PENNSYLVANIA ENTERPRISES, INC.

                             TABLE OF CONTENTS


                                                                         PAGE

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

            Consolidated Statements of Income for the three
              months ended March 31, 1997 and 1996. . . . . . . . . . .    2

            Consolidated Balance Sheets as of March 31, 1997,
              and December 31, 1996 . . . . . . . . . . . . . . . . . .    3

            Consolidated Statements of Cash Flows for
              the three months ended March 31, 1997 and 1996. . . . . .    5

            Notes to Consolidated Financial Statements. . . . . . . . .    6

  Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. . . . . . . . . . . .    9


PART II. OTHER INFORMATION

  Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .   15





























                                      -1-
<PAGE>


                        PART I.  FINANCIAL INFORMATION

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,       
                                                         1997           1996   
                                                       (Thousands of Dollars) 
<S>                                                    <C>           <C>
OPERATING REVENUES:
  Regulated                                            $  79,939     $   69,415
  Nonregulated -
    Gas sales and services                                 7,375          2,736
    Pipeline construction and services                     2,153          1,898
    Other                                                     24             38
      Total operating revenues                            89,491         74,087

OPERATING EXPENSES:
  Cost of gas                                             56,708         41,921
  Operation and maintenance                               10,332         10,197
  Depreciation                                             2,299          2,018
  Income taxes                                             5,599          5,685
  Taxes other than income taxes                            4,326          3,823
    Total other operating expenses                        79,264         63,644

OPERATING INCOME                                          10,227         10,443

OTHER INCOME, NET                                            389            571

INCOME BEFORE INTEREST CHARGES                            10,616         11,014

INTEREST CHARGES:
  Interest on long-term debt                               2,042          2,867
  Other interest                                             235            219
  Allowance for borrowed funds used during
    construction                                             (66)           (46)
      Total interest charges                               2,211          3,040

INCOME FROM CONTINUING OPERATIONS                          8,405          7,974

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS                   -           (365)

INCOME BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS       8,405          7,609

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS                       353            637

NET INCOME                                             $   8,052     $    6,972

COMMON STOCK (Note 3):
  Earnings per share of common stock:
    Continuing operations                              $     .84     $      .63
    Discontinued operations                                    -           (.03)
    Earnings per share of common stock                 $     .84     $      .60

  Weighted average number of shares outstanding        9,615,416     11,581,624

  Cash dividends per share                             $     .29     $     .275











The accompanying notes are an integral part of the consolidated financial statements.





</TABLE>
                                      -2-
<PAGE>


                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                    March 31,     December 31,
                                                      1997            1996    
                                                      (Thousands of Dollars)

<S>                                               <C>             <C>
ASSETS

UTILITY PLANT:
  At original cost                                $     329,179   $    319,205
  Accumulated depreciation                              (82,961)       (79,783)
                                                        246,218        239,422

OTHER PROPERTY AND INVESTMENTS:
  Nonutility property and equipment                      12,925         12,502
  Accumulated depreciation                               (4,766)        (4,674)
  Other                                                   1,742          1,720
                                                          9,901          9,548

CURRENT ASSETS:
  Cash and cash equivalents                               1,278          1,126
  Accounts receivable -
    Customers                                            33,325         22,464
    Others                                                  872            565
    Reserve for uncollectible accounts                   (1,629)        (1,233)
  Unbilled revenues                                      11,161         12,966
  Materials and supplies, at average cost                 2,968          2,865
  Gas held by suppliers, at average cost                  2,874         20,265
  Natural gas transition costs collectible                1,637          2,525
  Deferred cost of gas and supplier refunds, net         10,744         19,316
  Prepaid expenses and other                              4,223          1,438
                                                         67,453         82,297

DEFERRED CHARGES:
  Regulatory assets -
    Deferred taxes collectible                           30,293         29,771
    Other                                                 4,460          4,274
  Unamortized debt expense                                1,426          1,498
  Other                                                     612              -
                                                         36,791         35,543







