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  March 31, 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 ended March 31, 1998, and for the corresponding period
          of the preceding year; a consolidated balance sheet as of
          March 31, 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 March 31, 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 March 31, 1998 and
          December 31, 1997, and the results of their operations for the
          three months ended March 31, 1998 and their cash flows for the
          three months ended March 31, 1998.































                                   -2-

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

                                                  Three Months Ended
                                                        March 31,
                                                  1998          1997


Operating Revenues                               $15,597       $15,368
Operating Expenses
   Purchased Power                                 7,725        10,350
   Other Operation and Maintenance                 3,785         3,181
   Depreciation                                      659           627
   Amortization                                      402           409
   Taxes Other Than Income                           435           446
   Provision (Benefit) for Income Taxes              733          (166)
        Total Operating Expenses                  13,739        14,847
Operating Income                                   1,858           521
Other Income (Deductions)
   Equity in Income of Associated Companies          126           110
   Allowance for Equity Funds Used During
      Construction                                     7             4
   Other Income Taxes                                (16)          (44)
   Other - Net                                        72             3
Total                                                189            73
Income Before Interest Charges                     2,047           594
Interest Charges
   Long-Term Debt and Notes Payable                  945           850
   Less Allowance for Borrowed Funds          
      Used During Construction                        (4)           (2)
Total                                                941           848
Net Income (Loss) Available for Common Stock      $1,106         ($254)

Average Shares Outstanding (000's)                 1,617         1,617
Basic Earnings (Loss) Per Share of Common Stock    $0.68        ($0.16)
Dividends Declared per Common Share                $0.25         $0.25


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)
                                                      March 31,   December 31,
                     ASSETS                              1998         1997
Utility Plant
   Electric Plant in Service                             $96,260    $96,396
   Less Accumulated Depreciation                          47,873     47,230
      Net Electric Plant in Service                       48,387     49,166
   Construction Work-in-Progress                           1,211        699
        Total                                             49,598     49,865
Investment in Associated Companies
   Maine Yankee Atomic Power Company                       4,061      3,952
   Maine Electric Power Company, Inc.                        192        177
        Total                                              4,253      4,129
        Net Utility Plant and Investments                 53,851     53,994
Current Assets
   Cash and Cash Equivalents                               2,072      2,071
   Deposits for Interest and Dividends                       470         64
   Accounts Receivable - Net                               5,518      5,788
   Unbilled Base Revenue                                   1,469      1,686
   Deferred Fuel and Purchased Energy                        680        687
   Inventory                                               1,275      1,231
   Prepayments                                             2,061      2,189
      Total                                               13,545     13,716
Other Assets
   Restricted Investment                                   2,290      2,263
   Uncollected Maine Yankee Decommissioning Costs         41,568     43,429
   Recoverable Seabrook Costs                             25,943     26,299
   Regulatory Asset - SFAS 109 & 106                      13,585     13,607
   Deferred Fuel and Purchased Energy                      8,462      7,135
   Other                                                   2,893      3,038
      Total                                               94,741     95,771
Total Assets                                            $162,137   $163,481

         CAPITALIZATION AND LIABILITIES
Capitalization
   Common Shareholders' Equity
      Common Stock                                       $13,071     $13,071
      Paid-in Capital                                         38          38
      Retained Earnings                                   27,604      26,903
      Treasury Stock, at cost                             (5,714)     (5,714)
         Total                                            34,999      34,298
      Long-Term Debt (less current maturities)            35,625      35,650
Current Liabilities
   Long-Term Debt Due Within One Year                      4,155       4,155
   Notes Payable                                           7,700       7,200
   Accounts Payable                                        4,421       5,871
   Current Deferred Income Taxes                              46           6
   Dividends Declared                                        404         404
   Customer Deposits                                          39          43
   Interest and Taxes Accrued                                826         880
      Total                                               17,591      18,559
Deferred Credits
   Uncollected Maine Yankee Decommissioning Costs         41,568      43,429
   Deferred Income Tax                                    26,164      25,722
   Investment Tax Credits                                    631         648
   Deferred Revenues                                         967         902
   Miscellaneous                                           4,592       4,273
      Total                                               73,922      74,974
Total Capitalization and Liabilities                    $162,137    $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)
                                                           Three Months Ended
                                                               March 31,
                                                           1998        1997
Cash Flow From Operating Activities
   Net Income (Loss)                                      $1,106       ($254)

