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, 1998    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
          quarter and nine months ended September 30, 1998, and for the
          corresponding periods of the preceding year; a consolidated
          balance sheet as of September 30, 1998, and as of December 31,
          1997, 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, 1998, 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, 1998 and
          December 31, 1997, and the results of their operations for the
          three and nine months ended September 30, 1998 and their cash
          flows for the nine months ended September 30, 1998, and for
          the corresponding periods of the preceding year.






























                                   -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,
                                      1998       1997      1998       1997


Operating Revenues                  $12,832    $12,385    $41,672    $40,092
Operating Expenses
   Purchased Power                    7,444      8,912     22,558     26,573
   Other Operation and Maintenance    3,206      3,185     10,226      9,480
   Depreciation                         659        626      1,976      1,880
   Amortization                         402        411      1,205      1,231
   Taxes Other Than Income              368        386      1,182      1,268
   Provision (Benefit) for Income Taxes (20)      (747)     1,003       (941)
        Total Operating Expenses     12,059     12,773     38,150     39,491
Operating Income                        773       (388)     3,522        601
Other Income (Deductions)
   Equity in Income of Associated 
          Companies                     132        130        385        377
   Allowance for Equity Funds Used 
          During Construction            10          5         25         14
   Other Income Taxes                    (4)       (38)       (47)      (120)
   MY Replacement Power Carrying Charges 61         13        185         13
   Other - Net                          (31)        43        (43)         9
Total                                   168        153        505        293
Income Before Interest Charges          941       (235)     4,027        894
Interest Charges
   Long-Term Debt and Notes Payable   1,098        897      3,064      2,637
   Less Allowance for Borrowed Funds                                       
      Used During Construction           (6)        (3)       (14)        (7)
Total                                 1,092        894      3,050      2,630
Net Income (Loss) Available for 
     Common Stock                     ($151)   ($1,129)      $977    ($1,736)

Average Shares Outstanding (000's)    1,617      1,617      1,617      1,617
Basic Earnings (Loss) Per Share of 
     Common Stock                    ($0.09)    ($0.70)     $0.60     ($1.07)
Dividends Declared per Common Share   $0.25      $0.25      $0.75      $0.75







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                         1998              1997
Utility Plant
   Electric Plant in Service                        $98,642          $96,396
   Less Accumulated Depreciation                     51,177           47,230
      Net Electric Plant in Service                  47,465           49,166
   Construction Work-in-Progress                      2,840              699
        Total                                        50,305           49,865
Investment in Associated Companies
   Maine Yankee Atomic Power Company                  4,167            3,952
   Maine Electric Power Company, Inc.                   233              177
        Total                                         4,400            4,129
        Net Utility Plant and Investments            54,705           53,994
Current Assets
   Cash and Cash Equivalents                          1,665            2,071
   Deposits for Interest and Dividends                  472               64
   Accounts Receivable - Net                          4,206            5,788
   Unbilled Base Revenue                              1,365            1,686
   Deferred Fuel and Purchased Energy                   661              687
   Inventory                                          1,211            1,231
   Prepayments                                          825            2,189
      Total                                          10,405           13,716
Other Assets
   Restricted Investments                             3,702            2,263
   Uncollected Maine Yankee Decommissioning Costs    38,776           43,429
   Recoverable Seabrook Costs                        25,231           26,299
   Regulatory Asset - SFAS 109 & 106                 12,436           13,607
   Deferred Fuel and Purchased Energy                 9,119            7,135
   Regulatory Asset - Power Purchase Restructuring    8,706
   Other                                              3,735            3,038
      Total                                         101,705           95,771
Total Assets                                       $166,815         $163,481
          CAPITALIZATION AND LIABILITIES
Capitalization
   Common Shareholders' Equity
      Common Stock                                  $13,071          $13,071
      Paid-in Capital                                    38               38
      Retained Earnings                              26,667           26,903
      Treasury Stock, at cost                        (5,714)          (5,714)
         Total                                       34,062           34,298
      Long-Term Debt (less current maturities)       45,915           35,650
Current Liabilities
   Long-Term Debt Due Within One Year                 1,275            4,155
   Notes Payable                                     10,000            7,200
   Accounts Payable                                   3,637            5,871
   Current Deferred Income Taxes                         47                6
   Dividends Declared                                   404              404
   Customer Deposits                                     27               43
   Interest and Taxes Accrued                           489              880
      Total                                          15,879           18,559
Deferred Credits
   Uncollected Maine Yankee Decommissioning Costs    38,776           43,429
   Deferred Income Tax                               25,519           25,722
   Investment Tax Credits                               596              648
   Deferred Revenues                                  1,102              902
   Miscellaneous                                      4,966            4,273
      Total                                          70,959           74,974
Total Capitalization and Liabilities               $166,815         $163,481

   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, 
                                                           1998        1997
Cash Flow Used For Operating Activities
   Net Income (Loss)                                       $977     ($1,736)

Adjustments to Reconcile Net Income (Loss) to Net Cash
   Used For Operations
   Depreciation                                           1,976       1,880
   Amortization                                             169         194
   Amortization of Seabrook Costs                         1,064       1,064
   Income on Tax Exempt Bonds-Restricted Funds              (78)       (136)
   Deferred Income Taxes                                    863       1,210
   AFUDC                                                    (39)        (21)
   Change in Deferred Fuel & Purchased Energy            (1,984)     (2,130)
   Change in Deferred Regulatory and Debt Issuance Costs    410      (1,098)
   Change in Deferred Regulatory Asset - Payment for 
     Power Purchase Restructuring                        (8,706)
   Change in Deferred Revenues                              200         204
   Change in Benefit Obligation                             640         590
   Change in Current Assets and Liabilities                 673      (2,329)
   Other                                                   (592)        (24)
Net Cash Flow Used For Operating Activities              (4,427)     (2,332)

Cash Flow From Financing Activities
   Dividend Payments                                     (1,617)     (1,213)
   FAME Financing Costs                                    (534) 
   Deposit - FAME Capital Reserve Fund                   (2,378) 
   Issuance of Long Term Debt                            11,540  
   Drawdown of Tax Exempt Bonds Proceeds                  1,038       1,239
   Retirements of Long-Term Debt                         (4,155)     (1,315)
   Short-Term Borrowings, Net                             2,800       4,800
Net Cash Flow From Financing Activities                   6,694       3,511

Cash Flow Used For Investing Activities
   Investment in Electric Plant                          (2,673)     (1,941)
   Net Cash Used For Investment Activities               (2,673)     (1,941)

