<PAGE>
 
FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION-
                           Washington, D. C.  20549

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

For the fiscal year ended September 30, 1997
                          ------------------
                                      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 1-10032
                       -------

                         PROVIDENCE ENERGY CORPORATION
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

            Rhode Island                                  05-0389170
--------------------------------------------------------------------------------
  (State or other jurisdiction of                     (I. R. S. Employer
   incorporation or organization)                     Identification No.)

100 Weybosset Street, Providence, Rhode Island               02903
--------------------------------------------------------------------------------
   (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code 401-272-9191
                                                   ------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                     Name of each exchange on which
-------------------                     ------------------------------
                                        registered
                                        ----------

Common Stock, $1.00 Par Value           NEW YORK STOCK EXCHANGE
--------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:


                                     NONE
--------------------------------------------------------------------------------
                               (Title of Class)

   Indicate by checkmark 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 
    ---     ---

   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]

   State the aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of December 3, 1997: $111,064,747

   Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.

Common Stock, $1.00 Par Value:  5,881,441 shares outstanding at 
---------------------------------------------------------------
December 3, 1997.
---------------- 

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

Portions of the annual report to shareholders for the fiscal year ended
September 30, 1997 are incorporated by reference into Part II.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

PART I                                                            PAGE

  <S>       <C>                                                   <C>
 Item 1 -  Business
              General                                              I-1
              Operations of the Gas Companies                      I-2
              Nonutility Operations                                I-9
              Special Factors Affecting the Gas Industry           I-9
              Environmental Regulations                           I-10
              Other Standards                                     I-12

 
 Item 2 -  Properties                                             I-13
 
 Item 3 -  Legal Proceedings                                      I-13
 
 Item 4 -  Submission of Matters to a Vote of Security Holders    I-13

PART II

 Item 5 -  Market for Registrant's Common Equity and Related
           Stockholders' Matters                                  II-1

 Item 6 -  Selected Financial Data                                II-1
 
 Item 7 -  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                    II-1
 
 Item 8 -  Financial Statements and Supplementary Data            II-1
 
 Item 9 -  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure                    II-1
 
PART III
 
 Item 10 - Directors and Executive Officers of the Registrant    III-1
 
 Item 11 - Executive Compensation                                III-5
 
 Item 12 - Security Ownership of Certain Beneficial Owners
           and Management                                        III-5
 
 Item 13 - Certain Relationships and Related Transactions        III-5

PART IV

 Item 14 - Exhibits, Financial Statement Schedules and Reports
           on Form 8-K                                            IV-1

 Experts Consent                                                  IV-6

 Supplemental Schedule                                            IV-7

 Signatures                                                       IV-2

</TABLE> 
<PAGE>
 
PART I
------
ITEM 1. BUSINESS
----------------

  Providence Energy Corporation (the Registrant or the Company) and its
subsidiaries and their representatives may from time to time make written or
oral statements, including statements contained in the Registrant's filings with
the Securities and Exchange Commission (SEC) and in its reports to shareholders,
including this Form 10-K and annual report to shareholders, which constitute or
contain "forward-looking" statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations
and releases.

  All statements other than statements of historical facts included in this Form
10-K and annual report regarding the Registrant's financial position and
strategic initiatives and addressing industry developments are forward-looking
statements.  Where, in any forward-looking statement, the Registrant, or its
management, expresses an expectation or belief as to future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.  The following
are factors which could cause actual results to differ materially from those
anticipated, and include but are not limited to:  general economic, financial
and business conditions; changes in, or the failure to comply with, government
regulations; competition in the energy services sector; regional weather
conditions; the availability and cost of natural gas; development and operating
costs; the success and costs of advertising and promotional efforts; the
availability and terms of capital; the business abilities and judgment of
personnel; the ability of the Registrant to modify or redesign its computer
systems to work properly in the year 2000; unanticipated environmental
liabilities; the ability of the Registrant to form alliances and establish joint
ventures outside of the traditional utility business and the success of any
alliances or joint ventures; the costs and effects of unanticipated legal
proceedings; the impacts of unusual items resulting from ongoing evaluations of
business strategies and asset valuations; and changes in business strategy.

General
-------

  The Registrant was organized in 1981 as a Rhode Island business corporation.
The Registrant's outstanding common shares are listed on the New York Stock
Exchange.

  The Registrant is the parent of two wholly-owned natural gas distribution
utilities, The Providence Gas Company (ProvGas) and North Attleboro Gas Company
(North Attleboro Gas), together referred to as the Gas Companies.  In August
1996, the Registrant incorporated Providence Energy Services, Inc. to market
natural gas and energy services.  In January 1997, the Registrant agreed to form
a new limited liability company, Providence-Southern, LLC, (the "Joint
Venture"), together with an affiliate of Southern Company (Southern). The Joint
Venture was formed to market retail electricity, gas and energy service in New
England and will be owned 60% by Southern and 40% by the Registrant.  As part of
the agreement, the net assets of Providence Energy Services, Inc. will be
contributed to the Joint Venture.  The Registrant also conducts its nonutility
operations through a wholly-owned nonutility subsidiary, Newport America
Corporation.

                                      I-1
<PAGE>
 
(Newport America)-see "Nonutility Operations".
                       ---------------------  

  ProvGas, Rhode Island's largest natural gas distributor, was founded in 1847
and serves approximately 165,000 customers in Providence, Newport and 23 other
cities and towns in Rhode Island. North Attleboro Gas serves over 3,000
customers in North Attleboro and Plainville, Massachusetts, towns adjacent to
the northeastern Rhode Island border. The total natural gas service territory of
the Gas Companies encompasses 410 square miles and has a population of
approximately 850,000.

  The corporate offices of the Registrant are located at 100 Weybosset Street,
Providence, Rhode Island 02903 (Telephone 401-272-9191).

Operations of the Gas Companies
-------------------------------

  Customers.  The Gas Companies had an average annual number of customers of
  ----------                                                                
approximately 168,000 for the twelve months ended September 30, 1997, of which
approximately 90% were residential and 10% were commercial and industrial.

  The net increase in the average annual number of customers during fiscal 1997
over fiscal 1996 was approximately 1,700 or 1.0%.  This moderate increase was
the result of new housing construction and conversions from other energy sources
offset by shut-offs for non-payments and housing vacancies.

  Gas Service.  The gas services provided by the Gas Companies can be grouped
  ------------                                                               
into four categories -- firm sales, firm transportation, non-firm sales and non-
firm transportation.  Firm service is provided to those residential, commercial
and industrial customers that use natural gas throughout the year.  Non-firm
service is provided to those commercial and industrial customers that do not
require assured gas service because they can utilize an alternative fuel or
otherwise operate without gas service. Transportation service is a service where
the Gas Companies transport to certain large customers gas owned by those
customers or by third parties selling gas to those customers.

  The following table shows the distribution of gas to various customer classes,
and the total gas sold and transported by year since 1993:

<TABLE> 
<CAPTION> 

                       1997     1996     1995      1994     1993
                       ----     ----     ----      ----     ----
<S>                    <C>      <C>      <C>       <C>      <C> 
Firm                   80.4%    85.8%    76.4%     81.9%    83.9%
Non-Firm                9.6      9.3     17.6      15.8     14.7
Transportation         10.0      4.9      6.0       2.3      1.4
                       ----    -----    -----     -----    -----
                      100.0%   100.0%   100.0%    100.0%   100.0%
                      =====    =====    =====     =====    =====   

<CAPTION> 

Total Gas Sold and Transported
------------------------------
  <S>                 <C>      <C>      <C>       <C>      <C> 
  BCF(*)              27.3     28.1     28.1      28.7     27.1
                     =====    =====    =====     =====    =====     

</TABLE> 

(*) Gas sales are denominated in billions of cubic feet (Bcf) of natural gas.
Total gas sales include gas sold and transported by the Gas Companies.

