<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, 2000
                                       --------------------------------

                                      OR

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

      For the transition period from __________________ to _____________

                        Commission File Number 0-10007
                                               -------

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


           MASSACHUSETTS                                   04-3480443
     ------------------------------                   --------------------
   (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:

COLONIAL GAS COMPANY ("Company")

Consolidated Statements of Earnings
---------------------------------------

<TABLE>
<CAPTION>
                                                            (In Thousands)

                                                  For the                    For the
                                              Three Months Ended         Six Months Ended
                                              ------------------         ----------------
                                             June 30,     June 30,     June 30,     June 30,
                                               2000         1999        2000          1999
                                             -------      --------     --------     --------
                                                       (Predecessor)              (Predecessor)
<S>                                          <C>       <C>             <C>        <C>
OPERATING REVENUES                           $26,718      $25,579      $113,053     $113,573
   Cost of gas sold                           11,663       11,361        53,316       59,904
                                             -------      -------      --------     --------
   Operating Margin                           15,055       14,218        59,737       53,669
                                             -------      -------      --------     --------

OPERATING EXPENSES:
   Operations                                  6,351        7,909        13,293       15,339
   Maintenance                                   811        1,538         1,861        2,851
   Depreciation and amortization               2,610        3,783         8,394        7,565
   Amortization of goodwill                    1,506            -         3,012            -
   Income taxes                                  (38)      (1,164)        9,773        7,477
   Taxes, other than income                      989        1,554         2,654        2,918
   Merger related expenses                         -          410             -          796
                                             -------      -------      --------     --------
   Total Operating Expenses                   12,229       14,030        38,987       36,946
                                             -------      -------      --------     --------
OPERATING EARNINGS                             2,826          188        20,750       16,723

OTHER EARNINGS (LOSS), NET                       115          (47)           64         (109)
                                             -------      -------      --------     --------

EARNINGS BEFORE INTEREST EXPENSE               2,941          141        20,814       16,614
                                             -------      -------      --------     --------

INTEREST EXPENSE:
   Long-term debt                              2,133        2,133         4,266        4,266
   Other, including amortization
   of debt expense                             2,392          899         4,452        1,566
   Less - Interest during construction           (19)         (94)          (34)        (137)
                                             -------      -------      --------     --------
   Total Interest Expense                      4,506        2,938         8,684        5,695
                                             -------      -------      --------     --------

NET EARNINGS (LOSS)                          $(1,565)     $(2,797)     $ 12,130     $ 10,919
                                             =======      =======      ========     ========

COMMON STOCK DIVIDENDS                       $     -      $ 3,177      $  6,039     $  6,255
                                             =======      =======      ========     ========
</TABLE>

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

                                                         FORM 10-Q
                                                            Page 3


Colonial Gas Company
--------------------

Consolidated Balance Sheets
---------------------------



                                                      (In Thousands)

                                            June 30,    June 30,   December 31,
                                              2000        1999        1999
                                           ----------  ----------  -----------
                                                      (Predecessor)

ASSETS


GAS PLANT, at cost                         $ 390,746   $ 389,164   $ 390,447
   Construction work-in-progress               9,168      16,735       2,914
   Less-Accumulated depreciation            (118,365)   (110,341)   (109,628)
                                           ---------   ---------   ---------
        Net plant                            281,549     295,558     283,733
                                           ---------   ---------   ---------

NON-UTILITY PROPERTY-NET                           -       6,829           -
                                           ---------   ---------   ---------

CURRENT ASSETS:

   Cash and cash equivalents                     207       2,491         389
   Accounts receivable, less reserves
     of $3,524 and $3,194 at
     June 30, 2000 and 1999,
     respectively, and $2,677 at
     December 31, 1999                        16,876      12,327      15,987
   Accounts receivable - affiliates            3,933           -           -
   Accrued utility margin                        548         560       8,074
   Deferred gas costs                         13,638           -      13,803
   Natural gas and other inventories           8,682       9,571      11,581
   Materials and supplies                      2,401       2,788       2,277
   Current income taxes                            -           -       4,182
   Prepaid expenses                              225       6,207         330
                                           ---------   ---------   ---------
        Total Current Assets                  46,510      33,944      56,623
                                           ---------   ---------   ---------


OTHER ASSETS:

   Excess of cost over fair value of
    acquired net assets, less
    amortization                             236,073           -     239,045
   Deferred charges and other assets           5,777      31,212       4,646
                                           ---------   ---------   ---------
        Total Other Assets                   241,850      31,212     243,691
                                           ---------   ---------   ---------

TOTAL ASSETS                               $ 569,909   $ 367,543   $ 584,047
                                           =========   =========   =========

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

                                                               FORM 10-Q
                                                                  Page 4


Colonial Gas Company
--------------------

Consolidated Balance Sheets
---------------------------

<TABLE>
<CAPTION>
                                                                                 (In Thousands)

