SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549



                               FORM 10-Q

             Quarterly Report Under Section 13 or 15(d) of
                  The Securities Exchange Act of 1934


For Quarter Ended  September 30, 1997    Commission File Number   1-3429


                       MAINE PUBLIC SERVICE COMPANY                
            (Exact name of registrant as specified in its charter)




                        MAINE                         01-0113635       
         (State or other jurisdiction of          (I.R.S. Employer
          incorporation or organization)           Identification No.)




    209 State Street, Presque Isle, Maine                    04769     
   (address of principal executive offices)                (Zip Code)



Registrant's telephone number, including area code      207-768-5811   

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___.


                (APPLICABLE ONLY TO CORPORATE ISSUERS:)

     Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.

           Common Stock, $7.00 par value - 1,617,250 shares



                                                            Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

Item 1.   Financial Statements

          See the following exhibits - Maine Public Service Company and
          Subsidiary Condensed Consolidated Financial Statements,
          including a statement of consolidated operations for the three
          and nine months ended September 30, 1997, and for the
          corresponding period of the preceding year; a consolidated
          balance sheet as of September 30, 1997, and as of December 31,
          1996, the end of the Company's preceding fiscal year; and a
          statement of consolidated cash flows for the period January 1
          (beginning of the fiscal year) through September 30, 1997, and
          for the corresponding period of the preceding year.

          In the opinion of management, the accompanying unaudited
          condensed consolidated financial statements present fairly the
          financial position of the Companies at September 30, 1997 and
          December 31, 1996, and the results of their operations for the
          three and nine months ended September 30, 1997 and their cash
          flows for the nine months ended September 30, 1997.































                              -2-

               MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
                  STATEMENTS OF CONSOLIDATED OPERATIONS
                              (Unaudited)
             (Dollars in Thousands Except Per Share Amounts)

                                       Three Months Ended     Nine Months Ended
                                          September 30,         September 30,
                                         1997       1996       1997       1996


Operating Revenues                     $12,385    $12,584   $40,092    $43,168
Operating Expenses
   Purchased Power                       8,912      7,906    26,573     23,166
   Other Operation and Maintenance       3,185      3,542     9,480     10,604
   Depreciation                            626        563     1,880      1,824
   Amortization                            411        396     1,231      1,194
   Taxes Other Than Income                 386        386     1,268      1,247
   Provision (Benefit) for Income Taxes   (747)      (345)     (941)     1,319
        Total Operating Expenses        12,773     12,448    39,491     39,354
Operating Income (Loss)                   (388)       136       601      3,814
Other Income (Deductions)
   Equity in Income of Associated Cos.     130         81       377        263
   Allowance for Equity Funds Used 
     During Construction                     5          1        14          6
   Other Income Taxes                      (38)       (64)     (120)       (85)
   Other - Net                              56         67        22         56
Total                                      153         85       293        240
Income Before Interest Charges            (235)       221       894      4,054
Interest Charges
   Long-Term Debt and Notes Payable        897        877     2,637      2,652
   Less Allowance for Borrowed Funds
      Used During Construction              (3)        (1)       (7)        (3)
Total                                      894        876     2,630      2,649
Net Inc (Loss) Avail for Common Stock  ($1,129)     ($655)  ($1,736)    $1,405

Average Shares Outstanding (000's)       1,617      1,617     1,617      1,617
Earnings (Loss) Per Share of Common     ($0.70)    ($0.40)   ($1.07)     $0.87
Dividends Declared per Common Share      $0.25      $0.46     $0.75      $1.38





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








                                        -3-

               MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                              (Unaudited)
                        (Dollars in Thousands)
                                               September 30       December 31, 
               ASSETS                              1997              1996
Utility Plant
   Electric Plant in Service                      $90,608           $91,224
   Less Accumulated Depreciation                   42,864            41,670
      Net Electric Plant in Service                47,744            49,554
Construction Work-in-Progress                       2,046               461
        Total                                      49,790            50,015
Investment in Associated Companies
   Maine Yankee Atomic Power Company                3,857             3,585
   Maine Electric Power Company, Inc.                 173                74
        Total                                       4,030             3,659
        Net Utility Plant and Investments          53,820            53,674
Current Assets
   Cash and Temporary Investments                     529             1,291
   Deposits for Interest and Dividends                468               805
   Accounts Receivable - Net                        4,410             5,021
   Unbilled Base Revenue                            1,220             1,653
   Deferred Fuel and Purchased Energy               1,224               125
   Current Deferred Income Taxes                        0               222
   Inventory                                        1,254             1,194
   Prepayments                                      2,901               959
      Total                                        12,006            11,270
Other Assets
   Restricted Investment                            2,952             4,055
   Regulatory Asset - ME Yankee Decom. Liability   45,405                 0
   Recoverable Seabrook Costs                      26,655            27,722
   Regulatory Asset - SFAS 109 & 106               12,615            12,713
   Deferred Fuel and Purchased Energy               4,982             3,951
   Other                                            4,448             3,329
      Total                                        97,057            51,770
Total Assets                                     $162,883          $116,714

     CAPITALIZATION AND LIABILITIES
Capitalization
   Common Shareholders' Equity
      Common Stock                                $13,071           $13,071
      Paid-in Capital                                  38                38
  Retained Earnings                                27,748            30,697
      Treasury Stock, at cost                      (5,714)           (5,714)
         Total                                     35,143            38,092
      Long-Term Debt (less current maturities)     35,650            39,805
Current Liabilities
   Long-Term Debt Due Within One Year               4,155             1,315
   Notes Payable                                    6,200             1,400
   Accounts Payable                                 4,515             5,475
   Current Deferred Income Taxes                      280                 0
   Dividends Declared                                 404               744
   Customer Deposits                                   52                62
   Interest and Taxes Accrued                         562               962
      Total                                        16,168             9,958
Deferred Credits
   Maine Yankee Decommissioning Liability          45,405                 0
   Deferred Income Tax                             24,447            23,694
   Investment Tax Credits                             666               720
   Deferred Revenues                                  834               630
   Miscellaneous                                    4,570             3,815
      Total                                        75,922            28,859
Total Capitalization and Liabilities             $162,883          $116,714
  

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







































                                  -4-

               MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
                  Statements of Consolidated Cash Flows
                              (Unaudited)
                         (Dollars in Thousands)
                                                           Nine Months Ended
                                                              September 30, 
                                                            1997        1996
Cash Flow From (Used For) Operating Activities
   Net Income (Loss)                                    ($1,736)      $1,405

Adjustments to Reconcile Net Income (Loss) to Net Cash
   Provided by Operations
   Depreciation                                           1,880        1,824
   Amortization                                             194          131
   Amortization of Seabrook Costs                         1,064        1,064
   Income on Tax Exempt Bonds-Restricted Funds             (136)         (68)
   Deferred Income Taxes                                  1,210         (317)
   AFUDC                                                    (21)          (9)
   Change in Wheelabrator-Sherman Rate Plan Deferral     (1,031)      (1,031)
   Change in Deferred Regulatory & Debt Issuance Costs   (1,098)         850
   Change in Deferred Revenues                              204          202
   Change in Benefit Obligation                             590        1,038
   Change in Current Assets and Liabilities              (3,428)        (346)
   Other                                                    (24)         457
Net Cash Flow From (Used For) Operating Activities       (2,332)       5,200

Cash Flow Provided By Financing Activities
   Dividend Payments                                     (1,213)      (2,232)
   Tax Exempt Bond Issuance Costs                             0         (399)
   Issuance of Tax-Exempt Bonds                               0       15,000
   Drawdown of Tax Exempt Bonds Proceeds                  1,239          250
   Retirements on Long-Term Debt                         (1,315)     (11,315)
   Short-Term Borrowings, Net                             4,800        1,600
Net Cash Flow Provided By Financing Activities            3,511        2,904

