FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                                       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 0-7812


                         PENNSYLVANIA ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)


           Pennsylvania                                 23-1920170
(State or other jurisdiction of              (IRS Employer Identification No.)
 incorporation or organization)

           One PEI Center
      Wilkes-Barre, Pennsylvania                       18711-0601
(Address of principal executive offices)               (Zip Code)

                                 (570) 829-8843
               (Registrant's telephone number including area code)



    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
    required to be filed by Section 13 or 15(d) of the  Securities  Exchange Act
    of 1934 during the preceding 12 months (or for such shorter  period that the
    registrant was required to file such  reports),  and (2) has been subject to
    such filing requirements for the past 90 days.

                                    Yes X No __

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

    Registrant had 10,833,573 shares of common stock, no par value,  outstanding
as of April 30, 1999.

<PAGE>

                         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, 1999 and 1998.............         2

                 Consolidated Balance Sheets as of March 31, 1999
                    and December 31, 1998............................         3

                 Consolidated Statements of Cash Flows for
                    the three months ended March 31, 1999 and 1998...         5

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

    Item 2.      Management's Discussion and Analysis of Financial
                    Condition and Results of Operations.............         10



PART II.  OTHER INFORMATION

    Item 6.      Exhibits and Reports on Form 8-K...................         18


<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

                 PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                                                                   Three Months Ended
                                                                        March 31,
                                                            ------------------------------
                                                                 1999            1998*
                                                            -------------- ---------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>
OPERATING REVENUES:
     Energy products and services -
        Regulated .......................................   $     84,316    $     65,006
        Nonregulated ....................................         17,553           9,479
     Pipeline construction and services .................          2,443           2,404
                                                            ------------    ------------
           Total operating revenues .....................        104,312          76,889
                                                            ------------    ------------

OPERATING EXPENSES:
    Cost of gas and other energy ........................         65,753          46,531
    Operation and maintenance ...........................         11,519          10,953
    Depreciation ........................................          2,852           2,601
    Income taxes ........................................          6,910           4,156
    Taxes other than income taxes .......................          4,518           4,061
                                                            ------------    ------------
       Total operating expenses .........................         91,552          68,302
                                                            ------------    ------------

OPERATING INCOME ........................................         12,760           8,587

OTHER INCOME (DEDUCTIONS), NET ..........................            114              (3)
                                                            ------------    ------------

INCOME BEFORE INTEREST CHARGES ..........................         12,874           8,584
                                                            ------------    ------------

INTEREST CHARGES:
    Interest on long-term debt ..........................          2,745           2,588
    Other interest ......................................            199             159
    Allowance for borrowed funds used during construction            (26)            (23)
                                                            ------------    ------------
           Total interest charges .......................          2,918           2,724
                                                            ------------    ------------

INCOME BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS ....          9,956           5,860
SUBSIDIARY'S PREFERRED STOCK DIVIDENDS ..................             52             321
                                                            ------------    ------------
NET INCOME ..............................................   $      9,904    $      5,539
                                                            ============    ============

EARNINGS PER SHARE OF COMMON STOCK:
     Basic ..............................................   $       0.94    $       0.57
                                                            ============    ============
     Diluted ............................................   $       0.93    $       0.56
                                                            ============    ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
     Basic ..............................................     10,591,622       9,753,348
                                                            ============    ============
     Diluted ............................................     10,650,899       9,834,444
                                                            ============    ============

CASH DIVIDENDS PER SHARE ................................   $       0.30    $       0.30
                                                            ============    ============


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

* Reclassified to conform with 1999 consolidated financial statement presentation.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                 PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                         March 31,   December 31,
                                                           1999          1998
                                                       -----------   ------------
                                                          (Thousands of Dollars)
ASSETS

<S>     <C>    <C>    <C>    <C>    <C>    <C>
UTILITY PLANT:
    At original cost .................................   $ 379,134    $ 376,685

    Accumulated depreciation .........................     (97,781)     (95,735)
                                                         ---------    ---------
                                                           281,353      280,950
                                                         ---------    ---------
OTHER PROPERTY AND INVESTMENTS:
    Nonutility property and equipment ................      32,364       31,816
    Accumulated depreciation .........................      (5,710)      (5,460)
    Other ............................................       2,288        2,296
                                                         ---------    ---------
                                                            28,942       28,652
                                                         ---------    ---------
CURRENT ASSETS:
    Cash and cash equivalents ........................       3,244          807
    Restricted cash - common stock subscribed (Note 3)         397          452
    Accounts receivable -
       Customers .....................................      40,888       26,259
       Others ........................................         672          811
       Reserve for uncollectible accounts ............      (2,010)      (1,465)
    Unbilled revenues ................................       9,399       12,247
    Materials and supplies, at average cost ..........       2,974        3,053
    Gas held by suppliers, at average cost ...........       7,066       22,676
    Deferred cost of gas and supplier refunds, net ...        --          6,058
    Prepaid income taxes .............................        --          2,090
    Prepaid expenses and other .......................       7,545        2,713
                                                         ---------    ---------
                                                            70,175       75,701
                                                         ---------    ---------
DEFERRED CHARGES:
    Regulatory assets -
       Deferred taxes collectible ....................      31,257       31,097
       Other .........................................       8,509        8,598
    Unamortized debt expense .........................         948        1,014
    Other ............................................         148          190
                                                         ---------    ---------
                                                            40,862       40,899
                                                         ---------    ---------