TOTAL ASSETS                                      $     360,363   $    366,810




The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                      -3-
<PAGE>


                     PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                               CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                    March 31,      December 31,
                                                      1997            1996     
                                                      (Thousands of Dollars)

<S>                                               <C>            <C>
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholders' investment                 $     123,443   $     117,651
  Preferred stock of PGE -
    Not subject to mandatory redemption, net             18,804          18,851
    Subject to mandatory redemption                         739             739
  Long-term debt                                         85,392          75,000
                                                        228,378         212,241

CURRENT LIABILITIES:
  Current portion of long-term debt                      29,679          38,721
  Preferred stock subject to repurchase or
    mandatory redemption                                     80             115
  Notes payable                                               -          10,000
  Accounts payable                                       12,149          19,945
  Accrued general business and realty taxes               1,404           2,350
  Accrued income taxes                                   19,278          14,525
  Accrued interest                                        1,206           1,243
  Accrued natural gas transition costs                    1,506           2,095
  Other                                                   3,749           3,904
                                                         69,051          92,898

DEFERRED CREDITS:
  Deferred income taxes                                  50,468          49,270
  Unamortized investment tax credits                      4,725           4,767
  Operating reserves                                      3,046           3,086
  Other                                                   4,695           4,548
                                                         62,934          61,671





COMMITMENTS AND CONTINGENCIES (Note 4)






TOTAL CAPITALIZATION AND LIABILITIES              $     360,363   $     366,810




The accompanying notes are an integral part of the consolidated financial statements.


</TABLE>
                                      -4-
<PAGE>


                   PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         Three Months Ended    
                                                               March 31,       
                                                          1997         1996    
                                                        (Thousands of Dollars)
<S>                                                     <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Income from continuing operations, net of
    subsidiary's preferred stock dividends              $   8,052    $   7,337
  Effects of noncash charges to income -
    Depreciation                                            2,313        2,031
    Deferred income taxes, net                                351           96
    Provisions for self insurance                             202          241
    Other, net                                                387          625
  Changes in working capital, exclusive of cash 
   and current portion of long-term debt -
    Receivables and unbilled revenues                      (8,277)      (5,829)
    Gas held by suppliers                                  17,391       13,414
    Accounts payable                                       (9,638)        (970)
    Deferred cost of gas and supplier refunds, net          8,751       (2,955)
    Other current assets and liabilities, net                 554        5,449
  Other operating items, net                                 (853)      (2,912)
      Net cash provided by continuing operations           19,233       16,527
  Net cash provided by discontinued operations                  -        2,133
      Net cash provided by operating activities            19,233       18,660

CASH FLOW FROM INVESTING ACTIVITIES:
  Additions to utility plant                               (6,529)      (2,973)
  Proceeds from sale of discontinued operations                 -      261,752
  Acquisition of regulated business                        (2,009)           -
  Other, net                                                 (186)          68
      Net cash provided by (used for) investing 
        activities                                         (8,724)     258,847

CASH FLOW FROM FINANCING ACTIVITIES:
  Issuance of common stock                                    495          768
  Repurchase of subsidiary's preferred stock                  (82)           -
  Dividends on common stock                                (2,793)      (3,186)
  Repayment of long-term debt                                (141)     (50,050)
  Net decrease in bank borrowings                          (7,874)     (76,508)
  Other, net                                                   38          (73)
      Net cash used for financing activities              (10,357)    (129,049)

NET INCREASE IN CASH AND CASH EQUIVALENTS                     152      148,458
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR              1,126          629
CASH AND CASH EQUIVALENTS AT END OF YEAR                $   1,278    $ 149,087

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amount capitalized)                $   2,019    $   1,510 
    Income taxes                                        $     653    $     470 


The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>
                                      -5-
<PAGE>


                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of the Business.  Pennsylvania Enterprises, Inc. ("the Company") is a
holding company which, through  its  subsidiaries,  is engaged in both regulated
and nonregulated activities.   The  Company's regulated activities are conducted
by its principal subsidiary, PG Energy Inc. ("PGE"), a regulated public utility,
and PGE's wholly-owned subsidiary,  Honesdale  Gas Company ("Honesdale"), also a
regulated public utility which was acquired  on February 14, 1997.  Together PGE
and Honesdale distribute natural  gas  to  a  twelve-county area in northeastern
Pennsylvania, a territory that includes  129  municipalities, in addition to the
cities of Scranton, Wilkes-Barre and Williamsport.  