Cash Flow Used For Investing Activities
   Investment in Electric Plant                          (1,941)      (2,539)
   Investment in Restricted Funds                             0       (5,000)
   Net Cash Used For Investment Activities               (1,941)      (7,539)

Increase (Decrease) in Cash and Cash Equivalents           (762)         565
Cash and Cash Equivalents at Beginning of Year            1,291          976
Cash and Cash Equivalents at End of Period                 $529       $1,541

Change in Current Assets and Liabilities Providing
   Cash From Operating Activities
      Accounts Receivable                                  $610       $1,782
      Unbilled Revenue                                      433          277
      Deferred Maine Yankee Replacement Power Costs      (1,099)           0
      Inventory                                             (60)         (11)
      Prepayments                                        (1,941)        (777)
      Accounts Payable & Accrued Expenses                (1,361)      (1,604)
      Other Current Liabilities                             (10)         (13)
   Total Change                                         ($3,428)       ($346)

Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period For:
   Interest                                              $2,950       $3,219
   Income Taxes (1997 is net of a $500,000 refund)        ($130)      $2,371

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














































                                     -5-

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The accompanying unaudited consolidated financial statements include the  
    accounts of the Company and its wholly-owned Canadian subsidiary, Maine 
    and New Brunswick Electrical Power Company, Limited (the Subsidiary).

    The Company is subject to the regulatory authority of the Maine Public
    Utilities Commission (MPUC) and, with respect to wholesale rates, the 
    Federal Energy Regulatory Commission (FERC).

    The accompanying unaudited consolidated financial statements should be
    read in conjunction with the 1996 Annual Report, an integral part of 
    Form 10-K.  Certain financial statement disclosures have been condensed 
    or omitted but are an integral part of the 1996 Form 10-K.  These    
    statements reflect all adjustments that are, in the opinion of       
    management, necessary to a fair statement of results for interim periods 
    presented.  All such adjustments are of a normal recurring nature.  The 
    Company's significant accounting policies are described in the Notes to 
    Consolidated Financial Statements of the Company's Annual Report filed
    with the Form 10-K.  For interim reporting purposes, these same      
    accounting policies are followed.

    For purposes of the statements of consolidated cash flows,the Company
    considers all highly liquid securities with a maturity, when purchased, 
    of three months or less to be cash equivalents.

    Certain reclassifications have been made to the 1996 financial   
    statement amounts in order to conform to the 1997 presentation. 

2.  IMPLEMENTATION OF MULTI-YEAR RATE PLAN

    A four-year rate plan, approved by the MPUC on November 13, 1995,    
    provided retail rate increases of 4.4% on January 1, 1996 and 2.9% on 
    February 1, 1997.  The Company has the right to receive additional  
    annual increases in retail rates of 2.75% on February 1, 1998 and    
    February 1, 1999.  Several significant accounting orders that became 
    effective January 1, 1996 included the deferral of $902,000, net of  
    income taxes, annually of Wheelabrator-Sherman purchases, the five year 
    amortization of the Company's $1.3 million, net of income taxes, share
    of the Maine Yankee 1995 sleeving repair costs, and the $638,000, net of 
    income taxes, amortization over ten years of deferred post-retirement 
    benefits other than pensions (SFAS 106).  In addition, the plan allows
    the five year amortization of the $139,000 deferral of pension expenses 
    and $92,000 deferral of early retirement expenses, both net of income 
    taxes, related to the lay-up of the Caribou Steam Units and the four 
    year amortization of $300,000, net of tax, of deferred fuel from the 
    December 31, 1995 balance.

    With higher winter rates for our commercial and industrial customers and 
    the elimination of the fuel clause, revenues will be higher during the
    winter months than during the summer months when rates charged to those 
    customers are approximately 25% lower.   
                                    - 6-

3.  INCOME TAXES                                                        
      
    A summary of Federal and State income taxes charged (credited) to income 
    is presented below. For accounting and ratemaking purposes, income tax
    provisions (benefits) included in "Operating Expenses" reflect taxes 
    applicable to revenues and expenses allowable for ratemaking purposes.
    The tax effect of items not included in rate base is allocated as "Other 
    Income (Deductions)".

      (Dollars in Thousands)        Three Months Ended   Nine Months Ended
                                      September 30,        September 30,   
                                      1997      1996       1997      1996
      Current income taxes         $  (994)  $  (211)   $(2,031)  $ 1,721
      Deferred income taxes            303       (51)     1,264      (261)
      Investment credits               (18)      (19)       (54)      (56)
      Total income taxes           $  (709)  $  (281)   $  (821)  $ 1,404 

      Allocated to:
      Operating Income             $  (747)  $  (345)   $  (941)  $ 1,319
      Other income                      38        64        120        85 
      Total                        $  (709)  $  (281)   $  (821)  $ 1,404 

    For 1997, the Company anticipates a tax net operating loss that will be 
    carried back to earlier years to recover previously paid federal and 
    state income taxes.  For the nine months ended September 30, 1997 and 
    1996, the effective income tax rates were (32.1)% and 50%, respectively. 
    The principal reason for the effective tax rates differing from the US
    federal income tax rate are the contribution to net income of the    
    Company's Canadian subsidiary, flow through items required by regulation 
    and state income taxes.         
   
    The following summarizes accumulated deferred income taxes established
    on temporary differences under SFAS 109 as of September 30, 1997 and 
    December 31, 1996.
                                               (Dollars in Thousands)
                                            September 30,  December 31,
                                                 1997          1996
      Seabrook                                 $15,095       $15,273
      Property                                   8,178         8,104
      Regulatory expenses                        2,154         1,201     
 
      Investment tax credits                      (478)         (478)
      Pension and postretirement
       benefits                                   (762)         (670)
      Other                                        260           264 
      Net accumulated deferred income taxes    $24,447       $23,694 

4.  MAINE YANKEE 
    
    The Company owns 5% of the Common Stock of Maine Yankee Atomic Power 
    Company (Maine Yankee). As previously reported, Maine Yankee has been 
    out of service since December 6, 1996 and was not expected to return to   
    service until August, 1997.  On May 27, 1997, the Board of Directors of 
    Maine Yankee announced that it was considering permanent closure of  
    Maine Yankee based on the economics of the facility as well as       
    uncertainty regarding the operation of the plant.  

    No final decision was made but spending levels were reduced immediately 
    to a level that preserved the option of restarting the 810-megawatt  
    facility or closing it.  The Maine Yankee Board of Directors also had 
    preliminary discussions with PECO Energy Company (PECO) regarding the 
    sale of Maine Yankee but no agreement had been reached.  













































                                    -7-


    For additional information regarding Maine Yankee, reference is made to 
    the Company's 1996 Annual Report, "Analysis of Financial Condition and
    Review of Operations-1996, Maine Yankee", for discussion of the Nuclear 
    Regulatory Commission's Independent Safety Assessment results issued 
    October 7, 1996, and the current shutdown that began on December 6,  
    1996, to review and resolve cable separation and cable routing issues.
    The Company's rate plan contains a provision for additional rate     
    increases in the event of a Maine Yankee plant outage exceeding six  
    consecutive months.  After the six month period, 50% of the replacement 
    power costs can be deferred and recovered in rates with the annual rate 
    increase.  This provision went into effect on June 6, 1997, with     
    approximately $890,000 deferred in the third quarter of 1997.  In    
    addition, the profit-sharing mechanism allows additional rate increases   
    if earnings are more than 300 basis points below the target return on 
    equity, currently 11%, with 50% of the earnings deficiency recoverable
    from customers with the annual rate increase.  