Decrease in Cash and Cash Equivalents                      (406)       (762)
Cash and Cash Equivalents at Beginning of Year            2,071       1,291
Cash and Cash Equivalents at End of Period               $1,665        $529

Change in Current Assets and Liabilities Providing (Utilizing)
   Cash From Operating Activities
      Accounts Receivable                                $1,582        $610
      Unbilled Revenue                                      321         433
      Deferred Maine Yankee Replacement Power Costs          26
      Inventory                                              20         (60)
      Prepayments                                         1,364      (1,941)
      Accounts Payable & Accrued Expenses                (2,624)     (1,361)
      Other Current Liabilities                             (16)        (10)
   Total Change                                            $673     ($2,329)

Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period For:
   Interest                                              $3,331      $2,950
   Income Taxes (1998 & 1997 are net of refunds of 
     $2,052,451 and $500,000, respectively)             ($1,387)      ($130)

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 1997 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 1997 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 reclassification have been made to the 1997 financial          
    statement amounts in order to conform to the 1998 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.  On January 26, 1998, the MPUC approved a 3.9% rate 
    increase effective February 1, 1998, according to terms of a stipulation 
    agreed to by the Company and the Public Advocate and with the support of 
    the MPUC staff.  The Company has the right to receive an additional     
    increase in retail rates of a minimum of 3.1% on February 1, 1999.  

    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,  
                                         1998      1997     1998     1997
      Current income taxes            $  (337)  $  (994)  $  187  $(2,031)
      Deferred income taxes               339       303      916    1,264
      Investment credits                  (18)      (18)     (53)     (54)
      Total income taxes              $   (16)  $  (709)  $1,050  $  (821)

      Allocated to:
      Operating Income                $   (20)  $  (747)   1,003     (941)
      Other income                          4        38       47      120 
      Total                           $   (16)  $  (709)  $1,050  $  (821)

    For the nine months ended September 30, 1998 and 1997, the effective   
    income tax rates were 51.8% and (32.1%), 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, 1998 and   
    December 31, 1997.
                                               (Dollars in Thousands)
                                            September 30,   December 31,
                                                 1998          1997        
      Seabrook                                 $14,311       $14,489
      Property                                   8,537         9,565
      Regulatory expenses                        1,906         1,540       
      Deferred fuel                              1,993         1,631
      Pension and postretirement benefits         (936)         (847)
      Other                                       (292)         (656)
      Net accumulated deferred income taxes    $25,519       $25,722 

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 on August 6, 1997, the Board 
    of Directors of Maine Yankee voted to permanently cease power 
    operations.  For additional information regarding Maine Yankee,        
    reference is made to the Company's 1997 Annual Report.

    With the closing of Maine Yankee, a provision of the Company's rate plan 
    allowing the deferral of 50% of the excess Maine Yankee replacement    
    power costs went into effect on June 6, 1997.  For the third quarter of 
    1998, the Company recovered $140,000 of these deferred expenses in     
    accordance with the January, 1998 rate stipulation which provided for  
    recovery of $562,000 in rates effective February 1, 1998.  

                                    -7-

    An additional $1,105,000 would have been deferred in the third quarter 
    of 1998, however these costs were offset by net savings of $1,106,000  
    from the restructured Purchase Power Agreement with Wheelabrator-      
    Sherman, also in accordance with the rate plan stipulations.  As of     
    September 30, 1998, the Company has a net deferred replacement power   
    cost balance of approximately $3,066,000, subject to recovery in       
    accordance with the rate plan.

    On September 1, 1997, Maine Yankee estimated the sum of the future     
    payments for the closing, decommissioning and recovery of the remaining 
    investment in Maine Yankee to be approximately $930 million, of which  
    the Company's 5% share would be approximately $46.5 million.  Maine    
    Yankee has indicated that it plans to further update its decommissioning 
    cost estimate before final consideration by the Federal Energy         
    Regulatory Commission (FERC).  Legislation enacted in Maine in 1997    
    calling for restructuring the electric utility industry provides for   
    recovery of decommissioning costs, to the extent allowed by federal    
    regulation, through the rates charged by the transmission and          
    distribution companies.  Based on the Maine legislation and regulatory 
    precedent established by the FERC in its opinion relating to the       
    decommissioning of the Yankee Atomic nuclear plant, the Company believes 
    that it is entitled to recover substantially all of its share of such  
    costs from its customers and, as of September 30, 1998, is carrying on 
    its consolidated balance sheet a regulatory asset and a corresponding  
    liability in the amount of $38.8 million, which is the $46.5 million   
    discussed above net of the Company's post-September 1, 1997 cost-of-   
    service payments to Maine Yankee.

    On September 2, 1997, the 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 including:  that Maine   
    Yankee's decision in December 1996 to proceed with the steps necessary 
    to restart the Plant 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 that 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.  The Company believes the report's negative      
    conclusions are unfounded and may be contradictory.  In any event, the 
    Company has expensed its share of these costs.  On October 24, 1997, the 
    MPUC issued a Notice of Investigation initiating an investigation of the 
    shutdown decision and of the operation of the Plant prior to shutdown, 
    and announced that it had directed its consultant to extend its review 
    to include those areas.  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.  The MPUC subsequently stayed its investigation pending the   
    outcome of Maine Yankee's FERC rate case, in which the MPUC and the    
    Maine Office of the Public Advocate (OPA) are actively participating   
    while indicating that its consultant would continue its extended review. 
    Based on preliminary indications, the Company expects the consultant's 
    recommendations resulting from its extended review would call for      
    additional disallowances.  However, Maine Yankee, the Company, as well as 
    other Maine Yankee owners have discussed proposals to resolve these rate 
    case issues with several intervenors, including the MPUC and the OPA.  
  


                                    -8-

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.  At December 31, 1997, 
    the Company was not in compliance with these covenants.  On March 12,   
    1998, the Company and the Banks executed a waiver of the interest      
    coverage tests for the fourth quarter of 1997, avoiding a default.  On  
    March 31, 1998, the Company and the Banks executed amendments to the   
    revolving credit agreement and letter of credit and reimbursement 
    agreement which further adjusts the interest coverage tests for the    
    first three quarters of 1998.  With these amendments, the Company      
    has achieved its amended interest coverage tests for the first three   
    quarters of 1998 and expects to meet the interest coverage tests for the 
    fourth quarter of 1998 based on projected 1998 earnings.  In addition, 
    the Revolving Credit Agreement and Letter of Credit supporting the Tax 
    Exempt Bonds due 2021 are extended by one year to October, 1999 and    
    June, 2000, respectively. 


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.



                                    -9-

           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.  