TOTAL ASSETS .........................................   $ 421,332    $ 426,202
                                                         =========    =========

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

</TABLE>

<PAGE>

                 PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                     March 31,  December 31,
                                                       1999        1998
                                                     --------   ----------
                                                     (Thousands of Dollars)

CAPITALIZATION AND LIABILITIES


CAPITALIZATION:
    Common shareholders' investment (Note 3) .....   $146,122   $132,326
    Preferred stock of PG Energy -
       Not subject to mandatory redemption .......      4,745      4,831
       Subject to mandatory redemption ...........        240        240
    Long-term debt ...............................    100,000     98,000
                                                     --------   --------
                                                      251,107    235,397
                                                     --------   --------
CURRENT LIABILITIES:
    Current portion of long-term debt ............     49,836     81,348
    Preferred stock subject to repurchase ........         44       --
    Notes payable ................................      7,050      6,200
    Accounts payable .............................     17,829     22,370
    Deferred cost of gas and supplier refunds, net     10,859       --
    Accrued general business and realty taxes ....      1,457      1,764
    Accrued income taxes .........................      4,712       --
    Accrued interest .............................      1,303      1,811
    Other ........................................      1,733      1,924
                                                     --------   --------
                                                       94,823    115,417
                                                     --------   --------
DEFERRED CREDITS:
    Deferred income taxes ........................     61,268     60,923
    Unamortized investment tax credits ...........      4,381      4,424
    Operating reserves ...........................      2,642      2,836
    Other ........................................      7,111      7,205
                                                     --------   --------
                                                       75,402     75,388
                                                     --------   --------
COMMITMENTS AND CONTINGENCIES (Note 6)



TOTAL CAPITALIZATION AND LIABILITIES .............   $421,332   $426,202
                                                     ========   ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
<PAGE>
<TABLE>
<CAPTION>
                 PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Three Months Ended
                                                                       March 31,
                                                                  ------------------
                                                                   1999       1998*
                                                                  ------     -------
                                                               (Thousands of Dollars)

<S>     <C>    <C>    <C>    <C>    <C>    <C>
CASH FLOW FROM OPERATING ACTIVITIES:
      Net income ............................................   $  9,904    $  5,539
      Gain on sales of other property .......................       (134)       --
      Effects of noncash charges to income -
          Depreciation ......................................      2,873       2,629
          Deferred income taxes, net ........................        184         595
          Provisions for self insurance .....................        181         202
          Other, net ........................................        831         302
      Changes in working capital, exclusive of cash
           and current portion of long-term debt -
               Receivables and unbilled revenues ............    (11,101)        623
               Gas held by suppliers ........................     15,610      13,948
               Accounts payable .............................     (3,625)     (3,623)
               Deferred cost of gas and supplier refunds, net     16,917       4,478
               Other current assets and liabilities, net ....      1,043      (3,443)
      Other operating items, net ............................       (910)       (402)
                                                                --------    --------
                Net cash provided by operating activities ...     31,773      20,848
                                                                --------    --------
CASH FLOW FROM INVESTING ACTIVITIES:
      Additions to utility plant ............................     (3,306)     (4,477)
      Additions to nonutility property ......................       (493)     (4,124)
      Proceeds from the sales of other property .............        200        --
      Other, net ............................................        (40)        583
                                                                --------    --------
               Net cash used for investing activities .......     (3,639)     (8,018)
                                                                --------    --------
CASH FLOW FROM FINANCING ACTIVITIES:
      Issuance of common stock ..............................      7,135         807
      Repurchase of subsidiary's preferred stock ............        (42)       --
      Dividends on common stock .............................     (3,200)     (2,925)
      Issuance of long-term debt ............................      2,000        --
      Net decrease in bank borrowings .......................    (31,578)    (10,725)
      Other, net ............................................        (12)         (1)
                                                                --------    --------
               Net cash used for financing activities .......    (25,697)    (12,844)
                                                                --------    --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........      2,437         (14)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..............        807       2,202
                                                                --------    --------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................   $  3,244    $  2,188
                                                                ========    ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
         Interest (net of amount capitalized) ...............   $  3,181    $  3,142
                                                                ========    ========
         Income taxes .......................................   $     25    $    429
                                                                ========    ========



* Reclassified to conform with 1999 consolidated financial statement presentation.