  Firm Service.  In recent years, the distribution of the Gas Companies'
  -------------                                                         

                                      I-2
<PAGE>
 
firm sales has been approximately 60% to residential and 40% to commercial and
industrial customers.  Firm sales represent the highest percentage of operating
margin and represent the core of the Gas Companies' business.

  Non-Firm.  Non-firm customers consist of two types: seasonal customers that
  ---------                                                                  
typically use gas only during the nonwinter months and dual-fuel customers that
contract for gas service on a year round basis, but agree to service
interruption during certain peak periods.  By retaining the right to interrupt
service to the dual-fuel customers, the Gas Companies can balance daily demand
from firm customers with available gas supply and pipeline capacity.  Non-firm
customers may interrupt their gas service, as well, when it is more economical
to utilize an alternative fuel.  Accordingly, the amount of the Gas Companies'
non-firm sales fluctuates depending upon the relative price of natural gas to
alternative fuels.

  Non-firm sales produce substantially less margin to the Gas Companies than
firm sales due to the more competitive nature of non-firm sales. Service rates
charged to dual-fuel customers are based on the price that the customer would
otherwise pay for its alternative fuel.  Through September 30, 1997, total
margin was not impacted by non-firm sales due to the fact that the Rhode Island
Public Utilities Commission (RIPUC) required the Registrant to return any
margins earned from these non-firm customers to firm customers through the Gas
Charge Clause (GCC) during the term of the Integrated Resource Plan.  Beginning
October 1, 1997, under the terms of the Price Stabilization Agreement, any
margins earned from these non-firm customers will be retained by the Registrant
- See "Rates and Regulation" and "Competition & Marketing".
       --------------------       -----------------------  

  Transportation Service.  The Registrant provides both firm and non-firm
  -----------------------                                                
transportation of gas.  Margin from the firm transportation of gas purchased by
certain large customers from third parties is likely to represent an increasing
percentage of the Gas Companies' future total margin due to the continuing
regulatory developments affecting the natural gas industry - see "Rates and
                                                                  ---------
Regulation".  In general, these developments now allow customers to buy gas
----------                                                                 
directly from the producer-supplier rather than solely from the local gas
distribution company. Customer-owned gas is transported to the customer's
premises through a combination of the interstate pipelines and the Gas
Companies' distribution systems.

  For a given quantity of gas, the Gas Companies' margin from firm
transportation service is comparable to the margin from firm sales.  Margin from
nonfirm transportation service is less than the margin from firm sales, but is
generally comparable to the margin from interruptible sales, depending on the
price of alternative fuels.  To the extent that the Gas Companies' existing
customers buy gas directly from producer-suppliers, the Gas Companies' revenue
will decrease although firm margin will not be materially impacted.  Through
September 30, 1997, total margin was not impacted by nonfirm transportation due
to the fact that the RIPUC required the Registrant to return any margins earned
from these nonfirm customers to firm customers through the GCC during the term
of the Integrated Resource Plan.  Beginning October 1, 1997, under the terms of
the Price Stabilization Agreement, any margins earned from these non-firm
customers will be retained by the Registrant - See "Rates and Regulation" and
                                                    --------------------     
"Competition & Marketing".
------------------------  

                                      I-3
<PAGE>
 
  Gas Supply.  During 1997, the Registrant purchased 84% of its gas supply in
  -----------                                                                
the production area with transportation to market and storage provided by firm
pipeline contracts. Liquefied natural gas (LNG) provided 3% of supply
requirements. The remaining 13% was purchased in the market area, generally on
an interruptible basis.

The Registrant's principal subsidiary, ProvGas, has entered into a full
requirements contract with Duke Energy Trading and Marketing, LLC (DETM) to
provide all of its gas supply needs beginning October 1, 1997 and continuing
through September 30, 2000.  DETM is a joint venture of Duke Energy (60%) and
Mobil (40%).  DETM will provide all gas supplies required by ProvGas while
ProvGas is committed to purchase all supplies exclusively from DETM.  Supplies
required by ProvGas' firm sales customers will be purchased at a single, fixed
commodity price for the entire contract period.  In order to provide this
service, DETM, for the contract period, will take responsibility for ProvGas'
pipeline capacity resources not previously released, all storage contracts and
all LNG capacity.  Under the contract, DETM will purchase all working gas in
storage including both LNG and contract storage as of October 1, 1997. All
supply resources assigned to DETM will revert back to ProvGas on October 1,
2000.  The contract was entered into following a competitive bidding process.

  As well as providing supply for firm customers at a fixed price, DETM will
provide gas at market prices to cover ProvGas' non-firm sales customers' needs
and to make up the supply imbalances of transportation customers.  DETM will
also provide various other services to ProvGas' transportation service
customers, including enhanced balancing, standby and the storage and peaking
services available under ProvGas' recently approved FT-2 storage service
effective December 1, 1997.  DETM will receive the supply related revenues from
these services in exchange for providing the supply management inherent in these
services.

  Included in the DETM contract are a number of other important features.
ProvGas has retained the right to continue to make portfolio changes to reduce
supply costs.  To the extent it makes such changes, it must keep DETM whole for
the value lost over the remainder of the contract period. The contract relieves
ProvGas of the need to perform certain upstream supply management functions
which will make it possible for ProvGas to take on the additional supply
management workload required by the further unbundling of firm sales customers
without major staffing additions.

  When not using capacity for its own sales, the Registrant released the
capacity or used it to make off-system sales.  In fiscal 1997, the Registrant
received $7.2 million in revenue from released capacity, a 26.3% increase over
the $5.7 million of revenue generated in fiscal 1996. The revenues reduced the
firm customer's gas cost, making the Registrant more competitive.  As a result
of the DETM contract noted above, the Registrant will no longer generate revenue
from released capacity.

  Rates and Regulation.  ProvGas is subject to the regulatory jurisdiction of
  ---------------------                                                      
the RIPUC with respect to rates and charges, standards of service, accounting
and other matters.  The standards set by the RIPUC affect all aspects of
ProvGas' business, including its ability to market to new customers and to meet
competition from other fuel suppliers. (see

                                      I-4
<PAGE>
 
"Competition and Marketing".)  In August 1997, the RIPUC approved the Price
 -------------------------                                                 
Stabilization Plan Settlement Agreement, (the Plan or Energize R.I.) among
ProvGas, the Rhode Island Division of Public Utilities and Carriers (the
Division), The Energy Council of Rhode Island, and the George Wiley Center.
Effective October 1, 1997 through September 30, 2000, Energize R.I. provides
customers with an initial price decrease of approximately four percent and a
three-year price freeze.  Under Energize R.I., the GCC will be suspended for the
entire three-year term of the Plan.  Any excess or deficiency between amounts
billed and actual incurred gas costs will be retained or borne by ProvGas.
Energize R.I. also requires ProvGas to make significant capital investments to
improve its distribution system.  Capital investments required by Energize R.I.
are estimated to total approximately $26 million over its three-year term.  In
addition, ProvGas is required to fund the Demand Side Management Program Rebate
Assistance Program and the Low Income Weatherization Program at annual levels of
$.5 million and $.2 million, respectively.  Energize R.I. also calls for ProvGas
to fund the Low Income Assistance Program at an annual level of $1.0 million.
Finally, Energize R.I. continues the process of unbundling by requiring ProvGas
to provide unbundled service offerings up to 10 percent per year of firm system
throughput.