               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.  






                                    -10-

    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 generation 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. 

    In a related matter, and again as required by the Legislation described 
    above, the MPUC, on January 26, 1998, opened an investigation into the 
    feasibility of a direct physical interconnection between the Company's 
    service territory and the New England power grid (MPUC Docket No. 97-  
    586).  On October 13, 1998, the MPUC issued a draft report in Docket No. 
    97-586, which was prepared by an independent consultant and purports not 
    to be the product of either the MPUC or its Staff.  In addition to the 
    issue of the direct physical connection, the draft report also addresses 
    many of the issues concerning the development of a competitive market  
    for electricity in northern Maine.  The draft report concludes that "the 
    electricity market in northern Maine is likely to be subject to market 
    power problems" and recommends further study into methods of resolving 
    those problems.  While the Company disagrees with the reports          
    conclusion, it cannot predict the outcome of this proceeding.

7.  INVESTIGATION OF STRANDED COSTS, TRANSMISSION AND DISTRIBUTION UTILITY 
    REVENUE REQUIREMENTS AND RATE DESIGN

    On October 14, 1998, the Company filed its determination of stranded   
    costs, transmission and distribution costs and rate design with the    
    MPUC.  The Company's testimony supports its $96.6 million estimate of  
    stranded costs when deregulation occurs on March 1, 2000.  The major   
    components include the remaining investment in Seabrook, the above     
    market costs of the amended power purchase agreement and recovery of   
    fuel expense deferrals related to Wheelabrator-Sherman, the obligation 
    for remaining operating expenses and recovery of the Company's remaining 
    investment in Maine Yankee, and the recovery of several other regulatory 
    assets.  These stranded costs will be reduced by an estimated $19.6     
    million should the sale of the Company's generating assets be approved 
    by the MPUC, discussed further in Note 9, "GENERATING ASSET DIVESTITURE, 
    below.  The Company's proposed annual revenue requirements supported in 
    the filing would be approximately $32.6 millon; $19.3 million for   
    transmission and distribution and $13.3 million for stranded investment. 
    Decisions by the MPUC regarding stranded costs and the generating asset 
    sale approval are not expected until 1999.  The Company cannot predict 
    the MPUC's ultimate decision in these matters.   

8.  RESTRUCTURED POWER PURCHASE AGREEMENT WITH WHEELABRATOR-SHERMAN
               
    The Company has restructured its 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 original term of the PPA ran through December 31, 2000 and could 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.



                                   -11-

    On October 15, 1997, the Company and W-S agreed to amend the PPA.  Under 
    the terms of this amendment, W-S 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 agreed to renew the PPA for an         
    additional six years at agreed-upon prices.  The Company made an       
    upfront payment to W-S of $8.7 million on May 29, 1998, with the       
    financing provided by the Finance Authority of Maine (FAME).  This     
    payment has been reflected as a regulatory asset, and based on an MPUC 
    order, will be included in stranded costs and will be recovered in the 
    rates of the transmission and distribution utility.  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.

    On May 29, 1998, FAME issued $11,540,000 of its Taxable Electric Rate  
    Stabilization Revenue Notes, Series 1998A (Maine Public Service Company) 
    (the Notes) on behalf of the Company.  The Notes were issued pursuant  
    to, and are secured under, a Trust Indenture by and between FAME and   
    Peoples Heritage Bank, Portland, Maine, as Trustee (the Trustee), for  
    the purpose of:  (i) financing the buydown payment to W-S of           
    approximately $8.7 million, as required under the amended purchase power 
    agreement described above; (ii) for the Capital Reserve Fund, as       
    required by FAME under their Electric Rate Stabilization Program; and  
    (iii) for issuance costs.  The Notes are limited obligations of FAME,  
    payable solely out of the trust estate available under the Indenture,  
    principally the Loan Note and Loan Agreement with the Company and the  
    Capital Reserve Fund held by the Trustee.  The Company has issued $4   
    million of its First Mortgage Bonds and $7.54 million of its Second    
    Mortgage Bonds as collateral for its performance under the Loan Note   
    issued pursuant to the Loan Agreement.
 
    The Notes will bear interest at a Floating Interest Rate, initially at 
    5.7% per annum, and will be adjusted weekly.  On June 1, 1998, the     
    Company purchased an interest rate cap of 7% at a cost of $172,000, to 
    expire June, 2008, to limit its interest rate exposure to quarterly U.S. 
    LIBOR rates.              

9.  GENERATING ASSET DIVESTITURE

    In August, 1997, as required by the electric utility industry          
    restructuring legislation, the Company offered for sale all of its     
    generating capacity, including its Canadian subsidiary, with a total net 
    book value of $11.2 million as of September 30, 1998.  This plan was   
    approved by the Maine Public Utilities Commission, which has given the 
    proceeding the Docket No. 97-670.  Any final sale of the Company's     
    generation assets must be approved by the MPUC.  In its Order approving 
    the divestiture plan, the MPUC noted a number of concerns that it would 
    address when the final sale was brought before it for approval.  These 
    concerns included whether the sale of the assets of the Canadian       
    subsidiary should be delayed pending the development of a retail market 
    for electricity in Canada or until the MPUC completes its final study on 
    the efficiency of competitive markets in northern Maine and whether any 
    sale would create, or exacerbate, a concentration of generation market 
    power to the detriment of MPS's customers.

    On July 7, 1998, the Company announced that it has agreed to sell its  
    electric generating assets to WPS Power Development, Inc. (WPS-PDI)    
    located in Green Bay, Wisconsin, a wholly-owned subsidiary of WPS      
    Resources Corporation.  On August 7, 1998, the Company submitted its   
    filing to the MPUC seeking approval of the sale.

                                   -12-

    Both parties signed a purchase and sale agreement providing a sales    
    price of $37.4 million for the Company's 91.8 megawatts of generating  
    capacity, which is 3.2 times higher than the net book value of the     
    assets. If the MPUC approves the sale by the first quarter of 1999, the 
    Company would agree not to increase customer rates by 3.1% on February 
    1, 1999 now scheduled under its Rate Stability Plan.  In addition, the 
    Company is proposing that the net gain on the sale will be used to     
    reduce stranded costs by approximately $19.6 million.  In addition to the 
    MPUC's approval, approval must be obtained from the New Brunswick Lt.  
    Governor in Council before the sale can be consummated.
 
