===========================================================================
                 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C. 20549
                                     FORM 10-K
   (Mark One)
   (X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 
                             
   For the fiscal year ended September 30, 1998
                             ------------------
                                        OR,
   ( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 
                             
   For the transition period from                 to 
                                  ---------------    ------------------
   Commission file number 1-12859
                          -------
                                CTG Resources, Inc.
   ---------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)
                                          
                Connecticut                                 06-1466463
   ---------------------------------------         ----------------------------
      (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                    Identification No.)
    
             100 Columbus Blvd.
             P.O. Box 1500
             Hartford, Connecticut                           06144-1500
   ---------------------------------------         ----------------------------
   (Address of principal executive offices)                  (Zip code)
    
   Registrant's telephone number, including area code (860) 727-3010
                                                         ---------------
    
   Securities registered pursuant to Section 12(b) of the Act:
                                                     Name of Each Exchange on
              Title of Each Class                        Which Registered
              -------------------                  ----------------------------
   Common Stock - No Par                              New York Stock Exchange
   ----------------------------------------        ----------------------------
    
   Securities registered pursuant to Section 12(g) of the Act:
   None
   ---------------------------------------------------------------------------
                                 (Title of Class)
    
   Indicate by check mark if disclosure of delinquent filers pursuant to Item
   405 of Regulation S-K is not contained herein, and will not be contained,
   to the best of registrant's knowledge, in definitive proxy or information
   statements incorporated by reference in Part III of this Form 10-K or any
   amendment to this Form 10-K.   x   
                                -----
   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     
                                                        -----    -----
   State the aggregate market value of the voting stock held by nonaffiliates
   of the registrant.  (The aggregate market value shall be computed by
   reference to the price at which the stock was sold, or the average bid and
   asked prices of such stock, as of a specified date within 60 days prior to
   the date of filing.)
      The aggregate market value of the voting stock held by nonaffiliates
   ---------------------------------------------------------------------------
      of the Registrant on November 2, 1998 was $204,386,631.
   ---------------------------------------------------------------------------
   Indicate the number of shares outstanding of each of the registrant's
   classes of common stock, as of the latest practicable date (applicable only
   to corporate registrants).
   ---------------------------------------------------------------------------
     Number of shares of Common Stock outstanding as of the close of business
   ---------------------------------------------------------------------------
     on November 30, 1998 was 8,652,171.
   ---------------------------------------------------------------------------
                        DOCUMENTS INCORPORATED BY REFERENCE
    
   List hereunder the following documents if incorporated by reference and the<PAGE>
   Part of the Form 10-K into which the document is incorporated:  (1) Any
   annual report to security holders; (2) Any proxy or information statement;
   and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the
   Securities Act of 1933.  The listed documents should be clearly described
   for identification purposes.
      Definitive Proxy Statement for the Company's February 1999 Annual 
   ---------------------------------------------------------------------------
      Meeting (Part III)  
   ---------------------------------------------------------------------------
    
    <PAGE>



                                      PART I
    
   ITEM 1. BUSINESS
   ----------------
    
     General
     -------
    
     CTG Resources, Inc. ("the Company" or "CTG") is a Connecticut corporation
     organized as a holding company with two wholly-owned subsidiaries: 
     Connecticut Natural Gas Corporation ("CNG") and The Energy Network, Inc.
     ("TEN").  CNG is an energy provider engaged in the regulated distribution,
     sale and transportation of natural gas.  TEN holds and operates, through
     divisions or wholly-owned subsidiaries, CTG's unregulated, diversified
     businesses which are primarily engaged in district heating and cooling
     ("DHC") and also include the Company's equity investments in two
     partnerships, one of which is the Iroquois Gas Transmission System Limited
     Partnership ("Iroquois").

     CTG's headquarters are in Hartford, Connecticut.  At September 30, 1998,
     the Company employed 555 people.  The Company's common stock is traded on
     the New York Stock Exchange, under the symbol CTG.  Preferred stock of CNG
     is traded on the over-the-counter market.
    
     CTG's principal business is the distribution, transportation and sale of
     natural gas through CNG.  This business is subject to extensive
     regulation.  CTG's diversified businesses are unregulated and provide
     energy-related products and services, primarily district heating and
     cooling.  The activities of Iroquois are regulated at the Federal level.
     
     Segment information for all relevant periods is included in the Notes to
     the Financial Statements filed in Part II, Item 8 of this report.
    

     Seasonality
     -----------
    
     The Company's operations are seasonal.  Most of the Company's gas revenues
     and related operating expenses occur during the winter heating season,
     November to March.  Natural gas usage in the Company's service area is
     greater for heating purposes in winter and less for cooling in summer. 
     Natural gas usage for nonheating purposes remains steady throughout the
     year.  Accordingly, earnings are highest during the first and second
     quarters of the fiscal year, which begins October 1, and the third and
     fourth quarters frequently show a net loss.  The impact of seasonality on
     cash flows is discussed in Item 7.  Management's Discussion and Analysis
     of Financial Condition and Results of Operations.
    
     The Company's unregulated district heating and cooling businesses
     experience peak loads during both the winter heating and summer cooling
     seasons.
    
    <PAGE>



     Competition
     -----------
    
     In recent years, the natural gas industry has undergone structural changes
     in response to Federal regulatory policy intended to increase competition. 
     In 1992, the Federal Energy Regulatory Commission ("FERC") issued Order
     636, which required all interstate gas pipelines to provide "unbundled,"
     or separate, gas transportation and storage services and to discontinue
     their bundled merchant sales operations, which included the gas
     acquisition function.  Similarly, the Company has offered firm
     transportation rate tariffs to nonresidential customers since April 1,
     1996.  The impact of the FERC Order 636 and the resulting deregulation of
     the gas industry has continued to heighten competition and has changed the
     nature of the Company's business.
    
     The Company has historically distributed and sold natural gas to its
     customers without substantial competition from other gas utilities,
     cooperatives or other providers of natural gas.  At the local level, as a
     result of FERC Order 636 and Connecticut deregulation, the Company faces
     increasing competitive pressures as other providers of gas seek
     opportunities to make gas sales to the Company's commercial and industrial
     customers.  Similarly, the Company has offered firm transportation rate
     tariffs to nonresidential customers, since April of 1996.  The Company's
     transportation tariffs are designed to recover a margin on each
     transaction that is comparable to the margin that the Company would have
     received if it were making an on-system sale of natural gas.
    
     The Company also competes with suppliers of oil, electricity and propane
     for cooking, heating, air conditioning and other purposes.  Competition is
     greatest among the large commercial and industrial customers who have the
     capability of using alternative fuels.  The volatile effect of this price-
     sensitive load is somewhat overcome through the use of flexible rate
     schedules which allow gas pricing to meet alternative-fuel competition.   

     The diversified businesses own and operate DHC systems which distribute
     and sell steam, hot water and chilled water to office complexes and other
     large buildings in the City of Hartford.  The extent of competition to the
     DHC business from alternate fuels is diminished after a customer has made
     its commitment to DHC  because of the cost of the equipment necessary to
     utilize an alternative energy source.
    
    
     Regulatory Jurisdiction
     -----------------------
    
     CNG's principal business is the distribution of natural gas, and this
     business is subject to regulation by the Connecticut Department of Public
     Utility Control ("DPUC") as a public service company.  The scope of this
     regulation encompasses rates, standards of service, issuance of certain
     securities, safety practices and other matters.  Retail sales of gas by
     the Company and deliveries of gas owned by others are made pursuant to
     rate schedules and contracts filed with and subject to DPUC approval.  In
     general, the firm rate schedules provide for some reductions in the unit <PAGE>



     price of gas as greater quantities are used.  The rate schedules contain
     purchased gas adjustment provisions as described in Note 1 to the
     Financial Statements (included in Part II, Item 8 herein).
    
     Businesses operated by TEN are not public service companies under state
     law, and hence they are not subject to regulation by the DPUC.  However,
     intercompany transactions between CNG and its affiliates are subject to
     review and/or approval by the DPUC.
    
     The regulation of interstate sales of natural gas is under the
     jurisdiction of the FERC.  The Company is subject to the direct
     jurisdiction of the FERC for any off-system sales the Company makes in
     interstate commerce.  The FERC regulates the Company's pipeline gas
     suppliers and transporters, and the Company closely follows and
     participates in numerous proceedings before FERC.  Through an unregulated
     subsidiary, of TEN, TEN Transmission Company ("TEN Transmission"), the
     Company is an equity partner in Iroquois which is subject to regulation by
     FERC.
    
    
     Natural Gas Business (Regulated)
     -------------------------------
    
     CNG is a Connecticut corporation organized in 1848 and headquartered in
     Hartford, Connecticut.  CNG is engaged in the distribution, transportation
     and sale of natural gas in Hartford and 21 other cities and towns in
     central Connecticut and in Greenwich, Connecticut.  This business is
     subject to extensive regulation.  Many aspects of this traditional
     business have changed or are expected to change as deregulation of the
     industry occurs.  Later sections of this document address these changes
     (See, for example, the sections entitled "Regulatory Matters" and
     "Competition.").
    
     Consolidated gas operating revenues were $262,446,000 for the fiscal year
     ended September 30, 1998 and were derived approximately 50% from
     residential customers, 20% from commercial firm customers, 1% from
     industrial firm customers, 16% from interruptible customers, 11% from off-
     system sales and 2% from the aggregate of transportation of customer-owned
     gas and other gas-related revenues.  There were $2,299,000 of revenues
     from sales to affiliated companies.  The gas distribution business
     contributed 93% of consolidated revenues over the three fiscal years
     ending 1998.  During the fiscal year ended September 30, 1998, the peak-
     day sendout of gas was 248,659 thousands of cubic feet ("mcf") which
     occurred on December 31, 1997.
    
     CNG has one wholly-owned subsidiary, CNG Realty Corp. ("CNGR"), which was
     formed in 1977.  CNGR is a single purpose corporation which owns the
     Company's Operating and Administrative Center located on a 7-acre site in
     downtown Hartford, Connecticut.  This facility is leased to CNG.  CNGR
     engages in no other business activity.
    <PAGE>



     Gas Supply -
    
     The Company's current gas supply contract portfolio reflects the results
     of a continuing supply diversification strategy.  The purpose of such a
     strategy is to hold a secure, flexible, best-cost gas supply portfolio,
     which allows the Company to respond quickly and appropriately as customer
     needs change.
    
     The Company purchases natural gas on a long-term and seasonal basis from
     producers and, when economics dictate, on a short-term basis in the spot
     market.  Pipeline services purchased include firm and interruptible
     transportation service.  Gas storage service in the northeast and in the
     southeast production area is purchased from both pipelines and storage
     contractors.
    
     The Company's principal and most economical source of gas is pipeline-
     delivered natural gas.  Because of limited transportation capacity,
     pipelines may be unable to meet all of the Company's needs during the
     coldest periods of the year.  Therefore, the Company also utilizes
     liquefied natural gas ("LNG") and, to a much lesser extent, propane mixed
     with air ("LP-Air").  LNG and LP-Air are usually more expensive than
     natural gas.  Therefore, they are used primarily during the winter months
     for peak shaving when the demand for gas is greatest and exceeds
     deliverable supplies of natural gas through the pipelines.
    
     The Company currently holds pipeline transportation contracts with
     Algonquin Gas Transmission Company ("AGT"), CNG Transmission Corporation
     ("CNGT"), Iroquois Gas Transmission System ("IGTS"), National Fuel Gas
     Supply Corporation ("NFGS"), Tennessee Gas Pipeline Company ("TGP"), Texas
     Eastern Gas Transmission Corporation ("TETCO"), and Transcontinental Gas
     Pipeline Corporation ("TRANSCO").  The various agreements expire at
     different times through 2012 and provide for the delivery of a total
     maximum daily quantity of approximately 170,596 mcf and maximum annual
     quantity of approximately 48,708,730 mcf.  The Company also has signed
     supply contracts directly with producers to provide the natural gas for
     these transportation arrangements.
    
     The Company has contracted for storage service in various locations and
     with diverse expiration dates through 2012.  Under these arrangements, gas
     available during the warmer months of the year is stored underground in
     locations that, although out-of-state, are accessible for use during the
     colder winter months of the year and for balancing throughout the year.
    
     The gas supply which feeds into the Company's firm transportation rights
     on the interstate pipelines has been contracted for directly with
     producers of natural gas ("Direct Producer Contracts").  The Direct
     Producer Contracts are diverse in terms of expiration date, supply
     location, price, flexibility, etc. as part of the Company's gas supply
     diversification strategy.
    
     The Company continues to be very active in the area of purchasing gas
     directly from producers both in the spot market and under long-term
     arrangements.  Currently, the Company purchases all of its gas under such
     arrangements.  Spot market volumes are those purchased under short-term <PAGE>



     arrangements from producers and gas withdrawn from storage which had been
     purchased directly from producers for injection to that storage.  Spot
     market purchases are set by negotiation with the supplier.  
    
     Under FERC Order 636, a pipeline may not terminate service to a long-term
     firm transportation customer if that customer elects to exercise a "right
     of first refusal" following the initial contract term expiration.  This
     requires the customer to match the price and length terms of another offer
     made to the pipeline to continue to purchase such service.  The price for
     such continued firm transportation service would be capped at the maximum
     price determined as a just and reasonable rate under FERC jurisdiction.
    
     In addition to its pipeline gas supplies, the Company owns an LNG plant in
     Rocky Hill, Connecticut.  This plant has the design capacity to liquefy
     approximately 6,000 MCF per day and store 1,206,000 MCF.  The LNG plant is
     not a source of additional gas supply, but it permits the Company to
     liquefy and store gas supplies purchased during the summer and to deliver
     this stored gas during the following winter.  The plant has the design
     capacity to vaporize 60,000 MCF per day.
    
     LP-Air is a source of peak shaving supply to the Company.  The Company has
     approximately 720,000 gallons of on-site propane storage which can produce
     the equivalent of approximately 8,208 MCF of natural gas per day.
     
    
     Regulatory Matters -

     In April 1997, the DPUC began an investigation into improving the existing
     firm transportation programs in the state and expanding competition to all
     residential customers.  In August 1997, the DPUC initiated a generic
     proceeding to investigate firm transportation and unbundling in
     Connecticut.  This proceeding was divided into two phases.  The DPUC
     issued a decision regarding the issues of Phase I in July 1998, addressing
     the status of existing firm transportation service for commercial and
     industrial customers, streamlining the Connecticut local gas distribution
     companies' ("LDCs") administrative processes and thereby making firm
     transportation more readily accessible to customers.
     
     In Phase II, the DPUC is addressing the potential deregulation of the
     residential natural gas sales market in Connecticut and the future role of
     Connecticut's LDCs in natural gas commodity sales.  This phase of the
     review will explore the many important issues related to fully unbundled,
     competitive gas service for all customers,  including residential.  These
     issues will include recovery of potentially stranded costs, the LDCs'
     obligation to serve customers who choose other suppliers, a marketer code
     of conduct and consumer protection, use/role of fixed price hedging tools,
     future decisions regarding pipeline capacity entitlements, and public
     policy programs.

     Concurrently, the Connecticut State Legislature has undertaken a task
     force investigation related to residential deregulation.  Although the
     Company cannot predict the outcome of these proceedings, the Company <PAGE>



     anticipates that the timing of any DPUC decision will be related to the
     timing of the completion and announcement of the results of the
     Connecticut State Legislature's activities.

     In 1997 the DPUC informed CNG that it plans to initiate a second phase of
     the management audit which it performed in 1995 and 1996.  This second
     phase will focus on several areas of CNG's operations in which
     opportunities for improvements were identified by the initial audit.  The
     DPUC has not yet scheduled this second phase of its management audit.

    
     Diversified Businesses (Unregulated)
     -----------------------------------
    
     At September 30, 1998, the diversified businesses of the Company included
     TEN and its wholly-owned subsidiaries The Hartford Steam Company ("HSC"),
     TEN Transmission, ENI Gas Services, Inc. ("ENI Gas"), TEN Gas Services,
     Inc.("TEN Gas") and ENServe Incorporated ("ENServe").
    
     TEN was incorporated in 1982 and is engaged in the operations described in
     the following paragraphs.  TEN and HSC provide DHC services to many
     buildings and complexes in the south-end and downtown neighborhoods of
     Hartford, Connecticut.  TEN also holds a fifty percent interest in the
     Downtown Cogeneration Associates partnership which owns and operates a
     4.2-Megawatt cogeneration facility in downtown Hartford, Connecticut. 
     TEN's other operating division offers energy equipment rentals.  ENI Gas
     and TEN Gas together own 100% of KBC Energy Services ("KBC"), a gas
     marketing business which is in the process of winding down its operations. 
     TEN Transmission owns the Company's share of its investment in the
     Iroquois pipeline.
    
    
     TEN Transmission, which was formed in 1986, owns the Company's 4.87% share
     of Iroquois.  Iroquois operates a natural gas pipeline which transports
     Canadian natural gas into the states of New York, Massachusetts and
     Connecticut.  Although TEN Transmission is not regulated, Iroquois is
     regulated by the FERC.
    
     HSC, incorporated in Connecticut in 1961, owns and operates a central
     production plant and distribution system for the processing and
     distribution of steam for heating and chilled water for cooling to a
     number of offices, stores and other large buildings in the southend and
     downtown neighborhoods of Hartford, Connecticut.
    
     In June 1998, HSC acquired the assets of cogeneration facility which is
     located adjacent to and serves Hartford Hospital, providing both steam and
     electricity.  HSC will manage the facility and supply the hospital with
     steam and electricity over a twenty-year contract period.  HSC will also
     sell electricity to the local electric utility.  The facility is currently
     off-line for repowering as a 7.5-Megawatt facility and is scheduled to be
     back on line by January 1999 under HSC's management.<PAGE>



     HSC chills its own water supply for district cooling and produces its own
     steam from its existing boilers.  HSC also purchases steam from the
     Downtown Cogeneration Associates Limited Partnership ("DCA"), which sells
     steam to HSC under a twenty-year contract.  TEN is a 50% partner in the
     DCA with two unrelated third parties.  The DCA owns and operates a 4.2-
     megawatt cogeneration facility on the roof of a downtown Hartford building
     complex.  Electricity generated from this unit is sold to The Connecticut
     Light and Power Company under a twenty-year contract expiring in 2007. 
     During fiscal 1997, TEN provided cogeneration management and consulting
     services to DCA.
    
     The Capitol Area System ("CAS") is a district heating and cooling system
     serving a section of the City of Hartford, Connecticut.  TEN owns the
     distribution system and purchases hot and chilled water from a third
     party.  TEN also provides marketing services to this third party.
    
     TEN's energy equipment rentals division owns natural gas water heaters and
     natural gas conversion burners which it leases to customers in the
     residential market.

     In fiscal 1998, TEN sold the physical assets and business of ENServe and
     essentially completed the wind-down of its operations.  ENServe previously
     had offered energy system management services and energy conservation
     services to residential, commercial and industrial customers throughout
     Connecticut.
    
     ENI Gas was formed to own the Company's interest in KBC, a New England
     natural gas marketer.  At September 30, 1997 TEN had a 50% ownership
     interest in this partnership.  During the second quarter of fiscal 1998
     TEN Gas was formed to own a portion of KBC, and together ENI Gas and TEN
     Gas assumed full control of KBC.  The KBC operations were deemed not core
     to TEN's strategic focus on asset-based businesses.  Accordingly, ENI Gas
     and TEN Gas began the sale of KBC's assets and the wind down of its
     operations.
    

     The Energy Network Alliance
    
     In October 1998, TEN entered into a marketing alliance with Pratt &
     Whitney Canada, Inc., Carrier Corporation and Oxford Technologies, Inc. to
     provide energy for heating, cooling and electricity to large commercial,
     industrial and institutional facilities by combining cogeneration and
     district energy.  As its role in this alliance, TEN will own and operate
     the individual customers' on-site district energy plants which will be
     equipped with state-of-the-art energy systems provided by the other
     members of the alliance.<PAGE>



     Environmental Considerations
     ----------------------------
    
     The Company has not experienced and does not anticipate any significant
     problem in complying with laws and regulations pertinent to its business
     concerned with protecting the environment.  Additional information
     regarding environmental considerations is included in the Management's
     Discussion and Analysis of Financial Condition and Results of Operations,
     filed in Part II, Item 7 of this report, and the Notes to the Financial
     Statements, filed in Part II, Item 8 of this report.
    
    
     Franchises
     ----------
    
     CNG holds franchises, granted by the Legislature of the State of
     Connecticut, and other consents which it considers to be valid and
     adequate to enable it to carry on its operations, substantially as now
     carried on, in each of the communities which it serves.
     
    <PAGE>



   ITEM 2. PROPERTIES
   ------------------
    
     At September 30, 1998, CNG owns gas distribution mains, a natural gas
     liquefaction plant, propane gas storage tanks, metering stations, gas
     service connections, meters, regulators and other equipment necessary for
     the operation of a gas distribution system.  Substantially all of the
     Company's properties are subject to the lien of the Indenture of Mortgage
     and Deed of Trust securing its first mortgage bonds.  The properties, in
     management's opinion, are maintained in good operating condition.  The gas
     mains are located principally under public streets, roads and highways.
    
     TEN owns a distribution system located in the Capitol area of Hartford,
     Connecticut for the distribution of hot water for heating and chilled
     water for cooling.  This property was financed with industrial revenue
     bonds secured by a letter of credit with a bank.  
    
     HSC owns a cogeneration facility which is located on the campus of
     Hartford Hospital and supplies steam for heating and electricity for power
     to Hartford Hospital.  This facility is currently off-line for repowering
     as a 7.5-megawatt facility and is scheduled to be on line by January 1999
     under HSC management.  The purchase and repowering of this property were
     financed with a long-term secured term note.

     The equipment rentals division of TEN owns water heaters and conversion
     burners which it leases to its customers in the residential market.
    
     HSC owns a central production plant and distribution system, which
     includes a chilled water storage tank, in downtown Hartford, Connecticut
     for the processing and distribution of steam for heating and chilled water
     for cooling.
    
     CNGR owns the Operating and Administrative Center in Hartford which is
     leased by CNG.  The center is subject to the lien of the Mortgage Deed
     under which the CNGR's first mortgage notes are issued.
    

     Adriaen's Landing
    
     The Company has been approached by local businesses and government
     agencies regarding the development of a stadium and convention center
     along with hotel, retail, recreational and housing facilities.  The
     development, known as Adriaen's Landing, would be built in the area of the
     Company's headquarters, operating center and steam/chilled water
     production facilities.  The Company, in order to accommodate the
     development as it is currently planned, would be required to relocate its
     facilities.  Discussions are now underway with the participants in order
     to accomplish this at no cost to the Company or its customers.  The area
     of development, which includes Company property, may contain hazardous
     materials that the project participants will be required to address.<PAGE>



   ITEM 3. LEGAL PROCEEDINGS
   -------------------------
    
     In November 1995, certain Connecticut plumbers and HVAC contractors filed
     several class action suits against CNG and the State's two other LDCs,
     claiming that the LDCs engaged in unfair trade practices and similar
     allegations, all relating to customer service work.  The action alleged
     that the LDCs unfairly competed with licensed plumbers and contractors by
     performing customer service work using customer service employees who did
     not possess State trade licenses.  Previously, the LDCs claimed that the
     work was performed under a statutory exemption enacted in 1965 and amended
     in 1967.  In 1996, the Connecticut Court of Appeals upheld an
     administrative ruling against the LDCs' position.  

     In January 1998, the court granted CNG's motion to strike all but one
     count of the complaint:  the antitrust conspiracy claim.  The plumbers and
     contractors subsequently filed two additional lawsuits against CNG and the
     other LDCs alleging violations arising from the same business activities
     as in the first lawsuit.  In 1998, all of these cases were assigned to the
     Connecticut Superior Court Complex Litigation docket, and CNG successfully
     resisted the plumbers' and contractors' efforts to consolidate all of
     these cases.  A trial date for one of the suits tentatively is expected in
     the fourth quarter of calendar year 1999.
    
     The plumbers and contractors are currently asserting claims for profits
     which they allege were lost during certain specific periods.  There has
     not been any settlement demand or any formal statement of alleged damages. 
     As a result, management cannot estimate CNG's potential exposure related
     to these claims.  CNG is vigorously defending this matter.
    