                                                                      June 30,         June 30,        December 31,
                                                                        2000             1999             1999
                                                                    ------------     ------------     -------------
                                                                                   (Predecessor)
<S>                                                                 <C>            <C>                <C>
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common stockholder's investment-
    Common stock, $1 par value-
    Authorized and outstanding-100 shares
    at June 30, 2000 and December 31, 1999                            $      -         $      -         $       -
  Common Stock, $3.33 par value-
    Authorized shares-15,000,000 at
    June 30, 1999;
 Issued shares-8,951,000 at June 30, 1999                                    -           29,806                 -
 Amounts in excess of par value                                        225,667           64,341           225,667
 Retained earnings                                                       6,321           40,838               229
                                                                      --------         --------          --------
   Total common stockholder's investment                               231,988          134,985           225,896
 Long-term obligations, less current portion                           121,021          121,021           121,021
                                                                      --------         --------          --------
   Total Capitalization                                                353,009          256,006           346,917
                                                                      --------         --------          --------

ADVANCES FROM PARENT COMPANY                                           100,000                -           100,000
                                                                      --------         --------          --------

CURRENT LIABILITIES:
  Current portion of long-term obligations                                 646              661               646
  Notes payable                                                         30,300            8,500            29,000
  Gas inventory financing                                                7,038            8,269            15,009
  Accounts payable                                                      14,486           11,370            16,578
  Accounts payable-affiliates                                                -                -            17,916
  Accrued income taxes                                                   7,590            2,931                 -
  Accrued interest                                                       3,064            2,787             2,936
  Refundable gas costs                                                       -            4,484                 -
  Customer deposits                                                        643              813               644
  Refunds due customers                                                  3,591            5,460             5,331
  Other                                                                    671            4,613               389
                                                                      --------         --------          --------
     Total Current Liabilities                                          68,029           49,888            88,449
                                                                      --------         --------          --------

RESERVES AND DEFERRED CREDITS:
  Unfunded deferred income taxes                                             -            7,961                 -
  Deferred income taxes                                                 32,815           45,445            32,276
  Unamortized investment tax credits                                     2,708            2,941             2,811
  Postretirement benefits obligation                                     5,297                -             5,136
  Other                                                                  8,051            5,302             8,458
                                                                      --------         --------          --------
    Total Reserves and Deferred Credits                                 48,871           61,649            48,681
                                                                      --------         --------          --------

TOTAL CAPITALIZATION AND LIABILITIES                                  $569,909         $367,543          $584,047
                                                                      ========         ========          ========
</TABLE>

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

                                                              FORM 10-Q
                                                                 Page 5

Colonial Gas Company
--------------------
Consolidated Statements of Cash Flows
-------------------------------------
                                                          (In Thousands)

                                                       For the Six Months Ended
                                                       ------------------------
                                                       June 30,       June 30,
                                                         2000           1999
                                                         ----           ----
                                                                   (Predecessor)
Cash flows from operating activities:
   Net earnings                                        $ 12,130       $ 10,919
   Adjustments to reconcile net earnings to cash
      cash provided by operating activities:
      Depreciation and amortization                      11,780          7,839
      Deferred taxes                                        539            502
      Other changes in assets and liabilities:
         Accounts receivable                               (889)           914
         Accrued utility margin                           7,526          7,316
         Accounts payable-affiliates                    (21,849)             -
         Inventories                                      2,775          3,259
         Deferred gas costs                                 165         22,679
         Accounts payable                                (2,092)          (816)
         Federal and state income taxes                  11,772          2,931
         Refunds due customers                           (1,740)            (5)
         Other                                             (997)         7,672
                                                       --------       --------
Cash provided by operating activities                    19,120         63,210
                                                       --------       --------

Cash flows from investing activities:
   Capital expenditures                                  (6,592)        (9,540)
                                                       --------       --------

Cash flows from financing activities:
   Cash dividends paid on common stock                   (6,039)        (6,255)
   Issuance of common stock                                   -          1,398
   Retirement of long-term debt, including premiums           -            (91)
   Change in notes payable                                1,300        (43,500)
   Change in inventory financing                         (7,971)        (5,856)
                                                       --------       --------
Cash used for financing activities                      (12,710)       (54,304)
                                                       --------       --------

(Decrease) in cash and cash
   equivalents                                             (182)          (634)

Cash and cash equivalents at beginning of period            389          3,125
                                                       --------       --------

Cash and cash equivalents at end of period             $    207       $  2,491
                                                       ========       ========

Supplemental disclosure of cash flow information:
   Cash paid (received) during the period for:
     Interest, net of amounts capitalized              $  6,975       $  5,621
                                                       ========       ========
     Income taxes                                      $ (2,537)      $  3,595
                                                       ========       ========

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

                                                            FORM 10-Q
                                                               Page 6

                             COLONIAL GAS COMPANY
                             --------------------

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

                                 JUNE 30, 2000
                                 -------------



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

     General
     -------

     The Company is a wholly-owned subsidiary of Eastern Enterprises
     ("Eastern"). The consolidated financial statements include the accounts of
     the Company and its affiliate, Massachusetts Fuel Inventory Trust, and, for
     periods prior to August 31, 1999 ("Predecessor Financial Statements"), the
     operations of Colonial Gas Company, its affiliate, Massachusetts Fuel
     Inventory Trust, and a wholly-owned subsidiary, Transgas Inc. The
     Predecessor Financial Statements have been prepared using the historical
     cost of the Company's assets and have not been adjusted to reflect the
     merger with Eastern. However, certain accounts for the prior periods have
     been reclassified to conform to the presentation as of June 30, 2000. As of
     the merger, Transgas ceased to be a subsidiary of Colonial Gas Company. All
     material intercompany balances and transactions between the Company and its
     subsidiary have been eliminated in consolidation.