    Facilities being sold total 91.8 megawatts of generating capacity and  
    include:  34.5 MW of hydroelectric and diesel generating units at the  
    Canadian subsidiary, Maine & New Brunswick Electrical Power Co., Ltd., 
    (Tinker Plant), as well as its transmission system and interconnection 
    with NB Power; 31 MW of hydroelectric, oil-fired steam, and diesel     
    generating facilities at the Caribou Generating Station; 1.4 MW at Squa 
    Pan Hydroelectric generating station and storage dam; 4.2 MW at Flo's  
    Inn diesel generating station; a dismantled diesel unit at Houlton; the 
    Millinocket Lake Storage Dam; and the Company's joint ownership share  
    equivalent to 20.7 MW of Wyman Unit No. 4, an oil-fired plant in       
    Yarmouth, Maine.

    The Company's 5% ownership share in Maine Yankee was not part of the   
    sale because the plant was permanently shut down last August and is now 
    undergoing decommissioning.  The rights to the 18.1 MW output being    
    purchased under a power purchase agreement with Wheelabrator-Sherman   
    were offered in the initial request for proposal, but were not included 
    in the final sale.  When retail access begins, the Company will auction 
    the Wheelabrator-Sherman entitlement to a third party until 2006, when 
    the agreement with W-S expires.  The Company has agreed to buy back    
    electricity from WPS-PDI at a set price to cover the period between the 
    closing date and February 29, 2000, when retail access begins.

    Nineteen employees who operate and maintain the plants located in Maine 
    and in New Brunswick will be affected by the sale.  It is expected that 
    some employees will be hired by WPS-PDI, while other positions will be 
    eliminated.  Those individuals not offered employment by the buyer will 
    be eligible for an enhanced severance and extended benefits transition 
    package consistent with Maine's restructuring statute.            

10.  ACCOUNTING PRONOUNCEMENTS
    
    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.  In the first quarter of 1998, the FASB issued SFAS No. 132 
    "Employers' Disclosure about Pension and Other Postretirement Benefits", 
    which revises existing disclosure requirements about pension and       
    postretirement benefits.  These Statements are effective for financial 
    statements beginning 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-

                                                                 Form 10-Q
                     PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements

          Forward-Looking Statements

          The discussion below 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.

                          Results of Operations

          Loss per share and the net loss available for common stock for
          the three months ended September 30, 1998 along with the
          corresponding information for the previous year are as follows:
                              

                                         Three Months Ended
                                             September 30,       
                                              1998     1997      

          Loss per share                     $(.09)    $(.70)    

          Net loss (in thousands)            $(151)    $(1,129)

          For the third quarter of 1998 compared to the same quarter last
          year, the increase in consolidated earnings per share (EPS) of
          $.61 is attributable to the following:












                                   -14-

                                                                 Form 10-Q
PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements
          Results of Operations (Continued)                      
                                                           EPS
                                                         Increase
                                                        (Decrease)
          Decrease in operating expenses resulting
            from the closure of Maine Yankee and
            changes in net replacement power costs:
               Capacity Expenses                            $ .53 
               Replacement Power Costs                       (.09)
                                                              .44

          Increase in retail rates of 3.9% effective
            2/1/98 and a 4.5% sales increase, partially 
            offset by load retention discounts                .29

          Other fuel expense - increased prices              (.08)

          Increase in interest expense due to increased
            long-term and short-term borrowings              (.07) 

          Change in other operation & maintenance expenses    .04
          
          Other                                             ( .01)
               Total                                       $  .61 

          The net increase in Maine Yankee replacement power costs under
          the rate plan, compared to the third quarter of 1997, decreased
          earnings by $.09 per share in the third quarter of 1998.  The
          rate plan is discussed in detail in item 3(f) of the Legal
          Proceedings section.  Additional capacity expenses to address
          restart and closing issues during the second quarter of 1997
          were eliminated by the closure of Maine Yankee, increasing
          earnings by $.53 per share.  The rate increase under the
          Company's rate plan effective February 1, 1998, and a 4.5%
          increase in retail sales, partially offset by load retention
          contract discounts to several large customers, resulted in a net
          $.29 increase in earnings per share. 












                                   -15-

                                                               Form 10-Q
                     PART 1.  FINANCIAL INFORMATION

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

          An increase in other fuel expenses due to price increases
          reduced earnings by $.08 per share.  Interest expense decreased
          earnings by $.07 per share due to an increase in short-term
          borrowings and the issuance of the FAME note on May 29, 1998. 
          A reduction in wheeling expenses due to the termination of the
          transmission agreement with NB Power for Maine Yankee and Wyman
          wheeling, offset by increases in other operation and maintenance
          expenses, resulted in a net increase in earnings of $.04 per
          share.  Changes in other operating revenues not described above
          decreased earnings by $.01 per share.

          Consolidated operating revenues for the quarters ended
          September 30, 1998 and 1997, are as follows:

                                   1998                     1997
(Dollars in Thousands)          $       MWH              $        MWH

Retail                       11,314   117,635         10,536    112,557
Sales for Resale                420    11,058            474     10,859
Total Primary Sales          11,734   128,693         11,010    123,416
Secondary Sales                 521    14,706            774     19,799
Other Revenues/Rev. Adjust.     577      -               601       -   
Total Operating Revenues     12,832   143,399         12,385    143,215


          Primary sales in the third quarter of 1998 were 128,693 MWH,
          an increase of 5,277 MWH (4.3%) from sales in the third
          quarter of 1997.  Secondary sales decreased by 5,093 MWH,
          reflecting a decrease in power marketing sales.

          Retail revenues for the third quarter of 1998 were $11,314,000
          compared to $10,536,000 for the same period of 1997.  The
          increase in revenues reflects the 3.9% increase in retail
          rates effective February 1, 1998 allowed under the Company's
          rate plan and the 4.5% increase in retail sales, partially
          offset by load retention discounts to certain large industrial
          customers that were approved by the Maine Public Utilities
          Commission (MPUC).                  