     On July 28, 1997, CNG filed suit in state court against another
     Connecticut local gas distribution company seeking to enjoin that company
     from serving retail customers in a town in which CNG currently serves
     customers.  In its decision issued in October 1998, the court upheld the
     Company's franchise rights in the disputed area.
    
     The Company is not a party to any other litigation other than ordinary
     routine litigation incident to the operations of the Company or its
     subsidiaries.  In the opinion of management, the resolution of such
     litigation will not have a material adverse effect on the Company's
     financial condition or results of operations.
    
    
    
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   -----------------------------------------------------------
    
     There were no matters submitted to a vote of security holders during the
     last quarter of the fiscal year ending September 30, 1998.
    
    <PAGE>



   Executive Officers of the Registrant
   ------------------------------------
   All executive officers' terms of office are one year.
    
   Arthur C. Marquardt                                      Age - 51
   President and Chief Operating Officer
    
     Business experience:
        1998 - Present  President and Chief Executive Officer
        1997 - 1998     President and Chief Operating Officer
        1996 - 1997     President and Chief Operating Officer, Connecticut
                             Natural Gas Corporation
        1992 - 1996     Senior Vice President - Gas Business Unit, Long Island
                             Lighting Company

    
   James P. Bolduc                                          Age - 49
   Executive Vice President and Chief Financial Officer
    
     Business experience:
        1997 - Present  Executive Vice President and Chief Financial Officer
        1996 - 1997     Executive Vice President and Chief Financial Officer,
                             Connecticut Natural Gas Corporation
        1993 - 1996     Senior Vice President - Financial Services and Chief
                             Financial Officer, Connecticut Natural Gas
                             Corporation
    
    
   Anthony C. Mirabella,                                    Age - 58
Senior Vice President - District Heating and Cooling, The Energy Network, Inc.
    
     Business experience:
        1998 - Present  Senior Vice President - District Heating and Cooling,
                             The Energy Network, Inc.
        1997 - 1998     Senior Vice President - Operations and Chief Engineer,
                             Connecticut Natural Gas Corporation
        1993 - 1997     Vice President - Operations and Chief Engineer,
                             Connecticut Natural Gas Corporation
    
    
   Reginald L. Babcock                                      Age - 47
   Vice President, General Counsel and Secretary
    
     Business experience:
        1997 - Present  Vice President, General Counsel and Secretary
        1996 - 1997     Vice President - Administrative Services and General
                             Counsel and Secretary, Connecticut Natural Gas
                             Corporation
        1993 - 1996     Vice President - Corporate Services and General Counsel
                            and Secretary, Connecticut Natural Gas Corporation
    <PAGE>



   Executive Officers of the Registrant (Concluded)
   -----------------------------------------------


   Andrew H. Johnson                                        Age - 50
   Treasurer and Chief Accounting Officer
    
     Business experience:
        1997 - Present  Treasurer and Chief Accounting Officer
        1993 - 1997     Treasurer and Chief Accounting Officer, Connecticut
                             Natural Gas Corporation
        1986 - 1993     Treasurer, Connecticut Natural Gas Corporation
    
    
    <PAGE>



                                      PART II
    
    
    
   ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
   -------------------------------------------------------------
            SECURITY HOLDER MATTERS
            -----------------------
    
     The Company's common stock is listed on the New York Stock Exchange.  The
     high and low sales prices for each quarterly period during the years ended
     September 30, 1998 and 1997 were as presented in the table below.  These
     prices are based on the New York Stock Exchange NYSENet stock quotation
     service.
    
<TABLE>
<CAPTION>
                           QUARTERLY COMMON STOCK PRICES
                           -----------------------------
                                  1998                       1997
                          --------------------       --------------------

     <S>                   <C>          <C>           <C>          <C>
     Fiscal Year            High         Low           High         Low
     ---------------       ------       ------        ------       ------

     First Quarter         26 1/2       22 3/4        25 1/2       22 5/8
     Second Quarter        26 3/4       23 3/8        25 3/8       21 3/8

     Third Quarter         25 15/16     21 15/16      22 1/4       20 3/4
     Fourth Quarter        24 1/2       22 3/8        23 13/16     21 5/8
</TABLE>
    
     There were 7,384 record holders of the Company's common stock at November
     2, 1998
    
     Cash dividends are declared on the Company's common stock on a quarterly
     basis out of funds legally available therefor.  The total amount of
     dividends declared was $1.00 per share in 1998 and $1.52 per share in
     1997.  Funds utilized by the Company for the payment of dividends are
     typically received as dividends from its subsidiaries, CNG and TEN.  Under
     the most restrictive terms of the open-end indenture securing CNG's first
     mortgage bonds, as amended, retained earnings of $25,174,000 were
     available for CNG to pay dividends at September 30, 1998.  There are also
     certain restrictions relating to CNG's classes of preferred stock as to
     which dividends and sinking fund obligations must be paid prior to the
     payment of common stock dividends.
    
     Under a provision of a Forward Equity Purchase Agreement between CTG and
     TEN, dated October 1, 1997, the Company is restricted from declaring or
     paying any dividends or distributions to holders of its common stock if
     any amounts due and payable under this agreement are in arrears (See Note
     7 to the Financial Statements in Part II, Item 8).  There are no other
     restrictions on the Company's present or future ability to pay such
     dividends.  The Company expects that future cash for dividends will be
     available.<PAGE>



   ITEM 6. SELECTED FINANCIAL DATA
   --------------------------------
    
     FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS
     (Thousands of Dollars)
    
<TABLE>
   <S>                          <C>      <C>       <C>       <C>      <C>
                                 1998      1997     1996      1995      1994 
                                ------    ------   ------    ------    ------ 
   Operating revenues           $282,748 $305,295  $315,103  $274,935 $290,420 

   Net income applicable
     to common stock            $ 15,135 $ 17,013  $ 18,932  $ 16,957 $ 17,637 

   Earnings per share (1)       $   1.71 $   1.60  $   1.87  $   1.71 $   1.85 

   Total assets                 $459,181 $444,373  $443,574  $437,372 $437,622 

   Long-term obligations        $215,852 $126,787  $136,432  $150,390 $154,193 
    
   Cash dividends declared
     per common share           $   1.00 $   1.52  $   1.50  $   1.48 $   1.48 
   Dividend payout ratio            58.5%    95.0%     80.2%     86.6%    80.0%

   P/E ratio                          14       14        13        13       13 

   Market price as a %
     of book value -
     year-end                      170.2%   145.9%    152.9%    146.8%   162.0%
</TABLE>
    
   (Certain amounts for 1997 and prior years have been reclassified to conform
   with 1998 classifications.)
[FN]    
   (1)   Earnings per share for 1998 reflect the impact of the October, 1997  
   stock repurchase and the related assumption of additional debt (See Item 7.
   Management's Discussion and Analysis of Financial Condition and Results of
   Operations, and Item 8. Financial Statements and Supplementary Date, Notes
   to the Financial Statements, herein).<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998
       -----------------------------------------
       (Thousands of Dollars Except for Per Share Data)
    

       CTG Resources, Inc. ("the Company" or "CTG")is a holding company and
       parent of the Connecticut Natural Gas Corporation ("CNG") and The Energy
       Network, Inc. ("TEN").  CNG is an energy provider engaged in the
       regulated distribution, sale and transportation of natural gas.  TEN
       holds and operates, through divisions or wholly-owned subsidiaries,
       CTG's unregulated, diversified businesses which are primarily engaged in
       district heating and cooling ("DHC") and also include the Company's
       equity investments in two partnerships, one of which is the Iroquois Gas
       Transmission System ("Iroquois").
        
       In October 1997, TEN repurchased approximately 2.0 million shares of CTG
       common stock for approximately $53,000.  TEN financed the purchase with
       a combination of revolving bank debt and the issuance of Senior
       Subordinated Notes.  The shares repurchased by TEN were transferred by
       the depositary directly to CTG.  In connection with the repurchase, CTG
       reduced its quarterly dividend on common stock from $0.38 ($1.52
       annually) to $0.25 ($1.00 annually) per share, effective with the first
       quarter of fiscal 1998.  Higher fiscal 1998 earnings per share are
       primarily related to this common stock buy-back.  In the long-term, the
       lower dividend will enable CTG to retain more of its earnings to fund
       the future growth of the Company.  

         
       RESULTS OF OPERATIONS
       ---------------------
        
       Net income applicable to common stock and earnings per share for the
       fiscal years ended September 30, 1998, 1997 and 1996 were $15,135
       ($1.71), $17,013 ($1.60) and $18,932 ($1.87), respectively.  As a result
       of a first quarter fiscal 1998 stock repurchase, earnings per share have
       been impacted by both the benefit of lower weighted average shares
       outstanding and the cost of the debt which financed the transaction. 
       Together these factors provided net benefits to earnings per share of
       approximately $.11 for the twelve months ended September 1998 and have
       offset the lower earnings per share impact of a second consecutive
       warmer winter as compared to the prior year.

       Lower fiscal 1997 earnings are the result of the warmer weather
       experienced in the Company's natural gas service area during the winter
       heating season.  Earnings for 1996 include a nonrecurring item: the
       proceeds from the sale of a building by TEN, equivalent to $.05 per<PAGE>


       share.


       Gas Operating Margin

       Gas operating margin is equal to gas revenues less the cost of gas and
       Connecticut Gross Earnings Tax which is applied to revenues.  The <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       following table presents consolidated gas revenues, gas operating
       margin, heating degree days (a measure of weather) and gas deliveries
       for fiscal 1998, 1997 and 1996, respectively: 
        

<TABLE>
       <S>                                        <C>       <C>       <C>
                                                    1998      1997      1996   
                                                    ----      ----      ----   

       Gas Revenues                               $262,446  $283,324  $292,852 
                                                  ========  ========  ======== 
       Gas Operating Margin                       $109,241  $112,446  $116,104 
                                                  ========  ========  ======== 
       Heating Degree Days (30-Year Normal -
         6,107)                                      5,543     6,056     6,410 
                                                     =====     =====     ===== 
       Commodity and Transportation
         Volumes (mmcf)
           Firm Gas Sales                           20,577    22,354    23,911 
           Interruptible Gas Sales                   9,079     9,573     8,614 
           Off-System Gas Sales                     11,459    10,164    12,435 
           Transportation Services                   4,376     4,131     4,336 
                                                   -------   -------   ------- 
              Total                                 45,491    46,222    49,296 
                                                   =======   =======   ======= 
</TABLE>
       The Company's customers' greatest use of energy during the year is in
       the winter, mostly for the purpose of heating their homes or businesses.
       Changes in weather patterns from year to year impact the contribution to
       operating margin by the different customer classes, the proportionate
       amount of sales among the various customer classes and the different
       per-unit margin contributed by each customer class.  Firm sales
       contribute the highest per-unit operating margin of all customer
       classes.  Warmer winters historically mean lower firm sales and a higher
       proportion of overall sales to other classes.  
        
       During the fiscal 1998 heating season, the Company's service area has
       experienced warmer winter weather, as compared to the prior year, for
       the second consecutive fiscal year.  This warmer weather resulted in
       lower use per customer and reduced sales and operating margin,
       especially from the firm class of customers.  

       The Company's regulated gas business continues to add customers from
       year to year and to realize additional firm gas sales from customers who<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       add gas heating to their existing cooking and hot water service.  The
       full potential benefit to earnings from the addition of firm heating
       customers since fiscal 1996 has been more than offset by the effects of
       the warmer winter weather.
        
       When the Company's firm customers' need less gas in warmer winters, more
       of the Company's gas supplies are available for sale to interruptible
       customers.  Thus, in warmer winters, the Company's interruptible sales
       tend to be higher.  However, interruptible sales were lower in fiscal
       1998 because of lower usage in this even still warmer winter.  The
       Company did record higher interruptible sales in fiscal 1997. 
       Interruptible per-unit margins were higher in fiscal 1998 but lower in
       fiscal 1997 because of changes in the cost of gas associated with those
       sales.  A percentage of interruptible sales margin earned above a target
       level prescribed by the Connecticut Department of Public Utility Control
       ("DPUC") is refunded to firm ratepayers.

       Off-system sales permit the Company to make short-term gas sales and
       sales of transportation services by contract with customers nationwide. 
       These sales contribute the smallest per-unit operating margin.  The
       significance of the off-system sales program is that the Company acts as
       an independent marketer of natural gas and transportation, enabling the
       Company to generate operating margin from a source not restricted by the
       capacity of the Company's own distribution system or curtailment
       limitations driven by system demand.  A significant portion of margin
       earned on off-system sales is refunded to firm ratepayers, as directed
       by the DPUC.
         
       Off-system sales were higher in fiscal 1998, reflecting the Company's
       marketing efforts, the signing of favorably priced off-system sales
       contracts prior to the start of the heating season, and the availability
       of natural gas in the warmer winter.  Off-system sales were lower in
       fiscal 1997, as compared to 1996, because of the absence of production
       area sales that were made in prior years.
        
       Transportation services are sold under per-unit operating margins
       comparable to those earned on similar gas sales.  Therefore the Company
       is financially indifferent as to whether it transports gas or sells gas
       and transportation together.
        

       Weather Stabilization Program<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       In September 1998, CNG purchased an insurance program for the winter
       heating season (November through March).  The program is designed to
       reduce the effects of abnormal winter weather on its earnings.  This
       program will help to offset lost margins and thus provide CNG with
       additional earnings in the event of significantly abnormal warm winter
       weather in return for an insurance premium which increases in the event
       of significantly abnormal cold winter weather.  CNG management expects
       that this program will reduce significant winter weather-related
       earnings fluctuations.
        
        
       Operating and Maintenance Expenses
        
       Consolidated operations and maintenance ("O&M") expenses are lower in
       fiscal 1998 as compared to fiscal 1997.  A significant factor is the
       absence in fiscal 1998 of expenses related to TEN's HVAC operations. 
       Those assets were sold in the first quarter of 1998 (See "Earnings from
       Diversified Operations", below.).  The Company has also recorded many
       other variations in O&M expenses between all comparable periods which
       tend to offset each other.  Lower costs have been incurred for labor,
       employee benefits, regulatory expenses, outside purchased services,
       workers' compensation insurance and corporate insurance reserves. 
       Higher expenses have been recorded for pension related costs, bad debts
       and computer-related services.

       Medical insurance costs declined because of lower actual and projected
       claims realized as a result of the Company's aggressive management of
       claims.  Pension costs reflect a reduction in payments because of fewer
       claims, offset by higher costs related to changes in actuarial
       assumptions in the plans.  Employee benefits expenses reflect an
       increase in medical claims.  Offsetting some of this increase are
       reduced costs resulting from changes in benefit programs.

       In July 1998, the Company determined that the size of its Greenwich,
       Connecticut regulated gas operations could be reduced while still
       maintaining the level and quality of service.  Many of the activities
       previously handled in Greenwich have been integrated into the Hartford,
       Connecticut operations.  In conjunction with this decision, eleven
       positions have been eliminated from the Greenwich division.  The net
       fiscal 1998 savings from this realignment is approximately $10.  Future
       annual savings in payroll costs are estimated at approximately $292.

       Lower operating and maintenance expenses recorded in fiscal 1997 also<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       represent the net effect of variations in many different costs.  Lower
       costs were incurred for labor, reflecting the savings from early
       retirements and reduced overtime costs as a result of the warmer winter
       and fewer weather related expenses.  A reduction in pension costs
       reflects the absence of the expenses related to the early retirement
       program offered in fiscal 1996 and reduced costs because of those
       retirements.  Bad debt accruals are lower mainly because of the lower
       natural gas bills experienced as a result of the warmer winter heating
       season.  Costs related to workers compensation insurance were lower
       because of lower actual and projected claims (used to set the Company's
       premiums) as a result of the Company's aggressive monitoring of claims. 
       Lower costs were also recorded for outside purchased services.  Higher
       margins generated by service contract work also helped to offset
       increases in other expense categories.

       Year to year increases in depreciation result from annual additions to
       depreciable plant and reflect the Company's continued growth.
        
        
       Income Taxes
        
       Lower taxable income and the benefits of reductions to the Company's
       income tax reserves are the principal reasons for lower income taxes in
       fiscal 1998.  Other contributing factors include a lower State of
       Connecticut corporate income tax rate and the Connecticut Fixed Capital
       Asset Tax Credit.
        
       The on-going turn around of flow-through tax depreciation differences on
       older plant and the absence, in fiscal 1997, of cost of removal
       deductions related to prior periods that were recorded during fiscal
       1996, have resulted in an overall higher effective income tax rate in
       fiscal 1997.  Higher taxable income and an increase to the Company's
       income tax reserve also added to the increase in income taxes in fiscal
       1997.
        
        
       Other Income/(Deductions)
        
       Changes in the Company's equity in partnership earnings are discussed in
       "Earnings from Diversified Businesses." 
        
       Other income adds to earnings while other deductions reduce earnings. 
       The other income/(deductions) amount reported for fiscal 1998 includes<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       $1,012 of after-tax costs incurred by TEN related to the wind down of
       certain operations, as described below in the section "Earnings from
       Diversified Businesses."  Absent the impact of these costs, other income
       would have been higher in fiscal 1998.  This results from the net effect
       of lower income from investments of available cash being more than
       offset by the benefits of lower promotional and advertising expenses,
       lower life insurance premiums and the absence of fiscal 1997 costs
       associated with the termination of the Company's regulated propane
       service program.
        
       Other deductions were recorded in fiscal 1997 because of lower interest
       income from overnight cash investments, higher promotional and
       advertising expenses and higher premiums related to insurance.  These
       additional costs and reduced income were somewhat offset by the absence
       of the 1996 costs associated with converting the Company's regulated
       propane service program to natural gas.
        
       Nonrecurring income of $892 in fiscal 1996 relates to TEN's sale of land
       and a building in August 1996.  The net after tax gain was $515,
       equivalent to $.05 per share.
         
        
       Interest and Debt Expense
        
       Higher interest and debt expense has been recorded in fiscal 1998
       primarily because of the additional long-term debt issued during the
       first quarter in conjunction with the stock repurchase program. 
       Interest related to long-term debt declined in fiscal 1997 as the amount
       of principal outstanding was reduced by scheduled sinking fund payments
       and early repurchases of issues that were near maturity.
        
       Other interest relates primarily to interest on short-term borrowings
       and interest associated with pipeline refunds and deferred gas costs. 
       Short-term interest fluctuates as a result of changes in interest rates,
       short-term cash requirements and conversions to long-term debt. 
        
       In addition to seasonal working capital requirements, short-term
       borrowings in fiscal 1998 were used to temporarily finance a portion of
       the stock repurchase and the acquisition of a cogeneration facility (See
       "Investing Activities", below).
        
       Short-term borrowings were needed in both 1997 and 1996 to supplement
       the seasonal changes in available cash from operations.  In fiscal 1997,<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       because of the warmer winter, the Company did not need to borrow as much
       cash on a short-term basis to support working capital requirements.  The
       Company also recorded lower interest related to natural gas pipeline
       refunds and deferred gas costs.  Short-term borrowings in fiscal 1997
       and 1996 for the diversified businesses were minimal as they were able
       to meet their working capital needs from cash generated by day to day
       operations.
        

       Earnings from Diversified Businesses
        
       The Company's diversified businesses are all unregulated and include TEN
       and TEN's wholly-owned subsidiaries:  The Hartford Steam Company
       ("HSC"), ENI Gas Services,  TEN Gas Services,  ENServe Corporation
       ("ENServe"), and TEN Transmission Company ("TEN Transmission").  TEN and
       HSC provide DHC services to many buildings and complexes in the south-
       end and downtown neighborhoods of Hartford, Connecticut.  TEN also holds
       a fifty percent interest in the Downtown Cogeneration Associates
       partnership which owns and operates a 4.2-Megawatt cogeneration facility
       in downtown Hartford, Connecticut.  ENI Gas Services and TEN Gas
       Services together own 100% of KBC Energy Services ("KBC"), a small gas
       marketer which is in the process of winding down its operations.  TEN
       Transmission owns the Company's share of its investment in the Iroquois
       pipeline.  Although TEN Transmission is not regulated, Iroquois is
       regulated by the Federal Energy Regulatory Commission ("FERC").  Refer
       to Note 1 to the Financial Statements for additional information
       regarding these investments.
        
       Earnings contributed by the Company's diversified, unregulated
       businesses were $.08 per share in fiscal 1998, compared to earnings per
       share of $.25, and $.30 in 1997 and 1996.  Each fiscal year has been
       impacted by special items, each of which is discussed in detail below. 
       When the effects of these items are set aside, earnings from ongoing
       diversified operations are $.34 per share for fiscal 1998, $.32 for
       fiscal 1997 and $.25 for fiscal 1996.

       The fiscal 1998 benefit to earnings per share resulting from the lower
       weighted average shares outstanding is approximately $.01 for the twelve
       months ended September 30, 1998.  This is offset by the cost of the
       added debt issued to finance the repurchase, equivalent to $(.19) per
       share, for a net earnings impact from the stock repurchase of $(.18).
        
       Fiscal 1998 earnings from ongoing operations for TEN include the benefit<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       of lower energy and production costs for district heating and cooling,
       which have been realized as a result of lower energy prices, and higher
       chilled water sales for cooling because of the warmer summer weather. 
       These benefits were partially offset by the effects of lower steam and
       hot water sales during the warmer winter.
        
       Earnings from the diversified businesses in fiscal 1998 also reflect the
       measures that have been taken in the last few years to position this
       area of the Company for future growth and development.  Several
       significant factors impacting TEN's earnings have occurred in fiscal
       1998.  In the first quarter, the assets of TEN's wholly-owned HVAC
       subsidiary, ENServe, were sold.  The subsequent winding down of this
       operation is complete.  TEN's fiscal 1998 earnings have benefited $.07
       per share from the absence of losses that had been recorded by ENServe
       in fiscal 1997.  During the second quarter of fiscal 1998, TEN assumed
       the full ownership of KBC and began the wind down of its operations. 
       The Company's share of KBC's operating losses for fiscal 1998 was
       approximately $(.11).  Management does not anticipate any significant
       future impact to earnings related to the closing of these businesses. 
       In fiscal 1996, the property management business sold its land and
       building, realizing a gain of $.05 per share, and ceased operations.

       The wind down of KBC and the sale of the assets of ENServe will enable
       the Company to focus its investments on operating assets in capital
       intensive businesses in keeping with its strategic plan.  As a part of
       this plan, in June 1998 the diversified operations purchased a
       cogeneration facility which supplies a major local hospital with steam
       and electricity and sells electricity to the local electric utility. 
       (See "Investing Activities," below.)

       The reduction in TEN's earnings in fiscal 1997, as compared to 1996, is
       primarily the result of losses incurred by ENServe.  Earnings from
       ongoing operations partially offset these losses.  During fiscal 1997,
       the DHC business implemented cost-containment measures and upgraded
       and/or modified the equipment which produces steam for heating, reducing
       the cost of company-produced steam from 1996 levels.  Lower interest
       expense was incurred throughout fiscal 1997 because ongoing cash from
       operations eliminated the need for short-term borrowings for working
       capital.  DHC earnings in fiscal 1997 were also impacted by changes in
       weather:  Warmer winter weather and cooler summer weather resulted in
       lower sales volumes for both heating and cooling.   
        
       TEN continues to record higher earnings from its equity interest in two<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       partnerships.  The majority of these earnings are from Iroquois.  In
       August 1998 Iroquois' rates allowed by the FERC were reduced.  Thus the
       Company anticipates that these earnings may be somewhat lower in fiscal
       1999.

       New legislation, restructuring the electric utility industry, passed in
       Connecticut in April, 1998, is expected to result in reduced costs for
       electricity for TEN in the future.  Purchased power agreements currently
       in effect between TEN and the local electric utility will not be
       affected by this legislation.