  As part of Energize R.I., ProvGas will amortize approximately $4.0 million of
environmental costs previously charged to the accumulated depreciation reserve
over a ten year period.  All environmental costs incurred during the term of
Energize R.I. will also be amortized over a ten year period.

  Under Energize R.I. ProvGas may earn up to 10.9 percent annually on its
average common equity of up to $81.0 million, $86.2 million and $92.0 million in
fiscal 1998, 1999, 2000, respectively. In addition, ProvGas may not earn less
than a 7 percent return on common equity. In the event that ProvGas earns in
excess of 10.9 percent or less than 7 percent, ProvGas will defer revenues or
costs through a deferred revenue account over the term of the Plan. Any balance
in the deferred revenue account at the end of the Plan will be refunded to or
recovered from customers in a manner determined by all parties and approved by
the RIPUC.

  As a result of the above Plan, the three-year Settlement Agreement regarding
the Integrated Resource Plan (IRP) approved by the RIPUC in February 1996 was
terminated.  The Settlement Agreement called for (1) $0.5 million annual funding
associated with the Demand Side Management Program; (2) $0.2 million annual
funding associated with a low-income weatherization program; and (3) a
performance-based ratemaking mechanism. In 1997 and 1996, ProvGas was able to
record its annual share of the performance-based ratemaking mechanism under this
agreement which resulted in a $1.5 million increase to operating margin.

  Under the IRP, ProvGas was required to return all margins earned from non-firm
sales to firm customers through the GCC.  As a result of Energize R.I., ProvGas
will be able to retain all margins earned from non-firm customers.

  The following table sets forth the results of ProvGas' applications
before the RIPUC for revenue increases since 1990.

                                      I-5
<PAGE>
 
<TABLE> 
<CAPTION> 

                                               Authorized
  Date of     Revenue Increase  Date Rates  Revenue Increase      Return on
Application      Requested      Effective      Allowed  (*)     Common Equity
------------- ----------------  ----------  ----------------    -------------
<S>           <C>               <C>         <C>                 <C>
 5/17/90        $15,800,000      03/15/91      $9,176,000            12.8%
 1/15/93          9,100,000 (**) 11/14/93         694,000            11.2
 2/16/95         14,880,000 (***)12/17/95       4,161,572 (****)     10.9

</TABLE>

(*) Although the RIPUC reviews and approves all changes in gas costs billed to
customers through the GCC, such changes are not part of the general rate filings
described above. See Footnotes 1 and 10 in the Notes to the Consolidated
Financial Statements contained in the Registrant's 1997 Annual Report to
Shareholders filed herewith as Exhibit 13.

(**) Rate increase requested on January 15, 1993 of $9.1 million was
recalculated to $6,970,000 on September 14, 1993 due to cost of service
adjustments reflecting cost savings.

(***) Rate increase requested on February 16, 1995 of $14.9 million was revised
to $13,222,000 on July 18, 1995 due to lower projected costs.

(****) The allowed annualized revenue increase of $4,161,572 is comprised of an
initial award of $3,990,000 plus a revenue adjustment of $171,572 due to a
reconsideration motion.

  The Registrant has been working closely with the RIPUC to develop a new rate
structure that will allow the Registrant to offer unbundled services designed to
meet the needs of its customers, such that those customers would have the option
to purchase natural gas directly from suppliers and use the Registrant to
transport the gas.  The Registrant believes that this rate structure will foster
a more competitive and flexible gas market in Rhode Island and allow it to
remain competitive by offering commercial/industrial businesses value-added
services at competitive prices.

  In May 1996, the RIPUC approved a Rate Design Settlement Agreement among the
Registrant, the Division, The Energy Council of Rhode Island (TEC-RI) and a
consortium of oil heat organizations. The Agreement began a process of
unbundling natural gas service in Rhode Island enabling customers to choose
their gas suppliers. The Agreement went into effect June 2, 1996. This initial
program was available to approximately 120 of the largest commercial and
industrial customers. In April 1997, the Registrant filed a plan, "Business
Choice", for the second phase of unbundling with the RIPUC. Under this filing,
the Registrant evaluated the services offered in the first phase of unbundling
as well as proposed to further expand the availability of unbundled services to
an additional 3,400 medium and large commercial and industrial customers. The
Registrant plans to implement the new services in December 1997.

  The Rate Design Settlement Agreement also included changes to ProvGas' gas
cost recovery mechanism. Specifically, the Agreement replaced the previous CGA
with the GCC effective June 2, 1996.  In addition to the commodity and related
pipeline transportation costs historically included in the CGA, the GCC provides
for the recovery of: (1) inventory financing costs; (2) working capital
associated with gas supply purchases; (3) bad

                                      I-6
<PAGE>
 
debt expenses associated with the gas revenue portion of customer bills; and (4)
a substantial portion of LNG operating and maintenance expenses, all of which
were previously recovered in base rates. Prior to October 1, 1997, the GCC
provided for reconciliation of total gas costs billed with the actual cost of
gas incurred. Any excess or deficiency in amounts billed as compared to costs
incurred was deferred and either refunded to, or recovered from, customers over
a subsequent period. Effective October 1, 1997, as part of the Price
Stabilization Plan Agreement described above, the variable gas cost component of
the GCC was eliminated for a period of three years through September 30, 2000.
Accordingly, any excess or deficiency in amounts billed as compared to costs
incurred will be retained or borne by the Registrant.

  On October 8, 1996, the RIPUC approved a one-year Pilot Hedging Program
Agreement between ProvGas and the Division.  The objective of the pilot program
was to mitigate the impact of natural gas price escalation through utilization
of Financial Risk Management (FRM) tools, to develop a more balanced gas supply
cost approach, and finally, to study in more detail some of the benefits and
costs associated with the program.  The FRM tools were limited to the use of
options, including calls, puts, and collars, under the pilot program.  The total
expenditures for the purchase and exercise of the FRM tools and the net proceeds
from the sale of FRM tools were flowed through the Variable Gas Cost component
of the GCC and could not exceed $800,000.  For fiscal year 1997, total
expenditures, net of sales proceeds, made under the program were approximately
$154,000.  The program expired on September 30, 1997 and was not extended since
its objectives were met through Energize R.I., described above.  The Registrant
held no open positions at September 30, 1997.

  Competition and Marketing.  The Registrant experienced modest customer growth
  --------------------------                                                   
in both the residential and commercial/industrial markets.  In all, the average
annual number of customers rose one percent to 167,983. This customer growth was
achieved in an underperforming local economy, one that is now showing signs of
improvement.  The Providence Place Mall began construction in early 1997 and
will bring an estimated 3,000 construction jobs and more than 2,800 permanent
jobs in sales, management and maintenance.  The Fixed Income Group of Fidelity
Investments will bring to Rhode Island 2,500 new jobs and a $75 million state-
of-the art facility, the direct result of a creative package of land, lease and
tax incentives offered by the State of Rhode Island. Also, the newly expanded
T.F. Green Airport, and the arrival of Southwest Airlines, have begun to
significantly improve the competitiveness of transportation options.

  In 1998, the Registrant's core marketing efforts will continue to focus on
adding profitable new load and building loyalty with existing customers. The
Registrant will continue joint marketing with the local network of heating
contractors to promote heating conversions of customers on existing gas mains.
In addition, the Registrant will extend its coupon rebate program for high
efficiency heating equipment offered in combination with participating
manufacturers and local distributors.

  In 1996, the Registrant instituted a Demand Side Management (DSM) Program,
which furnishes rebates to customers installing new technologies such as gas-
fired air conditioning, cogeneration and gas motors.  These technologies use
proportionately more natural gas during the summer months, when the distribution
system has available capacity.  The DSM

                                      I-7
<PAGE>
 
program also allows for the improved utilization of existing resources, such as
mains, services, and year-round supply contracts.  Under the Price Stabilization
Plan Agreement described in "Rates and Regulation", the Registrant is committed
                             --------------------                              
to funding this program at an annual level of $0.5 million through September 30,
2000.