    The  Company,  through  its  other  subsidiaries,  PG  Energy  Services Inc.
("Energy Services"),  formerly  known  as  Pennsylvania  Energy Resources, Inc.,
Theta Land Corporation  and  Keystone  Pipeline  Services,  Inc. ("Keystone"), a
wholly-owned subsidiary of Energy  Services,  is engaged in various nonregulated
activities, including the marketing  and  sale  of  natural  gas and propane and
other energy-related services,  as  well  as  the  construction, maintenance and
rehabilitation of natural gas  distribution  pipelines.   Additionally, Theta is
presently initiating several residential  and commercial real estate development
projects on Company-owned land for which construction is expected to commence in
the latter half of 1997.  

    Principles of Consolidation.   The consolidated financial statements include
the  accounts  of  the  Company  and  its  subsidiaries,  PGE,  Energy  Services
(including Keystone) and  Theta.    The  consolidated  financial statements also
include  the  accounts  of  Honesdale  beginning  February  14,  1997,  the date
Honesdale was acquired by  PGE.    All  material intercompany accounts have been
eliminated in consolidation.

    Both PGE and Honesdale are  subject  to the jurisdiction of the Pennsylvania
Public Utility  Commission  ("PPUC")  for  rate  and  accounting  purposes.  The
financial statements  of  PGE  and  Honesdale  that  are  incorporated  in these
consolidated  financial  statements  have   been  prepared  in  accordance  with
generally accepted accounting principles,  including the provisions of Financial
Accounting Standards Board ("FASB") Statement 71, "Accounting for the Effects of
Certain Types of Regulation," which give  recognition to the rate and accounting
practices of regulatory agencies such as the PPUC.

    Interim Financial Statements.  The interim consolidated financial statements
included herein have been prepared by the Company without audit, pursuant to the
rules and  regulations  of  the  Securities  and  Exchange  Commission.  Certain
information and footnote disclosures  normally  included in financial statements
prepared in accordance with  generally  accepted accounting principles have been
condensed or  omitted  pursuant  to  such  rules  and  regulations, although the
Company believes that  the  disclosures  are  adequate  to  make the information
presented not misleading.

    The results for the interim periods are  not indicative of the results to be
expected for the year, primarily  due  to  the  effect of seasonal variations in
weather on the sale of natural gas.   However, in the opinion of management, all
adjustments, consisting of only normal  recurring accruals, necessary to present


                                      -6-
<PAGE>


fairly  the  results  for  the  interim  periods  have  been  reflected  in  the
consolidated financial statements.    It  is  suggested  that these consolidated
financial statements be  read  in  conjunction  with  the consolidated financial
statements and the notes thereto included  in the Company's latest annual report
on Form 10-K.

    Use of Accounting 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.  These estimates involve judgments with respect to,
among other things, various future economic factors and regulatory matters which
are difficult to predict and are beyond  the control of the Company.  Therefore,
actual amounts could differ from these estimates.

(2)  RATE MATTERS
<TABLE>
<CAPTION>
    <S>             <C>       <C>
    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers (which it is  estimated will total $6.6 million on
an annual basis) is being deferred, without carrying charges, until July, 1997.  
</TABLE>
    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs  of  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs. 