Adjustments to Reconcile Net Income (Loss) to Net Cash
   Provided by Operations
   Depreciation                                              659         627
   Amortization                                               57          54
   Amortization of Seabrook Costs                            355         355
   Income on Tax Exempt Bonds-Restricted Funds               (27)        (46)
   Deferred Income Taxes                                     456         239
   AFUDC                                                     (11)         (6)
   Change in Deferred Fuel & Purchased Energy             (1,327)       (344)
   Change in Deferred Regulatory and Debt Issuance Costs     235         (65)
   Change in Deferred Revenues                                65          62
   Change in Benefit Obligation                              206         197
   Change in Current Assets and Liabilities                 (929)       (730)
   Other                                                     (28)        107
Net Cash Flow From Operating Activities                      817         196

Cash Flow From (Used in) Financing Activities
   Dividend Payments                                        (809)       (404)
   Drawdown of Tax Exempt Bonds Proceeds                       0         450
   Retirements on Long-Term Debt                             (25)        (25)
   Short-Term Borrowings, Net                                500         400
Net Cash Flow From (Used In) Financing Activities           (334)        421

Cash Flow Used For Investing Activities
   Investment in Electric Plant                             (482)       (539)
   Net Cash Used For Investment Activities                  (482)       (539)

Increase in Cash and Cash Equivalents                          1          78
Cash and Cash Equivalents at Beginning of Year             2,071       1,291
Cash and Cash Equivalents at End of Period                $2,072      $1,369

Change in Current Assets and Liabilities Providing
   Cash From Operating Activities
      Accounts Receivable                                   $270       ($452)
      Unbilled Revenue                                       218         310
      Deferred Maine Yankee Replacement Power Costs            7           0
      Inventory                                              (44)       (115)
      Prepayments                                            128         187
      Accounts Payable & Accrued Expenses                 (1,504)       (655)
      Other Current Liabilities                               (4)         (5)
   Total Change                                            ($929)      ($730)

Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period For:
   Interest                                               $1,347      $1,301
   Income Taxes (1997 is net of a $500,000 refund)           $33       ($390)

   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 reclassifications 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 on 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
                                              March 31,    
                                            1998      1997  
      Current income taxes               $   293   $  (361) 
      Deferred income taxes                  474       257
      Investment credits                     (18)      (18)
      Total income taxes                 $   749   $  (122)  

      Allocated to:
      Operating Income                   $   733   $  (166)
      Other income                            16        44   
      Total                              $   749   $  (122)  

    For the three months ended March 31, 1998 and 1997, the effective      
    income tax rates were 40.4% and (32.5%), 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 March 31, 1998 and       
    December 31, 1997.
                                               (Dollars in Thousands)
                                              March 31,    December 31,
                                                 1998          1997        
      Seabrook                                 $14,430       $14,489
      Property                                   9,587         9,565
      Regulatory expenses                        1,635         1,540       
      Deferred fuel                              1,988         1,631
      Pension and postretirement
       benefits                                   (793)         (847)
      Other                                       (683)         (656)
      Net accumulated deferred income taxes    $26,164       $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 Maine Yankee replacement power costs 
    went into effect on June 6, 1997.  For the first quarter of 1998, the   
    Company recovered $94,000 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 $1,015,000 
    was deferred in the first quarter of 1998.  As of March 31, 1998, the 
    Company has deferred replacement power costs of approximately          
    $3,246,000, subject to recovery in accordance with the rate plan.

                                    -7-

    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.           
    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 March 31, 
    1998, is carrying on its consolidated balance sheet a regulatory asset 
    and a corresponding liability in the amount of $41.6 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 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 does not know how the MPUC plans to use the consultant's   
    report, but believes the report's negative conclusions concerning the  
    pre-shutdown operations of the plant are unfounded and may be          
    contradictory.  The same consultant is also investigating the prudency 
    of the shutdown decision itself and a report on this matter will be    
    forthcoming.  The Company believes it would have substantial           
    constitutional and jurisdictional grounds to challenge any effort in an 
    MPUC proceeding to alter wholesale Maine Yankee rates made effective by 
    the FERC.  On November 7, 1997, Maine Yankee and Central Maine Power   
    initiated a legal challenge 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      
    investigation is therefore barred on constitutional grounds.  The      
    Company joined in this appeal.  The MPUC subsequently stayed its       
    investigation pending the outcome of Maine Yankee's FERC rate case,    
    while indicating that its consultant would continue its extended review. 
    The Maine Supreme Court, on motions of the parties, stayed the appeal  
    pending resolution of the FERC proceeding.
    