</TABLE>


<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.  ("PG  Energy"),  a regulated  public
utility,  and  PG  Energy's  wholly-owned  subsidiary,   Honesdale  Gas  Company
("Honesdale"), also a regulated public utility. Together PG Energy and Honesdale
distribute natural gas to a thirteen-county area in northeastern Pennsylvania, a
territory that includes the cities of Scranton,  Wilkes-Barre and  Williamsport.
In 1998 PG Energy and Honesdale  collectively accounted for approximately 77% of
the Company's operating revenues.

       The Company,  through its other  subsidiaries,  PG Energy  Services  Inc.
("Energy  Services"),  PEI Power Corporation  ("Power Corp") which was formed in
October,  1997, Theta Land Corporation ("Theta") and Keystone Pipeline Services,
Inc. ("Keystone"),  a wholly-owned  subsidiary of Energy Services, is engaged in
various  nonregulated  activities.  These activities include the sale of natural
gas, propane,  electricity and other energy-related  products and services;  the
construction,  maintenance and rehabilitation of utility  facilities,  primarily
natural gas  distribution  pipelines;  and the sale of property for residential,
commercial and other development.

       Principles  of  Consolidation.   The  consolidated  financial  statements
include the accounts of the Company and its  subsidiaries,  PG Energy (including
Honesdale),  Energy Services  (including  Keystone),  Power Corp and Theta.  All
material intercompany accounts have been eliminated in consolidation.

       Both PG Energy and Honesdale  (collectively referred to as the "Regulated
Subsidiaries")  are  subject  to the  jurisdiction  of the  Pennsylvania  Public
Utility Commission (the "PPUC") for rate and accounting purposes.  The financial
information  of  the  Regulated  Subsidiaries  that  is  incorporated  in  these
consolidated financial statements has 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
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

       Rate  Increase.  By Order adopted  October 16, 1998, the PPUC approved an
overall  4.1%  increase in PG  Energy's  base  rates,  designed to produce  $7.4
million of additional annual revenue, effective October 17, 1998.

       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 PG Energy,
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 PG Energy has been permitted to make
the following  changes since January 1, 1998, to the gas costs  contained in its
tariff rates:

                          Change in                   Calculated
  Effective              Rate per MCF             Increase (Decrease)
                  -----------------------
    Date              From         To             in Annual Revenue
----------------  ------------   --------     -------------------------

March 1, 1999         $4.53      $4.39               $(3,200,000)
December 1, 1998       4.25       4.53                 7,100,000
September 1, 1998      4.18       4.25                 1,900,000
June 1, 1998           3.95       4.18                 5,800,000
March 1, 1998          4.05       3.95                (2,100,000)

       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)    RESTRICTED CASH - COMMON STOCK SUBSCRIBED

       The Company's Customer Stock Purchase Plan (the "Customer Plan") provides
the  residential  customers of all the Company's  subsidiaries  with a method of
purchasing  shares of the Company's  common stock  without  payment of brokerage
commission,  service  charge or other  regular  expense.  On April 1, 1999,  the
Company issued 17,356 shares of its common stock for an aggregate  consideration
of $392,000  with respect to payments  received  pursuant to the  Customer  Plan
during the subscription period ended March 31, 1999. Such payments are reflected
under the  captions  "Restricted  cash - common  stock  subscribed"  and "Common
shareholders' investment" in these consolidated financial statements as of March
31, 1999.

(4)    OPERATING SEGMENTS

       The Company has three principal operating segments:

       o      Regulated Energy Products and Services,  principally the purchase,
              distribution  and sale of  natural  gas in  thirteen  counties  in
              northeastern Pennsylvania by the Regulated Subsidiaries ("Energy
              Products and Services - Regulated")

       o      Nonregulated Energy Products and Services, principally the sale of
              natural  gas,  propane,   electricity  and  other   energy-related
              products  and  services  by  Energy   Services,   generally  in  a
              twenty-six  county area in northeastern and central  Pennsylvania,
              and by Power Corp. ("Energy Products and Services - Nonregulated")

       o      Pipeline Construction and Services,  principally the construction,
              maintenance and  rehabilitation of utility  facilities  throughout
              the eastern United States by Keystone ("Pipeline  Construction and
              Services").

