<PAGE>

                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.   20549



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

        For the quarterly period ended             June 30, 1999
                                           ---------------------------------

                                       OR

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

       For the transition period from __________________ to _____________

                          Commission File Number 18154
                                                 -----

                               ESSEX GAS COMPANY
           --------------------------------------------------------
            (Exact name of registrant as specified in its charter)


          MASSACHUSETTS                                    04-1427020
     ------------------------------                  --------------------
     State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)


                ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
                -----------------------------------------------
                   (Address of principal executive offices)
                                  (Zip Code)

                                 617-742-8400
              --------------------------------------------------
             (Registrant's telephone number, including area code)


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



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

   Yes  X    No ___
       ---

   Common stock of Registrant at the date of this report was 100 shares, all
   held by Eastern Enterprises.
<PAGE>

                                                                       FORM 10-Q
                                                                          Page 2

                        PART I.  FINANCIAL INFORMATION
                        ------------------------------


ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

Company or group of companies for which report is filed:

ESSEX GAS COMPANY AND SUBSIDIARY ("Company")

CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------

                                                    (In Thousands)

                                         Three Months Ended   Six Months Ended
                                         ------------------   ----------------
<TABLE>
<CAPTION>

                                         June 30,   May 31,   June 30,   May 31,
                                          1999       1998      1999       1998
                                         --------  --------  ---------  --------
<S>                                      <C>       <C>       <C>        <C>

OPERATING REVENUES                       $ 4,411   $14,020    $26,460   $37,006
Cost of gas sold                           1,704     6,753     11,705    18,086
                                         -------   -------    -------   -------
Operating Margin                           2,707     7,267     14,755    18,920
                                         -------   -------    -------   -------

OPERATING EXPENSES:
  Operations and maintenance expense       3,448     3,260      5,851     6,505
  Depreciation and amortization              707     1,136      2,653     2,950
  Taxes, other than income                   301       474        938     1,175
  Income Taxes                              (890)      814      1,611     2,762
                                         -------   -------    -------   -------
  Total Operating Expenses                 3,566     5,684     11,053    13,392
                                         -------   -------    -------   -------

OPERATING INCOME (LOSS)                     (859)    1,583      3,702     5,528

OTHER INCOME, NET                            223       125        364       218
                                         -------   -------    -------   -------

INCOME (LOSS) BEFORE
INTEREST CHARGES                            (636)    1,708      4,066     5,746
                                         -------   -------    -------   -------

INTEREST CHARGES:
  Interest on long-term debt                 616       626      1,232     1,251
  Amortization of deferred
   debt expense                                8         8         17        16
  Other interest expense                      87        80        197       245
  Allowance for funds used during
   construction                               (1)       (6)        (2)      (12)
                                         -------   -------    -------   -------

  TOTAL INTEREST CHARGES                     710       708      1,444     1,500
                                         -------   -------    -------   -------

Income (Loss) applicable to
common stock                             $(1,346)  $ 1,000    $ 2,622   $ 4,246
                                         =======   =======    =======   =======

Common Stock Dividends                   $     -   $   723    $     -   $ 1,435
                                         =======   =======    =======   =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>

                                                                       FORM 10-Q
                                                                          Page 3

ESSAY GAS COMPANY AND SUBSIDIARY
--------------------------------

CONSOLIDATED BALANCE SHEETS
---------------------------



                                                         (In Thousands)

                                                     June 30,    December 31,
                                                       1999          1998
                                                    -----------  -------------
<TABLE>
<CAPTION>
ASSETS

<S>                                                   <C>         <C>
GAS PLANT, AT COST                                     $112,485    $111,416
     Less: Accumulated depreciation                      32,050      29,229
                                                       --------    --------
NET PLANT                                                80,435      82,187
                                                       --------    --------

Other property and investments                              841         740

Capitalized Lease (net of accumulated amortization          502         532
     Of $622 at June 30, 1999 and $592 at
     December 31, 1998