   
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

                                    -8-

    adjusts the interest coverage tests for the first three quarters of    
    1998.  With these amendments, the Company expects to attain these      
    amended interest coverage tests 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.

           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.  


                                    -9-

               The MPUC shall determine these stranded costs by considering:

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

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

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

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

               The MPUC will conduct several rulemaking proceedings        
               associated with the new restructuring law.  The Company is  
               presently reviewing its business operations and the         
               opportunities that the new restructuring law presents.  

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

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



                                   -10-

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

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

    On October 15, 1997, the Company and W-S agreed to amend the PPA.  Under 
    the terms of this amendment, W-S has agreed to reductions in the price 
    of purchased power of approximately $10 million over the PPA's current 
    term.  The Company and W-S have also agreed to renew the PPA for an    
    additional six years at agreed-upon prices.  The Company will make     
    an upfront payment to W-S of $8.7 million.  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.

    In order to finance the upfront payment to W-S, the Company concluded  
    that it must obtain funds from the Finance Authority of Maine (FAME);  
    absent FAME financing, the Company does not believe it can obtain the  
    funds on terms sufficiently economic to justify the arrangement with   
    W-S.  The Company also asked the MPUC for a determination that any so- 
    called stranded costs created by the amended PPA will be recoverable   
    from customers to the extent permitted by Maine law.

    On December 22, 1997, the MPUC approved the amended PPA and determined 
    that the upfront payment created by the amended PPA will be treated as 
    stranded cost.  On February 19, 1998, the FAME Board of Directors voted 
    to provide the Company with the financing necessary to support the     
    amended PPA.  The Company expects to complete its financing with FAME  
    and pay W-S the upfront payment under the restructured PPA by mid-May, 
    1998, but cannot predict the exact timing of the financing.
 
8.  GENERATING ASSET DIVESTITURE

    As required by the electric utility industry restructuring legislation, 
    the Company has offered for sale all of its generating capacity,       
    including its Canadian subsidiary, with a total net book value of $10.8 
    million as of March 31, 1998.  This plan has been 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.

    MPS has received and reviewed bids for its generation assets and power 
    entitlements and is now in the process of negotiating terms of sale with 
    the successful bidders.  The Company cannot predict the exact terms of 
    any sale of these properties nor whether, or under what terms, that sale 
    will be approved by the MPUC.  









                                   -11-

9.  ACCOUNTING PRONOUNCEMENT
    
    In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive    
    Income", which requires the separate reporting of all changes to       
    shareholders' equity, and SFAS No. 131 "Disclosures about Segments of  
    an Enterprise and Related Information", which revises existing         
    guidelines about the level of financial disclosure of a Company's      
    operations.  Both Statements are effective for financial statements    
    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. 










































                                   -12-

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

          Earnings (loss) per share and net income (loss) available for
          common stock for the three months ended March 31, 1998 along
          with the corresponding information for the previous year are as
          follows:
                                        Three Months Ended
                                              March 31,          

                                             1998      1997      

          Earnings (loss) per share          $ .68     $(.16)    

          Net income (loss) in Thousands     $1,106    $(254)

          For the first quarter of 1998 compared to the same quarter last
          year, the increase in consolidated earnings per share (EPS) of
          $.84 is attributable to the following:














                                   -13-

                                                                 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 closure of Maine Yankee and deferral
            of replacement power costs: 
               Replacement Power Costs                    $ .39 
               Capacity Expenses                            .31 
                    Total                                   .70    
          Other fuel expense - above normal                 .25
            hydro generation and decrease in W-S purchases

          Increase in wheeling expenses due to NB
            Power's new transmission tariff               ( .19)

          Increase in retail rates of 3.9% effective
            2/1/98 and an unbilled revenue adjustment
            in 1997 were partially offset by a .7%
            volume decrease and load retention  
            discounts.                                      .09