  As a result of the Rate Design Settlement Agreements approved in May 1996 and
April 1997, the Registrant has been allowed to offer unbundled services to
approximately 3500 of its largest customers.  These customers are now able to
purchase natural gas directly from suppliers and use the Registrant to transport
the gas.  In addition, under the Price Stabilization Plan Agreement, the
Registrant is committed to providing unbundled service offerings to up to 10
percent per year of firm system throughput.  The Registrant believes that this
rate structure will foster a more competitive and flexible gas market in Rhode
Island and allow it to remain competitive by offering commercial/industrial
businesses value-added services at competitive prices.

  There are virtually unlimited opportunities to unbundle services, form
alliances, custom-tailor services for customers, and greatly increase the
Registrant's ability to compete with other energy suppliers.  To facilitate the
transition to a diversified energy marketer, the Registrant is planning to form
business alliances outside of its traditional utility business. The Registrant
is also seeking investment opportunities in non-regulated energy ventures.  In
November 1997, as part of the Registrant's strategic plan to strengthen its
position in the energy industry, the Registrant purchased two Rhode Island-based
oil distribution companies, which together serve over 4,000 customers.  These
acquisitions continue the Registrant's transition to a diversified energy
marketer and service provider.

  In January, 1997, the Registrant agreed to form a new limited liability
company, Providence-Southern, LLC (the "Joint Venture"), together with an
affiliate of Southern Company, (Southern), the United States' largest producer
of electricity.  The Joint Venture was formed to market retail electricity, gas
and energy services in New England and will be owned 60 percent by Southern and
40 percent by the Registrant. Providence-Southern, LLC will focus on tailoring
its services to the individual needs of the residential, commercial, and
industrial customers as consumers have more choices in a competitive energy
market. In addition to meeting the electricity and gas commodity needs of
customers, the Joint Venture will also serve as a marketing platform for other
areas of expertise of the Registrant and Southern, including energy consulting
and energy use analysis, home and business energy services, and unified billing.
The definitive operating agreement ("Agreement") of the Joint Venture is
expected to be finalized early in 1998.

  As part of the Joint Venture agreement described above, the operations of
Providence Energy Services, Inc. will be contributed to the Joint Venture.
Providence Energy Services, Inc. was incorporated in August 1996 to market
natural gas and energy services and presently serves approximately 51 customers.
In its first full year of operations in 1997, Providence Energy Services, Inc.
recorded sales of approximately $5.1 million and established itself in the New
England retail natural gas market.

                                      I-8
<PAGE>
 
     In August 1997, the Registrant was selected by Salve Regina University in
Newport, Rhode Island to provide energy management services for the development
and implementation of a comprehensive energy plan.  The plan includes
utilization of the latest energy management technology, installation of
insulation, conversion of many campus buildings to natural gas, and a variety of
other energy measures.  This project is estimated to generate $1.5 million of
revenues for the Registrant.

These and other energy ventures will increasingly be separate from the
distribution utility.  There are strategic long-term planning costs associated
with developing the new energy service offerings. These costs were approximately
$700,000, net of tax, in 1997.

     Employees.  As of September 30, 1997, the Registrant had 562 full-time
     ----------                                                            
employees.  Approximately 275 distribution and customer service employees are
covered by a collective bargaining agreement with Local 12431 of the United
Steelworkers of America.  A new five year agreement became effective in January
1996.

     The agreement was developed by a labor-management negotiations committee
and can be reopened for any reason at any time in order to allow for the
committee to deal with new issues as they arise, which results in increased
flexibility in the use of employees. This will result in increased job security
and will position the Registrant to reduce costs and increase levels of customer
service. The agreement calls for a general wage increase of 3.25% each year from
1997 to 2000.

     Additionally, in March 1996, a 38 month Labor Agreement was ratified by
Local 12431-02 of the United Steelworkers of America, which represents 92 office
and clerical employees. The agreement calls for a total wage increase of 8.44%
over 38 months.

     Gas Distribution Systems.  The Gas Companies' distribution systems consist 
     -------------------------
of approximately 2,400 miles of gas mains ranging in size from 2 to 36 inches in
diameter, approximately 142,000 services, (a service is a pipe connecting a gas
main with piping on a customer's premises), and approximately 163,000 active gas
meters together with related facilities and equipment. The Gas Companies have
regulating and metering facilities at nine points of delivery from Algonquin Gas
Transmission Company (Algonquin) and one point of delivery from Tennessee Gas
Pipeline Company, which the Gas Companies presently believe to be adequate for
receiving gas into their distribution systems.

Nonutility Operations
---------------------

     As described earlier, the Registrant conducts its nonutility operations
through a wholly-owned subsidiary, Newport America.  These operations total less
than two percent of the Registrant's consolidated assets and consolidated
revenues.

Special Factors Affecting the Natural Gas Industry
--------------------------------------------------

     General.  The natural gas industry is subject to numerous legislative
     --------                                                             
and regulatory requirements, standards and restrictions that are subject to
change and that affect the Gas Companies to varying degrees. Significant
industry factors that have affected or may affect the Gas

                                      I-9
<PAGE>
 
Companies from time to time include:  lack of assurance that rate increases can
be obtained from regulatory authorities in adequate amounts on a timely basis;
changes in the regulations governing the Gas Companies' operations; reductions
in the prices of oil and propane, which can make those fuels less costly than
natural gas in some markets; increases in the price of natural gas; and
competition with other gas suppliers for industrial customers, including
potential attempts to bypass the Gas Companies' facilities.

FERC Regulations.  In recent years FERC has been attempting to increase
-----------------                                                      
competition with regard to the transportation and sale of natural gas in
interstate commerce.  Beginning in late 1985, FERC began promulgating orders
that allow all industry participants access to pipeline transportation on an
open, nondiscriminatory basis to the extent of available capacity.

     Recent FERC orders are in furtherance of its policy to make gas
transportation and alternate supply sources more accessible to all parties,
including local distribution companies and their customers. Such open access
allows the Gas Companies to obtain its supply through a more competitive
national gas pipeline system, where and when capacity is available.

     FERC Order 636 and other related orders (the Orders) have significantly
changed the structure and types of services offered by pipeline transportation
companies.  The most significant components of the restructuring occurred in
November 1993.  In response to these changes, the Registrant had negotiated new
pipeline transportation and gas storage contracts.

     To meet the requirements of the Orders, the pipelines have incurred
significant costs, collectively known as transition costs.  The majority of
these costs will be reimbursed by the pipelines' customers including the
Registrant. Based upon current information, the Registrant anticipates its
transition costs to be approximately $21.7 million of which $16.2 million has
been included in the GCC and has been collected from customers. The remaining
minimum obligation of $5.5 million at September 30, 1997 will be assumed by DETM
under the gas supply contract described in "Gas Supply".  At the end of the
                                            ----------                     
three year term of the contract at September 30, 2000, the Registrant will
assume any remaining liability, which cannot be estimated at September 30, 1997.

Environmental Regulations
-------------------------

     Federal, state and local laws and regulations establishing standards and
requirements for the protection of the environment have increased in number and
in scope within recent years.  The Registrant cannot predict the future impact
of such standards and requirements, which are subject to change and can take
effect retroactively.  The Registrant continues to monitor the status of these
laws and regulations.  Such monitoring involves the review of past activities
and current operations, and may include expending funds to investigate or clean-
up certain sites.  To the best of its knowledge, subject to the following, the
Registrant believes it is in substantial compliance with such laws and
regulations.