       Year 2000 Compliance
        
       CTG's State of Readiness

       CTG has been preparing for Year 2000 ("Y2k") issues for a number of
       years. In 1989, CTG started the implementation of a Long-Range
       Information Systems Plan that addressed the replacement or redevelopment
       of all key CTG applications. All systems replaced or redeveloped since
       1989 have been required to be Y2k compliant.  In January 1998, a task
       force was organized to address all Y2k issues throughout CTG operations. 
       The task force, headed up by a Y2k compliance officer, is comprised of
       individuals from every business unit within CTG and charged with
       assembling an inventory of date-impacted systems, identifying critical
       vendors and customers for compliance, prioritizing non-compliant
       systems, identifying critical dates for compliance, developing test
       plans for all high priority systems, developing remediation plans for
       noncompliant vendors or systems, and certifying that all systems and
       critical vendors are compliant.  A subcommittee was also formed to
       communicate with the Board of Directors, customers, stockholders,  the
       DPUC, vendors and employees of CTG regarding the status of CTG's
       activities.  All of the above-noted activities of the task force, with
       the exception of the certification phase, are scheduled for completion
       during December 1998.  The certification of systems and critical vendors
       will be completed during the first six months of 1999.

       During December 1998 and the first half of 1999, all internal
       application programs and embedded technology will be tested.  Test plans
       have been developed for each system. The purpose of these tests will be
       to verify that the date-sensitive features of these systems will perform
       properly in the year 2000.  CTG has four systems that are not compliant
       at this time:  Payroll/HR, Computer Aided Gas Dispatch, and TEN's<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       financial system. Through the normal replacement schedule, these systems
       will be brought into compliance by mid 1999.

       In April 1998, a letter and survey were sent to CTG's vendors requesting
       a status of their Y2k efforts.  In September 1998, a second letter and
       survey were sent to vendors who did not respond.  For all critical
       vendors who are not Y2k compliant by the critical dates identified, CTG
       will make arrangements for alternate suppliers and service providers. 
       This process will take place throughout the remaining months of 1998 and
       the first six months of 1999.  Parts and materials purchased from non-
       compliant vendors which are critical to CTG's operations, will be
       acquired in adequate quantities and inventoried prior to the end of
       1999.

       Although not all vendors have returned surveys, no third parties with
       whom CTG has significant business relationships have disclosed problems
       which would indicate the potential for business interruptions. <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       Costs to Address CTG's Year 2000 Issues

       CTG has not incurred significant incremental costs, nor does it expect
       to incur significant outside consulting costs relating to the Y2k issue.
       In accordance with the aforementioned Long-Range Systems Plan, CTG has
       been replacing or redeveloping its major computer applications during
       the past decade and the timetable called for by this plan was not
       accelerated as a result of the advent of the Y2k issue.


       Risks of CTG's Year 2000 Issues

       Although the Company has not received responses from all of its vendors,
       CTG has not identified any known Y2k-related event, trend, demand,
       commitment, or uncertainty which would likely have a material effect on
       CTG's business, results of operations, liquidity, capital resources or
       financial condition.  CTG has canvassed its critical vendors and no such
       vendor has indicated it will not be Y2k compliant.  CTG has assigned
       critical dates throughout 1999 for these vendors to show compliance.  If
       a vendor does not show compliance by a specific date, CTG will either
       find a replacement vendor or develop a work-around for such
       noncompliance.

       CTG's Contingency Plans

       CTG's contingency plan includes selecting alternate vendors that are Y2k
       compliant, using back-up systems which do not rely on computers, and
       obtaining critical parts and materials. Critical dates for compliance
       have been established for systems and vendors utilized throughout CTG.
       These critical dates have been established in order to allow sufficient
       time for CTG to either remediate any date-sensitive features in existing
       computer software and applications critical to CTG's business or to
       acquire services and products from alternate providers who are Y2k
       compliant. 
        
        

       LIQUIDITY AND CAPITAL RESOURCES
       -------------------------------
        
       Natural gas sales in New England are seasonal, and the Company's cash
       flows vary accordingly because regulated natural gas operations are the
       principal segment of the Company's business.  The Company manages its<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       changes in cash requirements, primarily to fund gas purchases,
       construction expenditures and customer accounts receivable, by using
       cash flows generated from operations supplemented by short-term
       financing from lines of credit.
        
       The diversified operations' cash resources and requirements are also
       seasonal.  Cash requirements have generally been satisfied with cash
       flows from operations together with short-term financing from lines of
       credit.
        
       Long-term debt issued in fiscal 1998 was used to finance a stock
       repurchase and to refinance existing long-term and short-term debt.
        
          
       Cash Flows from Operating Activities
        
       The levels of construction expenditures, dividends, the cost of gas and
       volumes of gas sold are the principal factors which influence cash flows
       from operations from year to year.  The price of natural gas impacts the
       amount of purchased gas costs subject to refund or recovery through the
       Purchased Gas Adjustment provisions ("PGA") of the Company's tariffs. 
       The volumes of gas sold magnify the impact of changing prices.
        
       In fiscal 1998, the Company relied on cash from operations and its
       available lines of credit to satisfy cash requirements for working
       capital, dividends, asset acquisitions and construction expenditures. 
       Cash from operations is lower from year to year, following the trend of
       warmer winter weather and the resulting reduction in operating margin.
        
       During fiscal 1997, a combination of the cash on hand at year-end 1996,
       short-term borrowings and cash received from ongoing operations paid for
       the expenses related to ongoing operations and for construction,
       dividends and principal payments that were due on long-term debt.
        
        
       Investing Activities
        
       Construction expenditures in 1998, 1997 and 1996 were $26,060, $24,593
       and $24,281 respectively.  Capital spending for the fiscal year ending
       September 30, 1999 is estimated to be $26,100 for the regulated
       operations.  The diversified businesses are projecting to expend $14,000
       in fiscal 1999 primarily to fund the expansion of the DHC system.  CTG's
       construction program is subject to continuous review and modification,<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       and actual expenditures may vary from these estimates.  The Company
       plans to fund capital expenditures and other commitments through a
       combination of sources.
        
       Ten continues to investigate other DHC systems and other investment
       opportunities which are alligned with its overall capital asset
       investment strategy.  Additional borrowings and/or funds may be required
       to realize such transations.  The Company has been working with its
       banks and other sources in order to be prepared if such an opportunity
       arises.
        
       In June 1998, TEN acquired the assets of a 16-Megawatt capacity
       cogeneration facility which supplies Hartford Hospital with steam and
       electricity.  The purchase price of approximately $16,969 was financed
       through existing lines of credit.  The assets acquired in the
       transaction include $1,588 of current assets, $1,744 of plant and
       equipment and a note receivable of $13,637 of which $4,889 is current
       and classified in accounts and notes receivable in the consolidated
       balance sheet.  The note receivable relates to an existing termination
       agreement with the local electric utility which is now assigned to HSC. 
       Pursuant to this agreement, the utility will make payments to HSC
       through December 2000.

       HSC will now supply the hospital with steam and electricity over a
       twenty-year contract period.  The facility is currently off-line for
       repowering as a 7.5-Megawatt facility and is scheduled to be back on
       line by January 1999 under HSC's management.  Thus, revenues are
       expected to be realized from this facility beginning in the second
       quarter of fiscal 1999.  This investment is directly linked with the
       diversified operations' growth strategy of focusing on the ownership and
       operation of energy facility assets.  
        
       In May 1997, the Company invested $100 for a 2.15% interest in the AGA
       Gas Finance Company ("GasFinCo").  In July 1998, GasFinCo ceased
       operations and the Company wrote off its investment.
        
       In June 1997, the Company and Koch Gas Services Company acquired the
       partnership interest of Bay State Energy Enterprises in KBC.  As a
       result of this transaction the Company's interest in KBC had increased
       from one third to one half.  During the second quarter of fiscal 1998,
       two of TEN's subsidiaries together assumed the full ownership and
       control of KBC and began the sale of its assets and the wind down of its
       operations.<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

        
       Cash flows from investing activities in fiscal 1996 include the proceeds
       from the diversified businesses' sale of a building and land and the
       receipt of the balance of the settlement amount due from the termination
       of a steam supply contract.


       Adriaen's Landing
        
       The Company has been approached by local businesses and government
       agencies regarding the development of a stadium and convention center
       along with hotel, retail, recreational and housing facilities.  The
       development, known as Adriaen's Landing, would be built in the area of
       the Company's headquarters, operating center and steam/chilled water
       production facilities.  The Company, in order to accommodate the
       development as it is currently planned, would be required to relocate
       its facilities.  Discussions are now underway with the participants in
       order to accomplish this at no cost to the Company or its customers. 
       The area of development, which includes Company property, may contain
       hazardous materials that the project participants will be required to
       address.  This project is in line with the Company's vision and
       direction for growth.
          
        <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       Financing Activities

       The Company uses short-term debt to finance working capital
       requirements.  Capital expenditures are also temporarily funded with
       short-term debt.  The Company raises short-term funds through the use of
       available bank lines of credit and revolving credit agreements (See Note
       9 to the Financial Statements).  Long-term debt and equity issues are
       used to reduce outstanding short-term debt and to permanently finance
       completed construction.  In October 1998 the Company refinanced $30,800
       of short-term borrowings with long-term debt (see "Subsequent Events",
       below).
        
       The Company's 9.16%, Series AA First Mortgage Bonds are subject to
       redemption by sinking fund scheduled at $2,500 per year.  The Company
       exercised its option to increase the principal payment amount due on
       October 1, 1998, by an additional $2,500, for a total of $5,000.  This
       increased the Company's current portion of long-term debt by $2,500 at
       September 30, 1998.
        
       In August 1998, the Company refinanced its outstanding $10,600 1986 and
       1988 series of tax exempt, seven-day put, Industrial Revenue Variable
       Rate Demand Bonds ("IRBs") issued by the Connecticut Development
       Authority.  The 1998 series of IRBs mature in 2025 and have no sinking
       fund requirements.  The original IRBs financed TEN's Capitol Area
       district heating and cooling facilities in Hartford, Connecticut.  At
       the same time, the Company replaced the letter of credit which supports
       these IRBs.  The IRBs have been assigned the rating of A+/A-1 by
       Standard & Poor's.
        
       In October 1997, TEN issued Senior Secured Notes for $45,000, due in
       2009, at 6.99%.  The principal will be retired through semi-annual
       payments of $2,500 beginning in 2001.  The proceeds were used to
       repurchase approximately 2.0 million shares of CTG common stock.
        
       In October 1997, the Company issued a total of $19,000 of Medium Term
       Notes ("MTNs") due 2007.  These MTNs are unsecured and have no call
       provisions or sinking fund requirements.  The proceeds were used to
       refinance existing short-term debt.  The face values and interest rates
       of these MTNs are:

                            Face Value              Interest Rate
                            ----------              -------------
                                $ 1,000                  6.62%   <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

                                $ 1,000                  6.65%   
                                $17,000                  6.69%   
                            
       The MTNs are rated at A3 by Moody's and A- by Standard and Poor's. 

       In March 1998, the Company renewed its $20,000 revolving credit
       agreement to 2001 with two subsequent one-year renewal options. 
        <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       In February 1998, the Company replaced its expiring $9,000 bank line of
       credit with a seasonally adjusted $10,000 to $15,000 line of credit
       through February of 1999.
        
       In October 1997, TEN entered into a 364-day secured revolving credit
       agreement for $10,000 with a bank.  This agreement matured on September
       29, 1998 and was extended for sixty days at that time.  The Company
       expects to renew this agreement for one year beginning December 1998.
        
       In October 1997, TEN entered into a three-year revolving credit
       agreement for $10,000 with a bank.  The maximum borrowing amount is
       reduced by $500 on each fiscal quarter, beginning January 1, 1998.
        
       In August 1997, the Company repurchased $10,000 of existing 8.8% long-
       term mortgage debt, due in 2001, with available working capital.
        
        
       Common Stock and Dividend Matters
        
       On October 30, 1997, through a tender offer made by TEN, the Company
       repurchased approximately 2.0 million shares of CTG common stock for
       approximately $53,000.  TEN financed the purchase with a combination of
       revolving bank debt and the issuance of Senior Secured Notes.  The
       shares repurchased by TEN were transferred by the depositary directly to
       CTG.  In connection with the repurchase, effective with the first
       quarter of fiscal 1998, CTG reduced its quarterly dividend on common
       stock from $0.38 ($1.52 annually) to $0.25 ($1.00 annually) per share. 
       The lower shares outstanding help to increase overall earnings per
       share.  In the long-term, the lower dividend will enable CTG to retain
       more of its earnings to fund the future growth of the Company. 

       During fiscal 1997, 29,145 original issue shares of the Company's no par
       common stock were issued through various Company-sponsored plans. 
        
       Under the most restrictive terms of the indenture securing the Company's
       First Mortgage Bonds, retained earnings of $25,174 are available for CNG
       to pay dividends at September 30, 1998.  CTG's ability to pay dividends
       is not restricted by these terms.  Dividends paid on common and
       preferred stock in fiscal 1998 were $8,657.  The preferred stock on the
       balance sheet is issued by CNG.  CNG is prohibited from, among other
       things, paying dividends on common stock and purchasing, redeeming or
       retiring common stock, if dividends on preferred stock are in arrears.
        <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

        
       Forward Equity Purchase Agreement 
        
       In a Forward Equity Purchase Agreement dated October 1, 1997, and
       amended October 14, 1998, CTG has committed to fund from $7,500 to
       $16,100 per year into TEN from 1998 through 2009 for an aggregate
       additional cash infusion into TEN of $122,600.  In exchange, TEN caused
       all shares of CTG common stock purchased through the October 1997 tender
       offer to be transferred directly to CTG by the depositary.  As a
       provision of this agreement, CTG is restricted from declaring or paying
       any dividends or distributions to its holders of common stock if any
       amounts due and payable under this agreement are in arrears.
        

       Deferred Income Taxes
        
       In fiscal 1998, the Company performed a detailed study of Statement of
       Financial Accounting Standards No. 109, "Accounting for Income Taxes"
       ("SFAS No. 109") concerning deferred income tax liabilities.  As a
       result of the study, the Company identified that cost of removal costs
       were not being normalized in its deferred tax calculation.  Effective
       March 31, 1998, the Company normalized cost of removal costs in its
       calculation of deferred taxes.  The normalization of the cost of removal
       costs for deferred tax requirements reduced the amounts of unrecovered
       future taxes from rate payers and unfunded deferred income taxes on the
       balance sheet.  These amounts are reflected on the September 30, 1998
       balance sheet and have been reclassified for prior periods to conform
       with the current period presentation.
        
       The treatment of cost of removal costs as a normalized item is in
       accordance with SFAS No. 109.  Although current rates and tax expenses
       have been set utilizing flow-through treatment for these costs, the
       Company anticipates that, in future rate proceedings, the application of
       this method will reduce future income tax expense and corresponding rate
       payer revenue requirements.
        
         
       Other Tax Matters
        
       The Company is subject to audit by State of Connecticut and Federal
       authorities as it relates to income, sales, use and property tax returns
       filed.  In addition, the Company has several ongoing issues related to
       the taxability of off-system gas sales by state taxing authorities.  In<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       the opinion of management, the ultimate resolution of these issues will
       not have a material impact on the Company's results of operations.
        
         
       Competitive Environment

       In recent years, the natural gas industry has undergone structural
       changes in response to Federal regulatory policy intended to increase
       competition.  In 1992, the FERC issued Order 636, which required all
       interstate gas pipelines to provide "unbundled," or separate, gas
       transportation and storage services and to discontinue their bundled
       merchant sales operations, which included the gas acquisition function. 
       The impact of the FERC Order 636 and the resulting deregulation of the
       gas industry has continued to heighten competition and has changed the
       nature of the Company's business.

       The Company has historically distributed and sold natural gas to
       customers  within its franchise area without substantial competition
       from other providers of natural gas.  At the local level, as a result of
       FERC Order 636 and Connecticut deregulation, the Company faces
       increasing competitive pressures as providers of gas seek to make sales
       to the Company's commercial and industrial customers.  Similarly, the
       Company has offered firm transportation rate tariffs to nonresidential
       customers, since April of 1996.  The Company's transportation tariffs
       are designed to recover a margin on each transaction that is comparable
       to the margin that the Company would have received if it were making a
       system sale of natural gas.

       The Company also competes with suppliers of oil, electricity and propane
       for cooking, heating, air conditioning and other purposes.  Competition
       is greatest for the Company's large commercial and industrial customers
       who have the capability of using alternative fuels.  The volatile effect
       of this price-sensitive load is somewhat overcome through the use of
       flexible rate schedules which allow gas pricing to meet alternative-fuel
       competition.
        
       The diversified businesses own and operate district heating and cooling
       systems, collectively referred to as DHC, which distribute and sell
       steam, hot and chilled water to office complexes and other large
       buildings in the city of Hartford.  The risk of competition to the DHC
       business from alternate energy types is diminished after a customer has
       made its commitment to DHC, because of the cost of the equipment
       necessary to utilize an alternative energy source.  New legislation,<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       restructuring the electric utility industry, passed in Connecticut in
       April, 1998, and may result in an increase DHC's competition for
       customers if this alternative energy source becomes more affordable.
        
        
       Effects of Regulation
        
       The Company's natural gas distribution business is subject to cost-of-
       service regulation by the DPUC.  Based on current regulation and recent
       DPUC decisions, the Company believes that its use of regulatory
       accounting is appropriate and in accordance with the provisions of
       Statement of Financial Accounting Standards ("SFAS No. 71") (See Note 1
       to the Financial Statements).
        
        
       Regulatory Proceedings
        
       In a second phase of a regulatory review of natural gas deregulation
       which began in 1996, the DPUC is addressing the potential deregulation
       of the residential natural gas sales market in Connecticut and the
       future role of Connecticut's local gas distribution companies in natural
       gas commodity sales.  Concurrently, the Connecticut State Legislature
       has undertaken a task force investigation related to residential
       deregulation.  Although the Company cannot predict the outcome of these
       proceedings, the Company anticipates that the timing of any DPUC <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       decision will be related to the timing of the completion and
       announcement of the results of the Connecticut State Legislature's
       activities.

       Connecticut local gas distribution companies ("LDCs") pass on to firm
       customers any increases or decreases in gas costs from those reflected
       in tariff charges under PGA provisions.  During fiscal 1996, the DPUC
       initiated
       a review of the need to continue or modify PGA accounting for all
       Connecticut LDCs.  The review was prompted by the offering of unbundled
       services by LDCs that began in fiscal 1996.  In April 1997, the DPUC
       issued a decision affirming the need to continue the PGA.
        
        
       Environmental Matters
        
       In the ordinary course of business, the Company may incur costs to clean
       up environmental contaminants related to natural gas activity.  In those
       instances the Company expects that the remediation costs will be
       recoverable in rates.  In August 1998, the Company received a notice of
       violation from the Connecticut Department of Environmental Protection
       ("DEP") regarding a number of areas on noncompliance.  The Company
       submitted the required compliance report in September 1998.  The DEP has
       advised the Company that a Consent Order and a penalty or supplemental
       environmental project ("SEP") will be required to address the areas of
       noncompliance, but the DEP has not given the Company any indication of
       the amount of any penalty and/or SEP that may be required.  The Company
       is working with the DEP to resolve this issue.  In the opinion of
       management, any existing environmental issues will not be significant to
       the future financial condition or results of operations of the Company.
        
        
       Legal Proceedings

       In November 1995, certain Connecticut plumbers and HVAC contractors
       filed a class action suit against the CNG and the State's two other
       LDCs, claiming that the LDCs engaged in unfair trade practices relating
       to customer service work.  The plumbers and contractors are currently
       asserting claims for profits which they allege were lost during prior
       years.  In January 1998, the court granted CNG's motion to strike all
       but one count of the complaint:  the antitrust conspiracy claim.  The
       plumbers and contractors subsequently filed two additional lawsuits
       against CNG and the other LDCs alleging violations arising from the same<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       business activities as in the first lawsuit.  All of the cases were
       assigned to the State's complex litigation docket.  There has not been
       any settlement demand or any formal statement of alleged damages.  As a
       result, management cannot estimate the Company's potential exposure
       related to these claims.  The Company is vigorously defending this
       matter.
        
       In July 1997, the Company filed suit in State court against another
       Connecticut LDC seeking to enjoin that company from serving retail
       customers in a town in which the Company currently serves customers.  In
       its decision issued in October 1998, the court upheld the Company's
       franchise rights in the disputed area.
        
       The Company is not a party to any other litigation other than ordinary
       routine litigation incident to the operations of the Company or its
       subsidiaries.  In the opinion of management, the resolution of such
       litigation will not have a material adverse effect on the Company's
       financial condition or results of operations.
          
        

       SUBSEQUENT EVENTS 
        

       Long-term Debt 
        
       In October 1998, TEN issued $15,000 of Senior Secured Notes, due in
       2010, at 6.9%.  The full amount of the principal is due at maturity. 
       The proceeds were used to repay short-term debt that was used to finance
       the purchase and  repowering of the Hartford Hospital cogeneration
       facility (See "Investing Activities", above).  The September 30, 1998,
       financial statements reflect the classification of the debt that was
       retired as a result of this refinancing as long-term debt.
        
       In October 1998, the Company issued a total of $20,000 of MTNs at 6.04%,
       due 2008.  These MTNs are unsecured and have no call provisions or
       sinking fund requirements.  The proceeds were used primarily to
       refinance $15,800 of short-term debt that was outstanding at fiscal
       year-end 1998.  The long-term debt amounts shown on the balance sheet
       and statement of capitalization at September 30, 1998, include $15,800
       of these MTNs.<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       The Energy Network Alliance
        
       In October 1998, TEN entered into a marketing alliance with Pratt &
       Whitney Canada, Inc., Carrier Corporation and Oxford Technologies, Inc.
       to provide energy for heating, cooling and electricity to large
       commercial, industrial and institutional facilities by combining
       cogeneration and district energy.  As its role in this alliance, TEN
       will own and operate the individual customers' on-site district energy
       plants which will be equipped with state-of-the-art energy systems
       provided by the other members of the alliance.  TEN's participation in
       this alliance is in keeping with TEN's strategic plan to focus its
       investments in fixed assets in capital intensive businesses.
        
        <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       NEW ACCOUNTING STANDARDS
        
       In June 1997, the Financial Accounting Standards Board ("FASB") issued
       Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
       Comprehensive Income" ("SFAS No. 130").  This statement establishes
       standards for reporting and display of comprehensive income and its
       components in the financial statements.  Adoption of SFAS No. 130
       disclosure is required in fiscal 1999 and will have no impact on the
       Company's financial condition or results of operations.
        
       In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
       of an Enterprise and Related Information" ("SFAS No. 131") This
       statement requires that public business enterprises report certain
       additional information about operating segments.  Adoption of SFAS No.
       131 is required in fiscal 1999.  The adoption of SFAS No. 131 will have
       no impact on the Company's financial condition or results of operations.
        
       In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
       about Pensions and Other Postretirement Benefits" ("SFAS No. 132"). 
       This statement standardizes employers' disclosures requirements about
       pension and other postretirement benefit plans.  Adoption of SFAS No.
       132 is required in fiscal 1999.  The adoption of SFAS No. 132 will have
       no impact on the Company's financial condition or results of operations.
        
       In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
       Instruments and Hedging Activities" ("SFAS No. 133"). This statement
       establishes accounting and reporting standards for derivative
       instruments and for hedging activities.  Adoption of SFAS No. 133 is
       required beginning with the first quarter of fiscal 2000.  The Company
       is aware of certain provisions which may impact the natural gas industry
       but has not yet reviewed these provisions in detail against its existing
       accounting practices and disclosures.  At this time the Company cannot
       predict what impact, if any, the adoption of SFAS No. 133 will have on
       its financial condition or results of operations.
        

        
       INFLATION AND CHANGING PRICES
        
       Inflation impacts the prices the Company must pay for operating and
       maintenance expenses and construction costs.  The Company's rate
       schedules for natural gas and DHC sales include provisions that permit
       changes in gas costs and service costs, respectively, to be passed on to<PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (continued)
       ----------------------------------------------------

       customers.  The Company attempts to minimize the effects of inflation on
       other costs through cost control, productivity improvements and
       regulatory actions where appropriate.
        