    In accordance with  these  procedures  PGE  has  been  permitted to make the
following changes since January 1, 1996,  to  the gas costs contained in its gas
tariff rates:
[CAPTION]
                                    Change in              Calculated
             Effective             Rate per MCF        Increase (Decrease)
                Date              From     To           in Annual Revenue 
           [S]                    [C]     [C]              [C]
           March 1, 1997          $4.18   $4.49            $ 8,300,000
           December 1, 1996        3.01    4.18             32,400,000
           September 1, 1996       2.88    3.01              3,600,000
           June 1, 1996            2.75    2.88              3,400,000

    The changes in gas rates on account of purchased gas costs have no effect on
earnings since the change in revenue is  offset by a corresponding change in the
cost of gas.

(3)  COMMON STOCK

    Common Stock Split.  Pursuant to  resolutions adopted by the Company's Board
of Directors on February 19, 1997, a Certificate of Amendment was filed with the
Secretary of State  of  the  Commonwealth  of  Pennsylvania  on  March 20, 1997,
amending the Company's Restated  Articles  of  Incorporation to (i) increase the


                                      -7-
<PAGE>


number of authorized shares of  its  common  stock  from 15 million shares to 30
million shares and (ii) reduce the  stated  value of such shares from $10.00 per
share to $5.00 per share.  This amendment had no effect on the Company's capital
accounts.  On February 19, 1997, the Board of Directors also declared a two-for-
one split of the Company's common stock effective March 20, 1997.  The number of
shares of common stock reflected  in these consolidated financial statements and
the earnings per share of  common  stock  for  the quarter ended March 31, 1996,
were restated to give retroactive effect to this stock split.

(4)  COMMITMENTS AND CONTINGENCIES

    Environmental Matters.   PGE,  like  many  gas  distribution companies, once
utilized manufactured gas plants in connection with providing gas service to its
customers.  None of these plants  has  been in operation since 1960, and several
of the plant sites are no  longer  owned  by PGE.  Pursuant to the Comprehensive
Environmental Response, Compensation and  Liability  Act of 1980 ("CERCLA"), PGE
filed notices with the United States Environmental Protection Agency (the "EPA")
with respect to the former plant sites.  None of the sites is or was formerly on
the proposed or final  National  Priorities  List.    The EPA has conducted site
inspections and made preliminary assessments of each site and has concluded that
no  further  remedial  action  is  planned.    While  this  conclusion  does not
constitute a legal prohibition against further regulatory action under CERCLA or
other applicable  federal  or  state  law,  the  Company  does  not believe that
additional costs, if any, related to these manufactured gas plant sites would be
material to its financial position  or results of operations since environmental
remediation costs generally are recoverable through rates over a period of time.
































                                      -8-
<PAGE>


                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS                 

STOCK SPLIT

    On February 19, 1997,  the  Board  of Directors of Pennsylvania Enterprises,
Inc. (the "Company") declared a two-for-one  split of the Company's Common Stock
effective March 20, 1997, as more fully  discussed in Note 3 of the accompanying
Notes to Consolidated Financial Statements.  All per share data included in this
Form 10-Q has been restated to reflect this two-for-one split.

RESULTS OF CONTINUING OPERATIONS

    The following table expresses  certain  items  in the Company's consolidated
statements of income as percentages of operating revenues for each of the three-
month periods ended March 31, 1997 and 1996:
[CAPTION]

                                                            Three Months Ended
                                                                 March 31,    
                                                             1997        1996 
[S]                                                          [C]         [C]
OPERATING REVENUES:
  Regulated...........................................        89.3%       93.7%
  Nonregulated -
    Gas sales and services............................         8.3         3.7 
    Pipeline construction and services................         2.4         2.6 
    Other.............................................           -           - 
      Total operating revenues........................       100.0%      100.0%

OPERATING EXPENSES:
  Cost of gas.........................................        63.4        56.6 
  Operation and maintenance...........................        11.6        13.7 
  Depreciation........................................         2.6         2.7 
  Income taxes........................................         6.2         7.7 
  Taxes other than income taxes.......................         4.8         5.2 
    Total operating expenses..........................        88.6        85.9 