     At September 30, 1997, the Registrant was aware of four sites at which
future costs may be incurred.

                                     I-10
<PAGE>
 
     The Registrant has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 at two sites at Plympton, Massachusetts on which waste material is alleged
to have been deposited by disposal contractors employed in the past either
directly or indirectly by the Registrant and other PRP's.  With respect to one
of the Plympton sites, the Registrant has joined with other PRP's in entering
into an Administrative Consent Order with the Massachusetts Department of
Environmental Protection.  The costs to be borne by the Registrant, in
connection with both Plympton sites, are not anticipated to be material to the
financial condition of the Registrant.

     During 1995, the Registrant voluntarily began a study at its primary gas
distribution facility located in Providence, Rhode Island.  This site formerly
contained a manufactured gas plant operated by the Registrant. As of 
September 30, 1997, approximately $1.8 million has been spent primarily on
studies at this site. In accordance with state laws, such a voluntary study is
monitored by the Rhode Island Department of Environmental Management (DEM). The
purpose of this study was to determine the extent of environmental contamination
at the site. The Registrant has completed the study which indicates that
remediation will be required. The Registrant has several remediation options for
the site and is currently negotiating with DEM and contractors to arrive at the
best alternative. At September 30, 1997, the Registrant has compiled a
preliminary range of costs based on remediation alternatives, ranging from $1.7
million to in excess of $5.0 million. However, because of the uncertainties
associated with environmental assessment and remediation activities, the future
cost of remediation could be higher than the alternatives noted above. Based on
the proposals for remediation work, the Registrant has accrued $1.7 million at
September 30, 1997, for anticipated future remediation costs at this site.

     Tests conducted following the discovery of an abandoned underground oil
storage tank at the Registrant's Westerly, Rhode Island operations center in
1996 confirm the existence of contaminants at this site. The Registrant is
currently conducting tests at this site, the costs of which are being shared
equally with the prior owner, to determine the nature and extent of the
contamination.  Due to the early stages of investigation, management cannot
offer any conclusions as to whether any remediation will be required at this
site.  In addition, in 1997, contamination from scrapped meters and regulators
was discovered at this site.  The Registrant has reported this to the DEM and
the Rhode Island Department of Health and is in the process of remediation.  It
is anticipated that remediation will cost between $50,000 and $100,000.
Accordingly, the Registrant has accrued $50,000 at September 30, 1997 for
anticipated future remediation costs.

     In prior rate cases filed, the Registrant requested that environmental
investigation and remediation costs be recovered by inclusion in its
depreciation factors consistent with the rate recovery treatment for all types
of cost of removal.  Accordingly, environmental investigation costs of
approximately $2.3 million and an estimated $1.7 million for environmental
remediation costs have been charged to the accumulated depreciation reserve at
September 30, 1997.  Of the environmental investigation costs incurred,
approximately $0.9 million and $1.0 million were recorded in the years ended
September 30, 1997 and 1996, respectively, while the remainder were incurred in
prior years.

                                     I-11
<PAGE>
 
     Due to the materiality of the Registrant's environmental investigation and
remediation expenditures, the Registrant sought new treatment of these amounts.
As a result, included in the Price Stabilization Plan Settlement Agreement
described in "Rates and Regulation", which is effective October 1, 1997, all
              --------------------                                          
environmental investigation and remediation costs incurred through September 30,
1997 as well as all costs incurred during the three-year term of the Plan, will
be amortized over a ten-year period.  Additionally, it is the Registrant's
practice to consult with the RIPUC on a periodic basis when, in management's
opinion, significant amounts might be expended for environmental related costs.

Management has begun discussions with other parties who may assist the
Registrant in paying any future costs at the above sites. Management believes
that its program for managing environmental issues, combined with rate recovery
and financial contributions from others, will likely avoid any material adverse
effect on its results of operations or its financial condition as a result of
the ultimate resolution of the above sites.

Other Standards
---------------

     The Gas Companies are also subject to standards prescribed by the Secretary
of Transportation under the Natural Gas Pipeline Safety Act of 1968 with respect
to the design, installation, testing, construction and maintenance of pipeline
facilities. The enforcement of these standards has been delegated to the RIPUC
and MDPU and management believes that the Gas Companies are in substantial
compliance with all present requirements imposed by these agencies.

                                     I-12
<PAGE>
 
ITEM 2. PROPERTIES
------------------

     In addition to the Registrant's gas distribution system and storage
facilities, which constitute the principal properties of the Registrant, the
Registrant owns several buildings and other facilities in Newport, Providence
and Westerly that house its offices and provide floor space for its distribution
and maintenance facilities.

     Substantially all the foregoing properties are mortgaged as collateral for
the outstanding First Mortgage bonds of ProvGas.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     The Registrant is involved in legal and administrative proceedings in the
normal course of business, including certain proceedings involving material
amounts in which claims have been or may be made.  However, management believes,
after review of insurance coverage and consultation with legal counsel, that the
ultimate resolution of the legal proceedings to which it is or can at the
present time be reasonably expected to be a party, will not have a materially
adverse effect on the Registrant's results of operations or financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

     Not Applicable

                                     I-13
<PAGE>
 
                                    PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' 
----------------------------------------------------------------------------
         MATTERS
         -------

     The Registrant's common stock is listed on the New York Stock Exchange and
trades under the symbol "PVY". As of December 3, 1997, there were 6,458 holders
of record of the Registrant's outstanding common stock. For the balance of the
information called for by this item, reference is made to the materials under
'Dividends' and 'Common stock information' in the Registrant's Annual Report to
Shareholders for the fiscal year ended September 30, 1997, which is filed
herewith under Part IV as Exhibit 13.

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

     For the information called for by this item, reference is made to page 20
of the Registrant's Annual Report to Shareholders (pages 12 through 13 of this
Form 10-K) for the fiscal year ended September 30, 1997, which is filed herewith
under Part IV as Exhibit 13.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
         OF OPERATIONS
         -------------

     Regarding the information that relates to this item, reference is made to
pages 14 through 18, of the Registrant's Annual Report to Shareholders (pages 1
through 9 of this Form 10-K) for the fiscal year ended September 30, 1997, which
is filed herewith under Part IV as Exhibit 13.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

     For the information called for by this item, reference is made to pages 21
through 33 of the Registrant's Annual Report to Shareholders (pages 14 through
36 of this Form 10-K) for the fiscal year ended September 30, 1997, which is
filed herewith under Part IV as Exhibit 13.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
-----------------------------------------------------------------------
         FINANCIAL DISCLOSURE
         --------------------

     Not applicable

                                     II-1
<PAGE>
 
                                   PART III
                                   --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

     The following information is furnished with respect to the executive
officers of the Registrant:

<TABLE>
<CAPTION>

                                                                         Year
                                                                        Office
Name and Age                                 Office                   First Held
------------                                 ------                   ----------
<S>                       <C>     <C>                                 <C>   
 
James H. Dodge            (57)    Chairman, President and Chief
                                  Executive Officer                      1992
 
James DeMetro             (49)    Senior Vice President                  1996
 
Gary S. Gillheeney        (42)    Senior Vice President, Chief
                                  Financial Officer, Treasurer
                                  and Assistant Secretary                1996
 
Robert W. Owens           (49)    Senior Vice President                  1996
 
Alycia L. Goody           (45)    General Counsel and Secretary          1994
 
Gerald A. Yurkevicz       (40)    Vice President, Marketing              1996
 
James A. Grasso           (43)    Vice President, Public and
                                  Government Affairs                     1997
</TABLE>

     Mr. Dodge was elected President and Chief Executive Officer of the
Registrant and ProvGas in August 1990 after the retirement of Louis R. Hampton.
Mr. Dodge subsequently became Chairman of the Board in January 1992. Prior to
his employment with the Registrant, he was President and Chief Executive Officer
of Vermont Gas Systems, Inc. Vermont Gas Systems, Inc. is a regulated public
utility which sells natural gas to a portion of the population of the State of
Vermont.