                                   -16-

                                                             Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          For the third quarters ended September 30, 1998 and 1997,
          total operating expenses were $12,059,000 and $12,773,000,
          respectively.  The changes in operating expenses and energy
          sources are as follows:

                                                Increase/(Decrease)
          (Dollars in Thousands)                    $         MWH
          Purchased Power Expenses 
               Maine Yankee                    (1,512)           -    
               Wheelabrator-Sherman            (1,332)        (2,277) 
               NB Power                        (1,585)       (62,060)
               Northeast Empire                 2,294         67,968 
               Other Purchases                   (365)       ( 9,078)
               Deferred Fuel - MY Replacement   1,031            -    
                                               (1,469)       ( 5,447)
          Generating Expenses                      35          7,638  
          Other Operation & Maint. Expenses       (13)  
          Depreciation                             33 
          Amortization                            ( 9)
          Income Taxes                            727
          Taxes Other than Income                 (18)               
                    Total                        (714)         2,191 
          
          To meet the Company's energy requirements with the closing of
          Maine Yankee, the Company in late 1997 solicited bids for its
          energy requirements.  Purchases from Northeast Empire, the
          successful bidder, increased 67,968 MWH, substituting energy
          previously purchased from NB Power in 1997 to replace Maine
          Yankee energy.  With the closing of Maine Yankee, the
          Company's share of Maine Yankee capacity expenses to address
          restart and closing issues during the third quarter of 1997
          were eliminated resulting in a net decrease in purchased power
          expenses of $1,512,000.  Wheelabrator-Sherman purchased power
          expenses decreased by $1,332,000, due to decreased production
          of 2,277 MWH and to the reduced price under the amended Power
          Purchase Agreement (PPA), as discussed in Note 8 of the Notes
          to Consolidated Financial Statements, "Restructured Power
          Purchase Agreement with Wheelabrator-Sherman".  Deferred fuel
          expense increased $1,031,000 as a result of the deferral of
          Maine Yankee replacement power costs in the third quarter of
          1997.  There was no net deferral of Maine Yankee replacement
          power in the third quarter of 1998, as a result of the
          application of the Wheelabrator-Sherman savings mentioned
          above, in accordance with the January, 1998 rate stipulation
          discussed further in Note 4 of the Notes to Consolidated
          Financial Statements, "Maine Yankee".        

                                   -17-

                                                            Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          Hydro production was 96.7% and 65.1% of normal in the third
          quarters of 1998 and 1997, respectively, reflecting an
          increase of 6,116 MWH.  Generating expenses increased by
          $35,000 because of increased operation at Wyman No. 4.  


          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 on
          August 6, 1997, the Board of Directors of Maine Yankee voted
          to permanently cease power operations.  For additional
          information regarding Maine Yankee, reference is made to the
          Company's 1997 Annual Report. 

          The Plant provided reliable and low-cost power from the time
          it commenced operations in late 1972 to 1995.  Beginning in
          early 1995, however, Maine Yankee encountered various     
          operational and regulatory difficulties with the Plant.  In
          1995, the Plant was shut down for almost the entire year to
          repair a large number of steam generator tubes that were
          exhibiting defects.  Shortly before the Plant was to go back
          on-line in December 1995, a group with a history of opposing
          nuclear power released an undated, unsigned, anonymous letter
          alleging that in 1988 Yankee Atomic (then an affiliated
          consultant of Maine Yankee) and Maine Yankee had used the
          results of a faulty computer code as a basis to apply to the
          Nuclear Regulatory Commission (NRC) for an increase in the
          Plant's power output.  In response to the allegation, on 
          January 3, 1996, the NRC issued a Confirmatory Order that
          restricted the Plant to 90 percent of its licensed thermal
          operation level, which restriction was still in effect
          when the Plant was permanently shut down.

          As a result of the controversy associated with the
          allegations, the NRC, at the request of the Governor of Maine,
          conducted an intensive Independent Safety Assessment (ISA) of
          the Plant in the Summer and Fall of 1996.  On October 7, 1996,
          the NRC issued its ISA report, which found that while the
          Plant had been operated safely and could continue to operate,
          there were weaknesses that needed to be addressed, which would
          require substantial additional spending by Maine Yankee.  On
          December 10, 1996, Maine Yankee responded to the ISA report,
          acknowledged many of the weaknesses, and committed to revising
          its operations and procedures to address the NRC's criticisms.
     
                                   -18-
                                                            Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          Another result of the controversy associated with the
          allegations was an investigation of Maine Yankee initiated by
          the NRC's Office of Investigations (OI), which, in turn, 
          referred certain issues to the United States Department of
          Justice (DOJ) for possible criminal prosecution. 
          Subsequently, on September 24, 1997, the DOJ, through the
          United States Attorney for Maine, announced that its review
          had revealed insufficient grounds for criminal prosecution. 
          On October 8, 1998, the NRC issued a notice of violation for
          the pre-shutdown violations, but announced that it was not
          imposing civil penalties for those violations. 

          With the closing of Maine Yankee, a provision of the Company's
          rate plan allowing the deferral of 50% of the Maine Yankee
          replacement power costs went into effect on June 6, 1997.  For
          the third quarter of 1998, the Company recovered $140,000 of
          these deferred expenses in accordance with the January, 1998
          rate stipulation which provided for recovery of $562,000 in
          rates effective February 1, 1998.  An additional $1,105,000
          would have been deferred in the third quarter of 1998, however
          these costs were offset by net savings of $1,106,000 from the
          restructured Purchase Power Agreement with Wheelabrator-
          Sherman, also in accordance with the rate plan stipulation. 
          As of September 30, 1998, the Company has a net deferred
          replacement power cost balance of approximately $3,066,000,
          subject to recovery in accordance with the rate plan.

          On September 1, 1997, Maine Yankee estimated the sum of the
          future payments for the closing, decommissioning and recovery
          of the remaining investment in Maine Yankee to be
          approximately $930 million, of which the Company's 5% share
          would be approximately $46.5 million.  Maine Yankee has
          indicated that it plans to further update its decommissioning
          cost estimate before final consideration by the Federal Energy
          Regulatory Commission (FERC).  Legislation enacted in Maine in
          1997 calling for restructuring the electric utility industry
          provides for recovery of decommissioning costs, to the extent
          allowed by federal regulation, through the rates charged by
          the transmission and distribution companies.  Based on the
          Maine legislation and regulatory precedent established by the
          FERC in its opinion relating to the decommissioning of the
          Yankee Atomic nuclear plant, the Company believes that it is
          entitled to recover substantially all of its share of such 



                                   -19-

                                                             Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

Item 2.   Management's Analysis of Quarterly Income Statements
          Results of Operations (Continued)                      
     
          costs from its customers and, as of September 30, 1998, is
          carrying on its consolidated balance sheet a regulatory asset
          and a corresponding liability in the amount of $38.8 million,
          which is the $46.5 million discussed above net of the
          Company's post-September 1, 1997 cost-of-service payments to
          Maine Yankee.

