CONNECTICUT NATURAL GAS CORPORATION

-----------------------------------

UNION EMPLOYEE SAVINGS PLAN

---------------------------

FINANCIAL STATEMENTS AND SCHEDULES

----------------------------------

AS OF DECEMBER 31, 1998 AND 1997

--------------------------------

TOGETHER WITH

--------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

----------------------------------------















CONNECTICUT NATURAL GAS CORPORATION

-----------------------------------

UNION EMPLOYEE SAVINGS PLAN

---------------------------

INDEX

-----

|                                                                                                                                                                                                  | PAGE
----
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Report of Independent Public Accountants                                                                                                                                                          | 1        
|Financial Statements:
Statement of Net Assets Available for Benefits with Fund Information as of December 31, 1998                                                                                | 2        
|Statement of Net Assets Available for Benefits with Fund Information as of December 31, 1997                                                                                                      | 4        
|Statement of Changes in Net Assets Available for Benefits with Fund Information for the Year Ended December 31, 1998                                                                              | 6        
|Statement of Changes in Net Assets Available for Benefits with Fund Information for the Year Ended December 31, 1997                                                                              | 8        
|Statement of Changes in Net Assets Available for Benefits with Fund Information for the Year Ended December 31, 1996                                                                              | 10       
|Notes to Financial Statements and Schedules                                                                                                                                                       | 12       
|Schedules:
Schedule I - Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1998                                                                                        | 18       
|Schedule II - Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1998

All schedules, except those as set forth above, are omitted as not applicable or not required. | 19       
|                                                                                                                                                                                                  |          









REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

----------------------------------------

To the Plan Administrator of Connecticut Natural

Gas Corporation Union Employee Savings Plan:

We have audited the accompanying statements of net assets available for benefits with fund information of Connecticut Natural Gas Corporation Union Employee Savings Plan (the Plan) as of December 31, 1998 and 1997, and the related statements of changes
in net assets available for benefits with fund information for each of the three years in the period ended December 31, 1998. These financial statements and schedules referred to below are the responsibility of the Plan's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits with fund information of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available
for benefits with fund information for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.
These supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a
whole.

By Arthur Andersen LLP
						------------------------
						Arthur Andersen LLP



Hartford, Connecticut
June 25, 1999

-2-



|CONNECTICUT NATURAL GAS CORPORATION                                      | 
|------------------------------------------------------------------------ | 
|UNION EMPLOYEE SAVINGS PLAN                                              | 
|STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION     | 
|AS OF DECEMBER 31, 1998                                                  | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|Participant Directed                                                     | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|Assets                                                                   | 
|------                                                                   | 
|Investments, at                                                          | 
|current value                                                            | 
|                                                                         | 
|                                                                         | 
|Cash and temporary                                                       | 
|investments, at                                                          | 
|current value                                                            | 
|                                                                         | 
|Accounts receivable                                                      | 
|Employer                                                                 | 
|Employees                                                                | 
|Broker                                                                   | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|Participant notes receivable                                             | 
|                                                                         | 
|                                                                         | 
|Net Assets Available                                                     | 
|for Benefits                                                             | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|The accompanying notes are an integral part of this financial statement.



-3-



|CONNECTICUT NATURAL GAS CORPORATION                                     
|------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                             
|STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION    
|AS OF DECEMBER 31, 1998                                                 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Assets                                                                  
|------                                                                  
|Investments, at                                                         
|current value                                                           
|                                                                        
|Cash and temporary                                                      
|investments, at                                                         
|current value                                                           
|                                                                        
|Accounts receivable                                                     
|Employer                                                                
|Employees                                                               
|Broker                                                                  
|                                                                        
|                                                                        
|                                                                        
|Participant notes receivable                                            
|                                                                        
|Net Assets Available                                                    
|for Benefits                                                            
|                                                                        
|                                                                        
|                                                                        
|The accompanying notes are an integral part of this financial statement.

-4-



|CONNECTICUT NATURAL GAS CORPORATION                                      | 
|------------------------------------------------------------------------ | 
|UNION EMPLOYEE SAVINGS PLAN                                              | 
|STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION     | 
|AS OF DECEMBER 31, 1997                                                  | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|Participant Directed                                                     | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|Assets                                                                   | 
|------                                                                   | 
|Investments, at                                                          | 
|current value                                                            | 
|                                                                         | 
|Cash and temporary                                                       | 
|investments, at
current value                                            | 
|                                                                         | 
|Accounts receivable                                                      | 
|from broker                                                              | 
|                                                                         | 
|                                                                         | 
|Total Assets                                                             | 
|                                                                         | 
|                                                                         | 
|Liabilities                                                              | 
|-----------                                                              | 
|Accounts payable to                                                      | 
|broker                                                                   | 
|                                                                         | 
|Net Assets Available                                                     | 
|for Benefits                                                             | 
|                                                                         | 
|                                                                         | 
|                                                                         | 
|The accompanying notes are an integral part of this financial statement.