     Mr. DeMetro was elected Senior Vice President of the Registrant and ProvGas
in February 1996. For more than three years prior thereto, Mr. DeMetro served
the Registrant and ProvGas as Vice President Energy Services. For more than five
years prior thereto, Mr. DeMetro served the Brooklyn Union Gas Company, a
regulated natural gas utility, in various management positions, most recently as
Manager, Rates and Regulation.

     Mr. Gillheeney was elected Senior Vice President and Chief Financial
Officer of the Registrant and ProvGas in February 1996, and Treasurer and
Assistant Secretary of the Registrant and ProvGas in January 1994. For more than
five years prior thereto, Mr. Gillheeney served ProvGas in various management
positions, most recently as Assistant Treasurer and Controller.

     Mr. Owens was elected Senior Vice President of the Registrant and ProvGas
in February 1996. For more than a year prior thereto, Mr. Owens served the
Registrant and ProvGas as Vice President Operations. For more than five years
prior thereto, Mr. Owens served the Registrant and ProvGas in various management
positions, most recently as Vice President, Treasurer and Chief Financial
Officer.

                                     III-1
<PAGE>
 
     Ms. Goody was elected General Counsel and Secretary of the Registrant in
December 1994. Since 1994, Ms. Goody has also served ProvGas as Vice President,
General Counsel and Secretary. For two years prior to that, Ms. Goody served
ProvGas as Corporate Counsel.

     Mr. Yurkevicz was elected Vice President, Marketing of the Registrant in
August 1996. For ten years prior thereto, Mr. Yurkevicz served as Principal in
the Energy Practice at Mercer Management Consulting.

     Mr. Grasso was elected Vice President, Public and Government Affairs in May
1997. For three years prior thereto, Mr. Grasso served as Director of Public and
Government Relations of the Eastern Region of Pan Energy Corporation and Manager
of Public and Government Relations of Algonquin Gas Transmission Company. For
ten years prior thereto, Mr. Grasso served as Manager of Land, Public and
Government Relations of Algonquin Gas Transmission Company.

                                     III-2
<PAGE>
 
DIRECTORS OF THE REGISTRANT
---------------------------

     The following information is furnished with respect to the Directors of the
Registrant:

<TABLE> 
<CAPTION> 

   Name                      Director Since      Expiration of Term
   ----                      --------------      ------------------
<S>                          <C>                 <C>

Gilbert R. Bodell, Jr.            1980                  1998
 
James H. Dodge                    1991                  2000
 
John H. Howland                   1993                  1999
 
Douglas H. Johnson                1993                  1999
 
William Kreykes                   1996                  1999
 
Paul F. Levy                      1995                  1998
 
Romolo A. Marsella                1993                  1999
 
M. Anne Szostak                   1995                  1998
 
Kenneth W. Washburn               1975                  2000
 
W. Edward Wood                    1995                  1998
</TABLE>

     Gilbert R. Bodell, Jr. is Chairman and former President, Frontier
Manufacturing Company (textiles); former Vice President, Valley Lace Company and
Esten Dyeing and Finishing Company, Inc.

     James H. Dodge has been Chairman since January 1992 and President and Chief
Executive Officer of the Registrant since August 1990; from 1984 through August
1990:  President and Chief Executive Officer of Vermont Gas Systems, Inc. (a
regulated natural gas utility) and affiliated companies.

     John H. Howland is President and Chief Executive Officer, Original Bradford
Soap Works, Inc.

     Douglas H. Johnson is President and Managing Partner, Van Leesten &
Johnson, Inc. (business and urban planning consultants) since October 1991; from
1980 to October 1991: President and Chief Executive Officer, Peerless Precision,
Inc. (aerospace manufacturing company).

     William Kreykes is President and Chief Executive Officer, Lifespan
Corporation since December 1994; from October 1990 to December 1994: President
and Chief Executive Officer, Rhode Island Hospital.

                                     III-3
<PAGE>
 
     Paul F. Levy is Adjunct Professor, Massachusetts Institute of Technology.
From 1992 to 1995, Visiting Lecturer; from 1987 to 1992: Executive Director,
Massachusetts Water Resources Authority (a public authority).

     Romolo A. Marsella is President, Marsella Development Corporation (real
estate development).

     M. Anne Szostak is Senior Vice President, Fleet Financial Group. From 1991
to 1995: Chairman of the Board, Fleet Bank of Maine; from 1991 to 1994:
President and Chief Executive Officer, Fleet Bank of Maine; and from 1988 to
1991: Vice President, Fleet Financial Group.

     Kenneth W. Washburn is Chairman and President, Union Wadding Company
(manufacturers of non-woven textiles).

     W. Edward Wood is President and Chief Executive Officer, Coaxial
Communications of Central Ohio and Coaxial Communications of Southern Ohio
(Effective January 1998). From 1991 to 1997: President, BDS Management Group
(management and consulting services to a variety of private businesses); from
November 1990 to May 1991: Chief of Staff to Governor-elect and Governor of
Rhode Island; from January to November 1990: Chief of Staff, Phoenix Associates
III (private investment group).


                                     III-4
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION
--------------------------------

  For the information called for by this item, reference is made to pages 7 to
14 of the Registrant's proxy statement filed December 16, 1997 with the
Securities and Exchange Commission for the annual meeting of shareholders to be
held January 15, 1998.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
------------------------------------------------------------
         MANAGEMENT
         ----------

  For the information called for by this item, reference is made to page 15 of
the Registrant's proxy statement filed December 16, 1998 with the Securities and
Exchange Commission for the annual meeting of shareholders to be held January
15, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

  For the information called for by this item, reference is made to page 6 of
the Registrant's proxy statement filed December 16, 1997 with the Securities and
Exchange Commission for the annual meeting of shareholders to be held January
15, 1998.


                            III-5
<PAGE>
 
                                    PART IV
                                    -------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

                         PROVIDENCE ENERGY CORPORATION
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


(a) Financial Statements and Schedules
    ----------------------------------

Consolidated Balance Sheets--September 30, 1997 and 1996
Consolidated Statements of Income for the years ended September 30,
 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended September 30,
 1997, 1996 and 1995
Consolidated Statements of Capitalization--September 30, 1997
 and 1996
Consolidated Statements of Changes in Common Stockholders' Investment for
 the years ended September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Consent of Independent Public Accountants

The financial statements and related notes listed above are incorporated
by reference to Providence Energy Corporation's Annual Report to Shareholders
(see pages 14 through 36 of this Form 10-K) for the year ended September 30,
1997, filed herewith as Exhibit 13.

Schedule II.  Reserves for the years ended September 30, 1997, 1996 and 1995.

  Schedules I to XIII not listed above are omitted as not applicable or not
required under Regulation S-X.

(b) Reports on Form 8-K
    -------------------

  On September 5, 1997, the Registrant filed a report on Form 8-K regarding
the Rhode Island Public Utilities Commission's approval of the three-year
Price Stabilization Plan for the Providence Gas Company.


                            IV-1
<PAGE>
 
(c) Exhibits
    --------

  The following exhibits are filed as part of this report:

  3.1    Articles of Incorporation, as amended (incorporated by reference to
         Exhibit 4(e) to the Registration Statement of the Registrant on Form S-
         2 (Registration No. 33-24125)).