       Information  regarding the operating segments for the three-month periods
ended March 31, 1999 and 1998, is as follows:


<PAGE>


                                            1999         1998
                                         (Thousands of Dollars)
Operating revenues:
    Energy products and services -
     Regulated .......................   $  84,344    $  65,015
     Nonregulated ....................      17,918        9,479
    Pipeline construction and services       2,443        2,404
    Intercompany eliminations ........        (393)          (9)
                                         ---------    ---------
       Total .........................   $ 104,312    $  76,889
                                         =========    =========
Operating income (loss):
    Energy products and services -
     Regulated .......................   $  12,575    $   8,651
     Nonregulated ....................         333          131
    Pipeline construction and services        (110)        (122)
    Intercompany eliminations and
     corporate expenses ..............         (38)         (73)
                                         ---------    ---------
       Total .........................   $  12,760    $   8,587
                                         =========    =========
(5)    ACCOUNTING CHANGES

       Accounting for Derivative  Instruments  and Hedging  Activities.  In June
1998,  FASB Statement 133,  "Accounting  for Derivative  Instruments and Hedging
Activities" was issued.  The provisions of this  statement,  which are effective
for fiscal  quarters  beginning  after June 15, 1999,  establish  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts,  and for hedging activities.  While the
Company generally has not used derivative  instruments,  it expects to adopt, to
the extent necessary,  the provisions of FASB Statement 133 in the third quarter
of 1999. The impact of such adoption on the Company's future financial condition
and results of  operations  will depend upon a number of factors,  including the
extent to which the Company may use derivative instruments,  and the designation
and effectiveness of such derivative hedging market risk.

(6)    COMMITMENTS AND CONTINGENCIES

       Environmental  Matters. PG Energy, 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 1972,  and
several of the plant  sites are no longer  owned by PG Energy.  Pursuant  to the
Comprehensive  Environmental  Response,  Compensation  and Liability Act of 1980
("CERCLA"),  PG  Energy  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.  The
conclusion  by the EPA that it  anticipates  no  further  remedial  action  with
respect to the sites at which PG Energy  operated  manufactured  gas plants does
not, however,  constitute a legal prohibition  against further regulatory action
under CERCLA or other  applicable  federal or state law, and even in the absence
of any  further  action by the EPA,  some of the sites  may  ultimately  require
remediation.  In any event, 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.


<PAGE>



                 PENNSYLVANIA ENTERPRISES, INC AND SUBSIDIARIES

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

RESULTS OF 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, 1999 and 1998:

                                          Three Months Ended
                                               March 31,
                                          ------------------
                                           1999       1998
                                          ------     -------

OPERATING REVENUES:
    Energy products and services -
       Regulated .....................      80.8%     84.6%
       Nonregulated ..................      16.8      12.3
    Pipeline construction and services       2.4       3.1
                                           -----     -----
        Total operating revenues .....     100.0     100.0
                                           -----     -----
OPERATING EXPENSES:
    Cost of gas and other energy .....      63.0      60.5
    Operation and maintenance ........      11.1      14.2
    Depreciation .....................       2.7       3.4
    Income taxes .....................       6.6       5.4
    Taxes other than income taxes ....       4.4       5.3
                                           -----     -----
        Total operating expenses .....      87.8      88.8
                                           -----     -----

OPERATING INCOME .....................      12.2      11.2

OTHER INCOME, NET ....................       0.1       0.0

INTEREST CHARGES .....................      (2.8)     (3.6)
                                           -----     -----
INCOME BEFORE SUBSIDIARY'S PREFERRED
    STOCK DIVIDENDS ..................       9.5       7.6

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS      (0.0)     (0.4)
                                           -----     -----
NET INCOME ...........................       9.5%      7.2%
                                           =====     =====
     o Three Months Ended March 31, 1999, Compared With Three Months Ended March
31, 1998

       Operating  Revenues.  Operating  revenues increased $27.4 million (35.7%)
from $76.9 million for the quarter  ended March 31, 1998, to $104.3  million for
the quarter ended March 31, 1999, largely as a result of a $19.3 million (29.7%)
increase in operating  revenues from Regulated  Energy Products and Services and
an $8.1 million (85.2%) increase in revenues from  Nonregulated  Energy Products
and Services.

       The $19.3 million (29.7%)  increase in operating  revenues from Regulated
Energy  Products and Services from $65.0 million for the quarter ended March 31,
1998, to $84.3  million for the quarter ended March 31, 1999,  was primarily the
result of a 1.8 billion  cubic feet (21.2%)  increase in natural gas sales by PG
Energy Inc. ("PG Energy") to its residential and commercial  heating  customers.
This increase in sales was  attributable to more  seasonable  weather during the
first quarter of 1999, as well as higher levels in PG Energy's gas cost rate and
the impact of the rate  increase  granted PG Energy  effective  October 16, 1998
(see  "-Rate  Matters").  The number of heating  degree  days  increased  by 452
(17.8%) from 2,533 (79.4% of normal)  during the first  quarter of 1998 to 2,985
(93.6% of normal) during the first quarter of 1999.