        
        <PAGE>


   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   ------------------------------------------------------------------------
       RESULTS OF OPERATIONS, SEPTEMBER 30, 1998 (concluded)
       ----------------------------------------------------

       FORWARD LOOKING INFORMATION
        
       This report and other Company reports, including filings with the
       Securities and Exchange Commission, press releases and oral statements,
       contain forward looking statements.  Such statements include but are not
       limited to disclosures about Year 2000 Compliance, Adriaen's Landing,
       the Weather Stabilization Program, changes in operating and maintenance
       expenses, impacts to earnings from the wind down of certain diversified
       operations, earnings from equity interests in partnerships, the
       restructuring of the electric industry, future construction
       expenditures, diversified operations growth strategy, anticipated
       earnings from a newly acquired cogeneration facility, a Forward Equity
       Purchase Agreement, state and Federal tax audits, the Company's
       competitive environment, regulatory proceedings regarding further state
       deregulation of the natural gas industry, environmental matters, legal
       proceedings, the Energy Network Alliance, and New Accounting Standards.
        
       Forward looking statements are made based upon management's expectations
       and beliefs concerning future developments and their potential effect
       upon the Company.  The Company cautions that, while it believes such
       statements to be reasonable and makes them in good faith, they almost
       always vary from actual results, and the differences between assumed
       facts or basis and actual results can be material, depending upon the
       circumstances.  Investors should be aware of important factors that
       could have a material impact on future results.  These factors include,
       but are not limited to, weather, the regulatory environment, legislative
       and judicial developments which affect the Company or significant groups
       of its customers, economic conditions in the Company's service
       territory, fluctuations in energy-related commodity prices, customer
       conservation efforts, financial market conditions, interest rate
       fluctuations, customers' preferences, unforeseen competition, and other
       uncertainties, all of which are difficult to predict and beyond the
       control of the Company. <PAGE>

























                          This Page Intentionally Left Blank<PAGE>


       ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
       ----------------------------------------------------
        
       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
       ----------------------------------------
        
        
   To the Stockholders and The Board of Directors
     of CTG Resources, Inc.:
    
    
       We have audited the accompanying consolidated balance sheets and
   consolidated statements of capitalization of CTG Resources, Inc. (a
   Connecticut Corporation) and subsidiaries as of September 30, 1998 and
   1997, and the related consolidated statements of income, common stock
   equity and cash flows for each of the three years in the period ended
   September 30, 1998.  These financial statements and the schedule referred
   to below are the responsibility of the Company's management.  Our
   responsibility is to express an opinion on these financial statements 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 consolidated financial statements referred to above
   present fairly, in all material respects, the financial position of CTG
   Resources, Inc. and subsidiaries as of September 30, 1998 and 1997, and the
   results of their operations and their cash flows for each of the three
   years in the period ended September 30, 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 schedule listed in the schedule
   index is presented for purposes of complying with the Securities and
   Exchange Commission's rules and is not part of the basic financial
   statements.  This schedule has been subjected to the auditing procedures
   applied in the audits of the basic financial statements and, in our
   opinion, fairly states in all material respects the financial data required
   to be set forth therein in relation to the basic financial statements taken
   as a whole.


    

                                                    S/ Arthur Andersen LLP     
                                                -------------------------------
                                                      (ARTHUR ANDERSEN LLP)    
                                                                               
   Hartford, Connecticut
   October 27, 1998
                                       <PAGE>

























                                This Page Intentionally Left Blank <PAGE>
<TABLE>
<CAPTION>
                                      Consolidated Balance Sheets
                                      September 30, 1998 and 1997
                                        (Thousands of Dollars)
                                                    

    
    
   <S>                                                    <C>           <C>
                          Assets                             1998          1997   
                                                             ----          ----   
   Plant and Equipment:
      Plant in service                                    $ 510,542     $ 484,250 
      Construction work in progress                           3,647         7,703 
                                                          ---------     --------- 
                                                            514,189       491,953 
      Less-Allowance for depreciation                       176,173       160,313 
                                                          ---------     --------- 
                                                            338,016       331,640 
                                                          ---------     --------- 
   Investments, at equity                                    11,821        11,530 
                                                          ---------     --------- 
   Current Assets:
      Cash and cash equivalents                               1,264         4,458 
      Accounts and notes receivable (less
        allowance for doubtful accounts of
        $3,283 in 1998 and $3,439 in 1997)                   31,513        25,287 
      Accrued utility revenue                                 3,789         4,624 
      Inventories                                            17,852        17,584 
      Prepaid expenses                                       11,707         8,903 
                                                          ---------     --------- 
           Total Current Assets                              66,125        60,856 
                                                          ---------     --------- 
   Other Assets:
      Unrecovered future taxes                               10,734        17,263 
      Other assets                                           32,485        23,084 
                                                          ---------     --------- 
           Total Other Assets                                43,219        40,347 
                                                          ---------     --------- 
                                                          $ 459,181     $ 444,373 
                                                          =========     ========= 
</TABLE>

    
    
 The accompanying notes are an integral part of these consolidated financial
 statements.
    <PAGE>
<TABLE>
<CAPTION>
                                Consolidated Balance Sheets (Concluded)
                                      September 30, 1998 and 1997
                                        (Thousands of Dollars) 
                                                    

    

   <S>                                                    <C>           <C>
              Capitalization and Liabilities                 1998          1997   
                                                             ----          ----   
   Capitalization (see accompanying statements):
      Common stock equity                                 $ 123,397     $ 169,299 
      Preferred stock, not subject to
         mandatory redemption                                   879           884 
      Long-term debt                                        215,852       126,787 
                                                          ---------     --------- 
                                                            340,128       296,970 
                                                          ---------     --------- 
   Current Liabilities:
      Current portion of long-term debt                       5,733         1,487 
      Notes payable                                           2,000        27,500 
      Accounts payable and accrued expenses                  30,813        36,968 
      Refundable purchased gas costs                          1,640         4,714 
      Accrued taxes                                             707           484 
      Accrued interest                                        4,317         4,047 
                                                          ---------     --------- 
           Total Current Liabilities                         45,210        75,200 
                                                          ---------     --------- 
   Deferred Credits:
      Deferred income taxes                                  50,175        44,302 
      Unfunded deferred income taxes                         10,734        17,263 
      Investment tax credits                                  2,761         2,982 
      Refundable taxes                                        4,252         3,491 
      Other                                                   5,921         4,165 
                                                          ---------     --------- 
           Total Deferred Credits                            73,843        72,203 
                                                          ---------     --------- 
   Commitments and Contingencies                                    
                                                          ---------     --------- 
                                                          $ 459,181     $ 444,373 
                                                          =========     ========= 
</TABLE>

    
   The accompanying notes are an integral part of these consolidated financial
   statements.
    <PAGE>
<TABLE>
<CAPTION>
                                   Consolidated Statements of Income
                         For the Years Ended September 30, 1998, 1997 and 1996
                           (Thousands of Dollars Except for Per Share Data)
    
   <S>                                             <C>           <C>           <C>
                                                      1998          1997          1996   
                                                      ----          ----          ----   

   Operating Revenues                              $ 282,748     $ 305,295     $ 315,103 
   Less:  Cost of energy                             150,685       166,785       175,175 
          State gross revenues tax                     9,660        11,107        11,710 
                                                   ---------     ---------     --------- 
   Operating Margin                                  122,403       127,403       128,218 
                                                   ---------     ---------     --------- 
   Operating Expenses:
      Operations                                      45,623        48,241        49,640 
      Maintenance                                      8,361         8,682         8,615 
      Depreciation and amortization                   19,305        18,184        17,765 
      Income taxes                                    12,210        16,959        14,364 
      Local property taxes                             5,216         5,323         5,277 
      Other taxes                                      2,233         2,400         2,313 
                                                   ---------     ---------     --------- 
                                                      92,948        99,789        97,974 
                                                   ---------     ---------     --------- 
   Operating Income                                   29,455        27,614        30,244 
                                                   ---------     ---------     --------- 
   Other Income/(Deductions),
      net of income taxes:
      Allowance for equity funds used
        during construction                               61           125           144 
      Equity in partnership earnings                   3,271         2,910         2,037 
      Other income/(deductions)                         (811)          (68)          508 
      Nonrecurring items                                   -             -           892 
      Income taxes                                      (856)         (665)       (1,115)
                                                   ---------     ---------     --------- 
                                                       1,665         2,302         2,466 
                                                   ---------     ---------     --------- 
   Income Before Interest Charges                     31,120        29,916        32,710 
                                                   ---------     ---------     --------- 

   Interest and Debt Expense, net:
      Interest on long-term debt                      14,029        11,345        11,825 
      Other interest                                   1,463         1,200         1,585 
      Allowance for borrowed funds used
        during construction                              (41)          (84)          (96)
      Amortization of debt expense                       473           380           401 
                                                   ---------     ---------     --------- 
                                                      15,924        12,841        13,715 
                                                   ---------     ---------     --------- 
   Net Income                                         15,196        17,075        18,995 

   Less-Dividends on Preferred Stock                      61            62            63 
                                                   ---------     ---------     --------- 
   Net Income Applicable to Common Stock           $  15,135     $  17,013     $  18,932 
                                                   =========     =========     ========= 
</TABLE>
    


    The accompanying notes are an integral part of these consolidated financial
 statements.
    <PAGE>
<TABLE>
<CAPTION>
                             Consolidated Statements of Income (Concluded)
                         For the Years Ended September 30, 1998, 1997 and 1996
                           (Thousands of Dollars Except for Per Share Data)
    
   <S>                                             <C>           <C>           <C>
                                                      1998          1997          1996   
                                                      ----          ----          ----   

   Net Income Applicable to Common Stock           $  15,135     $  17,013     $  18,932 
                                                   =========     =========     ========= 

   Average Common Shares Outstanding
      During the Period:
      Basic                                        8,871,349    10,632,001    10,146,932 
                                                  ==========    ==========    ========== 
      Fully diluted                                8,922,965    10,683,759    10,175,544 
                                                  ==========    ==========    ========== 

   Income Per Average Share of
      Common Stock:
      Basic                                        $    1.71     $    1.60     $    1.87 
                                                   =========     =========     ========= 
      Fully diluted                                $    1.70     $    1.59     $    1.86 
                                                   =========     =========     ========= 

   Dividend Per Share of Common Stock              $    1.00     $    1.52     $    1.50 
                                                   =========     =========     ========= 

</TABLE>


    
    





 The accompanying notes are an integral part of these consolidated financial
 statements.
    <PAGE>
<TABLE>
<CAPTION>
                                 Consolidated Statements of Cash Flows
                         For the Years Ended September 30, 1998, 1997 and 1996
                                        (Thousands of Dollars)
    
   <S>                                               <C>         <C>        <C>
                                                       1998        1997       1996   
                                                       ----        ----       ----   

   Cash Flows from Operations:                       $ 27,091    $ 29,554   $ 37,114 
                                                     --------    --------   -------- 

   Cash Flows from Investing Activities:
      Capital expenditures                            (22,435)    (24,593)   (24,281)
      Purchase of Cogeneration Assets                 (17,067)          -          - 
      Cash distributions received from
        investments                                     2,442       1,761      2,061 
      Other investing activities, net                     901          54     (1,338)
                                                     --------    --------   -------- 
      Net cash used in investing activities           (36,159)    (22,778)   (23,558)
                                                     --------    --------   -------- 
   Cash Flows from Financing Activities:
      Dividends paid                                   (8,657)    (16,177)   (15,491)
      Issuance (repurchase) of common stock           (53,277)        622     15,557 
      Other stock activity, net                            (3)       (652)       (38)
      Issuance of long-term debt                       74,600           -          - 
      Principal retired on long-term debt             (12,089)    (22,126)    (3,911)
      Short-term debt                                   5,300      27,500     (4,200)
                                                     --------    --------   -------- 
      Net cash provided (used) by
         financing activities                           5,874     (10,833)    (8,083)
                                                     --------    --------   -------- 
   Increase (Decrease) in Cash and
      Cash Equivalents                                 (3,194)     (4,057)     5,473 
   Cash and Cash Equivalents at
      Beginning of Year                                 4,458       8,515      3,042 
                                                     --------    --------   -------- 
   Cash and Cash Equivalents at
      End of Year                                    $  1,264    $  4,458   $  8,515 
                                                     ========    ========   ======== 
</TABLE>
    
    

   The accompanying notes are an integral part of these consolidated financial
 statements.
    <PAGE>
<TABLE>
<CAPTION>
                           Consolidated Statements of Cash Flows (Concluded)
                         For the Years Ended September 30, 1998, 1997 and 1996
                                        (Thousands of Dollars)
    
   <S>                                               <C>         <C>        <C>
                                                       1998        1997       1996   
                                                       ----        ----       ----   
   Schedule Reconciling Earnings to
      Cash Flows from Operations:
      Net Income                                     $ 15,196    $ 17,075   $ 18,995 
                                                     --------    --------   -------- 
      Adjustments to reconcile income
         to net cash:
         Depreciation and amortization                 20,628      18,098     17,909 
         Provision for uncollectible
           accounts                                     5,044       3,855      4,600 
         Deferred income taxes, net                     6,414       4,115      1,886 
         Equity in partnership earnings                (3,271)     (2,910)    (2,037)

      Changes in assets and liabilities:
         Accounts receivable                           (5,410)     (3,873)    (1,640)
         Accrued utility revenue                          835        (444)       913 
         Inventories                                     (268)     (1,616)    (1,457)
         Purchased gas costs                           (3,074)     (1,298)     3,712 
         Prepaid expenses                              (2,804)      2,017     (4,825)
         Accounts payable and accrued expenses         (4,823)     (1,682)    (5,902)
         Other assets/liabilities                      (1,376)     (3,783)     4,960 
                                                     --------    --------   -------- 
           Total adjustments                           11,895      12,479     18,119 
                                                     --------    --------   -------- 
      Net cash provided by
         operations                                  $ 27,091    $ 29,554   $ 37,114 
                                                     ========    ========   ======== 



   Supplemental Disclosures of Cash Flow
      Information:
   Cash Paid During the Year for:
      Interest                                       $ 14,222    $ 13,058   $ 12,193 
                                                     ========    ========   ======== 
      Income taxes                                   $  8,042     $ 8,261   $ 17,633 
                                                     ========    ========   ======== 
</TABLE>


    
    



   The accompanying notes are an integral part of these consolidated financial 
statements.
    <PAGE>
<TABLE>
<CAPTION>
                               Consolidated Statements of Capitalization
                                      September 30, 1998 and 1997
                                        (Thousands of Dollars)
   <S>                                                            <C>          <C>
                                                                    1998         1997   
                                                                    ----         ----   
   Common Stock Equity:
      Common stock, no par, authorized 20,000,000
        shares, issued and outstanding 8,652,171
        shares in 1998 and 10,652,169 shares in 1997              $ 67,448     $120,409 
      Retained earnings                                             56,447       49,924 
                                                                  --------     -------- 
                                                                   123,895      170,333 
                                                                  --------     -------- 
      Less:  Unearned compensation - restricted
               stock awards                                           (498)      (1,034)
                                                                  --------     -------- 
                                                                   123,397      169,299 
                                                                  --------     -------- 

   Preferred Stock, Not Subject to Mandatory
      Redemption:
      $3.125 par value, 8%, noncallable, authorized
        909,898 shares in 1998 and 1997, issued and
        outstanding 134,426 shares in 1998 and 1997,
        entitled to preference on liquidation at
        $6.25 per share                                                420          420 

      $100 par value, callable, authorized 9,999,557
        shares in 1998 and 9,999,602 shares in 1997
        6% Series B, issued and outstanding 4,593
          shares in 1998 and 4,638 shares in 1997                      459          464 
                                                                  --------     -------- 
                                                                       879          884 
                                                                  --------     -------- 
   Long-Term Debt:
      First Mortgage Bonds -
        9.16%, due 2004                                             18,000       18,000 
      Industrial Revenue Demand Bonds -
        1986 and 1988 series,
          weighted average interest rate of
          3.492% in 1998 and 3.66% in 1997, due 2006                     -       11,400 
        1998 series, weighted average interest rate
          of 3.36% in 1998, due 2025                                10,600            - 
      First Mortgage Note -
        10.5%, due 2010                                                925          963 
      Senior Secured Notes -
        6.99%, due 2009                                             45,000            - 
        6.90%, due 2010                                             15,000            - 
      Secured Notes -
        9.32%, due 1999                                                  -            6 
        6.89%, due 2010                                             12,260       12,905 
      Unsecured Medium Term Notes -
        7.61%, due 2002                                             10,000       10,000 
        7.82%, due 2004                                             10,000       10,000 
        6.62%, due 2007                                              1,000            - 
        6.65%, due 2007                                              1,000            - 
        6.69%, due 2007                                             17,000            - 
        6.04%, due 2008                                             15,800            - 
        8.05%, due 2012                                              5,000        5,000 
        6.85%, due 2013                                             20,000       20,000 
        8.12%, due 2014                                              5,000        5,000 
        9.10%, due 2016                                             10,000       10,000 
        8.96%, due 2017                                             20,000       20,000 <PAGE>
        8.49%, due 2024                                              5,000        5,000 
      Less - Current Maturities                                     (5,733)      (1,487)
                                                                  --------     -------- 
                                                                   215,852      126,787 
                                                                  --------     -------- 
                                                                  $340,128     $296,970 
                                                                  ========     ======== 
</TABLE>
   The accompanying notes are an integral part of these consolidated financial
 statements.
    <PAGE>
<TABLE>
<CAPTION>
                            Consolidated Statements of Common Stock Equity
                         For the Years Ended September 30, 1998, 1997 and 1996
                             (Thousands of Dollars Except for Share Data)
    

   <S>                                 <C>         <C>         <C>            <C>
                                             Common Stock 
                                       ------------------------   Unearned    Retained
                                          Shares       Amount   Compensation  Earnings
                                        ----------   ---------- ------------  ---------
   Balance at September 30, 1995         9,931,279   $ 104,960        $ (371)  $ 45,522 
     Public offering                       700,000      15,557             -          - 
     Net income after
      preferred dividends                        -           -             -     18,932 
     Purchase of restricted
      stock awards                               -           -           (33)         - 
     Amortization and
      adjustment of
      restricted shares                    (10,840)       (349)           92          - 
     Dividends                                   -           -             -    (15,428)
                                        ----------    --------        ------   -------- 
   Balance at September 30, 1996        10,620,439     120,168          (312)    49,026 
     Net income after
      preferred dividends                        -           -             -     17,013 
     Purchase of restricted
      stock awards                          16,078         501        (1,131)         - 
     Issues to dividend
      reinvestment and
      employee benefit plans                29,145         622             -          - 
     Establish holding company                   -        (508)            -          - 
     Amortization and
      adjustment of
      restricted shares                    (13,493)       (374)          409          - 
     Dividends                                   -           -             -    (16,115)
                                        ----------    --------        ------   -------- 
   Balance at September 30, 1997        10,652,169     120,409        (1,034)    49,924 
     Repurchase Common Stock            (1,999,998)    (52,891)            -          - 
     Net income after
      preferred dividends                        -           -             -     15,135 
     Issues to dividend
      reinvestment and
      employee benefit plans                     -          63             -          - 
     Amortization and
      adjustment of
      restricted shares                          -        (133)          536        (16)
     Dividends                                   -           -             -     (8,596)
                                        ----------    --------        ------   -------- 
   Balance at September 30, 1998         8,652,171     $67,448        $ (498)  $ 56,447 
                                        ==========    ========        ======   ======== 
</TABLE>

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


   NOTES TO FINANCIAL STATEMENTS
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    
    
   1.  Summary of Significant Accounting Policies:
    
   Organization-
    
   CTG Resources, Inc. ("the Company" or "CTG") is a holding company and
   parent of the Connecticut Natural Gas Corporation ("CNG") and The Energy
   Network, Inc. ("TEN").  TEN holds and operates, through divisions or
   wholly-owned subsidiaries, CTG's unregulated, diversified businesses which
   also include the Company's equity investments in two partnerships, one of
   which is the Iroquois Gas Transmission System ("Iroquois").
    

   Nature of the business-
    
   CTG's principal business is the distribution, transportation and sale of
   natural gas through CNG.  This business is subject to extensive regulation. 
   CTG is also engaged in unregulated diversified businesses through TEN and
   its subsidiaries.  These business activities are primarily focused on
   district heating and cooling ("DHC") and also include other energy-related
   products and services and new business development.  The activities of
   Iroquois are regulated by the Federal Energy Regulatory Commission.

    
   Principles of consolidation-
    
   CTG owns all of the capital stock of its subsidiaries, CNG and TEN.  The
   consolidated financial statements represent the accounts of the Company
   after the elimination of intercompany transactions.  Certain prior year
   amounts have been reclassified to conform with current year presentations.
    
    
   Use of estimates-
    
   The preparation of financial statements in conformity with generally
   accepted accounting principles requires management to make estimates and
   assumptions that affect the reported amounts of assets and liabilities and
   disclosure of contingent assets and liabilities at the date of the
   financial statements and the reported amounts of revenues and expenses
   during the reporting period.  Actual results could differ from those
   estimates.
    
    
   Revenues-<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

    
   Revenues are recorded based on deliveries to customers through the end of
   the accounting period.  Regulated gas operations revenues are based on
   rates authorized by the Connecticut Department of Public Utility Control
   ("DPUC").
    
   The Company is required to provide natural gas service to residential
   customers within its defined service territory and is precluded by  <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Connecticut State law from discontinuing service to hardship residential
   customers during a winter moratorium period (November - April).
    
   In compliance with Connecticut law, the Company has an accounts receivable
   forgiveness program for qualified hardship natural gas customers.  The
   total payments made by these customers and the energy assistance funds
   received on their behalf are matched by the Company.  The DPUC allows the
   Company to defer this matched amount and to recover it from ratepayers in a
   future period.  At September 30, 1998 and 1997, deferred balances of
   approximately $5,400 and $4,100, respectively, are included in other assets
   pending future amortization and recovery from ratepayers.
    
    
   Purchased gas costs-
    
   The Company passes on to its firm customers changes in gas costs from those
   reflected in its tariff charges.  In accordance with this procedure, any
   current under or over-recoveries of gas costs are charged or credited to
   the cost of gas and included in current assets or liabilities.  Such
   amounts are collected or refunded in subsequent periods under purchased gas
   adjustment provisions ("PGA"). 
     

   Allowance for funds used during construction-
    
   In the ordinary course of business an allowance for funds used during
   construction ("AFUDC") is calculated on the construction of physical assets
   which exceed a minimum cost threshold and are constructed over an extended
   period of time.  
    
   AFUDC for the regulated operations is computed based on the weighted
   average cost of capital used to determine the rates charged to customers,
   as allowed by the DPUC.  It is computed at current borrowing rates for the
   diversified businesses.
    
    
   Plant-
    
   Plant is stated at original cost, which includes an apportionment of
   general and administrative costs, and, for certain long-term construction
   projects, AFUDC.
    
   Substantially all of the plant of the regulated operations is subject to<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   the lien of the Indenture of Mortgage and Deed of Trust securing its First
   Mortgage Bonds.  The Capitol Area DHC properties owned by TEN are also
   subject to the liens associated with TEN's Industrial Revenue Variable Rate
   Demand Bonds and related letter of credit (See Notes 8 and 9).
    
   During the fourth quarter of fiscal 1996, TEN sold land and a building
   situated thereon.  This resulted in a nonrecurring net gain of $515 or $.05
   per share.
    
    
   Depreciation-
    
   CTG and its subsidiaries, except CNG's wholly-owned subsidiary, CNG Realty
   Corp. ("CNGR"), provide depreciation on a straight-line basis.  The
   composite rate applied by the regulated operations was 4.1% in 1998, 1997
   and 1996, as approved by the DPUC.  The operating and administrative
   center, owned by CNGR, is being depreciated under a DPUC approved sinking
   fund method through 2010.
    
   The average depreciation rates for diversified businesses' depreciable
   plant were  3.6% in 1998 and 1997 and 3.8% in 1996.
    

   Cash and cash equivalents-
    
   Cash in excess of daily requirements is invested in short-term interest
   bearing securities with maturities of three months or less.
    
    
   Investments-
    
   The Company has investments of $11,821 at September 30, 1998.  These
   include $10,937 for a 4.87% investment in Iroquois and $884 for a 50%
   investment in the Downtown Cogeneration Associates Limited Partnership
   ("DCA").  These investments are accounted for on the equity method of
   accounting.
    