-5-



|CONNECTICUT NATURAL GAS CORPORATION                                     
|------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                             
|STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION    
|AS OF DECEMBER 31, 1997                                                 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Assets                                                                  
|------                                                                  
|Investments, at                                                         
|current value                                                           
|                                                                        
|Cash and temporary                                                      
|investments, at
current value                                           
|                                                                        
|Accounts receivable                                                     
|from broker                                                             
|                                                                        
|                                                                        
|Total Assets                                                            
|                                                                        
|                                                                        
|Liabilities                                                             
|-----------                                                             
|Accounts payable to                                                     
|broker                                                                  
|                                                                        
|Net Assets Available                                                    
|for Benefits                                                            
|                                                                        
|                                                                        
|                                                                        
|The accompanying notes are an integral part of this financial statement.

-6-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1998                                           
|                                                                               
|Participant Directed                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|(depreciation) of investments                                                  
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Loan repayments                                                                
|Transfers, net                                                                 
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|Loan issues                                                                    
|                                                                               
|Total deductions                                                               
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               

The accompanying notes are an integral part of this financial statement.



-7-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1998                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|(depreciation) of investments                                                  
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Loan repayments                                                                
|Transfers, net                                                                 
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|Loan issues                                                                    
|                                                                               
|Total deductions                                                               
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               
|The accompanying notes are an integral part of this financial statement.       

-8-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1997                                           
|                                                                               
|Participant Directed                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|of investments                                                                 
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Transfers, net                                                                 
|                                                                               
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               
|The accompanying notes are an integral part of this financial statement.       

-9-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1997                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|of investments                                                                 
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Transfers, net                                                                 
|                                                                               
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               
|The accompanying notes are an integral part of this financial statement.       



-10-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1996                                           
|                                                                               
|Participant Directed                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|(depreciation) of investments                                                  
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Transfers, net                                                                 
|                                                                               
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               

The accompanying notes are an integral part of this financial statement.

-11-



|CONNECTICUT NATURAL GAS CORPORATION                                            
|-------------------------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                                    
|STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
|FOR THE YEAR ENDED DECEMBER 31, 1996                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Additions to net assets                                                        
|attributed to:                                                                 
|Dividends and interest income                                                  
|                                                                               
|Realized gains (losses), net                                                   
|                                                                               
|Unrealized appreciation                                                        
|(depreciation) of investments                                                  
|                                                                               
|Contributions:                                                                 
|Employees                                                                      
|Employer                                                                       
|                                                                               
|Total contributions                                                            
|                                                                               
|Transfers, net                                                                 
|                                                                               
|Other, net                                                                     
|                                                                               
|Total additions/(deductions)                                                   
|                                                                               
|Deductions from net assets                                                     
|attributed to:                                                                 
|Benefits paid to participants                                                  
|                                                                               
|Net increase (decrease)                                                        
|                                                                               
|Net Assets Available                                                           
|for Benefits:                                                                  
|Beginning of year                                                              
|                                                                               
|End of year                                                                    
|                                                                               

The accompanying notes are an integral part of this financial statement.

-12-

CONNECTICUT NATURAL GAS CORPORATION

-----------------------------------

UNION EMPLOYEE SAVINGS PLAN

---------------------------

NOTES TO FINANCIAL STATEMENTS AND SCHEDULES

-------------------------------------------

AS OF DECEMBER 31, 1998 AND 1997

--------------------------------

1.	Description of the Plan:

------------------------

The following description of the Connecticut Natural Gas Corporation Union Employee Savings Plan (the Plan) is provided for general information purposes only. More complete information regarding the Plan's provisions may be found in the Plan
document.

a.	General -

-------

The Plan is a defined contribution thrift plan open to union employees of CTG Resources, Inc. (the "Company") and its subsidiaries and affiliates. Effective as of the close of business on March 31, 1997, the Company became the holding
company and parent of Connecticut Natural Gas Corporation ("CNG").