          On September 2, 1997, the 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 including:  that Maine Yankee's decision in 
          December 1996 to proceed with the steps necessary to restart
          the Plant 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 that 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.  The Company believes the report's
          negative conclusions are unfounded and may be contradictory. 
          In any event, the Company has expensed its share of these
          costs.  On October 24, 1997, the MPUC issued a Notice of
          Investigation initiating an investigation of the shutdown
          decision and of the operation of the Plant prior to shutdown,
          and announced that it had directed its consultant to extend
          its review to include those areas.  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.  The
          MPUC subsequently stayed its investigation pending the outcome
          of Maine Yankee's FERC rate case, in which the MPUC and the
          Maine Office of the Public Advocate (OPA) are actively
          participating, while indicating that its consultant would
          continue its extended review.  Based on preliminary
          indications, the Company expects the consultant's
          recommendations resulting from its extended review would call
          for additional disallowances.  However, Maine Yankee,
          the Company, as well as other Maine Yankee owners, have
          discussed proposals to resolve these rate case issues with
          several intervenors, including the MPUC and the OPA.   

          



                                   -20-

                                                            Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          On January 15, 1998, Maine Yankee, its former bondholders and
          lender banks revised the Standstill agreements and extended
          their term to April 15, 1998.  On April 7, 1998, Maine Yankee
          refunded all of its mortgage bonds and bank debt by means of
          a three-year revolving credit facility with two major banks, 
          which may be extended by agreement of the parties, and a
          $48 million term loan due in 2006 from a major institutional
          investor, and discharged its First Mortgage Indenture.  The
          banks' revolving credit commitments are scheduled to be
          reduced through planned prepayments, structured to conform to 
          Maine Yankee's projected cash flows, in two decrements from 
          their initial level of $80 million to a working-capital level
          of $20 million on March 31, 2000 and were reduced to $50
          million in June, 1998.  The new debt obligations are secured
          by a security interest in Maine Yankee's rights in its Power
          Contracts, Additional Power Contracts and Capital Funds
          Agreements with its Sponsors and its rights to certain
          expected third-party payments.  The new debt facilities also
          contain restrictions on the payment of common-stock dividends
          based on Maine Yankee's cash position and a debt service
          coverage test.  See Item 3(f) of the "Legal Proceedings and
          Regulatory Matters" section of this Form 10-Q for further
          discussion.

                          Financial Condition

          Net cash flows from operating activities were negative
          $4,427,000 for the first nine months of 1998, reflecting the
          $8,706,000 up-front payment to W-S for the amended PPA.  The
          Company received $11,540,000 from the issuance of FAME's
          Taxable Electric Rate Stabilization Revenue Notes.  The
          proceeds were used for the W-S payment discussed above, a
          $2,378,000 deposit to a Capital Reserve Fund and bond issuance
          costs.  For 1998, the receipt of $2,052,000 of tax refunds
          associated with the 1997 net operating loss carryback improved
          operating cash flows.  The Company drew down $1,038,000 from
          the trustee of the tax-exempt revenue board proceeds based on 
          qualifying property, which partially offset construction
          requirements.  For the period, $2,673,000 was invested in
          electric plant, $1,617,000 was paid in dividends and
          $4,155,000 was used to reduce long-term debt including the
          May 1, 1998 final sinking fund payment of $2,880,000 on the 7-
          1/8% First Mortgage and Collateral Trust Bonds.  Short-term
          borrowings increased by $2,800,000 for the additional Maine
          Yankee replacement power costs. 
          
          
                                   -21- 

                                                             Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          For the first nine months of 1997, net cash flows from
          operating activities were negative $2,332,000.  The Company
          drew down $1,239,000 from the trustee of the tax-exempt
          revenue bond proceeds.  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 other long-term debt.
          Short-term borrowings were increased by $4,800,000 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.  

          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 these
          amendments, the Company would have been in violation of its
          interest coverage tests through September 30, 1997 and would
          have been in default on these instruments.  At December 31, 
          1997, the Company was not in compliance with these covenants. 
          On March 12, 1998, the Company and the Banks executed a waiver
          of the interest coverage tests for the fourth quarter of 1997, 
          avoiding a default.  On March 31, 1998, the Company and the
          Banks executed amendments to the revolving credit agreement
          and letter of credit and reimbursement agreement which further
          adjusts the interest coverage tests for the first three
          quarters of 1998.  With these amendments, the Company has
          achieved its interest coverage tests for the first three
          quarters of 1998 and expects to meet the interest coverage 
          tests for the fourth quarter of 1998 based on projected
          earnings.  In addition, the Revolving Credit Agreement and
          Letter of Credit supporting the Tax Exempt Bonds due 2021 are
          extended by one year to October, 1999 and June, 2000,
          respectively.       
                                   -22-

                                                             Form 10-Q
                    PART 1.  FINANCIAL INFORMATION

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

          Year 2000 Issues

          The Year 2000 issue is the result of computer programs being
          written using two digits rather than four to define the
          applicable year.  Computer programs that have date-sensitive
          software using two digits would recognize a date using "00" as
          the year 1900 rather than the year 2000, resulting in system
          failure or miscalculations.  The Company has been conducting
          an on-going assessment of its computer systems, including
          embedded chip technology, to determine the potential technical
          and economic impact which the Year 2000 issues might have on
          the Company, its systems and its business operations.  As part
          of this process, the Company has reviewed the computer
          application systems responsible for its billing, customer
          information system and accounting transactions and has
          identified modifications necessary for those systems.  These
          modifications are principally being made to comply with the
          electric industry restructuring requirements but have
          incorporated changes that achieve Year 2000 compliance.  The
          Company is also reviewing its other mission critical systems
          in order to identify Year 2000 remediation or renovation
          measures needed for those systems and intends to complete
          necessary modifications, renovations and testing of all
          mission critical systems by July 1, 1999.  The compliance
          plans and implementation and testing milestones are based on
          the Company's best estimates, which were derived from
          numerous assumptions of future events, including the continued
          availability of certain resources, third party modification
          plans and other known factors.  In addition to the review of
          internal systems, the Company is requesting assurances of Year
          2000 compliance from third parties upon whom the Company
          relies. The responses are being reviewed and concerns of non-
          compliance are being pursued.  The Company is attempting to
          obtain responses and prepare contingency plans, where
          necessary, no later than July 1, 1999.

          To date, the Company's review and testing has not revealed
          material system modifications necessary to obtain Year 2000
          compliance for mission critical systems, other than the
          changes necessary for electric industry restructuring
          discussed above.  However, $50,000 has been budgeted in 1999
          for external expenditures for unforeseen modifications to
          achieve Year 2000 compliance for mission critical technology.




                                   -23-
                                                             Form 10-Q
                    PART 1.  FINANCIAL INFORMATION
                                   
Item 2.   Management's Analysis of Quarterly Income Statements
          Results of Operations (Continued)  

          The Company expects to finish the assessment phase of the Year
          2000 compliance project by December 31, 1998, and will then
          identify risks and most reasonable likely worse case scenarios
          specific to Year 2000 noncompliance by the Company and third
          party sources.  The Company will develop appropriate
          contingency plans for these risks no later than July 1, 1999.
          