   Iroquois owns and operates a natural gas pipeline which transports Canadian
   natural gas into New York State, Massachusetts and Connecticut.  DCA owns
   and operates a 4.2-Megawatt cogeneration facility in Hartford, Connecticut.

   During the second quarter of fiscal 1998, TEN assumed control of KBC Energy
   Services ("KBC"), a New England natural gas marketer, and began the sale of<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   its assets and the wind down of its operations.  At September 30, 1997 TEN
   had a 50% ownership interest in this partnership.  The fiscal 1998 charge
   to earnings related to the wind down of KBC was $1,012, net of income
   taxes.  Management does not anticipate any significant future activity
   related to KBC.

    
   Inventories-
    
   Gas inventories are stated at their weighted average cost.  Other
   inventories are accounted for using the first-in, first-out or average cost
   method.
    
    
   Accounting for the effects of regulation-
    
   CNG's natural gas distribution business is subject to regulation by the
   DPUC.  CNG prepares its financial statements in accordance with the
   provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of
   Regulation" ("SFAS No. 71").  SFAS No. 71 requires a cost-based, rate-
   regulated enterprise such as CNG to reflect the impact of regulatory
   decisions in its financial statements.  In certain circumstances, SFAS No.
   71 requires that certain costs and/or obligations (such as incurred costs
   not currently recovered through rates, but expected to be so recovered in
   the future) be reflected in a deferred account in the balance sheet and not
   be reflected in the statement of income until matching revenues and/or
   expenses are recognized.  CNG records regulatory assets and liabilities
   based on prior rate orders issued by the DPUC, which provide a mechanism
   for recovery in regulated rates, or on historical rate treatment, which
   provides evidence as to the probability of future rate recovery.
    
   In the application of SFAS No. 71, the Company follows accounting policies
   that reflect the impact of the rate treatment of certain events or
   transactions that are permitted to differ from generally accepted
   accounting principles.  Specifically, the DPUC permits recovery of
   depreciation on the operating and administrative center, owned by CNGR,
   under a sinking fund method through 2010.  The overall impact of annual
   depreciation expense under this method, versus straight line depreciation
   recovery, is not material to the overall financial statements.
    
   It is the Company's policy to continually assess the recoverability of
   costs recognized as regulatory assets and the Company's ability to continue
   to account for its regulated activities in accordance with SFAS No. 71,<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   based on each regulatory action and the criteria set forth in SFAS No. 71. 
   Based on current regulation and recent DPUC decisions, the Company believes
   that its use of regulatory accounting is appropriate and in accordance with
   the provisions of SFAS No. 71.
    
   The Company's consolidated balance sheets at September 30, 1998 and 1997
   contain the following amounts as a result of the application of SFAS No.
   71:
<TABLE>
    
   <S>                                                <C>            <C>
               Assets/(Liabilities)                     1998           1997   
               --------------------                     ----           ----   
   Unrecovered Future Taxes                           $ 10,734       $ 17,263 
   Hardship Arrearage Forgiveness                        5,388          4,138 
   Other Postretirement Benefits                         2,974          2,973 
   Deferred Income Taxes                                 1,797          3,141 
   Other Deferred Charges                                1,280          1,626 
   Recoverable Transition Costs                              -            839 
   Pipeline Refunds, Surcharges and Interest              (535)        (5,265)
   Deferred Gas Costs                                   (1,496)        (4,694)
   Revenue Sharing Mechanisms                           (3,329)        (2,481)
   Refundable Taxes                                     (4,252)        (3,491)
                                                      --------       -------- 
                                                      $ 12,561       $ 14,049 
                                                      ========       ======== <PAGE>
</TABLE>

   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   New accounting standards-
    
   In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
   No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").  This statement
   establishes standards for reporting and display of comprehensive income and
   its components in the financial statements.  Adoption of SFAS No. 130
   disclosure is required in fiscal 1999 and will have no impact on the
   Company's financial condition or results of operations.
    
   In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
   an Enterprise and Related Information" ("SFAS No. 131").  This statement
   requires that public business enterprises report certain additional
   information about operating segments.  Adoption of SFAS No. 131 is required
   in fiscal 1999.  The adoption of SFAS No. 131 will have no impact on the
   Company's financial condition or results of operations.
    
   In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
   about Pensions and Other Postretirement Benefits" ("SFAS No. 132").  This
   statement standardizes employers' disclosures requirements about pension
   and other postretirement benefit plans.  Adoption of SFAS No. 132 is
   required in fiscal 1999.  The adoption of SFAS No. 132 will have no impact
   on the Company's financial condition or results of operations.
    
   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
   Instruments and Hedging Activities" ("SFAS No. 133").  This statement
   establishes accounting and reporting standards for derivative instruments
   and for hedging activities.  Adoption of SFAS No. 133 is required beginning
   with the first quarter of fiscal 2000.  The Company is aware of certain
   provisions which may impact the the natural gas industry but has not yet
   reviewed these provisions in detail against existing accounting practices
   and disclosures.  At this time the Company cannot predict what impact, if
   any, the adoption of SFAS No. 133 will have on its financial condition or
   results of operations.
     
    
   2.  Regulatory Matters:
     
   In a second phase of a regulatory review of natural gas deregulation which
   began in 1996, the DPUC is addressing the potential deregulation of the
   residential natural gas sales market in Connecticut and the future role of
   Connecticut's local gas distribution companies in natural gas commodity
   sales.  Concurrently, the Connecticut State Legislature has undertaken a
   task force investigation related to residential deregulation.  Although the<PAGE>



   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Company cannot predict the outcome of these proceedings, the Company
   anticipates that the timing of any DPUC decision will be related to the
   timing of the completion and announcement of the results of the Connecticut
   State Legislature's activities.

   Connecticut local gas distribution companies ("LDCs") pass on to firm
   customers any increases or decreases in gas costs from those reflected in
   tariff charges under PGA provisions.  During fiscal 1996, the DPUC
   initiated a review of the need to continue or modify PGA accounting for all
   Connecticut LDCs.  The review was prompted by the offering of unbundled
   services by LDCs that began in fiscal 1996.  In April 1997, the DPUC issued
   a decision affirming the need to continue the PGA.
    
    
   3.  Purchase of Cogeneration Facility:
    
   In June 1998, TEN acquired the assets of a 16-Megawatt capacity
   cogeneration facility which supplies Hartford Hospital with steam and
   electricity.  The purchase price of approximately $17,000 was financed
   through existing lines of credit.  The assets acquired in the transaction
   include $1,619 of current assets, $1,744 of plant and equipment and a note
   receivable of $13,637, of which $4,889 is current and classified in
   accounts and notes receivable in the consolidated balance sheet.  The note
   receivable relates to an existing termination agreement with the local
   electric utility which is now assigned to The Hartford Steam Company
   ("HSC"), a wholly-owned subsidiary of TEN.  Pursuant to this agreement, the
   utility will make payments to HSC through December 2000.

   HSC will now supply the hospital with steam and electricity over a twenty-
   year contract period.  The facility is currently off-line for repowering as
   an 7.5-Megawatt facility and is scheduled to be back on line by January
   1999 under HSC's management.
     

   4.  Pension and Employee Benefit Plans:
    
   The Company has noncontributory retirement plans ("Plans") covering
   substantially all employees.  Pension benefits are based on years of
   credited service and employees' average annual earnings, as defined in the
   Plans.  The Company's funding policy is to contribute, annually, an amount
   at least equal to that which will satisfy the minimum funding requirements
   of the Employee Retirement Income Security Act.
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   The assumptions used in determining the pension obligations were:
    
<TABLE>
    <S>                                                   <C>         <C>         <C>
                                                          1998        1997        1996
                                                          ----        ----        ----
    Weighted Average Discount Rate .........              7.50%       7.50%       8.25%
    Rate of Increase in Future Compensation Levels
        ..............................                    4.00%       4.00%       4.40%
    Expected Long-term Rate of Return on Assets
        ..............................                    9.00%       9.00%       8.75%
</TABLE>
    
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   The following table represents the Plans' funded status and amounts
   included in the balance sheets at September 30, 1998 and 1997:
<TABLE>
    
    <S>                                                          <C>            <C>
                                                                   1998           1997   
                                                                   ----           ----   
    Actuarial present value of benefit obligations:

        Accumulated benefit obligation, including vested
            benefits of $84,328 in 1998 and of $76,545 in
            1997                                                 $ 87,222       $ 78,882 
                                                                 ========       ======== 
        Projected benefit obligation for service rendered
            to date                                              $101,853       $ 93,472 

    Assets at fair value, primarily publicly traded stocks
        and bonds                                                 123,611        113,331 
                                                                 --------       -------- 
    Value of assets over the projected benefit obligation
                                                                   21,758         19,859 
    Unrecognized net gain from past experience different
        from that assumed                                         (19,997)       (18,294)
    Prior service cost not yet recognized in net periodic
        pension cost                                                  303            874 
    Unrecognized net asset at January 1, 1986 being
        recognized over 15 years                                     (776)        (1,087)
                                                                 --------       -------- 

    Accrued pension liability                                    $  1,288       $  1,352 
                                                                 ========       ======== 
</TABLE>
    

   Net pension costs included in the statements of income for the years ending
   September 30, include the following components:
    
<TABLE>
       <S>                                         <C>            <C>           <C>
                                                      1998           1997          1996  
                                                      ----           ----          ----  

       Service cost                                $  2,377       $  2,113      $  2,095 
       Interest cost                                  6,856          6,373         6,183 
       Return on plan assets                        (14,897)       (18,616)      (11,503)

       Net amortization and deferral                  5,728         10,139         3,653 
                                                   --------       --------      -------- 
       Net cost                                    $     64       $      9      $    428
                                                   ========       ========      ========
</TABLE>
<PAGE>
   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

    
   The Company also provides its officers with a supplemental retirement plan.
   The actuarially determined accumulated benefit obligation was approximately
   $4,360 at September 30, 1998 and $4,454 at September 30, 1997.  The cost of
   this plan is being accrued over the service lives of the individual
   officers.  Net expense related to this plan was $634 for 1998, $548 for
   1997 and $540 for 1996.  The Company contributes to a trust to fund the
   liability for these supplemental retirement plan benefits.  The trust
   balance included in other assets at September 30, 1998 and 1997, was $5,805
   and $4,953, respectively.
     
   The Company may provide certain health care, life insurance or income
   benefits to former or inactive employees after employment but before
   retirement.  The Company accounts for these costs on the accrual basis
   under Statement of Financial Accounting Standards No. 112, "Employers'
   Accounting for Postemployment Benefits".
    
    
   5.  Postretirement Benefits Other Than Pensions:
    
   The Company provides certain health care and life insurance benefits to
   retirees through a benefit plan.  These benefits are available for
   employees leaving the Company who are otherwise eligible to retire and have
   met specific service requirements.  The Company accounts for these costs
   under SFAS No. 106, "Employers' Accounting for Postretirement Benefits
   Other Than Pensions" ("SFAS No. 106") on a prospective basis.  SFAS No. 106
   requires the expected cost of postretirement benefits, primarily health
   care and life insurance benefits, to be charged to expense during the years
   that eligible employees render service.
    
   In fiscal 1994, the Company adopted SFAS No. 106 and began amortizing its
   postretirement accumulated benefit obligation over a twenty-year period. 
   Total health care and life insurance costs under SFAS No. 106 were $2,748
   in 1998, $3,074 in 1997 and $3,293 in 1996.  Actual costs charged to
   expense were $2,813 in 1998 and $2,755 in 1997 and 1996.  In 1995, the DPUC
   approved a five-year phase-in of SFAS No. 106 expenses with an allowed
   annual recovery of $2,755 and deferral of additional SFAS No. 106 expenses
   for future recovery.  At September 30, 1998 and 1997, $2,975 and $2,973,
   respectively, were deferred pending future amortization and recovery.  
     <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998



   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   The following table represents the plan's funded status reconciled to the
   consolidated balance sheets at September 30, 1998 and 1997:
<TABLE>
       <S>                                                        <C>            <C>
                                                                    1998           1997   
                                                                    ----           ----   
       Accumulated postretirement benefit obligation of:

           Retirees                                               $ 18,143       $ 19,120 
           Active employees fully eligible
           to retire                                                 2,960          3,015 
           Active employees not eligible to retire                   8,152          6,325 
                                                                  --------       -------- 
       Total accumulated postretirement benefit obligation
                                                                    29,255         28,460 
       Less:  Market value of plan assets                           11,037          8,504 
                                                                  --------       -------- 
       Accumulated postretirement benefit obligation in
           excess of plan assets                                    18,218         19,956 
       Unrecognized transition amount                              (13,519)       (15,693)
       Unrecognized net loss                                        (1,870)        (1,746)
                                                                  --------       -------- 
       Accrued postretirement benefit
         obligation                                               $  2,829       $  2,517 
                                                                  ========       ======== 
</TABLE>
    
   The components of SFAS No. 106 health care and life insurance costs for the
   fiscal years ended September 30, 1998, 1997 and 1996 were:
    
<TABLE>
   <S>                                           <C>            <C>           <C>  
                                                   1998           1997          1996   
                                                   ----           ----          ----   
   Service cost                                  $    456       $    425      $    435 
   Interest cost                                    2,045          2,131         2,164 
   Return on plan assets                           (1,505)        (1,436)         (578)
   Net amortization                                 1,752          1,954         1,272 
                                                 --------       --------      -------- 
   Net health care and life insurance costs      $  2,748       $  3,074      $  3,293 
                                                 ========       ========      ======== 
</TABLE>
   For measurement purposes annual rates of increase of 8% and 7% are assumed
   for nonmedicare and medicare eligible retirees, respectively, in the per
   capita cost of covered health care benefits.  The rate is assumed to
   decrease to 4.5% for both groups in 2004.  The effect of increasing the
   assumed health care cost trend rates by one percentage point in each year
   would increase the accumulated postretirement benefit obligation as of<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   September 30, 1998 and 1997 by $1,701 and $1,402, respectively, and the
   aggregate of the service and interest cost for the years ended September
   30, 1998, 1997 and 1996 by $119, $134 and $133, respectively.  The weighted
   average discount rate used in determining the accumulated post retirement
   benefit obligation was 7.50% in 1998 and 1997 and 8.25% in 1996 and was
   determined by analyzing the interest rates, as of September 30, of each
   year, of long-term, high quality corporate debt securities having a
   duration comparable to the plan.  The expected long-term rate of return on
   plan assets was 8.00% in 1998 and 7.50% in 1997.
     
   The Company has established two Employee Benefit Trusts ("VEBA") to pay
   current retiree health care and life insurance benefits and to fund the
   Company's retirement benefit liability.  In fiscal 1998, 1997 and 1996 the
   Company funded $2,493, $2,459 and $2,896, respectively, for SFAS No. 106
   costs.  The VEBA balances are primarily invested in life insurance policies
   and commingled fixed income and equity mutual funds.
    
    
   6.  Taxes:
    
   Income Taxes-
    
   The following is an analysis of the provision for federal and state income
   taxes:
<TABLE>
<CAPTION>
                                                                       September 30, 
                                                                  ------------------------
    <S>                                                        <C>         <C>         <C>
                                                                 1998        1997        1996  
                                                                 ----        ----        ----  
    Charged to operations:
        Federal:
            Current                                            $ 4,742     $10,330     $ 9,842 
            Deferred                                             5,277       3,069       1,082 
                                                               -------     -------     ------- 
                                                                10,019      13,399      10,924 
                                                               -------     -------     ------- 
        State:
            Current                                                427       2,816       3,118 
            Deferred                                             1,985         965         543 
                                                               -------     -------     ------- 
                                                                 2,412       3,781       3,661 
                                                               -------     -------     ------- 
        Deferred investment tax credits                           (221)       (221)       (221)
                                                               -------     -------     -------
            Total charged to operations                         12,210      16,959      14,364 
                                                               -------     -------     ------- 
    Charged to other income/(deductions):
        Federal:
            Current                                                590         531         552 
            Deferred                                                62         (34)        232 
                                                               -------     -------     ------- 
                                                                   652         497         784 
                                                               -------     -------     ------- 
        State:
            Current                                                183         179         245 
            Deferred                                                21         (11)         86 
                                                               -------     -------     ------- 
                                                                   204         168         331 
                                                               -------     -------     ------- 
            Total charged to other income/(deductions)             856         665       1,115 
                                                               -------     -------     ------- 
               Total                                           $13,066     $17,624     $15,479 
                                                               =======     =======     ======= 
</TABLE>
    
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Depreciation for federal income tax purposes is computed using accelerated
   cost recovery methods and different lives as permitted under the Internal
   Revenue Code ("Code").  The DPUC has allowed the Company to normalize taxes
   on accelerated depreciation, as required under the Code, for depreciable
   property additions made by the regulated operations subsequent to 1980. 
   For certain other temporary differences, tax reductions are accounted for
   as a reduction of federal income tax expense in accordance with the flow-
   through method of accounting as required by the DPUC.  Under the
   established ratemaking practices followed by the DPUC, deferred income
   taxes not previously provided for will be collected in customer rates when
   such taxes become payable.
    
   Deferred income taxes result from temporary differences between the
   financial statement carrying amounts and the tax basis of existing assets
   and liabilities. Deferred income taxes are primarily a result of normalized
   plant items and temporary differences related to gas costs.  For the
   regulated operations, deferred investment tax credits are amortized to
   income over the average life of the related property.  The diversified
   businesses provide deferred taxes on all temporary differences, including
   depreciation.
    
   The tax effects of the temporary differences which resulted in the deferred
   income taxes on the balance sheets at September 30, 1998 and 1997 were:
    
<TABLE>
      <S>                                                        <C>            <C>
                                                                    1998           1997  
                                                                    ----           ----  
      Property, Plant and Equipment                              $ 53,297       $ 47,067 
      Other, net                                                   (3,122)        (2,765)
                                                                 --------       -------- 
         Deferred Income Taxes                                   $ 50,175       $ 44,302 
                                                                 ========       ======== 
</TABLE>

   The Company accounts for income taxes in accordance with SFAS No. 109,
   "Accounting for Income Taxes" ("SFAS No. 109").  Under the caption
   "Refundable Taxes" the balance sheet reflects refundable taxes to
   ratepayers for reductions in the statutory federal income tax rate on
   normalized plant related temporary differences.  The regulated operations
   also recognize the cumulative deferred income taxes on temporary
   differences which were previously flowed through to ratepayers.  At
   September 30, 1998 and 1997, the Company had $10,734 and $17,263,
   respectively, on the balance sheets as an unfunded deferred income tax
   liability, with a corresponding unrecovered receivable, for temporary
   differences previously flowed through to ratepayers.  These amounts have<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   been adjusted for the tax effect of future revenue requirements and will be
   amortized over the life of the related depreciable assets concurrent with
   their recovery in rates.
     
   In fiscal 1998, the Company performed a detailed study of SFAS No. 109
   concerning deferred income tax liabilities.  As a result of the study, the
   Company identified that cost of removal costs were not being normalized in
   its deferred tax calculation.  Effective March 31, 1998, the Company
   normalized cost of removal costs in its calculation of deferred taxes.  The
   normalization of the cost of removal costs for deferred tax requirements
   reduced the amounts of unrecovered future taxes from rate payers and
   unfunded deferred income taxes on the balance sheet.  Amounts shown on the
   balance sheet for the unfunded deferred income tax liability, and the
   corresponding unrecovered receivable related to SFAS No. 109 reflect this
   adjustment.
    
   The treatment of cost of removal costs as a normalized item is in
   accordance with SFAS No. 109.  Although current rates and tax expenses have
   been set utilizing flow-through treatment for these costs, the Company
   anticipates that, in future rate proceedings, the application of this
   method will reduce future income tax expense and corresponding rate payer
   revenue requirements.
    
   A reconciliation of the consolidated federal income tax expense, at the
   statutory tax rate of 35%, to the reported consolidated federal income tax
   expense is as follows:

<TABLE>
    <S>                                                    <C>         <C>         <C>
                                                             1998        1997        1996  
                                                             ----        ----        ----  
    Consolidated statutory federal income tax expense      $ 8,976     $10,762     $10,669 

    Change in consolidated federal income tax expense
        resulting from:
        Excess book over tax depreciation                    2,654       2,253       1,724 
        Investment tax credits                                (221)       (221)       (221)
        Bad debts                                               44         175         175 
        Tax reserves                                          (866)        714        (500)
       Computer software                                       175         175         175 
       Cost of removal                                        (381)       (324)       (507)
       Other                                                    69         141         (28)
                                                           -------     -------     ------- 
    Consolidated reported federal income tax expense       $10,450     $13,675     $11,487 
                                                           =======     =======     ======= <PAGE>
</TABLE>

   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

     
    
   Outstanding tax issues-
    
   The Company is subject to audit by State of Connecticut and Federal
   authorities as it relates to income, sales, use and property tax returns
   filed.  In addition, the Company has several ongoing issues related to the
   taxability of off-system gas sales by state taxing authorities.  In the
   opinion of management, the ultimate resolution of these issues will not
   have a material impact on the Company's results of operations.
    
    
   7.  Capital Stock:
    
   Common stock- 
    
   In March 1997, pursuant to the Agreement and Plan of Exchange approved by
   shareholders, each outstanding share of common stock, $3.125 par value of
   CNG was exchanged for one new share of common stock, without par value, of
   CTG.  Each outstanding share of CTG common stock held by CNG prior to this
   exchange was cancelled.  As a result, CTG became the sole common stock
   shareholder of CNG, CNG became a subsidiary of CTG and all of the common
   stock of CTG was owned by the former common stock shareholders of CNG.
    
    
   Recapitalization plan-  
    
   On October 30, 1997, through a tender offer made by TEN, the Company
   repurchased approximately 2.0 million shares of CTG common stock for
   approximately $53,000.  TEN financed the purchase with a combination of
   revolving bank debt and the issuance of Senior Secured Notes.  The shares
   repurchased by TEN were transferred by the depositary directly to CTG.  In
   connection with the repurchase, effective with the first quarter of fiscal
   1998, CTG reduced its quarterly dividend on common stock from $0.38 ($1.52
   annually) to $0.25 ($1.00 annually) per share.
    
   The following summary of pro forma financial information gives effect to
   the repurchase of the shares as if the transaction had occurred at the
   beginning of each year presented, in the case of income statement data, or
   at year-end in the case of balance sheet data. This summary pro forma
   financial information is for comparison purposes only and does not purport
   to be indicative of the results that would actually have been obtained had
   the repurchase of the shares been completed at the dates indicated.<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

<TABLE>
<CAPTION>
    
                              Year Ended
                               September        Year Ended              Year Ended
                               30, 1998     September 30, 1997      September 30, 1996
                              -----------   ------------------      ------------------
   <S>                         <C>         <C>        <C>          <C>        <C>
                                                       Pro Forma               Pro Forma
                                  As          As         Stock        As         Stock
   Income Statement Data:      Reported    Reported   Repurchase   Reported   Repurchase
   -------------------         --------    --------    ---------   --------    ---------
   Net Income Applicable to
     Common Stock               $ 15,135    $ 17,013    $ 14,855    $ 18,932    $ 16,780 
                                ========    ========    ========    ========    ======== 
   Income Per Average Share
     of Common Stock (1)          $ 1.71      $ 1.60      $ 1.72      $ 1.87      $ 2.06 
                                  ======      ======      ======      ======      ====== 
   Average Common Shares
     Outstanding During the
     Period (2)                8,871,349  10,632,001   8,632,001  10,146,932   8,146,932 
                               =========  ==========   =========  ==========   ========= 

   Dividends per Share of
     Common Stock (3)             $ 1.00      $ 1.52      $ 1.00      $ 1.50      $ 1.00 
                                  ======      ======      ======      ======      ====== 
   Balance Sheet Data:
   ------------------
   Total Assets                 $459,181    $464,287    $464,287    $466,979    $466,979 
                                ========    ========    ========    ========    ======== 
   Long-term Debt (Less
     Current Maturities) (4)    $185,052    $126,787    $179,678    $136,432    $189,323 
                                ========    ========    ========    ========    ======== 
   Total Common Equity          $123,397    $169,299    $116,408    $168,882    $115,991 
                                ========    ========    ========    ========    ======== 
</TABLE>
[FN]
   ---------------------------------------------------------------------------
   (1)   Represents earnings per share based on pro forma net income divided by
         the pro forma shares outstanding.  Lower pro forma earnings reflect
         additional after tax interest due to the higher debt outstanding.
   (2)   Represents shares outstanding less the 1,999,998 shares purchased
         pursuant to the tender offer.
   (3)   Pro Forma represents dividends at $0.25 per share per quarter.
   (4)   Represents long-term debt outstanding plus $45,000 of pro forma debt
         from the Senior Subordinated Notes at 6.99% and $7,891 of pro forma
         debt at a rate of 6.37% under the revolving credit facilities. 
    