OPERATING INCOME......................................        11.4        14.1 

OTHER INCOME, NET.....................................         0.4         0.8 

INTEREST CHARGES (1)..................................        (2.4)       (4.1)

INCOME FROM CONTINUING OPERATIONS.....................         9.4        10.8 

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS..........           -        (0.5)

INCOME BEFORE SUBSIDIARY'S PREFERRED
  STOCK DIVIDENDS.....................................         9.4        10.3 

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS (1)............        (0.4)       (0.9)

NET INCOME ...........................................         9.0%        9.4%

                    
(1)  None of  the  Company's  interest  expense  and  none  of  the subsidiary's
     preferred stock dividends was allocated to the discontinued operations.


                                      -9-
<PAGE>


o   Three  Months  Ended  March  31,  1997,  Compared  With  Three  Months Ended
    March 31, 1996

    Operating Revenues.  Operating revenues increased $15.4 million (20.8%) from
$74.1 million for the quarter  ended  March  31,  1996, to $89.5 million for the
quarter ended March 31, 1997,  largely  as  a  result of a $10.5 million (15.2%)
increase in regulated operating revenues and a $4.6 million (169.6%) increase in
gas sales  and  services  by  PG  Energy  Services  Inc.  ("Energy  Services") a
nonregulated affiliate of  the  Company  formerly  known  as Pennsylvania Energy
Resources, Inc.  

    The $10.5 million  (15.2%)  increase  in  regulated  operating revenues from
$69.4 million for the quarter  ended  March  31,  1996, to $79.9 million for the
quarter ended March 31, 1997, was  primarily  the  result of higher levels in PG
Energy Inc.'s ("PGE") gas cost rate and  the effect of the rate increase granted
PGE by the  Pennsylvania  Public  Utility  Commission  (the "PPUC") which became
effective on January 15, 1997 (see "Rate Matters").  The effect of the increases
in rates was partially offset  by  a  1.2  billion cubic feet (9.3%) decrease in
sales to PGE's residential and  commercial  heating  customers.  There was a 331
(10.0%) decrease in heating degree days from 3,321 (104.1% of normal) during the
first quarter of 1996 to  2,990  (93.7%  of  normal) during the first quarter of
1997.   Operating  revenues  of  Honesdale  Gas  Company  ("Honesdale") totaling
$834,000 from its February  14,  1997,  acquisition date through March 31, 1997,
also contributed to the increased regulated operating revenues.

    The $4.6 million increase in  nonregulated  gas sales and services from $2.7
million for the quarter ended March  31,  1996,  to $7.4 million for the quarter
ended March 31, 1997,  was  primarily  the  result  of  a 1.4 million cubic feet
(255.6%) increase in sales of natural gas by Energy Services during the quarter.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, increased $15.6 million (24.5%) from  $63.6 million for the first quarter
of 1996 to $79.3 million for  the  first  quarter  of  1997.  As a percentage of
operating revenues, total  operating  expenses  increased  from 85.9% during the
first quarter of 1996 to 88.6%  during  the  first quarter of 1997, largely as a
result of an increase in the cost of gas.

    Cost of gas increased $14.8 million (35.3%) from $41.9 million for the first
quarter of 1996  to  $56.7  million  for  the  first  quarter of 1997, primarily
because of higher levels  in  PGE's  gas  cost  rate  (see "-Rate Matters"), the
aforementioned increase in sales by Energy  Services and the higher level of gas
costs that Energy Services incurred  as  a  result  of market prices in January,
1997.  Also contributing to the  increase  was  $574,000 of gas costs related to
Honesdale from its February 14, 1997, acquisition date through March 31, 1997.  