CURRENT ASSETS:

     Cash and cash equivalents                               92          66
     Accounts receivable (net of allowance                6,689       3,906
       for uncollectible accounts of $939
       at June 30, 1999 and $745 at
       December 31, 1998)
     Accrued utility margin                                 238       2,285
     Supplemental fuel inventory                            933       3,891
     Materials and supplies (at average cost)               593         396
     Prepayments and other                                  105         265
     Current income taxes                                 2,110       2,504
                                                        -------     -------
       TOTAL CURRENT ASSETS                              10,760      13,313
                                                        -------     -------


DEFERRED CHARGES:
     Unamortized debt expense and other                   1,366       1,169
                                                        -------     -------
       TOTAL DEFERRED CHARGES                             1,366       1,169
                                                        -------     -------

     TOTAL ASSETS                                       $93,904     $97,941
                                                        =======     =======

</TABLE>


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

                                                                       FORM 10-Q
                                                                          Page 4
ESSEX GAS COMPANY AND SUBSIDIARY
--------------------------------

Consolidated Balance Sheets
---------------------------
<TABLE>
<CAPTION>

                                                          (In Thousands)
<S>                                                   <C>       <C>

                                                      JUNE 30,  DECEMBER 31,
                                                          1999          1998
                                                       -------       -------

CAPITALIZATION AND LIABILITIES:

COMMON STOCK EQUITY                                    $37,804       $35,137
LONG-TERM DEBT LESS CURRENT PORTION                     27,599        27,599
                                                       -------       -------
     TOTAL CAPITALIZATION                               65,403        62,736
                                                       -------       -------

NON-CURRENT OBLIGATIONS UNDER CAPITAL LEASE                439           472


CURRENT LIABILITIES:
     Current portion of long-term debt                     600           600
     Current obligations under capital lease                63            60
     Obligations under supplemental fuel inventory         895         4,345
     Notes payable                                       4,000         8,935
     Accounts payable                                    1,699         2,576
     Accrued interest                                      277           445
     Accrued taxes                                         212            21
     Refundable gas costs                                2,135           198
     Supplier refund due customers                           -            34
     Other                                                 340           553
                                                       -------       -------
       TOTAL CURRENT LIABILITIES                        10,221        17,767
                                                       -------       -------


DEFERRED CREDITS:
     Accumulated deferred income taxes                   7,640         7,359
     Unamortized investment tax credit                   1,013         1,048
     Deferred directors' fees                              176           977
     Retirement benefit liability                        7,031         5,500
     Other reserves                                      1,981         2,082
                                                       -------       -------
       TOTAL DEFERRED CREDITS                           17,841        16,966
                                                       -------       -------

     TOTAL CAPITALIZATION AND LIABILITIES              $93,904       $97,941
                                                       =======       =======
</TABLE>


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

                                                                       FORM 10-Q
                                                                          Page 5

ESSEX GAS COMPANY AND SUBSIDIARY
--------------------------------

Consolidated Statements of Cash Flows
-------------------------------------
<TABLE>
<CAPTION>

                                                             (In Thousands)
                                                            Six Months Ended
                                                           -------------------
                                                           June 30,   May 31,
                                                             1999       1998
                                                           ---------  --------
<S>                                                        <C>        <C>
OPERATING ACTIVITIES:
     NET INCOME:                                            $ 2,622   $ 4,246

     Adjustments to reconcile net income to net cash:

       Depreciation and amortization, including amounts
          related to non-utility operations                   2,862     3,276
       Deferred income taxes                                    281      (812)
       Other changes in assets and liabilities:
          Accounts receivable                                (2,783)     (552)
          Inventories including fuel                          2,761     1,033
          Accounts payable                                     (877)   (2,454)
          Accrued Interest                                     (168)     (601)
          Supplier refund obligations                           (34)   (1,277)
          Taxes payable/receivable                              585       443
          Refundable gas costs                                2,101     4,293
          Other, net                                          2,198        23
                                                            -------   -------

