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, 1998 and 1997. . . . . . . . . . .    2

            Consolidated Balance Sheets as of March 31, 1998
              and December 31, 1997 . . . . . . . . . . . . . . . . . .    3

            Consolidated Statements of Cash Flows for
              the three months ended March 31, 1998 and 1997. . . . . .    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 . . . . . . . . . . . . . .   15






























                                      -1-
<PAGE>

                        PART I.  FINANCIAL INFORMATION

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,       
                                                         1998            1997  
                                                        (Thousands of Dollars) 
<S>                                                    <C>            <C>
OPERATING REVENUES:
  Regulated                                            $  65,006      $  79,939
  Nonregulated -
    Gas sales and services                                 9,025          7,375
    Pipeline construction and services                     2,404          2,153
    Other                                                    454             24
      Total operating revenues                            76,889         89,491

OPERATING EXPENSES:
  Cost of gas                                             46,151         56,708
  Operation and maintenance                               11,333         10,332
  Depreciation                                             2,601          2,299
  Income taxes                                             4,156          5,599
  Taxes other than income taxes                            4,061          4,326
    Total other operating expenses                        68,302         79,264

OPERATING INCOME                                           8,587         10,227

OTHER INCOME (DEDUCTIONS), NET                                (3)           389

INCOME BEFORE INTEREST CHARGES                             8,584         10,616

INTEREST CHARGES:
  Interest on long-term debt                               2,588          2,042
  Other interest                                             159            235
  Allowance for borrowed funds used during
    construction                                             (23)           (66)
      Total interest charges                               2,724          2,211

INCOME BEFORE SUBSIDIARY'S PREFERRED STOCK DIVIDENDS       5,860          8,405

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS                       321            353

NET INCOME                                             $   5,539      $   8,052

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
  Basic                                                9,753,348      9,615,416 
  Diluted                                              9,834,444      9,660,881

EARNINGS PER SHARE OF COMMON STOCK:
  Basic                                                $     .57      $     .84
  Diluted                                              $     .56      $     .83

CASH DIVIDENDS PER SHARE                               $     .30      $     .29


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,
                                                      1998            1997    
                                                      (Thousands of Dollars)

ASSETS
<S>                                               <C>             <C>
UTILITY PLANT:
  At original cost                                $     355,243   $    351,106
  Accumulated depreciation                              (90,607)       (88,129)
                                                        264,636        262,977

OTHER PROPERTY AND INVESTMENTS:
  Nonutility property and equipment                      20,163         16,335
  Accumulated depreciation                               (5,028)        (4,875)
  Other                                                   2,269          2,171
                                                         17,404         13,631

CURRENT ASSETS:
  Cash and cash equivalents                               2,188          2,202
  Restricted cash - common stock subscribed
    (Note 3)                                                859              -
  Accounts receivable -
    Customers                                            32,068         28,681
    Others                                                1,576            850
    Reserve for uncollectible accounts                   (1,650)        (1,340)
  Unbilled revenues                                       7,682         12,108
  Materials and supplies, at average cost                 3,328          3,110
  Gas held by suppliers, at average cost                  7,985         21,933
  Deferred cost of gas and supplier refunds, net          1,593          6,316
  Prepaid expenses and other                              5,654          1,686
                                                         61,283         75,546

DEFERRED CHARGES:
  Regulatory assets -
    Deferred taxes collectible                           30,761         30,592
    Other                                                 6,316          4,415
  Unamortized debt expense                                1,276          1,361
  Other                                                     280            308
                                                         38,633         36,676






TOTAL ASSETS                                      $     381,956   $    388,830




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,
                                                      1998            1997     
                                                      (Thousands of Dollars)
<S>                                               <C>             <C>
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholders' investment (Note 3)        $     126,381   $     122,105
  Preferred stock of PG Energy -
    Not subject to mandatory redemption, net             15,864          15,864
    Subject to mandatory redemption                         640             640
  Long-term debt                                        125,000         127,000
                                                        267,885         265,609

CURRENT LIABILITIES:
  Current portion of long-term debt                      17,337          24,776
  Preferred stock subject to repurchase or
    mandatory redemption                                     80              80
  Notes payable                                           1,245           2,170
  Accounts payable                                       14,464          18,448
  Accrued general business and realty taxes                 937           2,953
  Accrued income taxes                                    7,856           4,618
  Accrued interest                                        1,215           1,783
  Accrued natural gas transition costs                      842           1,087
  Other                                                   1,808           1,722
                                                         45,784          57,637