       The $8.1 million (85.2%)  increase in revenues from  Nonregulated  Energy
Products  and  Services  was  primarily  the  result of a $4.9  million  (54.7%)
increase  in  gas  sales  and  services  by PG  Energy  Services  Inc.  ("Energy
Services")  from $9.0  million for the quarter  ended March 31,  1998,  to $14.0
million  for the quarter  ended  March 31,  1999,  and a $2.6  million  (680.0%)
increase in Energy Services'  electricity  sales,  from $380,000 for the quarter
ended March 31,  1998,  to $3.0  million for the quarter  ended March 31,  1999.
Energy  Services'  sales of natural  gas  increased  by 1.6  million  cubic feet
(60.2%) and its sales of electricity increased by 58.9 megawatts (412.5%) during
the quarter ended March 31, 1999. Also  contributing to the increase in revenues
from Nonregulated  Energy Products and Services in the first quarter of 1999 was
the sale of $383,000 of electric energy by PEI Power Corporation ("Power Corp"),
which began generating and selling electricity in July, 1998.

       Operating Expenses. Operating expenses, including depreciation and income
taxes,  increased $23.2 million (34.0%) from $68.3 million for the first quarter
of 1998 to $91.6  million  for the first  quarter of 1999.  As a  percentage  of
operating  revenues,  total  operating  expenses  decreased  slightly from 88.8%
during the first quarter of 1998 to 87.8% during the first quarter of 1999.

       The cost of gas and other energy  increased  $19.2  million  (41.3%) from
$46.5  million  for the first  quarter  of 1998 to $65.8  million  for the first
quarter  of 1999,  primarily  because  of the  increased  sales by PG Energy and
Energy  Services,  the sales by Power Corp and the higher  levels in PG Energy's
gas cost rate (see "-Rate Matters").

       Other than the cost of gas and other energy and income  taxes,  operating
expenses  increased  by $1.3  million  (7.2%)  from $17.6  million for the first
quarter of 1998 to $18.9  million for the first  quarter of 1999.  This increase
was  largely  attributable  to a  $566,000  (5.2%)  increase  in  operation  and
maintenance expense,  primarily as a result of increased payroll and other costs
associated with the expansion of the Company's  nonregulated  activities,  and a
$457,000  (11.3%)  increase in taxes other than income  taxes  resulting  from a
higher level of gross receipts tax because of the increased sales of natural gas
by PG Energy and the increased  sales of  electricity by Energy  Services.  Also
contributing to the higher operating  expenses was a $251,000 (9.7%) increase in
depreciation expense, primarily because of additions to utility plant.

       Income taxes  increased  $2.8  million  (66.3%) from $4.2 million for the
quarter  ended March 31, 1998,  to $6.9 million for the quarter  ended March 31,
1999, largely as a result of an increase in income before income taxes (for this
purpose, operating income net of interest charges).

       Operating Income. As a result of the above, operating income increased by
$4.2 million  (48.6%) from $8.6 million for the  three-month  period ended March
31, 1998, to $12.8 million for the three-month  period ended March 31, 1999, and
also increased as a percentage of total operating revenues for such periods from
11.2%  in  the  three-month  period  ended  March  31,  1998,  to  12.2%  in the
three-month period ended March 31, 1999.

       Operating income  attributable to the Company's three operating segments:
Regulated Energy Products and Services,  principally the purchase,  distribution
and sale of  natural  gas by PG  Energy  and  Honesdale  ("Energy  Products  and
Services - Regulated");  Nonregulated Energy Products and Services,  principally
the sale of natural gas, propane,  electricity and other energy-related products
and services by Energy Services and Power Corp ("Energy  Products and Services -
Nonregulated");   and  Pipeline  Construction  and  Services,   principally  the
construction,  maintenance and  rehabilitation of utility facilities by Keystone
("Pipeline  Construction  and Services"),  for the quarters ended March 31, 1999
and 1998, was as follows:

                                          Quarter Ended March 31,
                                     ----------------------------------
                                                             Increase
                                       1999        1998     (Decrease)

Energy Products and Services -
 Regulated .......................   $ 12,575    $  8,651    $  3,924
 Nonregulated ....................        333         131         202
Pipeline Construction and Services       (110)       (122)         12
Intercompany eliminations and
 corporate expenses ..............        (38)        (73)         35
                                     --------    --------    --------
 Total ...........................   $ 12,760    $  8,587    $  4,173
                                     ========    ========    ========
       The  increase in  operating  income from  Regulated  Energy  Products and
Services  is  primarily  related to the  aforementioned  increase in sales to PG
Energy's residential and commercial heating customers. The increase in operating
income from Nonregulated Energy Products and Services is primarily the result of
the increased sales by Energy Services.