          Other                                           ( .01)
               Total                                     $  .84 

          For the first quarter of 1998, the deferral of Maine Yankee
          replacement power costs under the rate plan, as further
          discussed in item 3(g) of the Legal Proceedings section,
          increased earnings by $.39 per share, as compared to the first
          quarter of 1997.  Additional capacity expenses to address
          restart and closing issues during the first quarter of 1997 were
          eliminated by the closure of Maine Yankee, further increasing
          earnings by $.31 per share.  A decrease in other fuel expenses,
          due to favorable hydro generation and decreased Wheelabrator-
          Sherman purchases increased earnings by $.25 per share.  An
          increase in wheeling expenses due to NB Power's new transmission
          tariff reduced earnings by $.19 per share.  The rate increases
          under the Company's rate plan effective February 1, 1998,
          partially offset by load retention contract discounts to several
          large customers and a .7% decrease in retail sales, resulted in
          a net $.09 increase in earnings per share.  
               






                                   -14-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          Consolidated operating revenues for the quarter ended March
          31, 1998 and 1997, are as follows:

                                   1998                     1997

(Dollars in Thousands)          $       MWH              $        MWH

Retail                       14,472   130,634         14,442    131,531
Sales for Resale                540    17,334            643     18,448
Total Primary Sales          15,012   147,968         15,085    149,979
Secondary Sales                 356     6,372             93      1,876
Other Revenues/Rev. Adjust.     229     3,228            190        -  
Total Operating Revenues     15,597   157,568         15,368    151,855


          Primary sales in the first quarter of 1998 were 147,968 MWH,
          a decrease of 2,011 MWH from sales in the first quarter of
          1997.  Secondary sales increased by 4,496 MWH, reflecting an
          increase in power marketing activities of the Company's Wyman
          No. 4 entitlements.   

          Retail revenues for the first quarter of 1998 were $14,472,000
          compared to $14,442,000 for the same period of 1997.  These
          revenues reflect the 3.9% increase in retail rates effective
          February 1, 1998 allowed under the Company's rate plan,
          partially offset by load retention discounts to certain large
          industrial customers that were approved by the Maine Public
          Utilities Commission, and a .7% decrease in retail sales.

          For the first quarter ended March 31, 1998 and 1997, total
          operating expenses were $13,739,000 and $14,847,000,
          respectively.  The changes in operating expenses and energy
          sources are as follows:













          
                                   -15-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

                                                Increase/(Decrease)
          (Dollars in Thousands)                    $         MWH
          Purchased Power Expenses 
               Maine Yankee                      (845)          -    
               Wheelabrator-Sherman              (161)       ( 2,900)
               NB Power                        (1,451)       (27,298)
               Northeast Empire                 1,013         30,000 
               Other Purchases                   (260)       ( 8,435)
               Deferred Fuel                     (921)           -    
                                               (2,625)       ( 8,633)
          Generating Expenses                      12         14,656  
          Other Operation & Maint. Expenses       592  
          Depreciation                             32 
          Amortization                             (7)
          Income Taxes                            899
          Taxes Other than Income                 (11)               
                    Total                      (1,108)         6,023 
          
          Hydro production was 182.4% and 110.6% of normal in the first
          quarters of 1998 and 1997, respectively, reflecting an
          increase of 13,356 MWH.  To meet the remainder of 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 30,000 MWH, replacing energy previously
          purchased from NB Power.  With the closing of Maine Yankee,
          the Company's share of Maine Yankee capacity expenses to
          address restart and closing issues during the first quarter of
          1997 were eliminated resulting in a net decrease in purchased
          power expenses of $845,000.  Wheelabrator-Sherman purchased
          power expenses decreased by $161,000, because of decreased
          production of 2,900 MWH.  The Company, in accordance with the
          multi-year rate plan, deferred $1,015,000, 50% of Maine Yankee
          replacement power costs in the first quarter of 1998 and
          amortized $94,000 of previously deferred Maine Yankee
          replacement power costs.  Generating expenses increased by
          $12,000 because of increased operation at Wyman No. 4, mostly
          offset by decreases due to reduced activity at the Caribou
          Steam Plant following Steam Units 1 and 2 placement on
          inactive status effective January 1, 1996.  