   Forward equity purchase agreement- 
    
   In a Forward Equity Purchase Agreement dated October 1, 1997, and amended<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   October 14, 1998, CTG has committed to fund from $7,500 to $16,100 per year
   into TEN from 1998 through 2009 for an aggregate additional cash infusion
   into TEN of $122,600.  In exchange, TEN caused all shares of CTG common
   stock purchased through the October 1997 tender offer to be transferred
   directly to CTG by the depositary.  As a provision of this agreement, CTG
   is restricted from declaring or paying any dividends or distributions to
   its holders of common stock if any amounts due and payable under this
   agreement are in arrears.
    
    
   Dividend reinvestment plan and employee savings plans-
    
   The Company maintains a Dividend Reinvestment Plan ("DRIP") which provides
   the Company's holders of common stock and preferred stock the opportunity
   to receive shares of the Company's common stock in lieu of some or all of
   their cash dividends.  In addition, the Company has Employee Savings Plans
   ("ESP"), which are designed to encourage and assist employees to save and
   invest for long-term financial security.  The Company's common stock is one
   of the investment options offered to employees under the ESP.  At September
   30, 1998, there were 315,542 shares of the Company's common stock reserved
   for issuance under the DRIP and ESP.  In the fiscal years ended September
   30, 1998, 1997 and 1996, the Company's contribution to the ESP on behalf of
   employees was $1,032, $960 and $965, respectively.
    
    
   Restricted stock plan-
    
   In 1990, the Company adopted a restricted stock performance plan.  The plan
   terminates in the year 2000 and is authorized to issue up to 200,000
   shares. On October 1, 1990, October 1, 1993 and October 1, 1996, key
   employees were granted 22,146, 24,040 and 41,800, respectively, of
   restricted shares of the Company's common stock under this plan. 
   Restrictions lapse and the shares vest over a one to five year period
   beginning October 1, 1990, 1993 and 1996, respectively, as certain
   performance goals are achieved.  In October 1995, 5,770 of the restricted
   shares became fully vested and were awarded to qualifying employees.
    
   The market value of the shares awarded under this plan has been recorded as
   unearned compensation and is a separate component of common equity.  The
   unearned compensation is being charged to expense over the vesting period
   based on achievement of the performance criteria.
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Earnings per share-

   The income statement discloses both basic and fully diluted earnings per
   share.  The decrease in basic earnings per share is the result of the
   dilutive effect of each year's weighted average of shares related to the
   restricted stock plan.  For the fiscal years ended September 30, the basic
   weighted average shares were reduced by 51,616 in 1998, 51,758 in 1997 and
   28,612 in 1996.
    

   Preferred stock-
    
   The preferred stock on the balance sheet was issued by CNG.  CNG is
   prohibited from, among other things, paying dividends on common stock and
   purchasing, redeeming or retiring common stock, if dividends on preferred
   stock are in arrears.
    
   The following table sets forth the changes in the number of shares
   outstanding for each class of the Company's preferred stock not subject to
   mandatory redemption, for the years ended September 30, 1998, 1997 and
   1996:
    

<TABLE>
                   <C>                             <C>            <C>            <C>
                                                     1998           1997           1996  
                                                     ----           ----           ----  
                   $3.125 par value                      -         (3,934)        (1,372)
                                                   =======        =======        ======= 
                   $100 par value                      (45)           (29)            (3)
                                                   =======        =======        ======= 
</TABLE>
    
    
   8.  Long-term Debt:
    
   The Company has various issues of first mortgage bonds and first mortgage
   notes outstanding with maturities from 2004 to 2010, secured notes with
   maturities from 1999 to 2010, industrial revenue variable rate demand bonds
   which mature in 2025 and unsecured medium term notes with maturities from
   2002 to 2024.  Under the most restrictive terms of the indenture securing
   the bonds, retained earnings of $25,174 are available for CNG to pay
   dividends at September 30, 1998.  CTG's ability to pay dividends is not
   restricted by these terms.  Dividends paid on common and preferred stock in
   fiscal 1998 were $8,657.  Sinking fund requirements for outstanding bonds
   were paid in cash.<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

    
   The Company's 9.16%, Series AA First Mortgage Bonds are subject to
   redemption by sinking fund scheduled at $2,500 per year.  The Company
   exercised its option to increase the principal payment amount due on
   October 1, 1998, by an additional $2,500, for a total of $5,000.  This
   increased the Company's current portion of long-term debt by $2,500 at
   September 30, 1998.
    
   In August 1998, the Company refinanced its outstanding $10,600 1986 and
   1988 series of tax exempt, seven-day put, Industrial Revenue Variable Rate
   Demand Bonds ("IRBs") issued by the Connecticut Development Authority.  The
   1998 series of IRBs mature in 2025 and have no sinking fund requirements. 
   The original IRBs financed TEN's capitol area district heating and cooling
   facilities in Hartford, Connecticut.  At the same time, the Company
   replaced the letter of credit which supports these IRBs.
    
   In October 1997, TEN issued Senior Secured Notes for $45,000, due in 2009,
   at 6.99%.  The principal will be retired through semi-annual payments of
   $2,500 beginning in 2001.  The proceeds were used to repurchase
   approximately 2.0 million shares of CTG common stock.
     
   In October 1997, the Company issued a total of $19,000 of Medium Term Notes
   ("MTNs") due 2007.  These MTNs are unsecured and have no call provisions or
   sinking fund requirements.  The proceeds were used to refinance existing
   short-term debt.  The face values and interest rates of these MTNs are:

                            Face Value              Interest Rate
                            ----------              -------------
                                $ 1,000                  6.62%   
                                $ 1,000                  6.65%   
                                $17,000                  6.69%   
    
   Long-term debt amounts which are due during each of the five years ending
   September 30, 1999 through 2003, are as follows:
    
                               Sinking Fund Requirements and Maturities
                               ----------------------------------------
                                             Year                 Total      
                                             ----                -------     
                                             1999                $ 5,733     
                                             2000                  3,283     
                                             2001                  5,843     
                                             2002                 18,404   
                                             2003                  8,465     
                                                                 -------     
                                                                 $41,728     
                                                                 =======     
<PAGE>
    

   9.  Short-term Borrowings and Lines of Credit:
    
   The Company maintains a line of credit under a revolving credit agreement
   with a bank.  Under this agreement the Company can borrow up to $20,000 at
   a Eurodollar or Base Rate of interest plus a variable margin.  In March of
   1998, the Company renewed this agreement to 2001 with two subsequent one-
   year renewal options.  There is a variable .15% to .5% commitment fee.  At
   September 30, 1998 there were $10,000 outstanding under this agreement.
    
   The Company also maintained a one-year line of credit with a bank for
   $9,000 through February 1998.  The Company paid a 1/5 of 1% commitment fee
   on this line of credit.  The interest rate varied according to market
   conditions.  In February 1998, the Company replaced this line of credit
   with a seasonally variable $10,000 to $15,000 line of credit through
   February of 1999.  The Company pays a 1/5 of 1% commitment fee on this line
   of credit.  The interest rate varies according to market conditions.  At
   September 30, 1998 there were $5,800 outstanding under this line of credit.
    
   TEN had a $5,000 unsecured revolving credit facility that expired on
   December 15, 1997.  There was a 1/5 of 1% annual facility fee.  The
   interest rate was based upon the Certificate of Deposit, Eurodollar or Cost
   of Funds rate plus a variable margin and is determined at the time of each
   borrowing.  This credit facility was not renewed.
    
   In October 1997, TEN entered into a 364-day secured revolving credit
   agreement for $10,000 with a bank.  This agreement matured on September 29,
   1998 and was extended for sixty days at that time.  The Company expects to
   renew this agreement for one year beginning December 1998.  Interest is
   based on a Bank Rate or a LIBOR rate plus a variable margin.  It is
   determined at the time of each borrowing.  There is a one-time $5
   commitment fee and a .375% facility fee upon renewal.  At September 30,
   1998 there were $9,000 outstanding under this line of credit.
    
   In October 1997, TEN entered into a three-year revolving credit agreement
   for $10,000 with a bank.  The maximum borrowing amount is reduced by $500
   on each fiscal quarter, beginning January 1, 1998.  Interest is based on a
   Bank Rate or a LIBOR rate plus a variable margin and is determined at the<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   time of each borrowing.  There is a one-time $5 commitment fee and an on-
   going .45% to .6% facility fee.  At September 30, 1998 there were $8,000
   outstanding under this line of credit.
     
   In October 1998, the $10,000 outstanding at September 30, 1998, under the
   $20,000 revolving credit agreement and the $5,800 outstanding at September
   30, 1998, under the $10,000 to $15,000 line of credit were refinanced with
   MTNs.  A secured note for $15,000 was also issued to refinance $15,000 of
   TEN's outstanding short-term borrowings at fiscal year-end 1998 (see Note
   13, "Subsequent Events").
    
   The weighted average interest rate on short-term borrowings outstanding was 
   5.98% at September 30, 1998 and 6.26% at September 30, 1997.
    
    
   10.  Fair Value of Financial Instruments:
    
   The fair value amounts disclosed below have been reported to meet the
   disclosure requirements of SFAS No. 107, "Disclosures About Fair Values of
   Financial Instruments" and are not necessarily indicative of the amounts
   that the Company could realize in a current market exchange.
    
   The carrying amount of cash and cash equivalents; accounts receivable;
   notes payable and commercial paper; accounts payable and accrued expenses;
   and unrecovered or refundable purchased gas costs approximates fair value.
    
   At September 30, 1998 and 1997, the fair value of the Company's long-term
   debt, including current maturities, is estimated to be $209,121 and
   $139,810, respectively.  The fair value at year-end 1998 and 1997, of
   $180,185 and $116,875 of fixed-rate long-term debt, based on the market
   value of similar instruments, is estimated at $198,521 in 1998 and $128,410
   in 1997.  The carrying amount of the variable-rate long-term debt of
   $10,600 in 1998 and $11,400 in 1997 approximates fair value.
    
   The Company has committed to support 4.87% of a letter of credit for
   Iroquois, equivalent to approximately $1,487 at September 30, 1998, which
   approximates fair value.  The letter of credit is used to satisfy Iroquois'
   cash retention requirements with respect to agreements between Iroquois and
   its lenders.
    
    
   11.  Commitments and Contingencies:
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Construction expenditures-
    
   Construction expenditures for the fiscal year ending September 30, 1999 are
   estimated at $26,100 for the regulated operations and $14,000 for the
   diversified businesses. 
    

   Adriaen's landing-
    
   The Company has been approached by local businesses and government agencies
   regarding the development of a stadium and convention center along with
   hotel, retail, recreational and housing facilities.  The development, known
   as Adriaen's Landing, would be built in the area of the Company's
   headquarters, operating center and steam/chilled water production
   facilities.  The Company, in order to accommodate the development as it is
   currently planned, would be required to relocate its facilities. 
   Discussions are now underway with the developers in order to accomplish
   this at no cost to the Company or its customers.  The area of development,
   which includes Company property, may contain hazardous materials that the
   project participants will be required to address.  This project is in line
   with the Company's vision and direction for growth.
      
    
   Gas supply-
    
   The Company is party to short-term and long-term contracts for the purchase
   of natural gas and transportation and storage services.
    
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   Steam supply-
    
   Along with generating steam from their own internal boilers, the DHC
   operations are party to long-term contracts for the purchase of steam.
    
    
   Letters of credit-
    
   The Company has outstanding letters of credit amounting to $1,500 for
   workers' compensation claims and $500 for a purchasing credit line.  As a
   condition of its ownership in the DCA, TEN is contingently liable under two
   letters of credit amounting to $8,800.  As a condition to its variable rate
   long-term debt, TEN holds a long-term letter of credit amounting to $10,757
   at September 30, 1998 and $11,400 at September 30, 1997.
    
    
   Environmental matters-
    
   In the ordinary course of business, the Company may incur costs to clean up
   environmental contaminants related to natural gas activity.  In those
   instances the Company expects that the remediation costs will be
   recoverable in rates.  In August 1998, the Company received a notice of
   violation from the Connecticut Department of Environmental Protection
   ("DEP") regarding a number of areas on noncompliance.  The Company
   submitted the required compliance report in September 1998.  The DEP has
   advised the Company that a Consent Order and a penalty or supplemental
   environmental project ("SEP") will be required to address the areas of
   noncompliance, but the DEP has not given the Company any indication of the
   amount of any penalty and/or SEP that may be required.  The Company is
   working with the DEP to resolve this issue.  In the opinion of management,
   any existing environmental issues will not be significant to the future
   financial condition or results of operations of the Company.
    
    
   Leases-
    
   The Company has entered into operating lease agreements for the use of
   computer and office equipment, facilities and motor vehicles.  For fiscal
   1998, 1997 and 1996, these lease payments were $2,058, $1,378 and $1,092,
   respectively.
    
   Lease payment amounts projected for each of the five years ending September
   30, 1999 through 2003, are as follows:
    
                                       Projected Lease Payments
                                  ----------------------------------
                                             Year                 Total      
                                             ----                -------     
                                             1999                $ 1,700     
                                             2000                  1,600     
                                             2001                  1,600     
                                             2002                  1,600     
                                             2003                  1,600     
                                                                 -------     
                                                                 $ 8,100     
                                                                 =======     
    
    
   Legal proceedings-
    
   In November 1995, certain Connecticut plumbers and HVAC contractors filed a
   class action suit against CNG and the State's two other LDCs, claiming that
   the LDCs engaged in unfair trade practices relating to customer service
   work.  The plumbers and contractors are currently asserting claims for
   profits which they allege were lost during prior years.  In January 1998,
   the court granted CNG's motion to strike all but one count of the
   complaint:  the antitrust conspiracy claim.  The plumbers and contractors
   subsequently filed two additional lawsuits against CNG and the other LDCs
   alleging violations arising from the same business activities as in the
   first lawsuit.  All of the cases were assigned to the State's complex
   litigation docket.  A trial date of August 1999 has been set in one of the
   cases against CNG.  There has not been any settlement demand or any formal
   statement of alleged damages.  As a result, management cannot estimate the
   Company's potential exposure related to these claims.  The Company is
   vigorously defending this matter.
    
   In July 1997, the Company filed suit in State court against another
   Connecticut LDC seeking to enjoin that company from serving retail
   customers in a town in which the Company currently serves customers.  In
   its decision issued in October 1998, the court upheld the Company's
   franchise rights in the disputed area.
    
   The Company is not a party to any other litigation other than ordinary
   routine litigation incident to the operations of the Company or its
   subsidiaries.  In the opinion of management, the resolution of such
   litigation will not have a material adverse effect on the Company's
   financial condition or results of operations.
    
    
   12.  Segment Information:
    
   The Company operates in two segments:  regulated gas related activities and
   unregulated diversified businesses.  Gas related activities consist<PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

   primarily of natural gas distribution to residential, commercial and
   industrial customers.  Diversified businesses consist primarily of district
   heating and cooling services.
    
   Intersegment sales are priced in accordance with terms of existing tariffs
   and contracts.  Information about the Company's operations, by business
   segment, is presented below:
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Continued)
   (In thousands of dollars, except per share amounts)
   September 30, 1998
    

<TABLE>
    <S>                                              <C>           <C>          <C>
                                                        1998          1997         1996  
                                                     --------      --------     -------- 
    Revenues:
          Gas related activities                     $266,418      $287,401     $297,016 
          Diversified businesses                       21,049        22,636       23,368 
          Intersegment revenues                        (4,719)       (4,742)      (5,281)
                                                     --------      --------     -------- 
            Total                                    $282,748      $305,295     $315,103 
                                                     ========      ========     ======== 
    Pre-Tax Operating Income:
          Gas related activities                     $ 39,342      $ 42,839     $ 41,130 
          Diversified businesses                        2,323         1,734        3,479 
                                                     --------      --------     -------- 
            Total                                      41,665        44,573       44,609 
          Income taxes                                 12,210        16,959       14,365 
                                                     --------      --------     -------- 
            Consolidated Operating Income            $ 29,455      $ 27,614     $ 30,244 
                                                     ========      ========     ======== 
    Depreciation and Amortization:
          Gas related activities                     $ 17,087      $ 16,019     $ 15,399 
          Diversified businesses                        2,218         2,165        2,366 
                                                     --------      --------     -------- 
            Total                                    $ 19,305      $ 18,184     $ 17,765 
                                                     ========      ========     ======== 
    Property Additions:
          Gas related activities                     $ 21,189      $ 23,726     $ 23,894 
          Diversified businesses                        1,246           867          387 
                                                     --------      --------     -------- 
            Total                                    $ 22,435      $ 24,593     $ 24,281 
                                                     ========      ========     ======== 
    Identifiable Assets:
          Gas related activities                     $382,669      $382,289     $380,805 
          Diversified businesses                       76,512        62,084       62,769 
                                                     --------      --------     -------- 
            Consolidated Identifiable Assets         $459,181      $444,373     $443,574 
                                                     ========      ========     ======== 
</TABLE>
    
    
   13.  Subsequent Events:
    

   Long-term Debt 

   In October 1998, TEN issued $15,000 of Senior Secured Notes, due in 2010,
   at 6.9%.  The full amount of the principal is due at maturity.  The
   proceeds were used to repay short-term debt that was used to finance the
   purchase and repowering of the Hartford Hospital cogeneration facility. 
   The September 30, 1998, financial statements reflect the classification of
   the debt that was retired as a result of this refinancing as long-term
   debt.
    <PAGE>


   NOTES TO FINANCIAL STATEMENTS (Concluded)
   (In thousands of dollars, except per share amounts)
   September 30, 1998

   In October 1998, the Company issued a total of $20,000 of MTNs at 6.04%,
   due 2008.  These MTNs are unsecured and have no call provisions or sinking
   fund requirements.  The proceeds were used primarily to refinance $15,800
   of short-term debt that was outstanding at fiscal year-end 1998.  The long-
   term debt amounts shown on the balance sheet and statement of
   capitalization at September 30, 1998, include $15,800 of these MTNs.


   14.  Quarterly Results (Unaudited):
    
   The following table sets forth information with respect to the consolidated
   quarterly results of operations for the fiscal years 1998 and 1997.  The
   amounts are unaudited but, in the opinion of management, present fairly the
   results of operations.
     
   The quarterly results of operations reflect the seasonal nature of the
   Company's operations.  The results of any one quarter during the year are
   not indicative of the results of future quarters or the results of the
   Company's fiscal year.
    
<TABLE>
                        Consolidated Results of Operations
                        ----------------------------------
   -----------------------------------------------------------------------------
   <S>                           <C>          <C>         <C>         <C>
                                 December 31,  March 31,   June 30,   September 30,
   Quarter Ended                      1997        1998        1998          1998   
   -----------------------------------------------------------------------------
      Operating Revenues            $ 92,396    $105,416    $ 48,370      $ 36,566 

      Operating Income (Loss)       $ 11,472    $ 14,169    $  3,775      $     39 

      Net Income (Loss)             $  8,123    $  9,727    $    179      $ (2,833)

      Net Income (Loss) Per
         Common Share*              $    .85    $   1.12    $    .02      $   (.33)

   -----------------------------------------------------------------------------
                                 December 31,  March 31,   June 30,   September 30,
   Quarter Ended                      1996        1997        1997          1997   
   -----------------------------------------------------------------------------
      Operating Revenues            $ 89,269    $124,681    $ 53,234      $ 38,111 

      Operating Income (Loss)       $  9,421    $ 16,050    $  3,342    $   (1,199)

      Net Income (Loss)             $  6,716    $ 12,689    $    658      $ (2,988)

      Net Income (Loss) Per
         Common Share*              $    .63    $   1.19    $    .06      $   (.28)


   * The sum of quarterly earnings per share does not equal annual earnings
   per share as reported on the statements of income because of quarterly
   changes in weighted average shares outstanding. 
    <PAGE>


   ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   ------------------------------------------------------------
    
    
   There have been no disagreements required to be disclosed under this item.
    
    <PAGE>


                                     PART III
    
    
    
   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   -----------------------------------------------------------
    
       The information required by this item regarding directors of the
       registrant and the disclosure of delinquent filers pursuant to Item 405
       of Regulation S-K is contained in the section entitled "Biographical
       Information" in the Company's proxy statement for its February 1999
       Annual Meeting, which the Company files with the Securities and Exchange
       Commission pursuant to Regulation 14A of the Securities Exchange Act of
       1934.  This information is hereby incorporated by reference.  The
       information required by this item regarding executive officers of the
       registrant is included in Part I hereof.
    
    
   ITEM 11. EXECUTIVE COMPENSATION
   -------------------------------
    
       The information required by this item is contained in the sections
       entitled "Compensation of Directors","Compensation Committee Report on
       Executive Compensation", "Compensation Committee Interlocks and Insider
       Participation", "Summary Executive Compensation", "Change of Control",
       "Long Term Incentive Plan", "Retirement Plans" and "Corporate
       Performance Graph" in the Company's proxy statement for its February
       1999 Annual Meeting, which the Company files with the Securities and
       Exchange Commission pursuant to Regulation 14A.  This information is
       hereby incorporated by reference.
    
    
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   -----------------------------------------------------------------------
    
       The information required by this item is contained in the section
       entitled "Ownership of Company Stock" in the Company's proxy statement
       for its February 1999 Annual Meeting, which the Company files with the
       Securities and Exchange Commission pursuant to Regulation 14A.  This
       information is hereby incorporated by reference.
    
    
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
   -------------------------------------------------------
    
       The information required by this item is contained in the section
       entitled "Certain Relationships and Related Transactions" in the
       Company's proxy statement for its February 1999 Annual Meeting, which<PAGE>


       the Company files with the Securities and Exchange Commission pursuant
       to Regulation 14A.  This information is hereby incorporated by
       reference.
    
    
    <PAGE>


                                      PART IV
    
   ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
   -------------------------------------------------------------------------
    
   (a)  1. Financial Statements:
           --------------------
    
           The consolidated balance sheets, statements of income, statements of
           cash flows, statements of capitalization and statements of common
           stock equity, together with the notes to the financial statements
           and report thereon of Arthur Andersen LLP dated October 27, 1998,
           are included in Part II, Item 8 herein.
    
        2. Financial Statement Schedules:
           -----------------------------
    
           The following financial statement schedules included herein under
           Item 14(d) are filed as part of this report.
    
              II  Valuation and Qualifying Accounts and Reserves for the fiscal
                  years ended September 30, 1998, 1997 and 1996
    
             Schedules I, III, IV, and V are not submitted because they are not
           applicable or the information required to be included therein is
           contained in the financial statements and footnotes.
    