    Other than the cost of gas and income taxes, operating expenses increased by
$919,000 (5.7%) from  $16.0  million  for  the  first  quarter  of 1996 to $17.0
million for the first quarter of 1997.  This increase was partially attributable
to a $503,000 (13.2%) increase in taxes other than income taxes resulting from a
higher level of gross receipts tax  because  the  increased sales by PGE and the
sales of Honesdale from its acquisition date.  Operation and maintenance expense
increased $135,000 (1.3%) largely  as  a  result  of increased payroll and other
costs attributable to the  expansion  of  the Company's nonregulated activities.





                                     -10-
<PAGE>


Also contributing  to  the  higher  operating  expenses  was  a $281,000 (13.9%)
increase in depreciation expense, primarily  as  a  result of a $312,000 (16.4%)
increase in depreciation attributable to additions to PGE's utility plant.

    Operating Income  (Loss).    As  a  result  of  the  above, operating income
decreased by $216,000 (2.1%) from $10.4 million for the three-month period ended
March 31, 1996, to  $10.2  million  for  the  three-month period ended March 31,
1997, and decreased as a percentage of total operating revenues for such periods
from 14.1% in the  three-month  period  ended  March  31,  1996, to 11.4% in the
three-month  period  ended  March  31,   1997,   largely  as  a  result  of  the
proportionately higher ratio of cost of gas to operating revenues.

    Other Income, Net.  Other  income,  net decreased $182,000 from $571,000 for
the three-month period ended  March  31,  1996,  to $389,000 for the three-month
period ended March 31, 1997, largely  because the first quarter of 1996 included
income from the temporary investment of  certain proceeds from the sale of PGE's
regulated water utility operations in February, 1996.  

    Interest Charges.   Interest  charges  decreased  $829,000 (27.3%) from $3.0
million for the first quarter of 1996  to  $2.2 million for the first quarter of
1997.  This decrease was largely attributable to the the Company's defeasance of
its 10.125% Senior Notes on September 30, 1996.

    Income  From  Continuing  Operations.    Income  from  continuing operations
increased $431,000 (5.4%) from  $8.0  million  for  the three-month period ended
March 31, 1996, to $8.4 million for the three-month period ended March 31, 1997.
This increase was largely the result of the matters discussed above, principally
the increase in operating revenues and decrease in interest charges, the effects
of which were partially offset by increased operating expenses.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased $284,000  (44.6%)  from  $637,000  for  the  three-month  period ended
March 31, 1996, to $353,000  for  the  three-month  period ended March 31, 1997,
primarily as a result of the repurchase by  PGE in 1996 of 134,359 shares of its
9% cumulative preferred stock,  9,408  shares  of its 5.75% cumulative preferred
stock and 20,330 shares of its  4.10% cumulative preferred stock, largely during
the second quarter of that year. 

    Net Income.  The increase in  net  income  of $1.1 million from $7.0 million
for the first quarter of 1996 to $8.1  million for the first quarter of 1997, as
well as the increase in earnings per share of common stock of $.24 from $.60 per
share for the first quarter of 1996  to  $.84 per share for the first quarter of
1997 were the result of  the  higher  income  from continuing operations and the
reduced dividends on subsidiary's preferred  stock,  as discussed above, and the
absence of any loss with respect  to discontinued operations.  Also contributing
to the increase in earnings per share  of  common stock was the reduction in the
weighted average number of shares outstanding  as  a result of the repurchase of
shares, largely during the second quarter  of  1996, with proceeds from the sale
of PGE's water utility operations in February, 1996.

RATE MATTERS

    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of



                                     -11-
<PAGE>
<TABLE>
<CAPTION>
<S>        <C>         <C>
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers (which it is  estimated will total $6.6 million on
an annual basis) is being deferred, without carrying charges, until July, 1997.  
</TABLE>
    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs  of  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs.  