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

     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, the
     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 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. Therefore
     these interim financial statements should be read in conjunction with the
     Company's 1999 Annual Report filed on Form 10-K with the Securities and
     Exchange Commission.

     Mergers
     -------

     On August 31, 1999, the Company completed a merger with Eastern in a
     transaction with an enterprise value of approximately $474 million. In
     effecting the transaction, Eastern paid $150 million in cash, net of cash
     acquired and including transaction costs, issued approximately 4.2 million
     shares of common stock valued at $186 million and assumed $138 million of
     debt. The Colonial merger was accounted for using the purchase method of
     accounting for business combinations.
<PAGE>

                                                            FORM 10-Q
                                                               Page 7


     In connection with the approval of the merger, the Massachusetts Department
     of Telecommunications and Energy (the "Department") approved a rate plan
     resulting in a ten year freeze of base rates at current levels. As part of
     the approved rate plan, the Company will be charged by Boston Gas for
     incremental costs incurred by Boston Gas on behalf of the Company. Due to
     the length of the base rate freeze, the Company was required to discontinue
     its application of Statement of Financial Accounting Standards No. 71
     "Accounting for the Effects of Certain Types of Regulation".

     On November 4, 1999, Eastern Enterprises ("Eastern"), the parent company of
     Colonial Gas, signed a definitive agreement to be acquired by KeySpan
     Corporation. Subject to receipt of approval from the Securities and
     Exchange Commission, the transaction is expected to close in the fall of
     2000. The merger was approved by Eastern's shareholders on April 26, 2000.


     Seasonal Aspect
     ---------------

     The amount of the Company's natural gas firm throughput for purposes of
     space heating is directly related to temperature conditions. Consequently,
     there is less gas throughput during the summer months than during the
     winter months. In addition, under its seasonal rate structure, the rates
     charged customers during November through April are higher than those
     charged during May through October. 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.


     Reclassifications
     -----------------

     Certain prior quarter financial statement amounts have been reclassified
     for consistent presentation with the current year.


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

     RESULTS OF OPERATIONS

     Second Quarter

     The seasonal net loss for the second quarter was $1.6 million compared to a
     net loss of $2.8 million for the same period in 1999.

     Operating margin increased $0.8 million, or 6%, due to customer growth and
     recovery from customers for costs written off at acquisition due to the
     discontinuance of FAS No.71.

     Operating expenses of $12.2 million were $1.8, or 13%, lower than the
     second quarter of 1999. This decline was principally due to lower
     depreciation expense of $1.2 million, based on a change in the quarterly
     recognition of depreciation, and decreased operations and maintenance
     expense of $2.3 million due to merger related synergies. Somewhat
     offsetting these decreases was the amortization of goodwill of $1.5
     million.
<PAGE>

                                                            FORM 10-Q
                                                               Page 8


     Total interest expense increased $1.6 million due principally to interest
     on Advances from Parent Company.

     Year-to-Date
     ------------


     Net earnings for the first six months of 2000 were $12.1 million, an
     increase of $1.2 million, or 11% from the same period last year.

     Operating margin for the first six months of 2000 was $59.7 million, an
     increase of $6.1 million, or 11%, from the prior year. This increase was
     due to growth in the customer base and recovery from customers for costs
     written off at acquisition due to the discontinuance of FAS No.71.

     Operating expenses of $39.0 million were $2.0 million, or 6%, above the
     first six months of 1999. This increase was principally due to the
     amortization of goodwill ($3.0 million), higher income taxes ($2.3 million)
     and higher depreciation expense ($0.8 million). Somewhat offsetting the
     preceding was a decrease in operations and maintenance expense of $3.0
     million, or 17%, due to merger related synergies.

     Total interest expense increased $3.0 million due primarily to interest on
     Advances from Parent Company.


     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 impact of
     any merger-related activities, the ability to successfully integrate
     natural gas distribution operations, temperatures above or below normal,
     changes in economic conditions, including interest rates, 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 2000 capital expenditures and working capital requirements, dividend
     payments and normal debt repayments.

     The Company expects capital expenditures for 2000 to be approximately $23
     million.
<PAGE>

                                                            FORM 10-Q
                                                               Page 9


                          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)   Reports on Form 8-K

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

                                                           FORM 10-Q
                                                             Page 10


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.



                                           Colonial Gas Company
                              ------------------------------------------------
                                              (Registrant)



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



Dated:         July 25, 2000
      --------------------------------