        3. Exhibits
           --------
    
      Exhibit
      Number
   ------------
    
    3   Articles of Incorporation and By-Laws
    
             (1)  Amended and Restated Certificate of Incorporation of the
                  Company, filed as Exhibit 3.2 to the Company's Registration
                  Statement on Form S-4, Amendment No. 1, filed with the
                  Commission on December 27, 1996 (Commission File No. 333-
                  16297)
    
             (2)  Amended and Restated By-Laws of the Company, filed as Exhibit
                  No. 3.4 to the Company's Registration Statement on Form S-4,
                  Amendment No. 1, filed with the Commission on December 27,
                  1996 (Commission File No. 333-16297)
    
    <PAGE>


    4   Instruments Defining Rights of Security Holders, Including Indentures
    
             (1)  Indenture of Mortgage and Deed of Trust between The Hartford
                  Gas Company and The First National Bank of Hartford, Trustee
                  dated February 1, 1947, filed as Exhibit No. 2.2 to the
                  Connecticut Natural Gas Corporation's Registration Statement
                  on Form S-7 filed with the Commission on December 8, 1970
                  (Commission File No. 2-38993)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
    4        (2)  In addition to the Indenture of Mortgage and Deed of Trust
                  referred to in 4(1) above, there have been sixteen
                  supplemental indentures thereto, all of which have been filed
                  with the Commission as follows:
    
                  (a)  Supplemental indentures 1-9 filed as Exhibit No. 2.2 to
                       the Connecticut Natural Gas Corporation's Registration
                       Statement on Form S-7 filed with the Commission on
                       December 8, 1970 (Commission File No. 2-38993)
    
                  (b)  Tenth Supplemental Indenture filed as Exhibit No. 2.3 to
                       the Connecticut Natural Gas Corporation's Registration
                       Statement on Form S-7 filed with the Commission on March
                       3, 1972 (Commission File No. 2-43286)
    
                  (c)  Eleventh Supplemental Indenture filed as Exhibit No. V
                       to the Connecticut Natural Gas Corporation's Annual
                       Report on Form 10-K for the fiscal year ended December
                       31, 1974, filed with the Commission in March, 1975
                       (Commission File No. 1-7727)
    
                  (d)  Twelfth Supplemental Indenture filed as Exhibit No. 4(h)
                       to the Connecticut Natural Gas Corporation's
                       Registration Statement on Form S-7 filed with the
                       Commission on December 23, 1981 (Commission File No. 2-
                       75457)
    
                  (e)  Thirteenth Supplemental Indenture filed as Exhibit No. 4
                       to the Connecticut Natural Gas Corporation's Quarterly
                       Report on Form 10-Q for the quarter ended June 30, 1982,
                       filed with the Commission in August, 1982 (Commission
                       File No. 1-7727)
    
                  (f)  Fourteenth Supplemental Indenture filed as Exhibit No.
                       4(iii) to the Connecticut Natural Gas Corporation's
                       Current Report on Form 8-K, dated August 28, 1986, filed
                       with the Commission in September, 1986 (Commission File
                       No. 1-7727)
    
                  (g)  Fifteenth Supplemental Indenture filed as Exhibit No.
                       4(iii) to the Connecticut Natural Gas Corporation's<PAGE>


                       Current Report on Form 8-K, dated December 8, 1987,
                       filed with the Commission in December, 1987 (Commission
                       File No. 1-7727)
    
                  (h)  Sixteenth Supplemental Indenture filed as Exhibit No.
                       4(ii)(h) to the Connecticut Natural Gas Corporation's
                       Quarterly Report on Form 10-Q for the quarter ended
                       September 30, 1989, filed with the Commission in
                       November, 1989 (Commission File No. 1-7727)<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
    
    4        (3)  Rights Agreement (including a Form of Certificate of Adoption
                  of Amendment to the Amended and Restated Articles of
                  Incorporation of the Company as Exhibit A thereto, a Form of
                  Right Certificate as Exhibit B thereto and a Summary of
                  Rights to Purchase Preferred Stock as Exhibit C thereto),
                  filed as Exhibit 4.1 to the CTG Resources, Inc.'s
                  Registration Statement on Form 8-A, filed with the Commission
                  on December 1, 1998 (Commission File No.1-12859)

    9   Voting Trust Agreement
           Not applicable
    
   10   Material Contracts
    
        Natural Gas Supply, Storage and Transportation
        ----------------------------------------------

            (1)   Canadian gas transportation contract (rate schedule CGT-NE)
                  between the Connecticut Natural Gas Corporation and
                  Tennessee, dated December 1, 1987, filed as Exhibit No.
                  10(xxiii) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1987, filed with the Commission on March 29, 1988 (Commission
                  File No. 1-7727)
    
            (2)   Gas purchase contract between the Connecticut Natural Gas
                  Corporation and TransCanada Pipelines Limited, dated
                  September 14, 1987, filed as Exhibit No. 10(xxiv) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1987, filed with
                  the Commission on March 29, 1988 (Commission File No. 1-7727)
    
            (3)   Gas sales agreement between the Connecticut Natural Gas
                  Corporation and Boundary Gas, Inc., dated September 14, 1987,
                  filed as Exhibit No. 10(xxv) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1987, filed with the Commission on March
                  29, 1988 (Commission File No. 1-7727)
    
            (4)   Precedent Agreement to First Amendment, dated September 14,<PAGE>


                  1988, to the Gas Sales Agreement between the Connecticut
                  Natural Gas Corporation and Boundary Gas, Inc., dated
                  September 14, 1987, filed as Exhibit No. 10(xxxi) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1989, filed with
                  the Commission March 28, 1990 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10       (5)   First Amendment, dated January 1, 1990, to the Gas Sales
                  Agreement between the Connecticut Natural Gas Corporation and
                  Boundary Gas, Inc., dated September 14, 1987, filed as
                  Exhibit 10(xxxii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the  fiscal year
                  ended December 31, 1989, filed with the Commission on March
                  28, 1990 (Commission File No. 1-7727)
    
            (6)   Amendment to Phase 2 Gas Sales Agreement, dated August 20,
                  1997, between the Connecticut Natural Gas Corporation and
                  Boundary Gas, Inc., filed as Exhibit No. 10(108) to the CTG
                  Resources, Inc.'s Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1997, filed with the Commission on
                  December 19, 1997 (Commission File No. 1-12859)
    
            (7)   Gas Transportation Contract for Firm Reserved Service, dated
                  February 7, 1991, between the Connecticut Natural Gas
                  Corporation and the Iroquois Gas Transmission System, L.P.,
                  filed as Exhibit No. 10(xxxvii) to the Connecticut Natural
                  Gas Corporation's Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1992, filed with the Commission on
                  December 23, 1992, (Commission File No. 1-7727)
    
            (8)   Gas Sales Agreement No. 1, dated February 7, 1991, between
                  the Connecticut Natural Gas Corporation and Alberta Northeast
                  Gas Limited, filed as Exhibit No. 10(xxxviii) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1992, filed with
                  the Commission on December 23, 1992, (Commission File No. 1-
                  7727)
    
            (9)   Amendment to ANE Gas Sales Agreement No. 1, dated August 19,
                  1997, between the Connecticut Natural Gas Corporation and
                  Alberta Northeast Gas Limited, filed as Exhibit No. 10(106)
                  to the CTG Resources, Inc.'s Annual Report on Form 10-K for
                  the fiscal year ended September 30, 1997, filed with the
                  Commission on December 19, 1997 (Commission File No. 1-12859)
    
           (10)   Gas Sales Agreement No. 2, dated February 7, 1991, between
                  the Connecticut Natural Gas Corporation and Alberta Northeast
                  Gas Limited, filed as Exhibit No. 10(xxxix) to the<PAGE>


                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1992, filed with
                  the Commission on December 23, 1992, (Commission File No. 1-
                  7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (11)   Amendment to ANE Gas Sales Agreement No. 2, dated August 19,
                  1997, between the Connecticut Natural Gas Corporation and
                  Alberta Northeast Gas Limited, filed as Exhibit No. 10(107)
                  to the CTG Resources, Inc.'s Annual Report on Form 10-K for
                  the fiscal year ended September 30, 1997, filed with the
                  Commission on December 19, 1997 (Commission File No. 1-12859)
    
           (12)   Gas Sales Agreement (ProGas), dated February 7, 1991, between
                  the Connecticut Natural Gas Corporation and Alberta Northeast
                  Gas Limited, filed as Exhibit No. 10(xl) to the Connecticut
                  Natural Gas Corporation's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1992, filed with the
                  Commission on December 23, 1992, (Commission File No. 1-7727)
    
           (13)   Gas Sales Agreement (ATCOR), dated February 7, 1991, between
                  the Connecticut Natural Gas Corporation and Alberta Northeast
                  Limited, filed as Exhibit No. 10(xli) to the Connecticut
                  Natural Gas Corporation's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1992, filed with the
                  Commission on December 23, 1992, (Commission File No. 1-7727)
    
           (14)   Gas Sales Agreement (AEC), dated February 7, 1991, between
                  the Connecticut Natural Gas Corporation and Alberta Northeast
                  Gas Limited, filed as Exhibit No. 10(xlii) to the Connecticut
                  Natural Gas Corporation's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1992, filed with the
                  Commission on December 23, 1992, (Commission File No. 1-7727)
    
           (15)   Gas Transportation Contract for Firm Reserved Service, dated
                  October 20, 1992, between the Connecticut Natural Gas
                  Corporation and the Iroquois Gas Transmission System, L.P.,
                  filed as Exhibit No. 10(xlvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1992, filed with the Commission on
                  December 23, 1992, (Commission File No. 1-7727)

           (16)   Service Agreement #89102 (Rate Schedule AFT-1), dated June 1,
                  1993, between the Connecticut Natural Gas Corporation and
                  Algonquin Gas Transmission Company, filed as Exhibit No.
                  10(xxxviii) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1993, filed with the Commission December 28,<PAGE>


                  1993 (Commission File No. 1-7727)
    
           (17)   Service Agreement #93205 (Rate Schedule AFT-1), dated June 1,
                  1993, between the Connecticut Natural Gas Corporation and
                  Algonquin Gas Transmission Company, filed as Exhibit No.
                  10(xl) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1993, filed with the Commission December 28, 1993 (Commission
                  File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (18)   Service Agreement #.6426, dated June 1, 1993, between the
                  Connecticut Natural Gas Corporation and Transcontinental Gas
                  Pipe Line Corporation, filed as Exhibit No. 10(xlv) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1993, filed with
                  the Commission December 28, 1993 (Commission File No. 1-7727)
    
           (19)   Service Agreement (Rate Schedule FTNN), dated October 1,
                  1993, between the Connecticut Natural Gas Corporation and CNG
                  Transmission Corporation, filed as Exhibit No. 10(liii) to
                  the Connecticut Natural Gas Corporation's Annual Report on
                  Form 10-K for the fiscal year ended September 30, 1993, filed
                  with the Commission December 28, 1993 (Commission File No. 1-
                  7727)
     
           (20)   Service Agreement (Rate Schedule GSS), dated November 1,
                  1993, between the Connecticut Natural Gas Corporation and CNG
                  Transmission Corporation, filed as Exhibit No. 10(liv) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1993, filed with
                  the Commission December 28, 1993 (Commission File No. 1-7727)
    
           (21)   Gas Storage Contract, dated February 16, 1990, between the
                  Connecticut Natural Gas Corporation and ENDEVCO Industrial
                  Gas Sales Company, filed as Exhibit No. 10(lxix) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1994, filed with
                  the Commission December 27, 1994 (Commission File No. 1-7727)
    
           (22)   Service Agreement #86006 (Rate Schedule AFT-1), dated
                  September 1, 1994, between the Connecticut Natural Gas
                  Corporation and Algonquin Gas Transmission Company, filed as
                  Exhibit No. 10(lxxi) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, filed with the Commission August 2, 1995
                  (Commission File No. 1-7727)
    
           (23)   Service Agreement #93005 (Rate Schedule AFT-1), dated
                  September 1, 1994, between the Connecticut Natural Gas
                  Corporation and Algonquin Gas Transmission Company, filed as
                  Exhibit No. 10(lxxii) to the Connecticut Natural Gas<PAGE>


                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, filed with the Commission August 2, 1995
                  (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (24)   Service Agreement #9B103 (Rate Schedule AFT-1), dated
                  September 1, 1994, between the Connecticut Natural Gas
                  Corporation and Algonquin Gas Transmission Company, filed as
                  Exhibit No. 10(lxxiii) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, filed with the Commission August 2, 1995
                  (Commission File No. 1-7727)
    
           (25)   Service Agreement #9W005 (Rate Schedule AFT-1), dated
                  September 1, 1994, between the Connecticut Natural Gas
                  Corporation and Algonquin Gas Transmission Company, filed as
                  Exhibit No. 10(lxxiv) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, filed with the Commission August 2, 1995
                  (Commission File No. 1-7727)
    
           (26)   Gas Storage Agreement No. 1626 (Rate Schedule FS), dated
                  September 1, 1993, by and between the Connecticut Natural Gas
                  Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(lxix) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    
           (27)   Gas Transportation Agreement No. 2498 (Rate Schedule FT-A),
                  dated September 1, 1993, by and between the Connecticut
                  Natural Gas Corporation and Tennessee Gas Pipeline Company,
                  filed as Exhibit No. 10(lxx) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    
           (28)   Gas Transportation Agreement No. 3900 (Rate Schedule FT-A),
                  dated October 1, 1993, by and between the Connecticut Natural
                  Gas Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(lxxi) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    
           (29)   Gas Transportation Agreement No. 3901 (Rate Schedule FT-A),<PAGE>


                  dated October 1, 1993, by and between the Connecticut Natural
                  Gas Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(lxxii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (30)   Gas Transportation Agreement No. 2075 (Rate Schedule FT-A),
                  dated September 1, 1993, by and between the Connecticut
                  Natural Gas Corporation and Tennessee Gas Pipeline Company,
                  filed as Exhibit No. 10(lxxiii) to the Connecticut Natural
                  Gas Corporation's Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1995, filed with the Commission
                  December 18, 1995 (Commission File No. 1-7727)
    
           (31)   Gas Transportation Agreement (FT-A Rate Schedule, Service
                  Package No. 86) dated September 1, 1993, between the
                  Connecticut Natural Gas Corporation and Tennessee Gas
                  Pipeline Company, filed as Exhibit No. 10(lxxxviii) to the
                  Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1996, filed with the
                  Commission July 29, 1996 (Commission File No. 1-7727)

           (32)   Gas Transportation Agreement (FT-A Rate Schedule, Service
                  Package No. 1625) dated September 1, 1993, between the
                  Connecticut Natural Gas Corporation and Tennessee Gas
                  Pipeline Company, filed as Exhibit No. 10(lxxxix) to the
                  Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1996, filed with the
                  Commission July 29, 1996 (Commission File No. 1-7727)
     
           (33)   Gas Transportation Agreement (FT-A Rate Schedule, Service
                  Package No. 2655) dated September 1, 1993, between the
                  Connecticut Natural Gas Corporation and Tennessee Gas
                  Pipeline Company, filed as Exhibit No. 10(xc) to the
                  Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1996, filed with the
                  Commission July 29, 1996 (Commission File No. 1-7727)
    
           (34)   Gas Storage Contract (Rate Schedule FS, Service Package No.
                  1626) dated December 1, 1994, between the Connecticut Natural
                  Gas Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(xciii) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1996, filed with the Commission July 29, 1996
                  (Commission File No. 1-7727)
    
           (35)   Amendment No.1-A to Gas Storage Contract (Rate Schedule FS,
                  Service Package No. 1626) dated July 1, 1995 between the
                  Connecticut Natural Gas Corporation and Tennessee Gas
                  Pipeline Company, filed as Exhibit No. 10(xciv) to the
                  Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1996, filed with the
                  Commission July 29, 1996 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (36)   Service Agreement (#N01719, FST Service) dated March 28, 1996
                  between the Connecticut Natural Gas Corporation and National
                  Fuel Gas Supply Corporation, filed as Exhibit No. 10(xcv) to
                  the Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1996, filed with the
                  Commission July 29, 1996 (Commission File No. 1-7727)
    
           (37)   Amendment No. 1 to Service Agreement (#N01719, FST Service)
                  dated April 1, 1996, between the Connecticut Natural Gas
                  Corporation and National Fuel Gas Supply Corporation, filed
                  as Exhibit No. 10(xcvi) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1996, filed with the Commission July 29, 1996
                  (Commission File No. 1-7727)
    
           (38)   Service Agreement (#O01718, FSS Service) dated March 28, 1996
                  between the Connecticut Natural Gas Corporation and National
                  Fuel Gas Supply Corporation, filed as Exhibit No. 10(xcvii)
                  to the Connecticut Natural Gas Corporation's Quarterly Report
                  on Form 10-Q for the quarter ended June 30, 1996, filed with
                  the Commission July 29, 1996 (Commission File No. 1-7727)
    
           (39)   Amendment No. 1 to Service Agreement (#O01718, FSS Service)
                  dated April 1, 1996, between the Connecticut Natural Gas
                  Corporation and National Fuel Gas Supply Corporation, filed
                  as Exhibit No. 10(xcviii) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1996, filed with the Commission July 29, 1996
                  (Commission File No. 1-7727)

           (40)   Service Agreement (#400507, Rate Schedule FSS-1), dated       
                  November 15,1996, between the Connecticut Natural Gas
                  Corporation and Texas Eastern Transmission Corporation, filed
                  as Exhibit No. 10(civ) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

           (41)   Service Agreement (#800424, Rate Schedule CDS), dated         
                  November 15, 1996, between the Connecticut Natural Gas
                  Corporation and Texas Eastern Transmission Corporation, filed<PAGE>


                  as Exhibit No. 10(cvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (42)   Storage Service Agreement (#300094, Rate Schedule GSS), dated
                  April 1, 1997, between the Connecticut Natural Gas
                  Corporation and CNG Transmission Corporation, filed as
                  Exhibit No. 10(109) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)
    
           (43)   Seasonal Transportation Service Agreement (#200106, Rate
                  Schedule FT), dated April 1, 1997, between the Connecticut
                  Natural Gas Corporation and CNG Transmission Corporation,
                  filed as Exhibit No. 10(110) to the CTG Resources, Inc.'s
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1997, filed with the Commission on December 19,
                  1997 (Commission File No. 1-12859)
    
           (44)   Storage Service Agreement (#1623, Rate Schedule SS-NE), dated
                  September 1, 1993, between the Connecticut Natural Gas
                  Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(111) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)
    
           (45)   Transportation Service Agreement (#1627, Rate Schedule FT-A),
                  dated September 1, 1993, between the Connecticut Natural Gas
                  Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(112) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)
    
           (46)   Transportation Service Agreement (#10781, Rate Schedule FT-
                  A), dated June 1, 1995, between the Connecticut Natural Gas
                  Corporation and Tennessee Gas Pipeline Company, filed as
                  Exhibit No. 10(113) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)
    
           (47)   Amended Transportation Service Agreement (#10781, Rate<PAGE>


                  Schedule FT-A), dated November 21, 1996, between the
                  Connecticut Natural Gas Corporation and Tennessee Gas
                  Pipeline Company, filed as Exhibit No. 10(114) to the CTG
                  Resources, Inc.'s Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1997, filed with the Commission on
                  December 19, 1997 (Commission File No. 1-12859)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (48)   Service Agreement (#830035, Rate Schedule FT-1), dated
                  November 15, 1996, between the Connecticut Natural Gas
                  Corporation and Texas Eastern Transmission Corporation, filed
                  as Exhibit No. 10(116) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)
    
           (49)   Service Agreement (#400223, Rate Schedule SS-1), dated
                  November 15, 1996, between the Connecticut Natural Gas
                  Corporation and Texas Eastern Transmission Corporation, filed
                  as Exhibit No. 10(117) to the CTG Resources, Inc.'s Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1997, filed with the Commission on December 19, 1997
                  (Commission File No. 1-12859)

           (50)   Service Agreement (#800294R, Rate Schedule FT-1), dated May
                  20, 1998, between Connecticut Natural Gas Corporation and
                  Texas Eastern Transmission Corporation, filed as Exhibit No.
                  10(128) to the CTG Resources, Inc.'s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)


           (51)   Service Agreement (#800295R, Rate Schedule FT-1), dated May
                  20, 1998, between Connecticut Natural Gas Corporation and
                  Texas Eastern Transmission Corporation, filed as Exhibit No.
                  10(129) to the CTG Resources, Inc.'s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)


           (52)   Service Agreement (#830047, Rate Schedule FT-1), dated May
                  20, 1998, between Connecticut Natural Gas Corporation and
                  Texas Eastern Transmission Corporation, filed as Exhibit No.
                  10(130) to the CTG Resources, Inc.'s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)<PAGE>
<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
        District Heating and Cooling
        ----------------------------

   10      (53)   Steam Supply Agreement between The Hartford Steam Company and
                  Independent Energy Operations, Inc., dated December 3, 1987,
                  filed as Exhibit No. 10(xxv) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1989, filed with the Commission on March
                  28, 1990 (Commission File No. 1-7727)
    
           (54)   Steam and Chilled Water Supply Agreement, dated May 28, 1986,
                  between Capitol District Energy Center Cogeneration
                  Associates and Energy Networks, Incorporated, filed as
                  Exhibit No. 10(xxxvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1993, filed with the Commission December
                  28, 1993 (Commission File No. 1-7727)
    
    
           (55)*  Asset Purchase Agreement, dated June 26, 1998, by and among
                  The Hartford Steam Company, CCF-1, Inc. and Kenetech
                  Facilities Management, Inc.


           (56)*  Assignment and Consent, dated June 26, 1998, by and among The
                  Hartford Steam Company, CCF-1, Inc. and The Connecticut Light
                  and Power Company<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
        Financing
        ---------

   10      (57)   Capital Contribution Support Agreement, dated April 15, 1993,
                  among Connecticut Natural Gas Corporation, ENI Transmission
                  Company and Bank of Montreal, filed as Exhibit No. 10(l) to
                  the Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1993, filed with the
                  Commission on August 3, 1993 (Commission File No. 1-7727)
    
           (58)   Secured Note Purchase Agreement, dated July 15, 1993, between
                  the CNG Realty Corp. and the Aid Association for Lutherans,
                  filed as Exhibit No. 10(xlix) to the Connecticut Natural Gas
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1993, filed with the Commission on August 3,
                  1993 (Commission File No. 1-7727)

           (59)   Three-year Revolving Credit Agreement between TEN and Fleet
                  National Bank, filed as Exhibit No. 99(B)(2) to the CTG
                  Resources, Inc.'s Issuer Tender Offer Statement on Schedule
                  13E-4, filed with the Commission on October 2, 1997
                  (Commission File No. 5-51659)

           (60)   364-Day Revolving Credit Agreement between and TEN and Fleet
                  National Bank, filed as Exhibit No. 99(B)(3) to the CTG
                  Resources, Inc.'s Issuer Tender Offer Statement on Schedule
                  13E-4, filed with the Commission on October 2, 1997
                  (Commission File No. 5-51659)

           (61)*  Reimbursement Agreement (Including Irrevocable Letter of
                  Credit), dated August 1, 1998, between The Energy Network,
                  Inc. and Fleet National Bank

           (62)   Note Purchase Agreement among TEN, Metropolitan Life
                  Insurance Company and Texas Life Insurance Company, filed as
                  Exhibit No. 99(B)(4) to the CTG Resources, Inc.'s Issuer
                  Tender Offer Statement on Schedule 13E-4, filed with the
                  Commission on October 2, 1997 (Commission File No. 5-51659)

           (63)*  Note Purchase Agreement, dated October 14, 1998, between The
                  Energy Network, Inc. and Metropolitan Life Insurance Company<PAGE>


     
           (64)   Revolving Credit Agreement, dated March 30, 1993, between the
                  Connecticut Natural Gas Corporation and The First National
                  Bank of Boston, filed as Exhibit No. 10(xlviii) to the
                  Connecticut Natural Gas Corporation's Quarterly Report on
                  Form 10-Q for the quarter ended March 31, 1993, filed with
                  the Commission on May 3, 1993 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (65)   First Amendment to Credit Agreement, dated March 30, 1998,
                  among Connecticut Natural Gas Corporation and BankBoston,
                  N.A., filed as Exhibit No. 10(124) to the CTG Resources,
                  Inc.'s Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1998, filed with the Commission on August 14, 1998
                  (Commission File No. 1-12859)

           (66)   Medium Term Notes, Series A, Placement Agency Agreement among
                  Connecticut Natural Gas Corporation, PaineWebber Incorporated
                  and Smith Barney, Harris Upham & Co. Incorporated, dated
                  November 1, 1991, filed as Exhibit No. 10(xxxix) to the
                  Connecticut Natural Gas Corporation's Transition Report on
                  Form 10-K for the period October 1, 1990 to September 30,
                  1991, filed with the Commission on December 23, 1991,
                  (Commission File No. 1-7727)
    
           (67)   Issuing and Paying Agency Agreement between The Connecticut
                  National Bank and Connecticut Natural Gas Corporation, for
                  the Medium Term Notes, Series A, dated November 1, 1991,
                  filed as Exhibit No. 10(xl) to the Connecticut Natural Gas
                  Corporation's Transition Report on Form 10-K for the period
                  October 1, 1990 to September 30, 1991, filed with the
                  Commission on December 23, 1991, (Commission File No. 1-7727)
    