    For the first nine months of 1997, while Maine Yankee was out of     
    service, the Company incurred additional replacement power costs of  
    approximately $4,824,000 of which $1,086,000 has been deferred under the  
    Company's rate plan, along with additional operating costs of        
    approximately $1.9 million associated with the efforts to restart Maine 
    Yankee, which have adversely impacted the Company's earnings.  The   
    Company's rate plan contains a provision for additional rate increases
    in the event of a Maine Yankee plant outage exceeding six consecutive 
    months.  

    On August 6, 1997, the Board of Directors of Maine Yankee voted to   
    permanently cease power operations at the plant and begin the process of  
    decommissioning the plant.  The formal vote followed an announcement by   
    the Maine Yankee Board on August 1, 1997, that Maine Yankee and PECO, 
    after two months of intensive negotiations, had been unable to arrive 
    at "a mutually beneficial framework for agreement" on a sale of the  
    plant to PECO.  The decision to shut down the plant was based on an  
    economic analysis of the costs, risks and uncertainties associated with   
    operating the plant compared to those associated with closing and      
    decommissioning the plant.  The Maine Yankee Board's decision to close
    the plant should mitigate the costs the Company would otherwise incur in 
    1997 through a phasing down of Maine Yankee's operations and maintenance  
    costs, but will not reduce the need to buy replacement energy and    
    capacity.

    The Company is responsible for 5 percent of the costs of decommissioning 
    the plant.  Maine Yankee has been collecting decommissioning costs in 
    advance pursuant to a 1994 Federal Energy Regulatory Commission (FERC)
    rate order.  Maine Yankee's most recent estimate of the total costs of
    decommissioning is $508 million (in 1997 dollars), based on a 1997 study  
    by an independent engineering consultant.  The previous estimate by the 
    same consultant was $316.6 million (in 1993 dollars). In early November, 
    1997, Maine Yankee released a cost estimate of $930 million (nominal 
    amount) for decommissioning and other operating expenditures from    
    September 1, 1997 through October 2008. 

    The Company has recorded its 5% share, $46.5 million, less $1.1 million 
    of its share of Maine Yankee's expenditures since September 1, 1997 as
    a decommissioning liability.  Maine legislation provides recovery in 
    rates for decommissioning costs through the regulated transmission and
    distribution affiliate that will be created by March 1, 2000, therefore 
    an offsetting regulatory asset has also been recognized.















































                                    -8-
    
    In a related matter, in early September, 1997, the Maine Public      
    Utilities Commission (MPUC) released the report of a consultant it had
    retained to perform a management audit of Maine Yankee for the period 
    January 1, 1994 to June 30, 1997.  The report contained both positive 
    and negative conclusions, the latter explaining that:  Maine Yankee's 
    decision in December, 1996 to proceed with the steps necessary to    
    restart its nuclear generating plant at Wiscasset, Maine, was        
    "imprudent"; that Maine Yankee's May 27, 1997, decision to reduce    
    restart-expenses while exploring a possible sale of the plant was    
    "inappropriate," based on the consultant's finding that a more objective 
    and comprehensive competitive analysis at the time "might have indicated 
    a benefit for restarting" the plant; and that those decisions resulted
    in Maine Yankee incurring $95.9 million in "unreasonable" costs.  On 
    October 24, 1997, the MPUC issued a Notice of Investigation initiating
    an investigation of the prudence of the Maine Yankee shutdown decision
    and of the operation of Maine Yankee prior to the shutdown, and      
    announced that it had directed its consultant to extend its review to 
    include those areas. The Company does not know how the MPUC plans to use  
    the consultant's report or any negative conclusions of its           
    investigation, but believes the report's negative conclusions are    
    unfounded and may be contradictory.  The Company has objected to this 
    investigation. The Company also plans to vigorously  contest the     
    negative conclusions of the report if they are introduced in Maine   
    Yankee's anticipated rate proceeding before the Federal Energy       
    Regulatory Commission.  In addition, the Company believes it would have 
    substantial constitutional and jurisdictional grounds to challenge any
    effort in an MPUC proceeding to alter wholesale Maine Yankee rates made 
    effective by the FERC.  On November 7, 1997, Central Maine Power and 
    Maine Yankee initiated legal challenges to the MPUC investigation in the 
    Maine Supreme Judicial Court alleging that such an investigation falls
    exclusively within the jurisdiction of the FERC, and that the MPUC's 
    investigation is therefore barred on constitutional grounds.  The    
    Company intends to join the appeals but cannot predict the timing or 
    outcome of the proceedings.   

5.  COMPLIANCE WITH FINANCIAL COVENANTS
                        
    The Company's short-term revolving credit agreement and a letter of  
    credit supporting its 1996 revenue bonds contain interest coverage tests  
    that the Company must satisfy to avoid default. On March 28, 1997, the
    Company and the Banks agreed on amendments to the revolving credit   
    agreement and letter of credit and reimbursement agreement which adjust   
    the interest coverage tests to exclude Maine Yankee incremental      
    replacement power costs through September 30, 1997. Under the amendment 
    to the revolving credit agreement, the Company was obligated to issue a 
    first mortgage bond of $11 million as collateral for the maximum amount 
    of the Company's obligations under the revolving credit agreement.  Both 
    amendments required the issuance of the first mortgage bonds on or   
    before May 15, 1997.  On April 28, 1997 the Maine Public Utilities   
    Commission approved the issuance of the first mortgage bonds, and the 
    Company issued the bonds on May 5, 1997.  Without the amendments, the 
    Company would have been in violation of the interest coverage tests for   
    the twelve months ended September 30, 1997 and would have been in    
    default on these instruments.  

    On August 6, 1997, as more fully described in Note 4, the Board of   
    Directors of Maine Yankee voted to permanently close the plant.
    Based on projected 1997 financial results, it is likely that the Company 
    will be in violation of its interest coverage tests at the end of 1997. 















































                                    -9-
     
    The Company and the Banks have discussed additional amendments to the 
    afore-mentioned interest coverage tests, but await the MPUC's decisions 
    on the restructured Wheelabrator-Sherman's agreement, as described in 
    Note 7, and the Company's February 1, 1998 rate increase.  The Company
    cannot predict the terms of these additional amendments to the interest 
    coverage tests but is working with the Banks to reach a resolution.  If 
    the Company's earnings provided under the rate plan are not sufficient
    to satisfy its interest coverage tests and other obligations, the    
    Company will likely seek an emergency rate increase.

           
6.  RESTRUCTURING OF MAINE'S ELECTRIC UTILITY INDUSTRY

    On May 29, 1997, legislation titled "An Act to Restructure the State's
    Electric Industry" was signed into law by the Governor of Maine.  The 
    principal provisions with accounting impact on the Company are as    
    follows:
               
           1)  Beginning on March 1, 2000, all consumers of electricity have
               the right to purchase generation services directly from
               competitive electricity suppliers who will not be subject to
               rate regulation.

           2)  By March 1, 2000, the Company, Central Maine Power Company 
               (CMP) and Bangor Hydro-Electric Company (BHE) must divest of 
               all generation related assets and business functions except
               for:
                  a)    contracts with qualifying facilities, such as the
                        Company's power contract with Wheelabrator-Sherman
                        (W/S), and conservation providers;

                  b)    nuclear assets, namely, the Company's investment in
                        the Maine Yankee Atomic Power Company;

                  c)    facilities located outside the United States, i.e.,
                        the Company's hydro facility in New Brunswick,
                        Canada; and

                  d)    assets that the MPUC determines necessary for the 
                        operation of the transmission and distribution
                        services.  

               The MPUC can grant an extension of the divestiture deadline
               if the extension will improve the selling price.  For assets
               not divested, the utilities are required to sell the rights
               to the energy and capacity from these assets.  The Company
               shall submit to the MPUC its divestiture plan no later than
               January 1, 1999.

           3)  The Company, through a regulated affiliate, will continue to
               provide transmission and distribution services which will be
               subject to continued rate regulation by the MPUC.