The Plan was established by the Company under the provisions of Section 401(a) of the Internal Revenue Code (IRC), and it includes a qualified cash or deferred arrangement as described in Section 401(k) of the IRC for the benefit of
eligible employees of the Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan Administrator is the Company. The Compensation Committee of the Company's Board of Directors appointed an
Administrative Committee to serve as manager of the Plan. Putnam Fiduciary Trust Company, trustee of the Plan, holds the Plan's investments and executes transactions therein.

b.	Eligibility -

-----------

Employees are eligible to participate when the following criteria are met:

(1)	Are at least age 21.

(2)	Are employed by the Company for one year or more.

(3)	Have completed 1,000 hours or more of service in a 12-month period beginning with date of hire.

(4)	Are normally employed for 20 or more hours per week and are covered by a collective bargaining agreement between the Company and any union which provides for participation under the Plan.



The number of employees participating in the Plan as of December 31, 1998 and 1997 was 314 and 323, respectively.

c.	Contributions -

-------------

Eligible employees may elect to participate in the Plan and authorize payroll deductions of not less than 1% and not greater than 26% of basic earnings as savings contributions to their accounts during each year, subject to the limits under
Section 415 of the IRC.

The Company will match a percentage of an employee's compensation depending on age or years of continuous service. The amount of the Company contribution will be determined according to the schedule below. However, if an employee's elected
savings allotment is less than the percentage contained in the schedule, the Company will







-13-

match no more than the percentage contributed by the employee.

As of December 31, 1998, if an employee's:

|Years of Continuous Service are
-------------------- | Or
-- | Age is
------ | The Company Will Contribute
---------------------------
|---------------------------------------------------- | ----- | ------------- | -------------------------------------------------------
|20                                                   |       | 45            | 4-1/2% of compensation                                 
|10                                                   |       | 35            | 3% of compensation                                     
|Less than l0                                         |       | Under 35      | 2% of compensation                                     

An exception to the above schedule exists for those Plan participants subject to the collective bargaining agreement between the Company and the employees in its Greenwich division. Each such
participant who, as of April 1, 1998, had either (1) attained age 50 or (2) completed 30 years of continuous service is grandfathered with respect to a previous Plan provision entitling such individual to a matching contribution of up to 6% of
compensation or the amount of the participant's contribution, if less.

d.	Investment Options -

------------------

Plan participants direct their contributions among various investment options in 5% increments, and they may elect to change their investment options at any time. A description of each investment option is provided below:

(1)	PUTNAM STABLE VALUE FUND - This fund seeks to provide interest income while preserving principal and maintaining liquidity. The fund invests in pools of guaranteed investment contracts, security-backed investment contracts, and money
market instruments issued by insurance companies and banks. The average yield for this fund was 6.06%, 6.48%, 5.74% for the years ended December 31, 1998, 1997 and 1996, respectively.

(2)	THE GEORGE PUTNAM FUND OF BOSTON - This fund primarily seeks current income and capital growth through investment in common and preferred stocks, debt securities, and cash equivalents.

(3)	THE PUTNAM FUND FOR GROWTH AND INCOME - This fund seeks long-term capital growth and current income through a portfolio of income-producing common stocks.

(4)	PUTNAM VISTA FUND - This fund seeks to provide capital appreciation by investing primarily in stocks of small to midsize companies believed to have above-average growth potential.

(5)	PUTNAM INTERNATIONAL GROWTH FUND - This fund seeks to provide capital appreciation by investing in a diversified portfolio of equity securities in companies located outside the United States.

(6)	PUTNAM INCOME FUND - This fund seeks to provide as high a level of income as possible given a prudent level of risk by investing in high yield and investment grade corporate bonds, mortgage and asset-backed securities, U.S. Treasury
securites, and foreign bonds.

(7)	COMMON STOCK FUND - This fund seeks to provide capital appreciation and current income through investment in the common stock of the Company, purchased at not more than fair market value.



Pursuant to the change in corporate organization discussed in Note 1.a. above and an Agreement and Plan of Exchange, dated as of December 20, 1996, by and between the Company and CNG, all outstanding shares of common stock of CNG, including
those shares held by the Plan, were exchanged for shares of common stock of the Company.