       Interest Charges.  Interest charges  increased  $194,000 (7.1%) from $2.7
million for the first  quarter of 1998 to $2.9 million for the first  quarter of
1999.  This  increase  was largely  attributable  to a higher  average  level of
long-term debt outstanding in 1999.

       Subsidiary's  Preferred  Stock  Dividends.  Dividends on preferred  stock
decreased  $269,000  (83.8%) from  $321,000 the quarter ended March 31, 1998, to
$52,000 for the quarter ended March 31, 1999,  as a result of the  repurchase by
PG Energy of all its remaining 9% cumulative  preferred  stock as of December 1,
1998.

       Net Income. The increase of $4.4 million in net income, from $5.5 million
for the first quarter of 1998 to $9.9 million for the first quarter of 1999, and
the $.37 per share increase in both the basic and diluted  earnings per share of
common stock,  from $.57 per share (basic) and $.56 per share  (diluted) for the
first quarter of 1998 to $.94 per share (basic) and $.93 per share (diluted) for
the first  quarter  of 1999,  were  principally  the result of the  increase  in
operating income, as discussed above.

RATE MATTERS

       Rate  Increase.  By Order adopted  October 16, 1998, the PPUC approved an
overall  4.1%  increase in PG  Energy's  base  rates,  designed to produce  $7.4
million of additional annual revenue, effective October 17, 1998.

       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 PG Energy,
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, PG Energy has been permitted to make
the following  changes since January 1, 1998, to the gas costs  contained in its
gas tariff rates:

                          Change in                    Calculated
    Effective            Rate per MCF              Increase (Decrease)
                     ---------------------
      Date             From          To             in Annual Revenue
------------------   ----------  ----------     ---------------------

March 1, 1999          $4.53        $4.39             $(3,200,000)
December 1, 1998        4.25         4.53               7,100,000
September 1, 1998       4.18         4.25               1,900,000
June 1, 1998            3.95         4.18               5,800,000
March 1, 1998           4.05         3.95              (2,100,000)

       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.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

       The primary capital needs of the Company continue to be the funding of PG
Energy's  construction  program  and the  seasonal  funding of PG  Energy's  gas
purchases  and  increases  in its  customer  accounts  receivable.  PG  Energy'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  continue  to
expand,  further capital will be required for those activities.  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 PG Energy'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 PG Energy to use bank borrowings to
fund such  expenditures,  pending the periodic  issuance of stock and  long-term
debt. Bank borrowings are also used by PG Energy for the seasonal funding of its
gas purchases and increases in customer accounts receivable.

       In order to temporarily finance construction expenditures and to meet its
seasonal borrowing requirements,  PG Energy has made arrangements for a total of
$64.0 million of unsecured  revolving bank credit,  which is deemed adequate for
its needs. Specifically, PG Energy currently has seven bank lines of credit with
an aggregate borrowing capacity of $64.0 million which provide for borrowings at
interest  rates  generally  less than prime and which  mature at  various  times
during  1999 and 2000 and which PG Energy  intends  to renew or  replace as they
expire.  As of April  30,  1999,  PG  Energy  had  $5.8  million  of  borrowings
outstanding under these bank lines of credit.

       In order to finance the  conversion  of its  cogeneration  facility,  the
construction  of  a  methane  recovery   facility  and  initial  phases  of  the
development of an industrial site adjacent to its cogeneration  facility,  Power
Corp has borrowed $7.0 million  pursuant to two bank lines of credit as of April
30, 1999.  These bank lines of credit  provide for  borrowings at interest rates
less than prime and mature during 1999 and 2000.  Power Corp intends to renew or
replace these lines of credit as they expire.

       The Company believes that its Regulated  Subsidiaries and Power Corp 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 other nonregulated  subsidiaries will be
able to raise such funds as are required for their needs.



Long-Term Debt and Capital Stock Financings

       Both  the  Company  and  its   subsidiaries,   most  notably  PG  Energy,
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 PG Energy  during the
three-month period ended March 31, 1999.

       The Company  also  obtains  external  funds from the sale of common stock
through its Dividend  Reinvestment  and Stock  Purchase Plan, its Customer Stock
Purchase  Plan,  its 1992 Stock  Option Plan and its  Employees'  Savings  Plan.
During 1999 (through April 30, 1999) the Company  realized $9.4 million from the
issuance of common stock under these plans.