           (68)   Medium Term Notes, Series B, Placement Agency Agreement among
                  Connecticut Natural Gas Corporation, Smith Barney Inc., and
                  A.G. Edwards & Sons, Inc., dated June 14, 1994, filed as
                  Exhibit No. 10(lxvi) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1994, filed with the Commission December
                  27, 1994 (Commission File No. 1-7727)
    
           (69)   Medium Term Notes, Series B, Amended and Restated Placement
                  Agency Agreement among Connecticut Natural Gas Corporation,
                  PaineWebber Incorporated, and A.G. Edwards & Sons, Inc.,
                  dated August 13, 1997, filed as Exhibit No. 10(119) to the
                  CTG Resources, Inc.'s Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1997, filed with the
                  Commission on December 19, 1997 (Commission File No. 1-12859)
     
           (70)   Issuing and Paying Agency Agreement between Shawmut Bank<PAGE>


                  Connecticut, National Association, and Connecticut Natural
                  Gas Corporation, for Medium Term Notes, Series B, dated June
                  14, 1994, filed as Exhibit No. 10(lxvii) to the Connecticut
                  Natural Gas Corporation's Annual Report on Form 10-K for the
                  fiscal year ended September 30, 1994, filed with the
                  Commission December 27, 1994 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (71)   First Amendment to Issuing and Paying Agency Agreement, dated
                  August 13, 1997, filed as Exhibit No. 10(118) to the CTG
                  Resources, Inc.'s Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1997, filed with the Commission on
                  December 19, 1997 (Commission File No. 1-12859)
     
           (72)   Forward Equity Purchase Agreement, dated October 1, 1997,
                  between CTG and TEN, filed as Exhibit No. 99(C) to the CTG
                  Resources, Inc.'s Issuer Tender Offer Statement on Schedule
                  13E-4, filed with the Commission on October 2, 1997
                  (Commission File No. 5-51659)
    
           (73)*  First Amendment to the Forward Equity Purchase Agreement,
                  dated October 14, 1998, between CTG Resources, Inc. and The
                  Energy Network, Inc.<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
        Employment, Compensation and Benefits
        -------------------------------------

   10      (74)   Connecticut Natural Gas Corporation Executive Restricted
                  Stock Plan, filed as Exhibit A to the Connecticut Natural Gas
                  Corporation's definitive proxy statement dated March 26,
                  1991, filed with the Commission on March 26, 1991 (Commission
                  File No. 1-7727)
    
           (75)   First Amendment to Connecticut Natural Gas Corporation
                  Executive Restricted Stock Plan, dated March 25, 1997, filed
                  as Exhibit No. 10(cxiv) to the CTG Resources, Inc.'s
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  1997, filed with the Commission on August 14, 1997
                  (Commission File No. 1-12859)

           (76)   Second Amendment to Restricted Stock Agreement (Under the
                  Connecticut Natural Gas Corporation Executive Restricted
                  Stock plan), dated June 27, 1995, filed as Exhibit No.
                  10(lxxxii) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1995, filed with the Commission December 18,
                  1995 (Commission File No. 1-7727)
    
           (77)   Third Amendment to Restricted Stock Agreement (Under the
                  Connecticut Natural Gas Corporation Executive Restricted
                  Stock plan), dated June 27, 1995, filed as Exhibit No.
                  10(lxxxiii) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1995, filed with the Commission December 18,
                  1995 (Commission File No. 1-7727)
    
           (78)   Amended and Restated CNG Officers' Retirement Plan, dated
                  June 28, 1994, filed as Exhibit No. 10(liii) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1994, filed with
                  the Commission December 27, 1994 (Commission File No. 1-7727)
    
           (79)   Amendment to Connecticut Natural Gas Corporation Officers'
                  Retirement Plan, dated June 27, 1995, filed as Exhibit No.
                  10(lxxix) to the Connecticut Natural Gas Corporation's Annual<PAGE>


                  Report on Form 10-K for the fiscal year ended September 30,
                  1995, filed with the Commission December 18, 1995 (Commission
                  File No. 1-7727)
    
           (80)   Amendment to Connecticut Natural Gas Corporation Officers'
                  Retirement Plan, dated March 25, 1997, filed as Exhibit No.
                  10(cxii) to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1997, filed with the
                  Commission on August 14, 1997 (Commission File No. 1-12859)<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (81)   Amendment to Connecticut Natural Gas Corporation Officer's
                  Retirement Plan, dated January 27, 1998, filed as Exhibit No.
                  10(127) to the CTG Resources, Inc.'s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)
    
           (82)   The Connecticut Natural Gas Corporation Officers' Retirement
                  Plan Trust Agreement, dated January 9, 1989, filed as Exhibit
                  No. 10(liv) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1994, filed with the Commission December 27,
                  1994 (Commission File No. 1-7727)
    
           (83)   First Amendment to the Connecticut Natural Gas Corporation
                  Officers' Retirement Plan and Deferred Compensation Plan
                  Trust Agreement, dated August 5, 1993, filed as Exhibit No.
                  10(lv) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1994, filed with the Commission December 27, 1994 (Commission
                  File No. 1-7727)
    
           (84)   Third Amendment to The Connecticut Natural Gas Corporation
                  Officers' Retirement Plan and Deferred Compensation Plan
                  Trust Agreement, dated September 12, 1995, filed as Exhibit
                  No. 10(lxxxi) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1995, filed with the Commission December 18,
                  1995 (Commission File No. 1-7727)
    
           (85)   Fourth Amendment to The Connecticut Natural Gas Corporation
                  Officers Retirement Plan and Deferred Compensation Plan Trust
                  Agreement, dated March 25, 1997, filed as Exhibit No.
                  10(cxvi) to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1997, filed with the
                  Commission on August 14, 1997 (Commission File No. 1-12859)

           (86)   The Connecticut Natural Gas Corporation Deferred Compensation
                  Plan, as amended, dated January 1, 1993, filed as Exhibit No.
                  10(lvi) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1994, filed with the Commission December 27, 1994 (Commission<PAGE>


                  File No. 1-7727)
    
           (87)   First Amendment to the Connecticut Natural Gas Corporation
                  Deferred Compensation Plan, dated  December 2, 1993, filed as
                  Exhibit No. 10(lvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1994, filed with the Commission December
                  27, 1994 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (88)   Second Amendment to the Connecticut Natural Gas Corporation
                  Deferred Compensation Plan, dated June 28, 1994, filed as
                  Exhibit No. 10(lviii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1994, filed with the Commission December
                  27, 1994 (Commission File No. 1-7727)

           (89)   Third Amendment to Connecticut Natural Gas Corporation
                  Deferred Compensation Plan, dated June 27, 1995, filed as
                  Exhibit No. 10(lxxx) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    
           (90)   Fourth Amendment to Connecticut Natural Gas Corporation
                  Deferred Compensation Plan, dated March 25, 1997, filed as
                  Exhibit No. 10(cxiii) to the CTG Resources, Inc.'s Quarterly
                  Report on Form 10-Q for the quarter ended June 30, 1997,
                  filed with the Commission on August 14, 1997 (Commission File
                  No. 1-12859)

           (91)   Agreement and Declaration of Trust, Connecticut Natural Gas
                  Corporation Employee Benefit Trust, dated December 28, 1987,
                  filed as Exhibit No. 10(lix) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1994, filed with the Commission December
                  27, 1994 (Commission File No. 1-7727)
    
           (92)   First Amendment to Agreement and Declaration of Trust,
                  Connecticut Natural Gas Corporation Employee Benefit Trust,
                  Dated December 2, 1993, filed as Exhibit No. 10(lx) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1994, filed with
                  the Commission December 27, 1994 (Commission File No. 1-7727)
    
           (93)   Second Amendment to Agreement and Declaration of Trust,
                  Connecticut Natural Gas Corporation Employee Benefit Trust,
                  dated March 25, 1997, filed as Exhibit No. 10(cxvii) to the
                  CTG Resources, Inc.'s Quarterly Report on Form 10-Q for the
                  quarter ended June 30, 1997, filed with the Commission on
                  August 14, 1997 (Commission File No. 1-12859)<PAGE>



           (94)   Agreement and Declaration of Trust, Connecticut Natural Gas
                  Corporation Union Employee Benefit Trust, dated December 2,
                  1993, filed as Exhibit No. 10(lxi) to the Connecticut Natural
                  Gas Corporation's Annual Report on Form 10-K for the fiscal
                  year ended September 30, 1994, filed with the Commission
                  December 27, 1994 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10      (95)   First Amendment to Agreement and Declaration of Trust,
                  Connecticut Natural Gas Corporation Union Employee Benefit
                  Trust, dated January 24, 1995, between the Connecticut
                  Natural Gas Corporation and Fleet Bank, N.A., filed as
                  Exhibit No. 10(xcii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)10

           (96)   CNG Annual Incentive Plan, 1994, filed as Exhibit No.
                  10(lxii) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1994, filed with the Commission December 27, 1994 (Commission
                  File No. 1-7727)
    
           (97)   Second Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated June 27, 1995, filed as Exhibit
                  No. 10(lxxvi) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1995, filed with the Commission December 18,
                  1995 (Commission File No. 1-7727)
    
           (98)   Third Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated October 31, 1995, filed as
                  Exhibit No. 10(xcvi) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

           (99)   Fourth Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated December 19, 1995, filed as
                  Exhibit No. 10(xcvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (100)   Fifth Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated February 27, 1996, filed as
                  Exhibit No. 10(xcviii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on<PAGE>


                  December 19, 1996 (Commission File No. 1-7727)

          (101)   Sixth Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan (As Amended and Restated, Effective as
                  of January 1, 1989), dated May 2, 1997, filed as Exhibit No.
                  10(cxviii) to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1997, filed with the
                  Commission on August 14, 1997 (Commission File No. 1-12859)<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10     (102)   Seventh Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated January 27, 1998, filed as
                  Exhibit No. 10.120 to the CTG Resources, Inc.'s Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 1998,
                  filed with the Commission on May 4, 1998 (Commission File No.
                  1-12859)
    
          (103)   Eighth Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated May 1, 1998, filed as Exhibit
                  No. 10.121 to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended March 31, 1998, filed with
                  the Commission on May 4, 1998 (Commission File No. 1-12859)
    
          (104)   Ninth Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan, dated June 9, 1998, filed as Exhibit
                  No. 10(125) to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)

          (105)   Connecticut Natural Gas Corporation Employee Savings Plan
                  Trust Agreement, including amendments thereto, filed as
                  exhibit 4(ii) to the Connecticut Natural Gas Corporation
                  Employee Savings Plan Registration Statement on Form S-8,
                  filed with the Commission on July 20, 1994 (Commission File
                  No. 33-54643)

          (106)   First Amendment to Connecticut Natural Gas Corporation
                  Employee Savings Plan Trust Agreement, dated March 25, 1997,
                  filed as Exhibit No. 10(cx) to the CTG Resources, Inc.'s
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  1997, filed with the Commission on August 14, 1997
                  (Commission File No. 1-12859)

          (107)   Second Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated January 24, 1995, filed as
                  Exhibit No. 10(lxxvii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1995, filed with the Commission December
                  18, 1995 (Commission File No. 1-7727)
    
          (108)   Third Amendment to Connecticut Natural Gas Corporation Union<PAGE>


                  Employee Savings Plan, dated June 27, 1995, filed as Exhibit
                  No. 10(lxxviii) to the Connecticut Natural Gas Corporation's
                  Annual Report on Form 10-K for the fiscal year ended
                  September 30, 1995, filed with the Commission December 18,
                  1995 (Commission File No. 1-7727)
    <PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10     (109)   Fourth Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated October 31, 1995, filed as
                  Exhibit No. 10(xcix) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (110)   Fifth Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated December 19, 1995, filed as
                  Exhibit No. 10(c) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (111)   Sixth Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated February 27, 1996, filed as
                  Exhibit No. 10(ci) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (112)   Seventh Amendment to Connecticut Natural Gas Corporation
                  Union Employee Savings Plan (As Amended and Restated,
                  Effective as of January 1, 1989), dated May 2, 1997, filed as
                  Exhibit No. 10(cxix) to the CTG Resources, Inc.'s Quarterly
                  Report on Form 10-Q for the quarter ended June 30, 1997,
                  filed with the Commission on August 14, 1997 (Commission File
                  No. 1-12859)

          (113)   Eighth Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated January 27, 1998, filed as
                  Exhibit No. 10.122 to the CTG Resources, Inc.'s Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 1998,
                  filed with the Commission on May 4, 1998 (Commission File No.
                  1-12859)
    
          (114)   Ninth Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan, dated June 9, 1998, filed as Exhibit
                  No. 10(126) to the CTG Resources, Inc.'s Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1998, filed with the
                  Commission on August 14, 1998 (Commission File No. 1-12859)<PAGE>


          (115)   Connecticut Natural Gas Corporation Union Employee Savings
                  Plan Trust Agreement, including amendments thereto, filed as
                  exhibit 4(ii) to the Connecticut Natural Gas Corporation
                  Union Employee Savings Plan Registration Statement on Form S-
                  8, filed with the Commission on July 20, 1994 (Commission
                  File No. 33-54653)<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
    
   10     (116)   First Amendment to Connecticut Natural Gas Corporation Union
                  Employee Savings Plan Trust Agreement, dated March 25, 1997,
                  filed as Exhibit No. 10(cxi) to the CTG Resources, Inc.'s
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  1997, filed with the Commission on August 14, 1997
                  (Commission File No. 1-12859)

          (117)   Amended and Restated CNG Nonemployee Directors' Fee Plan,
                  dated September 29, 1995, filed as Exhibit No. 10(lxxxiv) to
                  the Connecticut Natural Gas Corporation's Annual Report on
                  Form 10-K for the fiscal year ended September 30, 1995, filed
                  with the Commission December 18, 1995 (Commission File No. 1-
                  7727)
    
          (118)   CNG Nonemployee Directors' Fee Plan, dated October 1, 1996,
                  filed as Exhibit No. 10(xciii) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (119)   First Amendment to CNG Nonemployee Directors' Fee Plan, dated
                  May 2, 1997, filed as Exhibit No. 10(cxxx) to the CTG
                  Resources, Inc.'s Quarterly Report on Form 10-Q for the
                  quarter ended June 30, 1997, filed with the Commission on
                  August 14, 1997 (Commission File No. 1-12859)

          (120)   Second Amendment to CNG Nonemployee Directors' Fee Plan,
                  dated March 24, 1998, filed as Exhibit No. 10.123 to the CTG
                  Resources, Inc.'s Quarterly Report on Form 10-Q for the
                  quarter ended March 31, 1998, filed with the Commission on
                  May 4, 1998 (Commission File No. 1-12859)

          (121)   CNG Nonemployee Directors' Fee Plan Trust Agreement, by and
                  between the Connecticut Natural Gas Corporation and Fleet
                  Bank, N.A., dated September 28, 1995, filed as Exhibit No.
                  10(lxxxv) to the Connecticut Natural Gas Corporation's Annual
                  Report on Form 10-K for the fiscal year ended September 30,
                  1995, filed with the Commission December 18, 1995 (Commission
                  File No. 1-7727)
    
          (122)   First Amendment to CNG Nonemployee Directors' Fee Plan Trust<PAGE>


                  Agreement, dated October 1, 1996, between the Connecticut
                  Natural Gas Corporation and Putnam Fiduciary Trust Company,
                  filed as Exhibit No. 10(xciv) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)<PAGE>


   (a)  3. Exhibits (continued)
           --------
    
      Exhibit
      Number
   ------------
   10     (123)   Second Amendment to CNG Nonemployee Directors' Fee Plan Trust
                  Agreement, dated October 1, 1996, between the Connecticut
                  Natural Gas Corporation and Putnam Fiduciary Trust Company,
                  filed as Exhibit No. 10(xcv) to the Connecticut Natural Gas
                  Corporation's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1996, filed with the Commission on
                  December 19, 1996 (Commission File No. 1-7727)

          (124)   Third Amendment to CNG Nonemployee Directors' Fee Plan Trust
                  Agreement, dated March 25, 1997, filed as Exhibit No. 10(cxv)
                  to the CTG Resources, Inc.'s Quarterly Report on Form 10-Q
                  for the quarter ended June 30, 1997, filed with the
                  Commission on August 14, 1997 (Commission File No. 1-12859)

          (125)   Settlement Agreement and Release of All Claims between
                  Connecticut Natural Gas Corporation and Harry Kraiza, Jr.,
                  dated September 25, 1996, filed as Exhibit No. 10(cii) to the
                  Connecticut Natural Gas Corporation's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1996, filed with
                  the Commission on December 19, 1996 (Commission File No. 1-
                  7727)
    
   11*  Computation of Consolidated Primary and Fully Diluted Earnings Per
        Share
    
   12   Computation of Ratios
           Not applicable
    
   13   Annual Report to Stockholders for the Fiscal Year Ended September 30,
        1998
           Not applicable
    
   16   Letter Regarding Change in Certifying Accountant
           Not applicable
    
   18   Letter Regarding Change in Accounting Principles
           Not applicable
    
   21*  Subsidiaries of the Registrant
    
   22   Published Report Regarding Matters Submitted to Vote of Security
        Holders<PAGE>


           None
    
   23*  Consent of Independent Public Accountants
    
   24*  Power of Attorney
    
   27*  Financial Data Schedule
    <PAGE>


   (a)  3. Exhibits (concluded)
           --------
    
      Exhibit
      Number
   ------------
    
   28   Information from Reports Furnished to State Insurance Regulatory
        Authorities
           Not applicable
    
   99   Additional Exhibits
         
            (1)*  Exhibit Index
    
    
   99       (2)   Information required by Form 11-K with respect to the
                  Connecticut Natural Gas Corporation Employee Savings Plan for
                  the fiscal year ending December 31, 1997, filed as Exhibit
                  99(2) to the CTG Resources, Inc.'s Annual Report on Form 10-K
                  for the fiscal year ended September 30, 1997, filed with the
                  Commission on December 19, 1997, as amended by Form 10-K
                  Amendment No. 1, filed with the Commission on June 29, 1998
                  (Commission File No. 1-12859)
    
            (3)   Information required by Form 11-K with respect to the
                  Connecticut Natural Gas Corporation Union Employee Savings
                  Plan for the fiscal year ending December 31, 1997, filed as
                  Exhibit 99(3) to the CTG Resources, Inc.'s Annual Report on
                  Form 10-K for the fiscal year ended September 30, 1997, filed
                  with the Commission on December 19, 1997, as amended by Form
                  10-K Amendment No. 1, filed with the Commission on June 29,
                  1998 (Commission File No. 1-12859)
    
    
    
   *    All exhibits listed above which have an asterisk (*) next to the
   exhibit number are filed herewith.  All other exhibits listed above which
   have previously been filed with the Securities and Exchange Commission
   pursuant to the Securities Act of 1933 and the Securities Exchange Act of
   1934, and which were designated as noted above and have not been amended,
   are hereby incorporated by reference.
    
    
   (b)  Reports on Form 8-K
        -------------------
    
        There were no current reports filed on Form 8-K during the last quarter
        of fiscal 1998.
    
    <PAGE>

























                        This Page Intentionally Left Blank<PAGE>


                                    SIGNATURES
                                    ----------
    
         Pursuant to the requirements of Section 13 or 15(d) 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.
    
     
                                                    CTG RESOURCES, INC.        
                                            -----------------------------------
                                                        (Registrant)           
                                                                               
                                                 S/ Arthur C. Marquardt        
                                           ------------------------------------
                                                   (Arthur C. Marquardt)       
                                          President and Chief Executive Officer
                                                                               
                                                                               
         Pursuant to the requirements of the Securities Exchange Act of 1934,
   this report has been signed below by the following persons on behalf of the
   Registrant and in the capacities and on the dates indicated.
    

</TABLE>
<TABLE>
    
    <S>                                   <C>                       <C>
     S/ Arthur C. Marquardt               President, Chief          December 2, 1998
    -------------------------------       Executive Officer and
       (Arthur C. Marquardt)              Director



     S/ James P. Bolduc                   Executive Vice President  December 2, 1998
    -------------------------------       and Chief Financial
       (James P. Bolduc)                  Officer

                                           
    S/ Andrew H. Johnson                  Treasurer and Chief       December 2, 1998
    -------------------------------       Accounting Officer
      (Andrew H. Johnson)

     
                                                                     
     S/ R. L. Babcock                                               December 2, 1998
    -------------------------------
       (R. L. Babcock)
     as Attorney-in-fact for:
</TABLE>
            Victor H. Frauenhofer                  Chairman of the Board of
                                                      Directors
            Bessye W. Bennett, Esq.                Director
            Herman J. Fonteyne                     Director
            Beverly L. Hamilton                    Director
            Harvey S. Levenson                     Director
            Denis F. Mullane                       Director
            Richard J. Shima                       Director
            Laurence A. Tanner                     Director
            Michael W. Tomasso                     Director
    <PAGE>

























                        This Page Intentionally Left Blank<PAGE>
                                CTG RESOURCES, INC.
                            Annual Report on Form 10-K
                                  Schedule Index

                       Fiscal Year Ended September 30, 1998

      Item                                   Description
   ----------                                -----------
      
     II                 Financial Statement Schedule II; Valuation and
                        Qualifying Accounts and Reserves for the fiscal years
                        ended September 30, 1998, 1997 and 1996
    
    <PAGE>
<TABLE>
<CAPTION>
   (d) Financial Statement Schedules
       -----------------------------                                                   Page 1 of 1
                                 CTG RESOURCES, INC. AND SUBSIDIARIES
                                 -------------------------------------
                     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                    --------------------------------------------------------------
                         FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
                         -----------------------------------------------------
                                        (THOUSANDS OF DOLLARS)
    
   Column A                      Column B          Column C          Column D    Column E
                                                  Additions
                                           ------------------------
   <S>                          <C>        <C>            <C>      <C>           <C>
                                Balance At   Charged      Charged   Deductions    Balance  
                                Beginning   To Costs      To Other     From        At End  
   Description                  of Period  And Expenses   Accounts Reserves (1)  of Period 
   -----------                  ---------- ------------   -------- -----------   --------- 

   YEAR ENDED SEPTEMBER 30, 1998
   -----------------------------
     RESERVE DEDUCTED IN THE
     BALANCE SHEET FROM THE
     ASSET TO WHICH IT APPLIES:
       Allowance for doubtful
          accounts -
             Gas                  $  2,966    $  4,463    $      -    $  4,896    $  2,533 
             Other (2)                 473          93         650         466         750 
                                  --------    --------    --------    --------    -------- 
                                  $  3,439    $  4,556    $    650    $  5,362    $  3,283 
                                  ========    ========    ========    ========    ======== 
   YEAR ENDED SEPTEMBER 30, 1997
   -----------------------------
     RESERVE DEDUCTED IN THE
     BALANCE SHEET FROM THE
     ASSET TO WHICH IT APPLIES:
       Allowance for doubtful
          accounts -
             Gas                  $  4,425    $  3,689    $      -    $  5,148    $  2,966 
             Other                     394         166           -          87         473 
                                  --------    --------    --------    --------    -------- 
                                  $  4,819    $  3,855    $      -    $  5,235    $  3,439 
                                  ========    ========    ========    ========    ======== 
   YEAR ENDED SEPTEMBER 30, 1996
   -----------------------------
     RESERVE DEDUCTED IN THE
     BALANCE SHEET FROM THE
     ASSET TO WHICH IT APPLIES:
       Allowance for doubtful
          accounts -
             Gas                  $  4,066    $  4,959    $      -    $  4,600    $  4,425 
             Other                     524          82           -         212         394 
                                  --------    --------    --------    --------    -------- 
                                  $  4,590    $  5,041    $      -    $  4,812    $  4,819 
                                  ========    ========    ========    ========    ======== 
</TABLE>
[FN]
   Note: (1)   Deductions From Reserves include the write-off of uncollectible
               accounts, net of recoveries of accounts previously written off.
         (2)   $650 Charged to Other Accounts represents the receivables of KBC 
               Energy Services, Inc. (See Part I, "Diversified Businesses").



    <PAGE>