DEFERRED CREDITS:
  Deferred income taxes                                  53,275          52,511
  Unamortized investment tax credits                      4,553           4,596
  Operating reserves                                      2,779           2,825
  Other                                                   7,680           5,652
                                                         68,287          65,584





COMMITMENTS AND CONTINGENCIES (Note 5)






TOTAL CAPITALIZATION AND LIABILITIES              $     381,956   $     388,830




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,       
                                                          1998         1997    
                                                        (Thousands of Dollars)
<S>                                                     <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net income                                            $   5,539    $   8,052
  Effects of noncash charges to income -
    Depreciation                                            2,629        2,313
    Deferred income taxes, net                                595          351
    Provisions for self insurance                             202          202
    Other, net                                                302          387
  Changes in working capital, exclusive of cash 
   and current portion of long-term debt -
    Receivables and unbilled revenues                         623       (8,277)
    Gas held by suppliers                                  13,948       17,391  
    Accounts payable                                       (3,623)      (9,638)
    Deferred cost of gas and supplier refunds, net          4,478        8,751
    Other current assets and liabilities, net              (3,443)         554
  Other operating items, net                               (1,257)        (853)
      Net cash provided by operating activities            19,993       19,233

CASH FLOW FROM INVESTING ACTIVITIES:
  Additions to utility plant                               (4,477)      (6,529)
  Additions to nonutility property                         (4,124)        (433)
  Acquisition of regulated business                             -       (2,009)
  Other, net                                                  583          247
      Net cash used for investing activities               (8,018)      (8,724)

CASH FLOW FROM FINANCING ACTIVITIES:
  Issuance of common stock                                    807          495
  Common stock subscribed, net                                855            -
  Repurchase of subsidiary's preferred stock                    -          (82)
  Dividends on common stock                                (2,925)      (2,793)
  Repayment of long-term debt                                   -         (141)
  Net decrease in bank borrowings                         (10,725)      (7,874)
  Other, net                                                   (1)          38
      Net cash used for financing activities              (11,989)     (10,357)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          (14)         152
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR              2,202        1,126
CASH AND CASH EQUIVALENTS AT END OF YEAR                $   2,188    $   1,278

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amount capitalized)                $   3,142    $   2,019
    Income taxes                                        $     429    $     653







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.  ("PG Energy"), a regulated public
utility,  and  PG  Energy's   wholly-owned  subsidiary,  Honesdale  Gas  Company
("Honesdale"), also a regulated  public  utility  which was acquired on February
14, 1997.    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  1997, PG Energy and
Honesdale  collectively  accounted  for   approximately  84%  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, including the  sale of natural gas, propane and
electricity and other  energy-related  services,  as  well  as the construction,
maintenance and rehabilitation  of  natural  gas  distribution pipelines and the
sale of property for  residential,  commercial  and  other  development.  In the
fourth quarter of 1997,  Energy  Services  began marketing electricity and other
products and services, under the  name  PG  Energy  PowerPlus, in 26 counties in
northeastern  and  central  Pennsylvania.    Power  Corp  is  expected  to begin
generating and selling  electricity  and  steam,  which  will  be marketed by PG
Energy PowerPlus,  in  mid-1998  upon  the  completion  of  modifications to its
cogeneration facility that will enable it to burn both natural and methane gas.

    Principles of Consolidation.   The consolidated financial statements include
the accounts of the  Company  and  its  subsidiaries, PG Energy, Energy Services
(including  Keystone),  Power  Corp  and  Theta.    The  consolidated  financial
statements also include the accounts  of  Honesdale beginning February 14, 1997,
the date  Honesdale  was  acquired  by  PG  Energy.    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
statements  of  the  Regulated  Subsidiaries  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.

                                      -6-
<PAGE>

    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  December  19,  1996, the PPUC approved an
overall 5.3% increase in PG  Energy'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
PG Energy's residential heating  customers,  which  totaled $1.7 million through
March 31, 1997, was deferred, without carrying charges, until July, 1997.  

    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs of  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,  1997,  to  the  gas  costs contained in its
tariff rates:

                                    Change in              Calculated
             Effective             Rate per MCF        Increase (Decrease)
                Date              From     To           in Annual Revenue 
[CAPTION]
           [S]                    [C]     [C]             [C]
           March 1, 1998          $4.05   $3.95           $ (2,100,000)
           December 1, 1997        4.49    4.05            (12,100,000)
           March 1, 1997           4.18    4.49              8,300,000

    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.