  3.2    Bylaws (incorporated by reference to Exhibit C to the Proxy
         Statement/Prospectus forming a part of the Registrant's Registration
         Statement on Form S-14 (Registration No. 2-69473), as amended at the
         annual meetings of the shareholders held January 14, 1985 and January
         14, 1991, the text of such amendments being set forth in each case as
         Exhibit A to the proxy statement for such annual meeting, heretofore
         filed with the Securities and Exchange Commission and being
         incorporated herein by this reference).

  4.1    Indenture dated as of August 1, 1981 from The Providence Gas Company to
         St. Louis Union Trust Company, Trustee, filed as Exhibit 4.1 to
         Registration Statement of The Providence Gas Company on Form S-1
         (Registration No. 2-72726), incorporated herein by this reference.

  4.2    First Supplemental Indenture dated as of May 1, 1986 from The
         Providence Gas Company to Centerre Trust Company of St. Louis, Trustee
         (filed as Exhibit 4 (b) to the Registration Statement of The Providence
         Gas Company on Form S-3 (Registration File No. 33-5023), incorporated
         herein by this reference).

  4.3    First Mortgage Indenture of The Providence Gas Company dated as of
         January 1, 1922, as supplemented by First through Twelfth Supplemental
         Indentures (incorporated by reference to Exhibit 10.10 to Registration
         Statement of The Providence Gas Company on Form S-1 (Registration No.
         2-72726)).

  4.4    Fourteenth, Fifteenth and Sixteenth Supplemental Indentures of The
         Providence Gas Company dated as of August 1, 1988, June 1, 1990 and
         November 1, 1992, respectively (incorporated by reference to Exhibit 4
         to the report of the Registrant to the Securities and Exchange
         Commission on Form 10-Q for the quarter ended March 31, 1993).

  4.5    Seventeenth Supplemental Indenture of The Providence Gas Company dated
         as of November 1, 1993. (Filed as Exhibit 4.5 to the report of The
         Registrant in Form 10-K for the year ended September 30, 1993
         incorporated herein by this reference.)

  4.6    Eighteenth Supplemental Indenture of The Providence Gas Company dated
         as of December 1, 1995.  (Filed as Exhibit 4.6 to the report of the
         Registrant in Form 10-K for the year ended September 30, 1995
         incorporated herein by this reference.)


                               IV-2
<PAGE>
 
   4.7   Stock Rights Agreement (Filed as Exhibit 1 to the report of the
         Registrant in Form 8-K  File No. 0-9380 dated August  3, 1988,
         incorporated herein by this reference.)

  10.1   Material contracts filed as Exhibit 10 (a) through 10 (ff) to
         Registration Statement of the Registrant on Form S-2 (Registration No.
         33-24125), incorporated herein by this reference.

  10.2   Management contract dated October 29, 1997 between James H. Dodge,
         Chairman, President and Chief Executive Officer of The Providence Gas
         Company, and the said Company. (Filed as Exhibit 10.2 to the report of
         The Providence Gas Company in Form 10-K for the year ended September
         30, 1997, incorporated herein by this reference.)

  10.3   1989 Non-Employee Director Stock Option Plan (incorporated by reference
         to Exhibit A to the Registrant's proxy statement for the annual meeting
         of shareholders held January 9, 1989, heretofore filed with the
         Securities and Exchange Commission).

  10.4   1989 Stock Option Plan (incorporated by reference to Exhibit B to the
         Registrant's proxy statement for the annual meeting of shareholders
         held January 9, 1989, heretofore filed with the Securities and Exchange
         Commission).

  10.5   Management contract dated October 29, 1997 between James DeMetro,
         Senior Vice President, Energy Services of The Providence Gas Company,
         and the said Company. (Filed as Exhibit 10.3 to the report of The
         Providence Gas Company in Form 10-K for the year ended September 30,
         1997, incorporated herein by this reference.)

  10.6   Management contract dated October 29, 1997 between Robert W. Owens,
         Senior Vice President, Gas Distribution of The Providence Gas Company,
         and the said Company. (Filed as Exhibit 10.4 to the report of The
         Providence Gas Company in Form 10-K for the year ended September 30,
         1997, incorporated herein by this reference.)

  10.7   Management contract dated October 29, 1997 between Gary S. Gillheeney,
         Senior Vice President, Chief Financial Officer and Treasurer of The
         Providence Gas Company, and Senior Vice President, Chief Financial
         Officer, Treasurer and Assistant Secretary of the said Company. (Filed
         as Exhibit 10.5 to the report of The Providence Gas Company in Form 10-
         K for the year ended September 30, 1997, incorporated herein by this
         reference.)

  10.8   Management contract dated October 29, 1997 between Alycia L. Goody,
         Vice President, General Counsel and Secretary, of The Providence Gas
         Company, and General Counsel and Secretary of the said Company. (Filed
         as Exhibit 10.6 to the report of The Providence Gas Company in Form 10-
         K for the year ended September 30, 1997, incorporated herein by this
         reference.)

  10.9   Management contract dated October 29, 1997 between Gerald A.

                               IV-3
<PAGE>
 
         Yurkevicz, Vice President, Marketing of the Registrant.

  10.10  Non-Employee Director Stock Plan (incorporated by reference to Exhibit
         4.3 in Form S-8 (Registration No. 333-25415)).

  13     Portions of the Annual Report to Shareholders for the fiscal year ended
         September 30, 1997. (Pages 1 through 36)

  22     Subsidiaries of the Registrant.


                               IV-4
<PAGE>
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To The Board of Directors of
Providence Energy Corporation:

  We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in Providence Energy Corporation's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated November 4, 1997.  Our audit was made for
the purpose of forming an opinion on those statements taken as a whole.  The
schedule listed in the accompanying index to the financial statements is the
responsibility of the Company's management and 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 audit 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.



Arthur Andersen LLP



Boston, Massachusetts
November 4, 1997


                               IV-5
<PAGE>
 
                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



To The Board of Directors of
Providence Energy Corporation:


As independent public accountants, we hereby consent to the incorporation by
reference of our report dated November 4, 1997, included in this Form 10-K, into
the Company's previously filed Registration Statements on Forms S-3,
Registration No. 33-62318; S-3, Registration No. 33-70086; S-3, Registration No.
33-31768; S-8, Registration No. 33-31770;  S-8, Registration No. 33-43031; S-8,
Registration No. 33-04209; S-8, Registration No. 33-25415; and S-8, Registration
No. 33-31769.  It should be noted that we have not audited any financial
statements of the Company subsequent to September 30, 1997, or performed any
audit procedures subsequent to the date of our report.