Capital Expenditures and Related Financings

       Capital  expenditures  totaled $4.9 million during the first three months
of 1999,  including $3.2 million of expenditures for the construction of utility
plant and $1.3 million for the  development  of an  industrial  site adjacent to
Power Corp's cogeneration facility.

       The  Company  estimates  that its capital  expenditures  will total $17.6
million for the remainder of the year,  consisting of $15.2 million  relative to
utility  plant and $2.5  million  with  respect  to the  Company's  nonregulated
activities.   These  capital  expenditures  will  be  financed  with  internally
generated funds and bank borrowings,  pending the periodic issuance of stock and
long-term debt.

Current Maturities of Long-Term Debt

       As of March 31, 1999,  $49.8 million of long-term debt was required to be
repaid within twelve months.  The $49.8 million of long-term debt includes $20.0
million  outstanding under the Company's Term Loan Agreement which is due on May
31, 1999, $19.8 million outstanding under PG Energy's bank lines of credit which
is due at various  times  during 1999 and 2000 and $10.0  million of PG Energy's
9.23% series first mortgage bonds which mature September 1, 1999.

       The Company intends to repay the $20.0 million outstanding under its Term
Loan  Agreement  with proceeds from a $20.0 million  short-term  bank loan which
will mature in May, 2000. PG Energy intends to finance its current maturities of
long-term debt with internally  generated funds and bank borrowings  pending the
periodic issuance of long-term debt and capital stock.

Year 2000 Readiness Disclosure

       The Company has  performed an inventory  and  assessment  of its computer
systems  and  applications,  as well as devices  with  embedded  technology,  to
identify  year 2000 issues and to develop a plan for  addressing  those  issues.
This plan,  which was initiated in 1996,  was completed in March,  1999, for all
applications  and  devices  that could have a material  effect on the  Company's
operations,  and all such  applications and devices are now year 2000 compliant.
The plan is scheduled  to be  completed  by June 30,  1999,  with respect to all
other  issues.  The plan  involves  the  replacement  of  certain  systems  with
purchased software, the renovation of other systems, and the purchase of certain
hardware and other devices. The Company is utilizing both internal resources and
contract personnel to implement the plan, which is currently on schedule.

       It is estimated that the total cost of the Company's plan to address year
2000 issues will be approximately  $2.0-2.5 million. This amount, which had been
largely  expended  as of March 31,  1999,  includes  costs for the  purchase  of
hardware and software, external contractors and internal resources. The internal
resources,  which are estimated to account for approximately $1.0 million of the
total  cost,  involved  the  redeployment  of  existing  personnel  and  did not
represent an  incremental  cost. In view of the  estimated  cost and because the
plan is now largely  complete,  management  does not  believe  the  expenditures
necessary  to carry out the plan to address  year 2000  issues  will be material
relative to the Company's financial position or results of operations.

       As key  elements  of its plan to address  year 2000  issues,  the Company
replaced its financial and human resource systems with purchased  software.  The
installation  of  these  new  systems,  along  with  modifications  made  to the
Company's  customer  information  system and upgrading of its  operating  system
software  which were  completed in March,  1999,  resolved the primary year 2000
issues.

       The Company's plan to address year 2000 issues  includes an assessment of
its critical suppliers and vendors, and also its largest customers, to determine
their  status  relative  to year  2000  compliance.  The  Company  has  surveyed
approximately  200 such  suppliers,  vendors and  customers  and to date has not
identified  any situations  that would appear to pose a significant  risk to the
Company.  The Company intends to continue  monitoring the progress being made by
its suppliers,  vendors and largest  customers  relative to year 2000 compliance
and will promptly make any changes in its  contingency  planning as the occasion
warrants.

       The Company is subject to potential  disruptions  in its  operations as a
result of year 2000  related  failures of its  critical  suppliers  and vendors.
Although there is presently no basis for suggesting  such situation would occur,
management  believes the worst case  scenario in such regard  might  involve the
temporary disruption in the gas service of certain of its customers.  To provide
for this and other  possible  contingencies  related  to year 2000  issues,  the
Company is continuing to evaluate its existing  emergency and disaster  recovery
plans. These plans will be modified,  as deemed appropriate,  based, among other
considerations,  on the Company's  assessment of the year 2000 compliance of its
critical  suppliers and vendors.  These plans,  as so modified,  will attempt to
mitigate, to the extent reasonably possible, the effect of any year 2000 related
failures by a third party. However, the Company is dependent on its suppliers of
natural  gas,  interstate  gas  pipelines  and  utility  and   telecommunication
companies,  over which it has no control, to serve its customers. Any disruption
in service by one of these key suppliers  could,  depending  upon its nature and
extent, have a material adverse effect on the Company's operations.