     NET CASH PROVIDED BY OPERATING ACTIVITIES                9,548     7,618
                                                            -------   -------

INVESTING ACTIVITIES:

     Utility capital expenditures                            (1,069)   (2,862)
     Payments for retirements of property, plant and
       equipment, net                                           (68)      (36)
                                                            -------   -------
     NET CASH USED IN INVESTING ACTIVITIES                   (1,137)   (2,898)
                                                            -------   -------

FINANCING ACTIVITIES:

     Dividends paid                                               -    (1,435)
     Issuance of common stock                                     -     1,073
     Principal retired on long-term debt                          -      (146)
     Changes in supplemental fuel inventory                  (3,450)   (1,522)
     Changes in notes payable                                (4,935)   (2,233)
                                                            -------   -------
     NET CASH USED IN FINANCING ACTIVITIES                   (8,385)   (4,263)
                                                            -------   -------

Net increase in cash and cash equivalents                        26       457
Cash and cash equivalents at beginning of period                 66       369
                                                            -------   -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $    92   $   826
                                                            =======   =======

SUPPLEMENTAL DISCLOSURES:
      Cash paid during the year for:
       Interest (net of amount capitalized)                 $ 1,259   $ 1,466
                                                            =======   =======
       Income taxes                                         $   555   $ 3,204
                                                            =======   =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>

                                                                       FORM 10-Q
                                                                          Page 6


                        ESSEX GAS COMPANY AND SUBSIDIARY
                        --------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                                 JUNE 30, 1999
                                 -------------



1.   ACCOUNTING POLICIES AND OTHER INFORMATION
     -----------------------------------------

     General
     -------

     It is the Company's opinion that the financial information contained in
     this report reflects all normal, recurring adjustments necessary to present
     a fair statement of results for the periods reported, but such results are
     not necessarily indicative of results to be expected for the year due to
     the seasonal nature of the Company's business.  Certain information and
     footnote disclosures normally included in financial statements prepared in
     accordance with generally accepted accounting principles have been
     condensed or omitted in this Form 10-Q pursuant to the rules and
     regulations of the Securities and Exchange Commission.  However, the
     disclosures herein, when read with the transition report for the period
     ended December 31, 1998 filed on Form 10-K, are adequate to make the
     information presented not misleading.

     Certain prior year financial statement information has been reclassified to
     be consistent with the current presentation.

     Merger
     ------

     On September 30, 1998, the Company merged with ECGC Acquisition Company, a
     wholly owned subsidiary of Eastern Enterprises ("Eastern"), through the
     exchange of all of the Company's stock for approximately 2,047,000 shares
     of Eastern common stock.  The merger was accounted for as a pooling of
     interests by Eastern.

     On December 7, 1998, the Company changed its fiscal year end from August 31
     to December 31 to conform to Eastern's fiscal year end.  Accordingly, a
     transition period Form 10K has been filed reflecting the results of
     operations and cash flows for the four months ended December 31, 1998.  The
     accompanying Consolidated Statements of Earnings and Cash Flows for the
     three and six month periods ending June 30, 1999 have been compared to the
     three and six month periods ending May 31, 1998 which represents the most
     comparable periods of the preceding fiscal year.  Recasting of the
     preceding periods to a calendar basis for comparative purposes is not
     practical and in management's opinion does not materially affect the
     comparison.

     SEASONAL ASPECT
     ---------------

     The amount of the Company's natural gas firm throughput for purposes of
     space heating is directly related to the ambient air temperature.
     Consequently, there is less gas throughput during the summer months than
     during the winter months.  In order to more properly match depreciation and
     property tax expense with margin each month, the Company charges to
     depreciation and property tax expense an amount equal to the percentage of
     the annual volume of firm gas throughput forecasted for the month, applied
     to the estimated annual depreciation and property tax expense.
<PAGE>

                                                                       FORM 10-Q
                                                                          Page 7


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

     RESULTS OF OPERATIONS

     A comparison of results for the three and six month periods ended June 30,
     1999 to the three and six month periods ended May 31, 1998 reflect
     comparable but not precisely matched periods.