           4)  Maine electric utilities will be permitted a reasonable
               opportunity to recover legitimate, verifiable and unmitigable
               costs that are otherwise unrecoverable as a result of retail
               competition in the electric utility industry.  

















































                                   -10-

               The MPUC shall determine these stranded costs by considering:

                  a)    the utility's regulatory assets related to
                        generation, i.e., the Company's unrecovered
                        Seabrook investment;

                  b)    the difference between net plant investment in
                        generation assets compared to the market value for
                        those assets; and

                  c)    the difference between future contract payments and
                        the market value of the purchased power contracts,
                        i.e., the W/S contract.

               By July 1, 1999, the MPUC will have estimated the stranded 
               costs for the Company and the manner for the collection of 
               these costs by the transmission and distribution company. 
               Customers reducing or eliminating their consumption of    
               electricity by switching to self-generation, conversion to 
               alternative fuels or utilizing demand-side management 
               measures cannot be assessed exit or entry fees.
  
           5)  The MPUC shall include in the rates charged by the        
               transmission and distribution utility decommissioning     
               expenses for Maine Yankee.  In 2003 and every three years 
               thereafter until the stranded costs are recovered, the MPUC
               shall review and adjust the stranded cost recovery amounts 
               and related transition charges. However, the MPUC may adjust 
               the amounts at any point in time that they deem appropriate. 
               Since the legislation provides for our recovery of stranded
               costs by the transmission and distribution company, the   
               Company will continue to recognize existing regulatory assets 
               and plant costs as required by Emerging Issues Task Force 
               97-4.
 
           6)  Employees, other than officers, displaced as a result of
               retail competition will be entitled to certain severance
               benefits and retraining programs.  These costs will be
               recovered through charges collected by the regulated
               transmission and  distribution company.

               The MPUC will conduct several rulemaking proceedings      
               associated with the new restructuring law.  The Company is 
               presently reviewing its business operations and the       
               opportunities that the new restructuring law presents.  
               In accordance with EITF 97-4 "Deregulation of the Pricing of 
               Electricity", when the details of the restructuring plan are 
               determined by the MPUC rulemaking, the Company will       
               discontinue application of the Statement of Financial     
               Accounting Standards No. 71 (SFAS 71), "Accounting for the 
               Effects of Certain Types of Regulations", for the retail  
               segment of its business jurisdiction.  As a result, the   
               Company continues to defer certain costs as regulatory assets 
               in instances where recovery through future regulatory cash 

               flows is anticipated. The Company cannot predict the value of
               the Company's  stranded investment that the MPUC will
               determine. 


















































                                   -11-

7.  RESTRUCTURED PURCHASE POWER AGREEMENT WITH WHEELABRATOR-SHERMAN
               
    The Company has a Power Purchase Agreement (PPA) with the Wheelabrator- 
    Sherman Energy Company (W/S) under which the Company is obligated to 
    purchase the entire output (up to 126,582 MWH) of a 17.6 MW biomass  
    plant owned by W/S.  

    The current term of the PPA runs through December 31, 2000 and may be 
    renewed by either party for an additional fifteen years at prices to be 
    determined by mutual agreement or, absent mutual agreement, by the MPUC.

    On October 15, 1997, the Company and W/S agreed to amend the PPA.  Under 
    the terms of this amendment, W/S has agreed to reductions in the price
    of purchased power of approximately $10 million over the PPA's current
    term.  The Company and W/S have also agreed to renew the PPA for an  
    additional six years at agreed-upon prices.  The Company will also make 
    an up front payment to W/S of between $8.6 and $8.7 million, depending
    upon the exact date of the transaction. The Company believes the amended 
    PPA will help relieve the financial pressure caused by the recent    
    closure of Maine Yankee as well as the need for substantial increases in 
    its retail rates, and is therefore in the best interests of the Company, 
    its customers and shareholders.

    The Company intends to finance the up front payment to W/S from funds 
    obtained from the Finance Authority of Maine (FAME).  Absent FAME    
    financing, the Company does not believe it will be able to obtain the 
    funds on terms sufficiently economic to justify the arrangement with 
    W/S.  The amended PPA must be approved by the MPUC if FAME financing is 
    to be obtained, which approval is currently being sought.  The Company
    has also asked the MPUC to allow it to flow through immediately the  
    agreed-to reduction in power purchase costs under the current term of 
    the PPA, instead of deferring the reduction until the year 2000 as   
    required by the Company's Rate Stabilization Plan approved by the MPUC
    in November, 1995.  The Company has further asked the MPUC for a     
    determination that any so-called stranded investment created by the  
    amended PPA will be recoverable from customers to the extent permitted
    by Maine law.  On November 4, 1997, after a short hearing on the     
    Company's application, the MPUC determined that it lacked sufficient 
    information to make an informed decision and will not have the       
    opportunity to obtain this information within the statutory deadline 
    provided for the approval of the application.  The MPUC, therefore,  
    denied the application, but invited the Company to resubmit it with the 
    understanding that a decision would be following within 30 days after an 
    opportunity for additional review.  The Company consequently resubmitted 
    its application on November 6, 1997.  The MPUC's and FAME's favorable 
    action on these matters is a prerequisite to amending the PPA.  The  
    Company cannot predict either the MPUC's or FAME's ultimate decisions.

  
8.  GENERATING ASSET DIVESTITURE

    As required by the electric utility industry restructuring legislation, 
    the Company has offered for sale all of its generating capacity,     
 
    including its Canadian subsidiary, with a total net book value of $11.0 
    million as of September 30, 1997.  This plan must be approved by the 
    Maine Public Utilities Commission, which has given the proceeding the 
    Docket No. 97-670.  The Company believes it will take at least a full 
    year to complete this divestiture process, which began in late August,
    1997.  The Company cannot predict the final outcome of the proposed  
    divestiture.














































                                   -12-

9.  ACCOUNTING PRONOUNCEMENT

    In February 1997, the Financial Accounting Standards Board (FASB) issued 
    Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per 
    Share".  This Statement is effective for financial statements issued for 
    periods ending after December 15, 1997 with earlier application not  
    permitted.  The Statement requires dual presentation of basic and    
    diluted earnings per share on the income statement.  

    The Company's basic earnings per share for fiscal 1997 will be       
    calculated similar to its currently disclosed earnings per share.    
    Diluted earnings per share will not be materially different from basic
    earnings per share.

    In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive  
    Income", which requires the separate reporting of all changes to     
    shareholders' equity, and SFAS No. 131 "Disclosures about Segments of 
    an Enterprise and Related Information", which revises existing       
    guidelines about the level of financial disclosure of a Company's    
    operations.  Both Statements are effective for financial statements  
    issued after December 15, 1997.  The Company has not determined the  
    impact of the new standards, but does not expect them to have a material 
    impact to existing financial reporting. 



