-14-

All Company matching contributions are invested in the Common Stock Fund. Beginning on March 1, 1996 and continuing on a quarterly basis through October 1, 1999, the Plan Administrator has directed that portions of the non-participant
directed Common Stock Fund be transferred to the participant directed Common Stock Fund based upon a predetermined schedule. These transfers are scheduled to take place on January 1, April 1, July 1, and October 1 of each year, with the exception of 1996
for which the March 1 transfer was in lieu of the April 1 transfer. Following the transfers, Plan

participants will have the discretion of investing the transferred shares of common stock in the same manner as the other amounts under

their direction in the various participant directed funds. Also, effective March 1, 1996, all Company matching contributions are being invested in the participant directed Common Stock Fund.

In addition to transfers between the various funds noted above as a result of investment elections made by Plan participants, transfers are also made to or from the Employee Savings Plan for those employees who transfer to (from) the
Company's non-union payroll.

e.	Vesting -

-------

Participants are fully vested in their contributions and the earnings thereon. Participants are vested in the Company matching contributions and the earnings thereon as follows:

|Years of Continuous Service are
------------------------------- | Percentage Vested
-----------------
|--------------------------------------------------------------- | -----------------------------------
|Less than 1                                                     | 0%                                 
|1 but less than 2                                               | 20                                 
|2 but less than 3                                               | 40                                 
|3 but less than 4                                               | 60                                 
|4 but less than 5                                               | 80                                 
|5 or more                                                       | 100                                

Participants also become fully vested in their Company matching 	contribution account if any one of the following occurs:

(1)	Death

(2)	Disability

(3)	Attainment of age 65 (normal retirement date)



(4)	Total or partial termination of the Plan

(5)	Discontinuance of Company contributions to the Plan



Upon termination of employment before full vesting, the non-vested Company match portion of a participant's common stock account shall be forfeited after five years if the participant is not rehired and applied as a credit against the
employer's future contributions.

f.	Benefits -

--------

Upon termination of employment due to retirement, disability, or death, a participant (or his/her beneficiary) may elect to receive a lump-sum distribution equal to the value of the participant's vested interest in his/her account as soon
as practicable following the

termination date or defer the distribution to some future date.

Participants may request the withdrawal of certain account balances prior to termination of employment. Application for withdrawal of after-tax contributions and employee IRA contributions may be made once a year. There are no Plan
penalties for such withdrawals.



-15-

g.	Participant Notes Receivable -

----------------------------

Effective May 1, 1998 (July 1, 1998 for those Plan participants covered by the collective bargaining agreement between the Company and its Greenwich division employees), the Board of Directors adopted an amendment to the Plan which
established a participant loan provision. Under this provision, a Plan participant is allowed to borrow a minimum of $1,000 up to a maximum of one-half of the participant's vested account balance or $50,000, whichever is less. Each loan carries an
interest rate of prime plus 1%, established on the first day of the calendar quarter in which the loan is made. Security for each loan is provided by one-half of the Plan participant's vested account balance. Two types of loans are available to Plan
participants--"general purpose" and "principal residence" loans. Full repayment of each of these types of loans is required within five and fifteen years following loan origination, respectively, and loan refinancings are not permitted. All loans require
level amortization with principal and interest payments made at least quarterly, and for those Plan participants who are active employees, payments are made ratably through payroll deductions. No Plan partcipant may have more than one "general purpose"
loan and one "principal residence" loan outstanding at any time.

h.	Participant Accounts -

--------------------

Individual accounts are maintained for each of the Plan's participants to reflect the participant's share of the Plan's income, the participant's and the Company's contributions, and the participant's loan(s) (if applicable). Allocations of
Plan income are based on the share balances in the participants' accounts.

2.	Summary of Significant Accounting Policies:

------------------------------------------

a.	Basis of Accounting -

-------------------

The accompanying financial statements have been prepared on the accrual basis of accounting.

b.	Income Recognition -

------------------

Dividend income is recorded on the ex-dividend date. Interest income is recorded as earned.

c.	Investment Valuation -

--------------------

The Plan's investments are reflected at current value. The shares

of the Common Stock Fund and the Putnam mutual funds owned by the Plan, with the exception of the Putnam Stable Value Fund, are valued at market as determined by the quoted market price as of the last business day of the year. The latter
fund is valued at contract value (cost plus accumulated earnings) which approximates current value. Purchases and sales of securities are reflected on a trade date basis. Realized and unrealized appreciation (depreciation)

presented in the statements of changes in net assets available for benefits with fund information are computed based on the change in the current value of the Plan assets from year to year.

d.	Administrative Expenses -

-----------------------

Administrative expenses of the Plan may be paid by either the Company or the Plan. During 1998, 1997 and 1996, the Company paid all administrative expenses relating to the Plan.