                                      -7-
<PAGE>

(3)  RESTRICTED CASH-COMMON STOCK SUBSCRIBED

    The Company  reinstated  its  Customer  Stock  Purchase  Plan (the "Customer
Plan") effective February 4, 1998.    The Customer Plan provides the residential
customers of all the Company's  subsidiaries  with a method of purchasing newly-
issued shares of the Company's  common  stock  at  a 5% discount from the market
price.  On April 1, 1998, the  Company  issued 35,668 shares of its common stock
for an aggregate consideration  of  $855,000  with  respect to payments received
pursuant to the Customer  Plan  during  the  subscription period ended March 31,
1998.  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,  1998.    The proceeds from the issuance of
shares through the Customer Plan  were  used  by  the Company to purchase common
stock of PG Energy.

(4)  ACCOUNTING CHANGES

    Reporting Comprehensive Income.    Effective  January  1,  1998, the Company
adopted the provisions of  FASB  Statement 130 "Reporting Comprehensive Income."
However, because there were no  items comprising other comprehensive income, the
adoption of FASB 130 had no effect on the Company's financial statements for the
first quarter of 1998.

    Disclosures about Segments of  an  Enterprise  and  Related Information.  In
June, 1997, FASB Statement 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued.   The  provisions  of this statement, which are
effective  for  fiscal  years  beginning  after  December  15,  1997,  establish
standards for reporting information about operating segments in annual financial
statements and selected segment information  in interim financial reports issued
to shareholders.  The Company expects  to adopt the reporting provisions of FASB
Statement 131 by the fourth quarter of 1998.

(5)  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.
Notwithstanding this determination by the EPA,  some of the sites may ultimately
require remediation.  One site that was owned by PG Energy from 1951 to 1967 and
at which it operated a manufactured gas  plant  from 1951 to 1954 was subject to
remediation in 1996.  The remediation  at  this site, which was performed by the
party from whom PG Energy  acquired  the  site  in 1951, required the removal of
materials from  two  former  gas  holders.    The  cost  of  such remediation is
purported to have been approximately $525,000, of which the party performing the
remediation is seeking to recover a material portion from PG Energy.  PG Energy,
however,  believes  that  any  liability  it  may  have  with  respect  to  such
remediation would be considerably less than  the  amount that the other party is
seeking.  While the final resolution of  the matter is uncertain, PG Energy does
not believe that it will have  any  material impact on its financial position or
results of operations.  Although the  conclusion  by the EPA that it anticipates


                                      -8-
<PAGE>

no further remedial action with respect to the sites at which PG Energy operated
manufactured gas plants 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.




















































                                      -9-
<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, 1998 and 1997:
[CAPTION]
                                                            Three Months Ended
                                                                 March 31,    
                                                             1998        1997 
[S]                                                          [C]         [C]
OPERATING REVENUES:
  Regulated...........................................        84.6%       89.3%
  Nonregulated -
    Gas sales and services............................        11.7         8.3 
    Pipeline construction and services................         3.1         2.4 
    Other.............................................         0.6           - 
      Total operating revenues........................       100.0       100.0 

OPERATING EXPENSES:
  Cost of gas.........................................        60.0        63.4 
  Operation and maintenance...........................        14.7        11.6 
  Depreciation........................................         3.4         2.6 
  Income taxes........................................         5.4         6.2 
  Taxes other than income taxes.......................         5.3         4.8 
    Total operating expenses..........................        88.8        88.6 

OPERATING INCOME......................................        11.2        11.4 

OTHER INCOME (DEDUCTIONS), NET........................        (0.0)        0.4 

INTEREST CHARGES......................................        (3.6)       (2.4)

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

NET INCOME ...........................................         7.2%        9.0%

o   Three  Months  Ended  March  31,  1998,  Compared  With  Three  Months Ended
    March 31, 1997

    Operating Revenues.  Operating revenues decreased $12.6 million (14.1%) from
$89.5 million for the quarter  ended  March  31,  1997, to $76.9 million for the
quarter ended March 31, 1998,  largely  as  a  result of a $14.9 million (18.7%)
decrease in regulated  operating  revenues,  the  impact  of which was partially
offset by a $1.7 million (22.4%) increase in gas sales and services by PG Energy
Services Inc. ("Energy Services"), a nonregulated affiliate of the Company.