 









                                   -13-

Item 2.   Management's Analysis of Quarterly Income            Form 10-Q
          Statements

                          Results of Operations

          Earnings (loss) per share and net income (loss) available for
          common stock for the three months ended September 30, 1997 along
          with the corresponding information for the previous year are as
          follows:
                                        Three Months Ended
                                           September 30,         
   
                                         1997      1996      

          Loss per share                $(.70)    $(.40)    

          Net loss in Thousands         $(1,129)  $(655)

          For the third quarter of 1997 compared to the same quarter last
          year, the decrease in consolidated earnings per share (EPS) of
          $.30 is attributable to the following:
                                                          EPS        
                                                        Increase
                                                       (Decrease)

          Increase in operating expenses resulting
            from extended Maine Yankee outage in 1997:
               Replacement Power Costs                    $(.32)
               Capacity Expenses                           (.18)
                    Total                                 ( .50)

          Increase in retail revenues:
          2.9% rate increase effective 2/1/97   $  .12
           .7% volume decrease                    (.03)
          Load retention discounts               ( .05)         
          Unbilled revenue adjustment              .02      .06

          Increase in Power Marketing earnings    
            due to sale of Wyman Unit No. 4's capacity
            because of the outage of several nuclear 
            units in New England                            .04

          Insurance reimbursement in 1997 for legal
            expenses incurred in 1996 defending lawsuit     .02

          Reduction in generation operation and
            maintenance expenses                            .02

          Other                                             .06 
               Total                                     $( .30)



                                   -14-
                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          Additional replacement power and capacity expenses associated
          with the unscheduled Maine Yankee outage that began on December
          6, 1996 and the August 6, 1997 decision to close had a material
          impact on the Company's earnings and cash flows for the third
          quarter of 1997.  For the third quarter of 1997, Maine Yankee
          replacement power costs reduced earnings by $.32 per share,
          while additional capacity expenses to address restart and
          closing issues further reduced earnings by $.18 per share.  The
          rate increases under the Company's rate plan effective February
          1, 1997 were partially offset by load retention contract
          discounts to several large customers and a .7% decrease in
          retail sales resulting in a net $.06 increase in earnings per
          share.  Power marketing earnings increased $.04 per share
          because of demand for the Company's Wyman Unit No. 4 capacity
          entitlement due to the outage of several nuclear units in New
          England.  Legal expenses were reduced in 1997 by $.02 per share
          due to an insurance settlement received following the successful
          defense against a lawsuit adjudicated in 1996.  Generation
          related operating and maintenance expenses were also decreased
          by $.02 per share.
               
          Consolidated operating revenues for the quarter ended
          September 30, 1997 and 1996, are as follows:

                                   1997                     1996

(Dollars in Thousands)          $       MWH              $        MWH

Retail                       10,536   112,557         10,425    113,381
Sales for Resale                474    10,859            460     10,664
Total Primary Sales          11,010   123,416         10,885    124,045
Secondary Sales                 774    19,799          1,118     49,699
Other Revenues/Rev. Adjust.     601                      581           
Total Operating Revenues     12,385   143,215         12,584    173,744


          Primary sales in the third quarter of 1997 were 123,416 MWH,
          a decrease of 629 MWH from sales in the third quarter of 1996. 
          Secondary sales decreased by 29,900 MWH, reflecting a decrease
          in power marketing activities.  During the third quarter of
          1996, secondary sales of the Company's Wyman Unit No. 4 and
          Maine Yankee entitlements for varying lengths of time (Maine
          Yankee operated at a 90-percent level for approximately half
          of the third quarter in 1996) were made at prevailing market
          rates.  As previously mentioned, since Maine Yankee was not



                                   -15-
                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          available for the same period in 1997, secondary sales for the
          quarter were limited to Wyman No. 4 entitlements.  However, as
          noted above, because of the increased demand for Wyman Unit
          No. 4's capacity, profit from power marketing activity was
          actually higher in 1997.

          Retail revenues for the third quarter of 1997 were $10,536,000
          compared to $10,425,000 for the same period of 1996,
          reflecting the 2.9% increase in retail rates effective
          February 1, 1997 allowed under the Company's rate plan,
          partially offset by load retention discounts to certain large
          industrial customers that were approved by the Maine Public
          Utilities Commission and a .7% decrease in retail sales.

          For the third quarters ended September 30, 1997 and 1996,
          total operating expenses were $12,773,000 and $12,448,000,
          respectively.  The changes in operating expenses and energy
          sources are as follows:

                                                Increase/(Decrease)
          (Dollars in Thousands)                    $         MWH
          Purchased Power Expenses 
               Maine Yankee                       354        (42,646)
               Wheelabrator-Sherman               390          1,473 
               NB Power                         1,120         26,094 
               LG&E                               392          9,632 
               Bangor Hydro-Electric             (289)       (12,750)
               Other Purchases                    (71)       ( 2,760)
               Deferred Fuel                     (890)                
                                                1,006        (20,957)
          Generating Expenses                     123         (8,531) 
          Other Operation & Maint. Expenses      (480) 
          Depreciation                             63 
          Amortization                             15 
          Income Taxes                           (402)                 
                    Total                         325        (29,488)
          











                                   -16-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          As previously mentioned, Maine Yankee was out of service for
          all of the third quarter of 1997, while it operated at a 90-
          percent level of operation for approximately half of the third
          quarter of 1996, resulting in a decrease in production of
          42,646 MWH.  Hydro production was 65.1% and 144.0% of normal
          in the third quarters of 1997 and 1996, respectively, as
          reflected in the 15,260 MWH decrease.  Because of the
          previously mentioned decrease in power marketing activities,
          purchases from Bangor Hydro-Electric were eliminated in the
          third quarter of 1997.  To meet the remainder of the Company's
          energy requirements, purchases from NB Power and LG&E
          increased 26,094 MWH and 9,632 MWH, respectively.  Although
          Maine Yankee did not operate in the third quarter of 1997
          creating a reduction in fuel costs of $144,000, the Company's
          share of Maine Yankee capacity expenses to address restart and
          closing issues increased by $498,000 resulting in a net
          increase in purchased power expenses of $354,000. 
          Wheelabrator-Sherman purchased power expenses increased by
          $390,000, because of an increased production of 1,473 MWH and
          a 5% contractual price increase.  The Company, in accordance
          with the multi-year rate plan, deferred $890,000, or 50%, of
          Maine Yankee replacement power costs once the current outage
          exceeded six months in early June, 1997.  See the "Effects on
          the Company's Rate Plan Resulting from the Maine Yankee
          Closure" Section of this Form 10-Q for additional information. 
          Generating expenses increased by $123,000 because of increased
          operation at Wyman No. 4, partially offset by decreases due to
          reduced activity at the Caribou Steam Plant following Steam
          Units 1 and 2 placement on inactive status effective January
          1, 1996.  Other operation and maintenance expenses decreased
          by $480,000 primarily due to decreased wheeling expenses due
          to AEI and decreased power marketing activity in 1997 and
          decreased medical expenses in 1997.

          Maine Yankee Closure

          The Company owns 5% of the Common Stock of Maine Yankee Atomic
          Power Company (Maine Yankee). As previously reported, Maine
          Yankee has been out of service since December 6, 1996 and was
          not expected to return to service until August, 1997.  On May
          27, 1997, the Board of Directors of Maine Yankee announced
          that it was considering permanent closure of Maine Yankee






                                   -17-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          based on the economics of the facility as well as uncertainty
          regarding the operation of the plant.  No final decision was 
          made but spending levels were reduced immediately to a level
          that preserved the option of restarting the 810-megawatt
          facility or closing it.  The Maine Yankee Board of Directors
          also had preliminary discussions with PECO Energy Company
          (PECO) regarding the sale of Maine Yankee but no agreement had
          been reached.  For additional information regarding Maine
          Yankee, reference is made to the Company's  Form 8-K filed
          June 4, 1997 under Item 5, "Other Material Events - Maine
          Yankee Owners Cut Spending and Consider Closure of Maine
          Yankee" and it's 1996 Annual Report, "Analysis of Financial
          Condition and Review of Operations-1996, Maine Yankee", for
          discussion of the Nuclear Regulatory Commission's Independent
          Safety Assessment results issued October 7, 1996, and the
          current shutdown that began on December 6, 1996, to review and
          resolve cable separation and cable routing issues.