     QUARTER-TO-QUARTER

     Results for the quarter ended June 30, 1999 reflect a net loss of $1.3
     million compared to net earnings applicable to common stock of $1.0 million
     for the quarter ended May 31, 1998.  This decrease in earnings reflects the
     effect of the accounting change for revenue recognition, the use of fiscal
     period ending May 31, 1998 and a non-recurring pension charge ($.8 million)
     related to early retirement and severance programs for union employees.
     This decline was partially mitigated by merger related synergies that
     resulted in lower general and administrative expenses and employee
     benefits.

     YEAR TO DATE

     Net earnings applicable to common stock for the six months ended June 30,
     1999 were $2.6 million compared to earnings of $4.2 million for the six
     months ended May 31, 1998.  This decrease in earnings was primarily due to
     the same reasons described in the quarter-to-quarter results.

     YEAR 2000 ISSUE

     On September 30, 1998, there was an Acquisition of the Company by Eastern,
     the parent company of Boston Gas (See Note 1 of the Notes to Consolidated
     Financial Statements).  The Company's Year 2000 issues are being addressed
     through the integration of its operations with those of its affiliate
     Boston Gas.  The Company has incurred a cost of approximately $1.4 million
     to integrate various systems with those of Boston Gas.  Boston Gas' Year
     2000 plan is as follows:

     STATE OF READINESS

     Boston Gas has assessed the impact of the Year 2000 with respect to its
     Information Technology (IT) systems and embedded chip technology systems as
     well as its potential exposure to significant third party risks.
     Accordingly, Boston Gas has substantially completed the replacement or
     modification of existing systems and technology as required and assured
     itself that major customers and critical vendors are also addressing these
     issues. In addition, Boston Gas is finalizing and testing its contingency
     plans to address major external and internal risk that could potentially
     impact business operations.

     With respect to internal information systems, Boston Gas has tested and
     certified as Year 2000 ready, all eleven "mission critical" business
     systems. Installation of an upgrade and replacement to two of these mission
     critical systems scheduled for the third quarter of 1999 will include Year
     2000 re-certification testing. The Company has completed certification
     testing of fifty percent of less than critical business systems, and the
     remaining are scheduled for testing during the third quarter of 1999. An

<PAGE>

                                                                       FORM 10-Q
                                                                          Page 8


     integration test plan designed to re-certify interfaces between mission
     critical systems has been developed and will be executed during the third
     quarter of 1999. Conversion and certification testing of all technology
     infrastructure components has been completed, including mainframe and
     client-server hardware and software, data/voice communications and e-mail
     systems. All telephone components have been certified as Year 2000 ready
     with the exception of an upgrade to the call management server that is
     scheduled for the third quarter. Eighty percent of Boston Gas' desktop
     hardware, operating system software and applications have been certified as
     Year 2000 ready with the remaining desktops scheduled to be certified as
     part of the rollout of an upgraded application in the third quarter of
     1999. To minimize the risk of corruption of previously certified
     information systems, Boston Gas will impose a freeze on changes to
     information systems and technology components, effective October 1, 1999.

     With respect to embedded chip systems, Boston Gas has completed its
     inventory, assessment, remediation and certification testing of all date
     sensitive components containing embedded chips.

     Boston Gas has identified material third party relationships and has
     completed a detailed survey of third party readiness. A readiness
     assessment has been completed of all mission critical suppliers and risk
     mitigation plans have been developed. Boston Gas has begun testing
     electronic interfaces with suppliers where practicable, and implemented
     risk mitigation strategies as required. However, there can be no assurance
     that third party systems, on which Boston Gas relies, will be timely
     converted or that any such failure to convert by a third party would not
     have an adverse effect on Boston Gas' operations.