    The $14.9 million  (18.7%)  decrease  in  regulated  operating revenues from
$79.9 million for the quarter  ended  March  31,  1997, to $65.0 million for the
quarter ended March 31, 1998, was  primarily  the  result of a 1.7 billion cubic
feet  (16.2%)  decrease  in  sales  by  PG  Energy  Inc.  ("PG  Energy")  to its
residential and commercial  heating  customers.    This  reduction  in sales was
attributable to the  unseasonably  warm  weather  during  the  quarter and lower
levels in PG Energy's gas  cost  rate  (see  "-Rate  Matters").  There was a 457
(15.3%) decrease in heating degree days  from 2,990 (93.7% of normal) during the
first quarter of 1997 to  2,533  (79.4%  of  normal) during the first quarter of
1998.

                                     -10-
<PAGE>

    The $1.7 million increase in  nonregulated  gas sales and services from $7.4
million for the quarter ended March  31,  1997,  to $9.0 million for the quarter
ended March 31, 1998, was primarily  the  result of a 793,000 cubic feet (40.3%)
increase in sales of natural gas by Energy Services during the quarter.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, decreased $11.0 million (13.8%) from  $79.3 million for the first quarter
of 1997 to $68.3 million for  the  first  quarter  of  1998.  As a percentage of
operating  revenues,  total  operating   expenses  remained  largely  unchanged,
increasing only slightly from 88.6%  during  the  first quarter of 1997 to 88.8%
during the first quarter of 1998.

    The cost of gas decreased $10.6  million  (18.6%) from $56.7 million for the
first quarter of 1997 to $46.2 million  for the first quarter of 1998, primarily
because of the aforementioned decrease  in  sales to PG Energy's residential and
commercial heating customers and lower levels  in PG Energy's gas cost rate (see
"-Rate Matters").  The effects  of  these  factors  were partially offset by the
increased sales by Energy Services.

    Other than the cost of gas and income taxes, operating expenses increased by
$1.0 million (6.1%) from $17.0 million  for  the  first quarter of 1997 to $18.0
million for the first quarter of  1998.   This increase was largely attributable
to  a  $1.0  million  (9.7%)  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.   Also contributing to the
higher operating  expenses  was  a  $302,000  (13.1%)  increase  in depreciation
expense, primarily as a result of additions to utility plant.

    Income taxes decreased $1.4 million (25.8%)  from $5.6 million for the first
quarter of 1997 to $4.2 million for the  first quarter of 1998 due to a decrease
in income  before  income  taxes  (for  this  purpose,  operating  income net of
interest charges).

    Operating Income.  As a result  of  the above, operating income decreased by
$1.6 million (16.0%) from $10.2  million  for the three-month period ended March
31, 1997, to $8.6 million for  the  three-month period ended March 31, 1998, and
also decreased as a percentage of total operating revenues for such periods from
11.4% in the three-month period  ended  March  31,  1997, to 11.2% in the three-
month period ended March 31, 1998.

    Other Income (Deductions), Net.    Other  income (deductions), net decreased
$392,000 from income of  $389,000  for  the  three-month  period ended March 31,
1997, to deductions of $3,000 for  the  three-month period ended March 31, 1998,
largely because the first quarter of 1997 included a gain on the condemnation of
certain property of PG Energy for highway construction.

    Interest Charges.   Interest  charges  increased  $513,000 (23.2%) from $2.2
million for the first quarter of 1997  to  $2.7 million for the first quarter of
1998.  This increase was  largely  attributable  to  a higher level of long-term
debt outstanding in 1998.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased  $32,000  (9.1%)  from  $353,000  for  the  three-month  period  ended
March 31, 1997, to $321,000  for  the  three-month  period ended March 31, 1998,
primarily as a result of the  repurchase  by  PG  Energy of 30,560 shares of its
4.10% cumulative preferred stock in 1997.



                                     -11-
<PAGE>

    Net Income.  The decrease in  net  income  of $2.5 million (31.2%) from $8.1
million for the first quarter of 1997  to  $5.5 million for the first quarter of
1998, as well as the $.27 per  share decrease in both basic and diluted earnings
per share of common  stock,  were  the  result  of  the matters discussed above,
principally the decrease  in  operating  revenues  and  the increase in interest
charges, the effects  of  which  were  partially  offset  by decreased operating
expenses.

RATE MATTERS

    Rate Increase.  By Order adopted  December 19, 1996, the Pennsylvania Public
Utility Commission (the "PPUC") approved an overall 5.3% increase in PG Energy'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  PG  Energy's  residential heating
customers, which totaled  $1.7  million  through  March  31, 1997, was deferred,
without carrying charges, until July, 1997.  