Arthur Andersen LLP



Boston, Massachusetts
December 18, 1997


                               IV-6
<PAGE>
 
Supplemental Schedule

                       PROVIDENCE ENERGY CORPORATION      Schedule II
                       -----------------------------                 
                        RESERVES FOR THE YEARS ENDED
                        -----------------------------
        SEPTEMBER 30, 1997, SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
        ------------------------------------------------------------- 
                           (Thousands of Dollars)

<TABLE>
<CAPTION>
                                                                    Charge
                                                                    for
                                                                    Which
                                     Additions                      Reserves 
                           Balance   Charged         Other          Were      Balance
                           9/30/96   to Operations   Add (Deduct)   Created   9/30/97
                           -------   -------------   ------------   -------   -------
<S>                        <C>       <C>             <C>            <C>       <C>  
RESERVES DEDUCTED FROM                                                        
 ASSETS:                                                                      
 Accounts receivable                                                          
   Allowance for                                                              
    doubtful accounts      $ 3,195      $ 5,200        $    --      $ 6,584   $ 1,811
   Allowance for lease                                                        
     receivables -                                                            
      current                   27            1             --            1        27
      other                      9           94             --           55        48
                           -------      -------        -------      -------   -------
  Total                    $ 3,231      $ 5,295        $    --      $ 6,640   $ 1,886
                           =======      =======        =======      =======   =======
 Allowance for lease                                                          
   receivables -                                                              
     long-term             $   403      $   138        $    --      $   140   $   401
                           =======      =======        =======      =======   =======
                                                                              
DEFERRED CREDITS AND                                                          
 RESERVES:                                                                    
 Accumulated deferred                                                         
   income taxes            $20,713      $   782        $    --      $    --   $21,495
                           -------      -------        -------      -------   -------
 Unamortized investment                                                       
   tax credit                2,533           --             --          158     2,375
                           -------      -------        -------      -------   -------
 Other-                                                                       
   Liability and                                                              
     damage reserve            561          281             --          221       621
   Other                     7,583        1,265            925(B)       537     9,236
                           -------      -------        -------      -------   -------
     Total other             8,144        1,546            925          758     9,857
                           -------      -------        -------      -------   -------
     Total deferred                                                           
      credits and                                                             
       reserves            $31,390      $ 2,328        $   925      $   916   $33,727
                           =======      =======        =======      =======   =======

</TABLE>

                                  IV-7
<PAGE>
 
                                                            Schedule II (cont'd)

<TABLE>
<CAPTION>
                                                                    Charge
                                                                    for
                                                                    Which
                                     Additions                      Reserves
                           Balance   Charged         Other          Were      Balance
                           9/30/95   to Operations   Add (Deduct)   Created   9/30/96
                           -------   -------------   ------------   -------   -------
<S>                        <C>       <C>             <C>            <C>       <C>
RESERVES DEDUCTED FROM
 ASSETS:
 Accounts receivable
   Allowance for
    doubtful accounts      $ 1,995      $ 5,078        $    --      $ 3,878   $ 3,195
   Allowance for lease
     receivables -
      current                  337            3             --          313        27
      other                     80           17             --           88         9
                           -------      -------        -------      -------   -------
  Total                    $ 2,412      $ 5,098        $    --      $ 4,279   $ 3,231
                           =======      =======        =======      =======   =======
 Allowance for lease
   receivables -
     long-term             $   651      $ 1,179        $    --      $ 1,427   $   403
                           =======      =======        =======      =======   =======

DEFERRED CREDITS AND
 RESERVES:
 Accumulated deferred
   income taxes            $18,734      $ 1,943        $    36(C)   $    --   $20,713
                           -------      -------        -------      -------   -------
 Unamortized investment
   tax credit                2,691           --             --          158     2,533
                           -------      -------        -------      -------   -------
 Other-
   Liability and
     damage reserve            334          520             --          293       561
   Other                     5,307        1,303          1,742(B)       769     7,583
                           -------      -------        -------      -------   -------
     Total other             5,641        1,823          1,742        1,062     8,144
                           -------      -------        -------      -------   -------
     Total deferred
       credits and
        reserves           $27,066      $ 3,766        $ 1,778      $ 1,220   $31,390
                           =======      =======        =======      =======   =======
</TABLE>

                                 IV-8
<PAGE>
 
                                                            SCHEDULE II (cont'd)


<TABLE>
<CAPTION>
                                                                    Charge
                                                                    for
                                                                    Which
                                     Additions                      Reserves
                           Balance   Charged         Other          Were      Balance
                           9/30/94   to Operations   Add (Deduct)   Created   9/30/95
                           -------   -------------   ------------   -------   -------
<S>                        <C>       <C>             <C>            <C>       <C>
RESERVES DEDUCTED FROM
 ASSETS:
 Accounts receivable
   Allowance for
    doubtful accounts      $ 2,671      $ 3,169        $    --      $ 3,845   $ 1,995
   Allowance for lease
     receivables -
      current                  367            4             --           34       337
      other                     80           --             --           --        80
                            ------      -------        -------      -------  --------
  Total                    $ 3,118      $ 3,173        $    --      $ 3,879   $ 2,412
                           =======      =======        =======      =======   =======
 Allowance for lease
   receivables -
     long-term             $   951      $    --       $  (200)      $   100   $   651
                           =======      =======        =======      =======   =======

DEFERRED CREDITS AND
 RESERVES:
 Accumulated deferred
   income taxes            $15,506      $ 2,142         $1,086(C)   $    --   $18,734
                           -------      -------         ------      -------  --------
 Unamortized investment
   tax credit                2,851           --             --          160     2,691
                           -------      -------        -------      -------  --------
 Other-
   Liability and
     damage reserve            421          400             --          487       334
   Other                     5,898          623            418(A)     1,632     5,307
                           -------      -------        -------      -------  --------
     Total other             6,319        1,023            418        2,119     5,641
                           -------      -------        -------      -------  --------
     Total deferred
      credits and
       reserves            $24,676      $ 3,165        $ 1,504      $ 2,279   $27,066
                           =======      =======        =======      =======   =======
</TABLE>

(A) Includes adjustments to the regulatory pension liability.
(B) Principally an accrual for environmental investigation and remediation costs
    in addition to adjustment to the regulatory pension liability.
(C) Represents adjustments to the regulatory asset and liability for FAS No. 109
    activity.

                                 IV-9
<PAGE>
 
INCORPORATION BY REFERENCE INTO REGISTRATION STATEMENTS ON FORM S-8

    For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13,1990) under the Securities Act of 1933, the
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Part II of Registrant's Registration Statements on Form S-8
Nos. 33-31769, 33-31770, 33-43031, 33-04209, and 33-25415.

    Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable.  In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the Securities being registered, the Registrant will, unless in
the opinion of its counsel that matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act,
will be governed by the final adjudication of such issue.


                                 IV-10
<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.

                  PROVIDENCE ENERGY CORPORATION

                  By   /s/ JAMES H. DODGE
                       ----------------------------------------
                        James H. Dodge, Chairman,
                        President and CEO

                  Date December 23, 1997
                       ----------------------------------------

    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>
<CAPTION>
 
       Signature                   Title                  Date
       ---------                   -----                  ----
<S>                       <C>                            <C>
 
/s/JAMES H. DODGE         Chairman, President and CEO    12-23-97
------------------------  (Principal Executive Officer)  --------
James H. Dodge                                          
 
/s/GARY S. GILLHEENEY     Senior Vice President, Chief   12-23-97
------------------------  Financial Officer, Treasurer   --------
Gary S. Gillheeney        and Assistant Secretary     
                                                      
/s/GILBERT R. BODELL, JR. Director                       12-23-97
------------------------                                 --------
Gilbert R. Bodell, Jr.
 
/s/JOHN H. HOWLAND        Director                       12-23-97
------------------------                                 --------
John H. Howland
 
/s/DOUGLAS H. JOHNSON     Director                       12-23-97
------------------------                                 --------
Douglas H. Johnson
 
/s/WILLIAM KREYKES        Director                       12-23-97
------------------------                                 --------
William Kreykes
 
/s/PAUL F. LEVY           Director                       12-23-97 
------------------------                                 --------  
Paul F. Levy                                                       
                                                                   
/s/ROMOLO A. MARSELLA     Director                       12-23-97
------------------------                                 --------
Romolo A. Marsella
 
/s/M. ANNE SZOSTAK        Director                       12-23-97
------------------------                                 -------- 
M. Anne Szostak                                                   
 
/s/KENNETH W. WASHBURN    Director                       12-23-97
------------------------                                 --------
Kenneth W. Washburn
 
/s/W. EDWARD WOOD         Director                       12-23-97
------------------------                                 --------
W. Edward Wood

</TABLE>

                                  IV-11