          Although all reasonable and available efforts will be made,
          the Company cannot predict the ultimate achievement of Year
          2000 compliance due to its reliance on systems and third
          parties outside of the Company's control.




































                                   -24-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters 
          (a)  Restructuring of Maine's Electric Utility Industry.

          In the Company's Form 10-K for December 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.  See item (b) below
          regarding the divestiture of the Company's generating assets.

          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.

     

                                   -25-
                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          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 Company estimated
          its stranded costs to be approximately $96.6 million, based on
          its October 14, 1998 filing, which included the remaining
          investment in Seabrook, the above market costs of the amended
          power purchase agreement and recovery of fuel expense
          deferrals related to Wheelabrator-Sherman, the obligation for
          remaining operating expenses and recovery of the Company's
          remaining investment in Maine Yankee, and the recovery of 

                                   -26-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          several other regulatory assets, but does not include any
          benefits from the Company's sale of generating assets.  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
          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
          


                                   -27-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

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

     (b)  Maine Public Service Company, Request for Approval of Sale of
          Generating Assets, Docket No. 98-584

          Reference is made to the Company's Form 8-K for July 7, 1998
          in which the Company reported that it had agreed to sell all
          of its generating assets to WPS Power Development, Inc. (WPD-
          PDI) for $37.4 million.

          On August 7, 1998, the Company filed with the MPUC for
          approval of this sale.  This proceeding was assigned the MPUC
          Docket No. 98-584.  The Public Advocate and Houlton Water
          Company have intervened in the proceeding.  As reported in the
          Company's Form 10-Q for the quarter ended June 30, 1998, the
          MPUC, in its Order approving the Company's divestiture plan on
          MPUC Docket No. 97-670, noted a number of concerns that it
          would address in Docket No. 98-584.  These concerns include 


                                   -28-
                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          whether the sale of the Canadian subsidiary should be delayed
          pending the development of a retail market for electricity in
          Canada or until the MPUC completes its final study on the
          efficiency of competitive markets in northern Maine (see item
          (c) below).  The Company addressed this concern in its August 
          7th filing and believes the market for electricity in northern
          Maine is sufficiently competitive to justify the sale of the
          Company's Canadian assets.  The Company cannot at this time
          predict the MPUC's ultimate conclusions on this issue or
          whether it will approve the sale of the Company's generation
          assets.

     (c)  Interim Report by the Maine Public Utilities Commission and
          the Maine Attorney General Regarding Market Power Issues
          Raised by the Prospect of Retail Competition in the Electric
          Industry, MPUC Docket No. 97-877

          The Legislation described in item (a) above required the Maine
          Department of the Attorney General and the MPUC to jointly
          conduct a study of the various market power issues presented
          by the introduction of retail competition into Maine's
          electric utility industry.  A final report in this matter is
          due by December 31, 1998.  On February 2, 1998, the MPUC and
          the Attorney General issued its interim report in this matter.

          This interim report did not reach any final conclusion or make
          any recommendations, but did note certain areas of concern. 
          Among the principal areas of concern are:

          -    whether the proposed regulation of transactions between
               a utility and its marketing affiliate will be sufficient
               to prevent market dominance by the affiliate or whether
               an outright ban on affiliate marketing is preferable.

          -    that "special circumstances" in the Company's service
               territory (such as its direct physical isolation from the
               New England power grid) indicates that it may be subject
               to a high degree of market power.  Accordingly, the 
               interim report noted, without further elaboration, that
               the Final Report would "evaluate several possible
               legislative adjustments".

          In a related matter, and again as required by the Legislation
          described in item (a), the MPUC, on January 26, 1998, opened
          an investigation into the feasibility of a direct physical
          interconnection between the Company's service territory and
          the New England power grid (MPUC Docket No. 97-586).  On 

                                   -29-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          October 13, 1998, the MPUC issued a draft report in Docket No.
          97-586, which was prepared by an independent consultant and
          purports not to be the product of either the MPUC or its
          Staff.  In addition to the issue of the direct physical
          connection, the draft report also addresses many of the issues
          concerning the development of a competitive market for 
          electricity in northern Maine.  The draft report concludes
          that "the electricity market in northern Maine is likely to be
          subject to market power problems" and recommends further study
          into methods of resolving those problems.  The draft report
          does not flatly conclude that northern Maine should not be
          opened up to retail competition in electricity, but states its
          belief that customers in northern Maine "are likely to pay
          higher prices that are significantly higher than those
          available from a competitive electricity market".

          On October 26, 1998, the Company submitted to the MPUC
          comments in which it stated its very substantial disagreement
          with this report's conclusions.  Moreover, the Commission has
          stated that this report, when final, will be allowed into the
          record in Docket No. 98-584 (see (b) above) and the report's
          authors will be subject to discovery and questioning during
          the hearing in that Docket.  The Company expects to vigorously
          challenge the analysis of this report.

          The Company cannot at this time predict either the ultimate
          conclusions of the studies described above or the effect of
          these studies upon the proposed sale of the Company's
          generation assets in Docket No. 98-584 or the prospect of
          retail competition in the Company's service territory.

     (d)  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 

                                   -30-
                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          comply with the Order.  A decision by the FERC regarding the
          fees under the Company's tariff is not expected until later in
          1998.  The Company cannot predict the FERC's ultimate decision
          in this matter.

     (e)  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 Maine Yankee Power
          Plant (see Item 1.  "Subsidiaries and Affiliated Companies",
          above).  The MPUC stated that the "permanent shutdown of the
          plant presents significant ratemaking issues" such as
          replacement power costs and stranded cost 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 joined that appeal on
          November 13, 1997.


                                   -31-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          On December 2, 1997, the MPUC issued an Order staying the
          investigation.  The MPUC noted that Maine Yankee had begun a
          rate proceeding before the FERC on November 6, 1997, which
          could address the prudence issues raised in the MPUC's own
          investigation.  The MPUC therefore stayed its investigation in
          order "to avoid unnecessary duplicative efforts by all parties
          involved".  The MPUC reserved the right to reopen the  
          investigation particularly if FERC declines to address the
          prudence issues of concern to the MPUC "if we feel it  
          necessary to investigate those matters after the FERC  
          proceeding ends."  The Company cannot therefore predict 
          whether the MPUC will reopen its investigation once the FERC
          proceeding is concluded.