     COST OF YEAR 2000 REMEDIATION

     Boston Gas expects the cost of Year 2000 compliance will approximate $13.9
     million.  Approximately 65% of these costs will be incurred under capital
     projects that have resulted in added functionality while also addressing
     Year 2000 issues.  As of June 30, 1999 approximately $12.4 million has been
     incurred.

     RISKS OF YEAR 2000 ISSUES

     Boston Gas has assessed the most reasonably likely worst case Year 2000
     scenario.  Given Boston Gas' efforts to minimize the risk of Year 2000
     failure by its internal systems, Boston Gas believes the worst case
     scenario would involve failures that impact data and voice communication
     providers, its electricity provider or a pipeline supplier.  Detailed plans
     to accommodate any one or a combination of these worse case scenarios are
     addressed as part of Boston Gas' business contingency planning process.

     CONTINGENCY PLANS

     Boston Gas has initiated the development of a business contingency plan in
     the event that one or more of its internal systems, its embedded chip
     systems, or its mission critical suppliers' systems experience a Year 2000
     failure. An impact analysis has been completed which identified voice/data
     communications, electricity and gas supply as the three major sources of
     external risk and their impact on mission critical processes. Draft plans
     have been developed and desk tested for each of these risk areas. During
     the third quarter of 1999, all plans will be finalized and tested via live
     drills.
<PAGE>

                                                                       FORM 10-Q
                                                                          Page 9

     FORWARD-LOOKING INFORMATION

     This report and other Company reports and statements issued or made from
     time to time contain certain "forward-looking statements" concerning
     projected future financial performance, expected plans or future
     operations.  The Company cautions that actual results and developments may
     differ materially from such projections or expectations.

     Investors should be aware of important factors that could cause actual
     results to differ materially from the forward-looking projections or
     expectations. These factors include, but are not limited to: the effect of
     the Acquisition by Eastern and other strategic initiatives on earnings and
     cash flow, temperatures above or below normal in the Company's service
     area, changes in economic conditions, including interest rates, the
     timetable and cost for completing Year 2000 plans, the impact of third
     party Year 2000 issues, regulatory and court decisions and developments
     with respect to previously disclosed environmental liabilities. Most of
     these factors are difficult to predict accurately and are generally beyond
     the control of the Company.


     LIQUIDITY AND CAPITAL RESOURCES

     The Company believes that projected cash flow from operations, in
     combination with currently available resources, is more than sufficient to
     meet 1999 capital expenditures and working capital requirements, dividend
     payments and normal debt repayments.

     Capital expenditures for the year are projected to be in line with the
     original estimate of $6.8 million.
<PAGE>

                                                                       FORM 10-Q
                                                                         Page 10

                           PART II. OTHER INFORMATION
                           --------------------------


ITEM 1.  LEGAL PROCEEDINGS
--------------------------

     There are no material pending legal proceedings involving the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     None.

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

     (a) List of Exhibits

         None.

     (b) No reports on Form 8-K have been filed during the quarter for which
         this report is filed.
<PAGE>

                                                                       FORM 10-Q
                                                                         Page 11

                                   SIGNATURES
                                   ----------



     It is the Company's opinion that the financial information contained in
     this report reflects all normal, recurring adjustments necessary to present
     a fair statement of results for the period reported, but such results are
     not necessarily indicative of results to be expected for the year due to
     the seasonal nature of the business of the Company.  Except as otherwise
     herein indicated, all accounting policies have been applied in a manner
     consistent with prior periods.  Such financial information is subject to
     year-end adjustments and an annual audit by independent public accountants.

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



                                                  Essex Gas Company
                                  ---------------------------------------------
                                                    (Registrant)


                                            /s/   Joseph F. Bodanza
                                  ---------------------------------------------

                                  J.F. Bodanza, Sr Vice President and Treasurer
                                  (Principal Financial and Accounting Officer)





Dated:  July 30, 1999
      ------------------