    In accordance with these  procedures,  PGE  has  been  permitted to make the
following changes since January 1, 1996,  to  the gas costs contained in its gas
tariff rates:
[CAPTION]
                                    Change in              Calculated
             Effective             Rate per MCF        Increase (Decrease)
                Date              From     To           in Annual Revenue 
           [S]                    [C]     [C]              [C]
           March 1, 1997          $4.18   $4.49            $ 8,300,000
           December 1, 1996        3.01    4.18             32,400,000
           September 1, 1996       2.88    3.01              3,600,000
           June 1, 1996            2.75    2.88              3,400,000

    The changes in gas rates on account of purchased gas costs have no effect on
earnings since the change in revenue is  offset by a corresponding change in the
cost of gas.

    Recovery of FERC Order 636 Transition  Costs.   By Order of the PPUC entered
August 26, 1994, PGE  began  recovering  the  Non-Gas Transition Costs (i.e. Gas
Supply Realignment and Stranded Costs)  that  it estimates it will ultimately be
billed pursuant to Federal  Energy  Regulatory  Commission Order 636 through the
billing of a surcharge to  its  customers  effective  September 12, 1994.  It is
currently estimated that  $10.2  million  of  Non-Gas  Transition  Costs will be
billed to PGE, generally  over  a  six-year  period extending through January 1,
1999, of which $8.7 million had  been  billed  to  PGE and $8.5 million had been
recovered from its  customers  as  of  March  31,  1997.    PGE has recorded the
estimated Non-Gas Transition  Costs  that  remain  to  be  billed  to it and the
amounts remaining to be recovered from its customers.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

    The primary capital needs of the Company continue to be the funding of PGE's
construction program  and  the  seasonal  funding  of  PGE's  gas  purchases and
increases in  its  customer  accounts  receivable.    PGE's  revenues are highly
seasonal and weather-sensitive, with approximately  75% of its revenues normally
being realized in the first and  fourth  quarters  of the calendar year when the
temperatures in its service area are the coldest.

    Additionally, as the Company's  nonregulated activities expand, capital will
be required for those activities, especially the residential and commercial real
estate development projects  that  are  planned  for certain Company-owned land.


                                     -12-
<PAGE>


The projects that  are  currently  planned  by  the  Company  are in the initial
planning and design  phases,  and  the  amount  and  type  of funding that those
projects will require has  not  yet  been  finalized.   However, it is currently
anticipated that such expenditures will  be  funded  by a combination of capital
provided by the Company, bank borrowings and other debt financing.

    The cash flow  from  PGE's  operations  is  generally  sufficient  to fund a
portion of its  construction  expenditures.    However,  to  the extent external
financing is required, it is the practice  of PGE to use bank borrowings to fund
such expenditures, pending the  periodic  issuance  of stock and long-term debt.
Bank borrowings are  also  used  by  PGE  for  the  seasonal  funding of its gas
purchases and increases in customer accounts receivable.

    In order to  finance  construction  expenditures  and  to  meet its seasonal
borrowing requirements, PGE has made  arrangements  for a total of $70.5 million
of unsecured revolving bank credit,  which  is deemed adequate for its immediate
needs.  Specifically,  PGE  currently  has  six  bank  lines  of  credit with an
aggregate borrowing capacity of  $70.5  million  which provide for borrowings at
interest rates generally  less  than  prime  and  which  mature at various times
during 1997 and 1998.  As of  May  1,  1997, PGE had $39.4 million of borrowings
outstanding under these bank lines of credit.  

    The Company believes that PGE, as  well  as Honesdale, will be able to raise
in a timely manner  such  funds  as  are  required for their future construction
expenditures, refinancings and  other  working  capital requirements.  Likewise,
the Company believes that its  nonregulated  subsidiaries  will be able to raise
such funds as are  required  for  their  needs,  including that required for the
residential and commercial real estate development that is planned.

Long-Term Debt and Capital Stock Financings

    Both the Company and its subsidiaries, particularly PGE, periodically engage
in long-term debt and capital stock financings in order to obtain funds required
for construction expenditures,  the  refinancing  of  existing  debt and various
working capital purposes.  No  long-term  debt  or capital stock financings were
consummated by either the  Company  or  PGE  during the three-month period ended
March 31, 1997.  A  $40.0-$50.0  million  long-term debt financing, the proceeds
from which will be used to repay bank borrowings is, however, planned by PGE for
later in 1997.