                                   -16-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          Other operation and maintenance expenses increased by $592,000
          primarily due to increased wheeling expenses related to NB
          Power energy purchases.  Increased medical expenses and 1998
          expenses related to deregulation compliance, as well as image
          and promotional advertising also contributed to the increase.

          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, there were weaknesses that
          needed to be addressed, which would require substantial





                                   -17-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          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.
                                   
          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 27, 1997, the DOJ, through the United States
          Attorney for Maine, announced that its review had revealed
          insufficient grounds for criminal prosecution.  On April 23,
          1998, the Maine Yankee officials met with the NRC to address
          alleged procedural violations announced by the OI.  The
          Company believes that the OI investigation, however, could
          ultimately result in the imposition of civil penalties,
          including fines, on Maine Yankee, but cannot predict the
          extent of these fines nor when they will be assessed. 

          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 first quarter of 1998, the Company recovered $94,000 of
          these deferred expenses in accordance with the January, 1998
          rate stipulation.  An additional $1,015,000 were deferred in
          the first quarter of 1998.  As of March 31, 1998, the Company
          has deferred replacement power costs of approximately
          $3,246,000, 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.  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





                                   -18-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          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 March 31, 1998, is
          carrying on its consolidated balance sheet a regulatory asset 
          and a corresponding liability in the amount of $41.6 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 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 does not know
          how the MPUC plans to use the consultant's report, but
          believes the report's negative conclusions concerning the pre-
          shutdown operations of the plant are unfounded and may be
          contradictory.  The same consultant is also investigating the
          prudency of the shutdown decision itself and a report on this
          matter will be forthcoming.  The Company believes it would
          have substantial constitutional and jurisdictional grounds to
          challenge any effort in an MPUC proceeding to alter wholesale
          Maine Yankee rates made effective by the FERC.  On November 7,
          1997, Maine Yankee and Central Maine Power initiated a legal
          challenge 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 investigation is therefore barred on constitutional





                                   -19-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          grounds.  The Company joined in this appeal.  The MPUC
          subsequently stayed its investigation pending the outcome of
          Maine Yankee's FERC rate case, while indicating that its
          consultant would continue its extended review.  The Maine
          Supreme Court, on motions of the parties, stayed the appeal 
          pending resolution of the FERC proceeding.

          On January 15, 1998, Maine Yankee, its 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
          $48,000,000 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 $80,000,000 to a working-capital level
          of $20,000,000 on March 31, 2000.  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(g) 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 $817,000 for the
          first three months of 1998.  The $621,000 increase in net cash
          flow from operating activities reflects decreased purchased
          power expenditures due to favorable hydro generation and
          decreased Wheelabrator-Sherman purchases and the decrease in
          restart and closing expenses due to the closure of Maine
          Yankee.  For the period, $482,000 was invested in electric
          plant, $809,000 was paid in dividends and $25,000 was used to
          reduce long-term debt.  Short-term borrowings increased by
          $500,000 for the additional Maine Yankee replacement power





                                   -20-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          costs.  On May 1, 1998, the Company made the final sinking
          fund payment on its 7-1/8% First Mortgage and Collateral Trust
          Bonds of $2,880,000.  Funding was provided by operating cash
          flows.

          For the first three months of 1997, net cash flows from
          operating activities were $196,000.  $450,000 was drawn from
          the trustee of the tax-exempt bonds based on qualifying
          property, which partially offset construction requirements. 
          For the period, $539,000 was invested in electric plant,
          $404,000 was paid in dividends and $25,000 was used to reduce
          other long-term debt.  Short-term borrowings were increased by
          $400,000 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.  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 which further adjusts the





                                   -21-

                                                                 Form 10-Q
                         PART 1.  FINANCIAL INFORMATION

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

          interest coverage tests for the first three quarters of 1998. 
          With these amendments, the Company expects to attain these
          amended interest coverage tests 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.








































                                   -22-          
                                                             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.