Natural Gas Industry Restructuring

       The Company and PG Energy  believe  that in 1999  Pennsylvania  may enact
legislation  which provides all customers of the larger natural gas utilities in
the state that are  regulated by the PPUC with the right to choose their natural
gas supplier.  As currently  envisioned,  such legislation would require that PG
Energy provide all of its customers with unbundled transportation service within
the next year to 18 months.  While the rates for the  transportation  of natural
gas through PG Energy's  distribution system and the storage services offered by
PG Energy would  continue to be price  regulated by the PPUC, the commodity cost
of gas purchased from suppliers  other than PG Energy would not be so regulated.
Customers  could,  however,  continue to receive a bundled sales service from PG
Energy which would be subject to price regulation by the PPUC. Essentially,  the
legislation would extend the transportation  service which is now available to a
limited  number of PG Energy's  customers to all its  customers,  and  customers
could  choose to have their  natural gas  provided  by a supplier  other than PG
Energy, based on nonregulated market prices and other considerations.

       If  Pennsylvania  enacts  legislation  which permits all customers of the
larger regulated LDCs to choose their supplier of natural gas, PG Energy will be
faced with significant competition from marketers for the sale of natural gas to
its customers.  However,  under current  regulations of the PPUC, PG Energy does
not  realize a profit or incur any loss with  respect to the  commodity  cost of
natural gas.  Moreover,  PG Energy would not expect the pending  legislation  to
result in the bypass of its  distribution  system by any  significant  number of
customers  because of the nature of its  customer  base and the cost of any such
bypass.  Additionally,  based on various provisions of the legislation currently
being considered, PG Energy does not believe that the legislation will result in
any  significant  amount of transition  costs (such as the negotiated  buyout of
contracts  with  interstate  pipelines,  the recovery of deferred  purchased gas
costs or the recovery of regulated assets). Further, PG Energy believes that the
transition  costs  it  would  incur  in  offering  choice  to all its  customers
(including  those involving  information  systems and customer  education) would
generally be recoverable  through rates or other customer charges.  Accordingly,
although it cannot be certain,  because the terms of such  legislation  have not
been  finalized and the ultimate  effect on PG Energy cannot be  determined,  PG
Energy  does not  believe  that  the  enactment  of  legislation  providing  for
customers of the larger  regulated LDCs to purchase their natural gas from third
parties  would have any  material  adverse  impact on its  earnings or financial
condition despite the increased  competition to which PG Energy would be subject
regarding the sale of natural gas to its customers.

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,   such   statements   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.  The  Company
cautions  that  assumptions,  projections,  expectations,  intentions or beliefs
about future events,  while  expressed in good faith and believed by the Company
to have a reasonable  basis,  may and often do vary from actual  results and the
differences  between  assumptions,  projections,   expectations,  intentions  or
beliefs  and  actual  results  can be  material.  Accordingly,  there  can be no
assurance that actual results will not differ materially from those expressed or
implied by the forward-looking statements. The following are some of the factors
that could cause actual  achievements and events to differ materially from those
expressed  or  implied  in  such  forward-looking   statements:  the  nature  of
Pennsylvania  legislation  restructuring the natural gas industry; the impact of
year 2000  disruption;  industrial,  commercial  and  residential  growth in the
service  territories of the Company and its subsidiaries;  the weather and other
natural  phenomena;  the timing and  extent of changes in  commodity  prices and
interest rates; changes in environmental and other laws and regulations to which
the Company and its  subsidiaries  are subject or other  external  factors  over
which the Company  has no control;  growth in  opportunities  for the  Company's
nonregulated  activities;  and general  economic  conditions  and  uncertainties
relating  to such  growth  during the  periods  covered  by the  forward-looking
statements.  Also, it is not possible for the Company to predict any new factors
which may emerge and affect the Company and its subsidiaries,  nor can it assess
the effect of each such factor on the Company's  business or the extent to which
any such factor,  or combination of factors,  may cause actual results to differ
materially from those contained in any forward-looking  statements.  The Company
undertakes   no   obligation   to  publicly   release  any   revision  to  these
forward-looking  statements to reflect events or circumstances after the date of
this filing.


<PAGE>


                           PART II. OTHER INFORMATION

Item 6.       Exhibits and Reports on Form 8-K

(a)    Exhibits

       10-1     Form of Stock Option Agreement -- 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.


<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)

Date:   May 6, 1999             By:               /s/ Donna M. Abdalla  
                                                      Donna M. Abdalla
                                                          Secretary

Date:   May 6, 1999             By:               /s/ John F. Kell, Jr. 
                                                      John F. Kell, Jr.
                                             Vice President, Financial Services
                                               (Principal Financial Officer and
                                                 Principal Accounting Officer)