          The Company's rate plan contains a provision for additional
          rate increases in the event of a Maine Yankee plant outage
          exceeding six consecutive months.  After the six month period,
          50% of the replacement power costs can be deferred and
          recovered in rates with the annual rate increase.  This
          provision went into effect on June 6, 1997, with approximately
          $890,000 deferred in the third quarter of 1997.  In addition,
          the profit-sharing mechanism allows additional rate increases 
          if earnings are more than 300 basis points below the target
          return on equity, currently 11%, with 50% of the earnings
          deficiency recoverable from customers with the annual rate
          increase.  As more fully explained in Note 4, on October 24,
          1997, the MPUC issued a "Notice of Investigation" (NOI) to
          formally commence an investigation into the report of a
          consultant who performed a management audit at Maine Yankee. 
          The findings of the investigation will be used in future
          ratemaking proceedings.  The Company cannot predict the effect
          of this investigation on the MPUC's review of the Company's
          rate plan filing for its February 1, 1998 increase.

          For the first nine months of 1997, while Maine Yankee was out
          of service, the Company incurred additional replacement power
          costs of approximately $4,824,000, of which $1,086,000 have
          been deferred, along with additional operating costs of






                                   -18-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          approximately $1.9 million associated with the efforts to
          restart Maine Yankee, which have adversely impacted the
          Company's earnings.  See the "Effects on the Company's Rate
          Plan Resulting from the Maine Yankee Closure" section of this
          Form 10-Q for additional information.

          On August 6, 1997, the Board of Directors of Maine Yankee
          voted to permanently cease power operations at the plant and
          begin the process of decommissioning the plant.  The formal
          vote followed an announcement by the Maine Yankee Board on
          August 1, 1997, that Maine Yankee and PECO, after two months
          of intensive negotiations, had been unable to arrive at "a
          mutually beneficial framework for agreement" on a sale of the 
          plant to PECO.  The decision to shut down the plant was based
          on an economic analysis of the costs, risks and uncertainties
          associated with operating the plant compared to those
          associated with closing and decommissioning the plant.  The
          Maine Yankee Board's decision to close the plant should
          mitigate the costs the Company would otherwise incur in 1997
          through a phasing down of Maine Yankee's operations and
          maintenance costs, but will not reduce the need to buy
          replacement energy and capacity.

          The Company is responsible for 5 percent of the costs of
          decommissioning the plant.  Maine Yankee has been collecting
          decommissioning costs in advance pursuant to a 1994 Federal
          Energy Regulatory Commission (FERC) rate order.  Maine
          Yankee's most recent estimate of the total costs of
          decommissioning was $508 million (in 1997 dollars), based on
          a 1997 study by an independent engineering consultant.  The
          previous estimate by the same consultant was $316.6 million
          (in 1993 dollars).  In early November, 1997, Maine Yankee
          released a cost estimate of $930 million (nominal amount) for
          decommissioning and other expenditures from September 1, 1997
          through October, 2008.  The Company has recorded its 5% share,
          $46.5 million, less $1.1 million of its share of Maine
          Yankee's expenditures since September 1, 1997 as a
          decommissioning liability.  Maine legislation provides
          recovery in rates for decommissioning costs through the
          regulated transmission and distribution affiliate that will be
          created by March 1, 2000, therefore an offsetting regulatory
          asset has also been recognized.






                                   -19-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          In a related matter, in early September, 1997, the Maine
          Public Utilities Commission (MPUC) released the report of a
          consultant it had retained to perform a management audit of
          Maine Yankee for the period January 1, 1994 to June 30, 1997. 
          The report contained both positive and negative conclusions,
          the latter explaining that: Maine Yankee's decision in
          December, 1996 to proceed with the steps necessary to restart
          its nuclear generating plant at Wiscasset, Maine, was
          "imprudent"; that Maine Yankee's May 27, 1997, decision to
          reduce restart-expenses while exploring a possible sale of the
          plant was "inappropriate," based on the consultant's finding
          that a more objective and comprehensive competitive analysis
          at the time "might have indicated a benefit for restarting"
          the plant; and that those decisions resulted in Maine Yankee
          incurring $95.9 million in "unreasonable" costs.  On October
          24, 1997, the MPUC issued a Notice of Investigation initiating
          an investigation of the prudence of the Maine Yankee shutdown 
          decision and of the operation of Maine Yankee prior to the
          shutdown, and announced that it had directed its consultant to
          extend its review to include those areas. The Company does not
          know how the MPUC plans to use the consultant's report or any
          negative conclusions of its investigation, but believes the
          report's negative conclusions are unfounded and may be
          contradictory.  The Company has objected to this
          investigation.  The Company also plans to vigorously  contest
          the negative conclusions of the report if they are introduced
          in Maine Yankee's anticipated rate proceeding before the
          Federal Energy Regulatory Commission.  In addition, the
          Company believes it would have substantial constitutional and
          jurisdictional grounds to challenge any effort in an MPUC
          proceeding to alter wholesale Maine Yankee rates made
          effective by the FERC.  On November 7, 1997, Central Maine
          Power and Maine Yankee initiated legal challenges to the MPUC
          investigation in the Maine Supreme Judicial Court alleging
          that such an investigation falls exclusively within the
          jurisdiction of the FERC, and that the MPUC's investigation is
          therefore barred on constitutional grounds.  The Company
          intends to join the appeals but cannot predict the timing or
          outcome of the proceedings.  See Item 1. (d) of the "Legal
          Proceedings and Regulatory Matters section of this Form 10-Q
          for further discussion.







                                   -20-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

                          Financial Condition

          Net cash flows from operating activities were negative
          $2,332,000 for the first nine months of 1997.  The $7,532,000
          decrease in net cash flow from operating activities reflects
          the additional replacement power costs and capacity expenses
          required in 1997 due to the Maine Yankee outage and closing.
          For the period, $1,941,000 was invested in electric plant,
          $1,213,000 was paid in dividends and $1,315,000 was used to
          reduce long-term debt.  Short-term borrowings increased by
          $4,800,000 for the additional Maine Yankee replacement power
          costs and capacity expenses.  The Company drew down $1,239,000
          in 1997 from the 1996 tax-exempt revenue bond proceeds based
          on qualifying property, which partially offset construction
          requirements.     

          For the first nine months of 1996, net cash flows from
          operating activities were $5,200,000.  $10,000,000 of tax-
          exempt bonds were issued in 1991 and were refinanced with a
          new $15,000,000 issue, with the remaining $5,000,000 deposited
          with the trustee to be withdrawn based on qualified property
          additions.  $250,000 was drawn from the trustee of the tax-
          exempt bonds for issuance expenses incurred.  For the period,
          $2,539,000 was invested in electric plant, $2,232,000 was paid
          in dividends and $1,315,000 was used to reduce other long-term
          debt.  Short-term borrowings were increased by $1,600,000 for
          working capital and construction requirements.
          
          Amendments of Interest Coverage Tests in Financial Instruments

          The Company's short-term revolving credit agreement and a
          letter of credit supporting its 1996 tax-exempt revenue bonds
          contain interest coverage tests that the Company must satisfy
          to avoid default.  As previously mentioned, the extended
          outage at Maine Yankee and the closing of the plant has
          adversely impacted the financial results for the third quarter
          of 1997.

          On March 28, 1997, the Company and the Banks agreed on
          amendments to the revolving credit agreement and letter of
          credit and reimbursement agreement which adjust the interest
          coverage tests to exclude Maine Yankee incremental replacement






                                   -21-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          power costs through September 30, 1997.  Under the amendment
          to the revolving credit agreement, the Company was obligated
          to issue a first mortgage bond of $11 million as collateral
          for the maximum amount of the Company's obligations under the
          revolving credit agreement.  Both amendments required the
          issuance of the first mortgage bonds on or before May 15,
          1997.  On April 28, 1997 the Maine Public Utilities Commission
          approved the issuance of the first mortgage bonds, and the
          Company issued the bonds on May 5, 1997.  Without these
          amendments, the Company would have been in violation of its
          interest coverage tests for the twelve months ended September
          30, 1997 and would have been in default on these instruments.

