. WRIGHT                                         March 29, 1996
Russell D. Wright,
President and Chief Operating Officer

Principal Financial Officer:

JAMES D. RAPPOLI                                     March 28, 1996
James D. Rappoli
Financial Vice President and Treasurer


A majority of the Board of Directors:

WILLIAM G. POIST                                     March 28, 1996
William G. Poist, Director

R. D. WRIGHT                                         March 29, 1996
Russell D. Wright, Director

JAMES D. RAPPOLI                                     March 28, 1996
James D. Rappoli, Director
<PAGE>