-16-

e.	Use of Estimates in the Preparation of Financial Statements -

-----------------------------------------------------------

The preparation of financial statements in conformity with generally accepted accounting principles and the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the fianancial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.

3.	Federal Income Tax Status:

-------------------------

In 1994 the Plan was amended and restated to meet the requirements of the Tax Reform Act of 1986, and the Plan received a favorable

determination letter from the Internal Revenue Service dated October 24, 1994. The Plan has been amended since receiving the determination letter. However, the Plan Administrator and management believe that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC. Therefore, they believe that the Plan was qualified and the related trust was tax-exempt through the year ended December 31, 1998.

4.	Investments:

-----------

The fair market values of individual assets that represent 5% or more of the Plan's net assets as of December 31, 1998 and 1997 are as follows:

1998:

CTG Resources, Inc. common stock		$8,410,550

The Putnam Fund for Growth and Income 	                   5,197,979

The George Putnam Fund of Boston 		   1,908,329

Putnam Vista Fund 			   2,685,586

1997:

CTG Resources, Inc. common stock		$8,941,135

The Putnam Fund for Growth and Income 	                   4,378,627

The George Putnam Fund of Boston 		   1,752,110

Putnam Vista Fund			   1,759,969

5.	Concentration of Credit Risk:

----------------------------

The Plan's assets are invested in mutual funds managed by Putnam Investments, Inc., as described in Note 1, and the common stock of CTG. In the event of any uncertainties in the financial marketplace, the Plan may be exposed to financial risks.

6.	Reconciliation to Form 5500:

---------------------------

As of December 31, 1996, the Plan had $1,324 of excess contributions from participants. In 1997, these excess contributions were returned to the participants. This amount was reflected as a reduction in benefits paid to participants in the Plan's
Form 5500 for 1997; however, in accordance with generally accepted accounting principles, benefits paid to participants is not reduced by this amount in the accompanying statement of changes in net assets available for benefits for the year ended December
31, 1997.

The table on the following page reconciles benefits paid to participants per the financial statements to the Form 5500 as filed by the Company for the year ended December 31, 1997.



-17-

Benefits

Paid to

Participants

------------

Per financial statements				                                 $868,731

Excess contributions

returned to participants				                                    
  (1,324)

--------

Per Form 5500						                 $867,407

========

-18-

Schedule I

EIN 06-0383860

Plan No. 006



|    | CONNECTICUT NATURAL GAS CORPORATION                          
|--- | -------------------------------------------------------------
|    | UNION EMPLOYEE SAVINGS PLAN                                  
|    | ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES   
|    | AS OF DECEMBER 31, 1998                                      
|    |                                                              
|    |                                                              
|    |                                                              
|    | (b)Identity of Issue, Borrower,                              
|(a) | Lessor, or Similar Party                                     
|--- | ---------------------------------------------                
|    |                                                              
|*   | Putnam Stable Value Fund                                     
|    |                                                              
|    |                                                              
|*   | The George Putnam Fund of Boston                             
|    |                                                              
|    |                                                              
|*   | The Putnam Fund for Growth and Income                        
|    |                                                              
|    |                                                              
|*   | Putnam Vista Fund                                            
|    |                                                              
|    |                                                              
|*   | Putnam International Growth Fund                             
|    |                                                              
|    |                                                              
|*   | Putnam Income Fund                                           
|    |                                                              
|    |                                                              
|    |                                                              
|*   | CTG Resources, Inc.                                          
|*   | Boston Safe Company                                          
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|*   | CTG Resources, Inc.                                          
|*   | Boston Safe Company                                          
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    | *Represents a party-in-interest.                             
|    |                                                              
|    | The accompanying notes are an integral part of this schedule.





-19-

Schedule II

EIN 06-0383860

Plan No. 006



|CONNECTICUT NATURAL GAS CORPORATION                          
|-------------------------------------------------------------
|UNION EMPLOYEE SAVINGS PLAN                                  
|ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS               
|FOR THE YEAR ENDED DECEMBER 31, 1998                         
|                                                             
|                                                             
|                                                             
|Identity of                                                  
|Party Involved                                               
|---------------                                              
|                                                             
|Putnam Vista                                                 
|Fund                                                         
|                                                             
|                                                             
|                                                             
|The Putnam                                                   
|Fund for                                                     
|Growth and                                                   
|Income                                                       
|                                                             
|CTG                                                          
|Resources, Inc.                                              
|                                                             
|                                                             
|                                                             
|                                                             
|The accompanying notes are an integral part of this schedule.