          Effects on the Company's Rate Plan Resulting from the Maine
          Yankee Closure

          As mentioned above, the amendments to the Company's revolving
          credit agreement and letter of credit and reimbursement
          agreement only exclude Maine Yankee incremental replacement
          power costs through September 30, 1997.  Interest coverage
          tests for periods after September 30, 1997 will reflect Maine
          Yankee replacement power costs, as a result of the recent
          decision to close Maine Yankee.  The Company's rate plan
          contains a provision for additional rate increases in the
          event of a Maine Yankee plant outage exceeding six consecutive
          months.  After the six month period, 50% of the replacement
          power costs can be deferred and recovered in rates with the
          annual rate increase.  This provision went into effect on June
          6, 1997, with approximately $890,000 deferred in the third
          quarter of 1997.  In addition, the profit-sharing mechanism
          allows additional rate increases if earnings are more than 300
          basis points below the target return on equity, currently 11%,
          with 50% of the earnings deficiency recoverable from customers
          with the annual rate increase.  As more fully explained in
          Note 4, on October 24, 1997, the MPUC issued a "Notice of
          Investigation" (NOI) to formally commence an investigation
          into the report of a consultant who performed a management
          audit at Maine Yankee.  The Company cannot predict the effect
          of this investigation on the MPUC's review of the Company's
          rate plan filing for its February 1, 1998 increase.  Based on
          projected 1997 financial results, it is likely that the
          Company will be in violation of its interest coverage tests at






                                   -22-

                      PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements       Form 10-Q
          Results of Operations (Continued)

          the end of 1997.  The Company and the Banks have discussed
          additional amendments to the aforementioned interest coverage
          tests, but await the MPUC's decisions on the restructured
          Wheelabrator-Sherman agreement, as described on Note 7, and
          the Company's February 1, 1998 rate increase.  The Company
          cannot predict the terms of these additional amendments to the
          interest coverage tests but is working with the Banks to reach
          a resolution.  If the Company's earnings provided under the
          rate plan are not sufficient to satisfy its interest coverage
          tests and other obligations, the Company will likely seek an
          emergency rate increase in advance of any possible violation
          of the previously mentioned interest coverage tests.

          Forward-Looking Statements

          The above discussion may contain "forward-looking statements",
          as defined in the Private Securities Litigation Reform Act of
          1995, related to expected future performance or our plans and
          objectives.  Actual results could potentially differ
          materially from these statements.  Therefore, there can be no
          assurance that actual results will not materially differ from
          expectations.

          Factors that could cause actual results to differ materially
          from our projections include, among other matters, electric
          utility restructuring; future economic conditions; changes in
          tax rates, interest rates or rates of inflation; developments
          in our legislative, regulatory, and competitive environment;
          and the results of safety investigations or the
          decommissioning cost of Maine Yankee.


















                                   -23-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters 
          (a)  Restructuring of Maine's Electric Utility Industry.

               In the Company's Form 10-K for December 31, 1996 as well
               as the form 10-Q for the quarter ended March 31, 1997,
               the Company described electric utility restructuring
               efforts in Maine, including the Maine Public Utilities
               Commission's (MPUC) recommendation to the legislature. 
               After months of hearings and deliberations, the Maine
               legislature passed L.D. 1804, "An Act to Restructure the
               State's Electric Industry", which the Governor signed
               into law on May 29, 1997.

          The principal provisions of the new law are as follows:

          1)   Beginning on March 1, 2000, all consumers of electricity
          have the right to purchase generation services directly from
          competitive electricity suppliers who will not be subject to
          rate regulation.

          2)   By March 1, 2000, the Company, Central Maine Power
          Company (CMP) and Bangor Hydro-Electric Company (BHE) must
          divest of all generation related assets and business functions
          except for:

               (a)  contracts with qualifying facilities, such as the
               Company's power contract with Wheelabrator-Sherman (W/S),
               and conservation providers;

               (b)  nuclear assets, namely, the Company's investment in
               the Maine Yankee Atomic Power Company, however, the MPUC
               may require divestiture on or after January 1, 2009;

               (c)  facilities located outside the United States, i.e.,
               the Company's hydro facility in New Brunswick, Canada;
               and

               (d)  assets that the MPUC determines necessary for the
               operation of the transmission and distribution services.

          The MPUC can grant an extension of the divestiture deadline if
          the extension will improve the selling price.  For assets not
          divested, the utilities are required to sell the rights to the
          energy and capacity from these assets.  The Company shall
          submit to the MPUC its divestiture plan no later than January
          1, 1999.



                                   -24-
                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

          3)   Billing and metering services will be subject to
          competition beginning March 1, 2002, but permits the MPUC to
          establish an earlier date, no sooner than March 1, 2000.

          4)   The Company, through an unregulated affiliate, may market
          and sell electricity both within and outside its current
          service territory, without limitation.  Both CMP and BHE are
          limited to 33% of the load within their respective service
          territories, but may sell an unlimited amount outside their
          service territories.  Consumer-owned utilities are allowed to
          market and sell within their service territories, but the MPUC
          can limit or prohibit competition in their service territory,
          if the tax-exempt status of the consumer-owned utility is
          threatened.

          5)   The Company, through a regulated affiliate, will continue
          to provide transmission and distribution services which will
          be subject to continued regulation by the MPUC.

          6)   Maine electric utilities will be permitted a reasonable
          opportunity to recover legitimate, verifiable and unmitigable
          costs that are otherwise unrecoverable as a result of retail
          competition in the electric utility industry.  The MPUC shall
          determine these stranded costs by considering:

               a)   the utility's regulatory assets related to
               generation, i.e., the Company's unrecovered Seabrook
               investment;

               b)   the difference between net plant investment in
               generation assets compared to the market value for those
               assets; and

               c)   the difference between future contract payments and
               the market value of the purchased power contracts, i.e.,
               the W/S contract.

          By July 1, 1999, the MPUC will have estimated the stranded
          costs for the Company and the manner for the collection of
          these costs by the transmission and distribution company. 
          Customers reducing or eliminating their consumption of
          electricity by switching to self-generation, conversion to
          alternative fuels or utilizing demand-side management measures
          cannot be assessed exit or entry fees.  The MPUC shall include
          in the rates charged by the transmission and distribution


                                   -25-
                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

          utility decommissioning expenses for Maine Yankee.  In 2003
          and every three years thereafter until the stranded costs are
          recovered, the MPUC shall review and revaluate the stranded
          cost recovery.

          7)   All competitive providers of retail electricity must be
          licensed and registered with the MPUC and meet certain
          financial standards, comply with customer notification
          requirements, adhere to customer solicitation requirements and
          are subject to unfair trade practice laws.  Competitive
          electricity providers must have at least 30% renewable
          resources in their energy portfolios, including hydro-electric
          generation.

          8)   A standard-offer service will be available, ensuring
          access for all customers to reasonably priced electric power. 
          Unregulated affiliates of CMP and BHE providing retail
          electric power are prohibited from providing more than 20% of
          the load within their respective service territories under the
          standard offer service, while any unregulated affiliate of the
          Company does not have a similar restriction.

          9)   Unregulated affiliates of CMP and BHE marketing and
          selling retail electric power must adhere to specific codes of
          conduct, including, among others:

               a)   employees of the unregulated affiliate providing
               retail electric power must be physically separated from
               the regulated distribution affiliate and cannot be
               shared;

               b)   the regulated distribution affiliate must provide
               equal access to customer information;

               c)   the regulated distribution company cannot
               participate in joint advertising or marketing programs
               with the unregulated affiliate providing retail electric
               power;

               d)   the distribution company and its unregulated
               affiliated provider of retail electric power must keep
               separate books of accounts and records; and

               (e)  the distribution company cannot condition or tie the
               provision of any regulated service to the provision of


                                   -26-
                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

               any service provided by the unregulated affiliated
               provider of electricity.