          As a result, the Maine Supreme Judicial Court, on December 15,
          1997, upon motion by Maine Yankee and its Maine owners, stayed
          all proceedings in the appeal until the first to occur of
          either December 31, 1998 or the 30th day after the conclusion
          of the FERC's investigation.

     (f)  Maine Public Utilities Commission Approves Rate Increase
          Pursuant to Previously Approved Rate Plan, MPUC Docket 
          No. 97-830.

          Reference is made to the Company's Form 10-K for December 31,
          1997 where the Company's rate stabilization plan approved by
          the Maine Public Utilities Commission (MPUC) (Docket No. 95-
          052) in November, 1995 is described.  

          On November 13, 1997, the Company filed with the MPUC its
          annual rate increase pursuant to the Company's rate plan.  The
          filing supported an annual increase in retail rates of 7.6%
          effective February 1, 1998 consisting of the following:

          -    2.75% specified annual increase provided in the rate
               plan;
          -    2.22% increase for 50% of the Maine Yankee replacement
               power costs in accordance with the Maine Yankee plant
               outage provisions of the rate plan; and
          -    2.63% increase in accordance with the profit-sharing
               mechanism of the rate plan since earnings for the review
               period, i.e. the twelve months ended September 30, 1997,
               were more than 300 basis points below the target return
               on equity.

          Additional capacity payments to restart Maine Yankee and
          incremental replacement power costs have adversely impacted
          the Company's 1997 earnings and triggered the rate plan
          profit-sharing mechanism noted above.  The Company's ability
          to increase its rates for the profit-sharing and for 50% of  

                                   -32-

                                                            Form 10-Q
                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          Maine Yankee replacement power costs is subject to the MPUC's
          pending review of the prudency of the decision to close Maine
          Yankee (see item (e) above).  

          In addition, the Company had amended its November, 1997 filing
          requesting that the savings from the restructured
          Wheelabrator-Sherman (W-S) Contract, as approved by the MPUC
          on December 22, 1997 (see item (e) above) be used to offset
          future Maine Yankee replacement power costs.  However, this
          treatment was again subject to the results of the MPUC's
          review of the prudency of closing Maine Yankee.  The
          restructuring of the W-S Contract required an up-front payment
          of approximately $8.7 million, which the Company financed from
          funds obtained from the Finance Authority of Maine (FAME),
          under its rate stabilization program.  

          On January 15, 1998, the Public Advocate and the Company, with
          the support of the MPUC Staff, reached an agreement on the
          rate increase for February 1, 1998.  The principal elements of
          the stipulation are as follows:

          -    the rate increase effective February 1, 1998 was 3.9%,
               consisting of the specified increase of 2.75% and
               approximately $562,000 of the 1997 recoverable Maine
               Yankee replacement power costs (1.15%);

          -    the minimum rate increase effective February 1, 1999 will
               be 3.1%, consisting of a specified increase of 2% and the
               remaining recoverable 1997 Maine Yankee replacement power
               costs of $523,000;

          -    Maine Yankee replacement power costs for the period
               October 1, 1997 through September 30, 1998 will be offset
               by the 1998 savings under the restructured W-S contract,
               with the recovery of any incremental Maine Yankee
               replacement power costs subject to a final order by the
               MPUC in its previously mentioned review of the prudency
               of closing Maine Yankee;

          -    the Company wrote off in 1997 unamortized Maine Yankee
               refueling outage costs of approximately $1,458,000;

          -    the Company waives its right to collect additional
               revenues for the profit-sharing review period, i.e. the
               twelve months ended September 30, 1997, since the
               earnings deficiency was the result of the closing of
               Maine Yankee and, based on the 3.9% increase granted by
               the MPUC, the Company expects to earn a reasonable rate
               of return in 1998 without these additional revenues;


                                   -33-

                      PART II.  OTHER INFORMATION              Form 10-Q

Item 3.   Legal Proceedings and Regulatory Matters - Continued

          -    a customer service and reliability standards penalty will
               be suspended pending review of these standards during the
               rate plan's mid-term review in September of 1998.

          This agreement was approved by the MPUC on January 26, 1998.

          The Company was not able to attain its interest coverage 
          tests for the fourth quarter of 1997. On March 12, 1998, the
          Company and the Banks executed a waiver of the interest
          coverage tests for the fourth quarter of 1997, avoiding a
          default.  On March 31, 1998, the Company and the Banks
          executed amendments to the revolving credit agreement and
          letter of credit and reimbursement agreement, which further
          adjusts the interest coverage tests for the first three
          quarters of 1998.  The Company met the new interest coverage
          tests for the first three quarters of 1998.  The Company
          believes that its rate plan deals effectively with the closing
          of Maine Yankee, with customers and shareholders sharing the
          burden equally.  However, the Company cannot predict what the
          MPUC's decisions will be concerning the prudency of closing
          Maine Yankee.  If the Company is adversely impacted by the
          MPUC prudency decision, the Company may be required to seek an
          emergency rate increase and will review all cash expenditures,
          including the level of dividends.

     (g)  Maine Public Service Company Investigation of Stranded Costs,
          Transmission and Distribution Utility Revenue Requirements and
          Rate Design, Docket No. 98-577

          On October 14, 1998, the Company filed its determination of
          stranded costs, transmission and distribution costs and rate
          design with the MPUC.  The Company's testimony supports its
          $96.6 million estimate of stranded costs when deregulation
          occurs on March 1, 2000.  The major components include the
          remaining investment in Seabrook, the above market costs of
          the amended power purchase agreement and recovery of fuel
          expense deferrals related to Wheelabrator-Sherman, the
          obligation for remaining operating expenses and recovery of
          the Company's remaining investment in Maine Yankee, and the
          recovery of several other regulatory assets.  These stranded
          costs will be reduced by an estimated $19.6 million should the
          sale of the Company's generating assets be approved by the
          MPUC, discussed further in item (b) above.  The Company's
          proposed annual revenue requirements supported in the filing
          would be approximately $32.6 million; $19.3 million for
          transmission and distribution and $13.3 million for stranded
          investment.  Decisions by the MPUC regarding stranded costs
          and the generating asset sale approval are not expected until
          1999.  The Company cannot predict the MPUC's ultimate decision
          in these matters.













































                                   -34-

                         PART II.  OTHER INFORMATION            Form 10-Q

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

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits - None

          (b)  Reports on Form 8-K - None

                               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 12, 1998            /s/  Larry E. LaPlante          
                                   Larry E. LaPlante, Vice President
                                   Finance, Administration and Treasurer
























                                   -35-
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