    The Company also  obtains  external  funds  from  the  sale  of common stock
through its Dividend Reinvestment and Stock  Purchase Plan (the "DRP"), its 1992
Stock Option Plan  and  its  Employees'  Savings  Plan.   During the three-month
period ended March 31, 1997, the Company realized $331,000, $27,000 and $159,000
from the issuance of common  stock  under  the  DRP,  1992 Stock Option Plan and
Employees' Savings Plan, respectively.

Capital Expenditures and Related Financings

    Capital expenditures totaled $7.1 million  during  the first three months of
1997, including $6.5 million  of  expenditures  for  the construction of utility
plant.  

    The Company estimates that its capital expenditures will total $36.0 million
for the remainder of the year,  consisting  of $27.2 million relative to utility
plant and $8.8 million  with  respect  to the Company's nonregulated activities,


                                     -13-
<PAGE>


including $6.1 million for  residential  and commercial real estate development.
It  is  anticipated  that  such  capital  expenditures  will  be  financed  with
internally generated funds and bank  borrowings,  and to the extent necessary by
the issuance of stock and long-term debt.

Current Maturities of Long-Term Debt and Preferred Stock

    As of March 31, 1997, $29.7 million  of PGE's long-term debt, and $80,000 of
PGE's preferred stock was required to be repaid within twelve months.

    On April 18, 1997, PGE announced  an  offer  to  purchase any and all of the
78,853 outstanding shares of its 4.10%  cumulative preferred stock at a price of
$70.00 per share for an  aggregate  consideration  of $5.5 million, exclusive of
fees and other expenses.  The  offer,  which is not conditioned upon any minimum
number of shares being tendered  by  shareholders,  will expire on May 16, 1997,
unless extended at the option of  PGE.   Although PGE cannot presently determine
the number of shares  which  will  be  tendered  by shareholders pursuant to the
offer, it is anticipated that payment  for  any shares tendered will be financed
with borrowings under PGE's bank lines of credit.

Forward-Looking Statements

    Certain statements made above relating  to plans, conditions, objectives and
economic  performance  go  beyond  historical  information  and  may  provide an
indication  of  future  results.    To  that  extent,  they  are forward-looking
statements within the meaning of Section  21E  of the Securities Exchange Act of
1934, and each is subject to  factors  that could cause actual results to differ
from those in the forward-looking statement,  such as the nature of Pennsylvania
legislation  restructuring  the  natural   gas  industry  and  general  economic
conditions and uncertainties relating to  new  projects like the residential and
commercial development projects on Company-owned land.



























                                     -14-
<PAGE>


                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     11-1  Statement Re Computation of Per Share Earnings -- filed herewith.

     27-1  Financial Data Schedule -- filed herewith.

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed  during the quarter for which this report
     is filed.












































                                     -15-
<PAGE>


                        PENNSYLVANIA ENTERPRISES, INC.

                                  SIGNATURES

Pursuant to  the  requirements  of  the  Securities  Exchange  Act  of 1934, the

Registrant has duly  caused  this  Report  to  be  signed  on  its behalf by the

undersigned thereunto duly authorized.






                                              PENNSYLVANIA ENTERPRISES, INC.   
                                                       (Registrant)

[CAPTION]
[S]       [C]                        [C]
Date:     May 13, 1997               By:           /s/ Thomas J. Ward          
                                                       Thomas J. Ward
                                                         Secretary



Date:     May 13, 1997               By:         /s/ John F. Kell, Jr.         
                                                     John F. Kell, Jr.
                                            Vice President, Financial Services
                                             (Principal Financial Officer and
                                               Principal Accounting Officer)



























                                     -16-
<PAGE>