               The MPUC shall determine the extent of separation
               required in the case of the Company to avoid cross-
               subsidization and shall consider all similar relevant
               issues as well as the Company's small size.

          10)  Employees, other than officers, displaced as a result of
          retail competition will be entitled to certain severance
          benefits and retraining programs.  These costs will be
          recovered through charges collected by the regulated
          distribution company.

          11)  Other provisions of the new law include provisions for:

               a)   consumer education;
               b)   continuation of low-income programs and demand side
                    management activities;
               c)   consumer protection provisions;
               d)   new enforcement authority for the MPUC to protect
                    consumers.

          The MPUC will conduct several rulemaking proceedings
          associated with the new restructuring law.  The Company is
          presently reviewing its business operations and the
          opportunities that the new restructuring law presents.  The
          Company cannot predict the value of the Company's stranded
          investment that the MPUC will determine, but anticipates that
          all stranded costs will be recovered.

          As reported in its Form 8-K dated September 4, 1997, the
          Company, pursuant to this legislation, has offered for sale
          all of its generating capacity, including its Canadian
          Subsidiary, with a net book value of $11.0 million as of
          September 30, 1997.  This plan must be approved by the Maine
          Public Utilities Commission, which has given the proceeding
          the Docket No. 97-670.  The Company believes it will take at
          least a full year to complete this divestiture process, which
          began in late August, 1997.  The Company cannot predict the
          final outcome of the proposed divestiture.






                                   -27-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

          (b)  Maine Public Service Company, Request For Open Access
               Transmission Tariff, FERC Docket No. ER 95-836-000.

               On March 31, 1995, the Company filed an open access
               transmission tariff with the Federal Energy Regulatory
               Commission (FERC).  This tariff provides fees for various
               types and levels of transmission and transmission-related
               services that are required by transmission customers. 
               The tariff, as filed, substantially increases some of the
               fees for transmission services and provides separate fees
               for various transmission-related services.  On May 31,
               1995, the FERC approved the filed tariff, subject to
               refund.  The filing has been vigorously contested by the
               Company's wholesale customers.  On May 31, 1996, the FERC
               issued Order 888, a final rule on open transmission
               access and stranded cost recovery.  As a result the
               Company has refiled its tariff to comply with the Order. 
               A decision by the FERC regarding the fees under the
               Company's tariff is not expected until later in 1997. 
               The Company cannot predict the FERC's ultimate decision
               in this matter.

          (c)  Restructured Purchase Power Agreement with Wheelabrator-
               Sherman

               The Company has a Power Purchase Agreement (PPA) with the
               Wheelabrator-Sherman Energy Company (W/S) under which the
               Company is obligated to purchase the entire output (up to
               126,582 MWH) of a 17.6 MW biomass plant owned by W/S. 
               The current term of the PPA runs through December 31,
               2000 and may be renewed by either party for an additional
               fifteen years at prices to be determined by mutual
               agreement or, absent mutual agreement, by the MPUC.

               On October 15, 1997, the Company and W/S agreed to amend
               the PPA.  Under the terms of this amendment, W/S has
               agreed to reductions in the price of purchased power of
               approximately $10 million over the PPA's current term. 
               The Company and W/S have also agreed to renew the PPA for
               an additional six years at agreed-upon prices.  The
               Company will also make an upfront payment to W/S of
               between $8.6 and $8.7 million, depending upon the exact
               date of the transaction.  The Company believes the
               amended PPA will help relieve its financial pressure
               caused by the recent closure of Maine Yankee (see the


                                   -28-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

               Company's Form 10-Q for the period ended June 30, 1997)
               as well as the need for substantial increases in its
               retail rates, and is therefore in the best interests of
               the Company, its customers and shareholders.

               The Company intends to finance the upfront payment to W/S
               from funds obtained from the Finance Authority of Maine
               (FAME).  Absent FAME financing, the Company does not
               believe it will be able to obtain the funds on terms
               sufficiently economic to justify the arrangement with
               W/S.  The amended PPA must be approved by the MPUC if
               FAME financing is to be obtained, which approval is
               currently being sought and has been given the Docket No.
               97-727.  The Company has also asked the MPUC to allow it
               to flow through immediately the agreed-to reduction in
               power purchase costs under the current term of the PPA,
               instead of deferring the reduction until the year 2000 as
               required by the Company's Rate Stabilization Plan
               approved by the MPUC in November, 1995.  The Company has
               further asked the MPUC for a determination that any so-
               called stranded investment created by the amended PPA
               will be recoverable from customers to the extent
               permitted by Maine law.  On November 4, 1997, after a
               short hearing on the Company's application, the MPUC
               determined that it lacked sufficient information to make
               an informed decision and will not have the opportunity to
               obtain this information within the statutory deadline
               provided for the approval of the application.  The MPUC,
               therefore, denied the application, but invited the
               Company to resubmit it with the understanding that a
               decision would be following within 30 days after an
               opportunity for additional review.  The Company
               consequently resubmitted its application on November 6,
               1997.  The MPUC's and FAME's favorable action on these
               matters is a prerequisite to amending the PPA.  The
               Company cannot predict either the MPUC's or FAME's
               ultimate decisions.

          (d)  Maine Public Utilities Commission Investigation of the
               Operation and Shutdown of Maine Yankee Atomic Power
               Company Generating Facility in Wiscasset, Maine, MPUC
               Docket No. 97-781

               On October 24, 1997, the MPUC issued a Notice of
               Investigation regarding the August, 1997 shutdown of the


                                   -29-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings and Regulatory Matters - Continued

               Maine Yankee Power Plant (see "Maine Yankee Closure" in
               section Management's Analysis above).  The MPUC stated
               that the "permanent shutdown of the plant presents
               significant ratemaking issues" such as replacement power
               costs and stranded investment issues, for all three of
               Maine Yankee's Maine owners.  The announced scope of the
               investigation is therefore intended to focus on "two
               separate generic prudence questions .... presented in
               determining the reasonableness of increased purchased
               power costs and reasonableness of the recovery of the
               unamortized Maine Yankee investment:

               1.   Was the decision to shut down the Maine Yankee
                    Plant prudent?

               2.   Was the plant prematurely shut down because the
                    plant had been operated or was operating
                    imprudently?"

               As an owner of Maine Yankee, the Company was made a party
               to this investigation.

               The Company believes the MPUC's jurisdiction over Maine
               Yankee costs and prudence issues is preempted by the
               Federal Power Act and FERC jurisdiction.  If, however,
               the MPUC should successfully assert jurisdiction over
               these issues and, if it disallowed substantial amounts of
               the Maine Yankee-related expenses in retail rates, the
               effect on the Company's financial condition would be
               material and adverse.  On November 7, 1997, Central Maine
               Power and Maine Yankee initiated legal challenges to the
               MPUC investigation in the Maine Supreme Judicial Court
               alleging that such an investigation falls exclusively
               within the jurisdiction of the FERC, and that the MPUC's
               investigation is therefore barred on constitutional
               grounds.  The Company intends to join the appeals but
               cannot predict the timing or outcome of the proceedings.

Item 5.   Other Information

          None






                                   -30-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION


Item 6.   Exhibits and Reports on form 8-K

          (a)  Exhibits - none

          (b)  A Form 8-K was filed on:  October 15, 1997 under Item 5,
               Other Events; September 4, 1997 under Item 5, Other
               Events.









































                                   -31-
                                                             Form 10-Q

                               SIGNATURE                              

     Pursuant to the requirements 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.

                                   MAINE PUBLIC SERVICE COMPANY
                                          (Registrant)


Date: November 13, 1997             /s/  Larry E. LaPlante          
                                   Larry E. LaPlante, Vice President
                                   Finance, Administration and Treasurer






































                                   -32-

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