    Proposed Rate Increase.  On March  16,  1998, PG Energy filed an application
with the PPUC seeking an  increase  in  its  base gas rates, designed to produce
$15.0 million in additional annual revenue,  to  be  effective May 15, 1998.  On
April 23, 1998, the PPUC  suspended  this  rate increase for seven months (until
December 15, 1998) in order  to  investigate  the reasonableness of the proposed
rates.  It is not  presently  possible  to  determine  what action the PPUC will
ultimately take in this matter.

    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,  1997,  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, 1998          $4.05   $3.95           $ (2,100,000)
           December 1, 1997        4.49    4.05            (12,100,000)
           March 1, 1997           4.18    4.49              8,300,000

    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

                                     -12-
<PAGE>

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, increased
capital will  be  required  for  those  activities,  especially  to  convert the
cogeneration facility  Power  Corp  acquired  in  November,  1997,  to burn both
natural and methane gas and, in connection therewith, to construct a methane gas
recovery facility at a nearby  landfill.    It is currently anticipated that the
expenditures for the expansion of  the Company's nonregulated activities 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
$78.5 million of unsecured revolving  bank  credit, which is deemed adequate for
its immediate needs.  Specifically, PG  Energy currently has eight bank lines of
credit with an aggregate borrowing  capacity  of $78.5 million which provide for
borrowings at interest  rates  generally  less  than  prime  and which mature at
various times during 1998  and  1999  and  which  PG  Energy intends to renew or
replace as they expire.   As  of  May  1,  1998,  PG  Energy had $7.5 million of
borrowings outstanding under these bank lines of credit.  

    The Company believes that its  regulated  subsidiaries 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 relative to
Power Corp's cogeneration facility and related methane gas recovery facility.

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, 1998. 

    The Company also  obtains  external  funds  from  the  sale  of common stock
through its Dividend  Reinvestment  and  Stock  Purchase  Plan  (the "DRP"), its
Customer Stock Purchase Plan (the  "Customer  Plan"), its 1992 Stock Option Plan
and its Employees'  Savings  Plan.    During  1998  (through  May 1) the Company
realized $2.6 million, $855,000 and  $268,000  from the issuance of common stock
under the DRP, the Customer Plan  and the Employees' Savings Plan, respectively.
There have been no issuances of  common  stock  under the 1992 Stock Option Plan
during 1998.





                                     -13-
<PAGE>

Capital Expenditures and Related Financings

    Capital expenditures totaled $8.8 million  during  the first three months of
1998, including $4.4 million  of  expenditures  for  the construction of utility
plant and $3.8 million for the  conversion of Power Corp's cogeneration facility
and construction of the related methane gas recovery facility.

    The Company estimates that its capital expenditures will total $38.8 million
for the remainder of the year,  consisting  of $31.9 million relative to utility
plant and $6.9 million  with  respect  to the Company's nonregulated activities,
including $4.3  million  relative  to  Power  Corp's  cogeneration  facility and
related methane gas recovery  facility.    It  is  anticipated that such capital
expenditures  will  be  financed  with   internally  generated  funds  and  bank
borrowings, and by the periodic issuance of stock and long-term debt.

Current Maturities of Long-Term Debt and Preferred Stock

    As of March 31, 1998,  $17.3  million  of  long-term debt, and $80,000 of PG
Energy's preferred stock was required to be repaid within twelve months.

Year 2000

    The Company is currently  replacing  its  financial and customer information
systems with purchased software packages.  The installation of these new systems
will resolve the  primary  year  2000  issues.    The  new financial systems are
anticipated  to  be  operational  by  the  end  of  1998  and  the  new customer
information system is now anticipated to be operational in 1999.

    The  Company  has  completed  a  review  of  the  program  coding  of  other
significant  in-house  developed  applications  and  determined  that  they  are
presently year 2000  compliant.    Additionally,  the  Company  is reviewing its
installed base of  personal  computers  to  identify non-compliant machines that
would be in service  at  year  2000.    The  Company,  as a contingency, is also
presently  evaluating  the  feasibility   of  modifying  its  existing  customer
information system to make it year 2000  compliant in the event its new customer
system is not fully operational in 1999, as now scheduled.

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  the  expansion  of  the  Company's
nonregulated activities.    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.









                                     -14-
<PAGE>

                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     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)



Date:     May 5, 1998               By:            /s/ Thomas J. Ward          
                                                       Thomas J. Ward
                                                         Secretary



Date:     May 5, 1998               By:          /s/ John F. Kell, Jr.         
                                                     John F. Kell, Jr.
                                            Vice President, Financial Services
                                             (Principal Financial Officer and
                                               Principal Accounting Officer)




























                                     -16-
<PAGE>