                                   -23-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

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

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

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

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

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

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

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

          By July 1, 1999, the MPUC will have estimated the stranded
          costs for the Company and the manner for the collection of
          these costs by the transmission and distribution company. 
          Customers reducing or eliminating their consumption of
          electricity by switching to self-generation, conversion to
          alternative fuels or utilizing demand-side management measures
          cannot be assessed exit or entry fees.  The Company estimates
          its stranded costs to be approximately $85 million, based on


                                   -24-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

          the completion of the W-S contract restructuring, market power
          estimates beyond 2000 and regulatory treatment of the
          Company's remaining Seabrook investment, 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;




                                   -25-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

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

               (e)  the distribution company cannot condition or tie the
               provision of any regulated service to the provision of
               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, Divestiture of Generation
          Assets, MPUC Docket No. 97-670

          As reported in item (a) above, the Company is required to
          obtain the MPUC's approval of a plan to divest itself of all
          its generation assets by January 1, 1999.  On September 9,
          1997, the Company, pursuant to this Legislation, submitted to
          the MPUC its plan for divesting itself of all its power
          entitlements and generation assets, including its Canadian
          subsidiary.  A hearing was held on this plan on December 18,
          1997.  By Order issued February 20, 1998, the MPUC approved


                                   -26-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

          the Company's plan and ordered it to proceed to divest itself
          of its generation assets in accordance with the plan.

          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 (see item (c) below)
          and whether any sale would create, or exacerbate, a
          concentration of generation market power to the detriment of
          MPS's customers.

          MPS has received and reviewed bids for its generation assets
          and power entitlements and is now in the process of
          negotiating the terms of sale with the successful bidders. 
          The Company cannot predict the exact terms of any final sale
          of these properties nor whether, or under what terms, that
          sale will be approved by the MPUC.

     (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.



                                   -27-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

          -    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).  The MPUC
          expects to issue a draft report on this matter by December 1,
          1998.  The Company will be directly involved in this
          investigation.

          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 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
          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.




                                   -28-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

     (e)  Restructured Purchase Power Agreement with Wheelabrator-
          Sherman

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

          On October 15, 1997, the Company and W-S agreed to amend the
          PPA.  Under the terms of this amendment, W-S has agreed to
          reductions in the price of purchased power of approximately
          $10 million over the PPA's current term in exchange for up-
          front payments of $8.7 million.  The Company and W-S have also
          agreed to renew the PPA for an additional six years at agreed-
          upon prices.  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.

          In order to finance the upfront payment to W-S, the Company
          concluded that it must obtain funds from the Finance Authority
          of Maine (FAME); absent FAME financing the Company does not
          believe it can obtain the funds on terms sufficiently economic
          to justify the arrangement with W-S.  The amended PPA must be
          approved by the MPUC if FAME financing is to be obtained.  The
          Company's request for this approval was given the MPUC Docket
          No. 97-727.  The Company also asked the MPUC for a
          determination that any so-called stranded costs created by the
          amended PPA will be recoverable from customers to the extent
          permitted by Maine law.

          On December 22, 1997, the MPUC approved the amended PPA and
          determined that the upfront payment created by the amended PPA
          will be treated as stranded cost.  On February 19, 1998, the
          FAME Board of Directors voted to provide the Company with the
          financing necessary to support the amended PPA.  The Company
          expects to complete its financing with FAME and pay W-S the
          upfront payment under the restructured PPA by mid-May, 1998.




                                   -29-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

     (f)  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.

          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
                                   -30-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

          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.

     (g)  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
          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 (f) above).  
                                   -31-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

Item 3.   Legal Proceedings and Regulatory Matters (Continued)

          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 requires an up-front payment
          of approximately $8.7 million, which the Company intends to
          finance 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;


                                   -32-

                                                             Form 10-Q

                      PART II.  OTHER INFORMATION

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.  Based on
          the Company's current projections, the Company believes that
          it can attain these amended interest coverage tests.  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, or if the Company is
          unable to complete the financing for the restructured
          Wheelabrator-Sherman contract, the Company may be required to
          seek an emergency rate increase and will review all cash
          expenditures, including the level of dividends.

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)  A Form 8-K was filed on:  January 28, 1998 under Item 5,
               Other Material Events.






                                   -33-

                                                             Form 10-Q

                               SIGNATURE                              

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

                                   MAINE PUBLIC SERVICE COMPANY
                                          (Registrant)


Date: May 5, 1998                   /s/  Larry E. LaPlante          
                                   Larry E. LaPlante, Vice President
                                   Finance, Administration and Treasurer






































                                   -34-

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