PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                             TABLE OF CONTENTS


                                                                         PAGE

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

            Consolidated Statements of Income for the three and nine
              months ended September 30, 1997 and 1996. . . . . . . . .    2

            Consolidated Balance Sheets as of September 30, 1997,
              and December 31, 1996 . . . . . . . . . . . . . . . . . .    3

            Consolidated Statements of Cash Flows for
              the nine months ended September 30, 1997 and 1996 . . . .    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 . . . . . . . . . . . . . .   19






























                                    -1-
<PAGE>

                               PART I.  FINANCIAL INFORMATION

                       PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                              Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                  Three Months Ended      Nine Months Ended
                                                     September 30,          September 30,     
                                                   1997       1996        1997         1996   
                                               (Thousands of Dollars, Except for Share Amounts) 
<S>                                              <C>        <C>         <C>         <C>
OPERATING REVENUES:
  Regulated                                      $  16,276  $  13,998   $ 129,425   $  108,870
  Nonregulated - 
    Gas sales and services                           4,523      2,210      17,889        7,086
    Pipeline construction and services               3,344      3,095       8,124        7,634
    Other                                               66         51         126          108
      Total operating revenues                      24,209     19,354     155,564      123,698

OPERATING EXPENSES:
  Cost of gas                                       11,089      7,628      90,523       63,335
  Operation and maintenance                         11,088     10,777      32,396       31,816
  Depreciation                                       2,367      2,108       7,045        6,214
  Income taxes                                      (2,064)    (2,043)      3,618        2,610
  Taxes other than income taxes                      2,020      1,635       9,684        8,380
    Total operating expenses                        24,500     20,105     143,266      112,355

OPERATING INCOME (LOSS)                               (291)      (751)     12,298       11,343

OTHER INCOME, NET                                      667        736       1,395        2,096

INCOME (LOSS) BEFORE INTEREST CHARGES                  376        (15)     13,693       13,439

INTEREST CHARGES:
  Interest on long-term debt                         2,238      2,469       6,379        7,660
  Other interest                                       230        166         631          623
  Allowance for borrowed funds used
    during construction                                (45)       (73)       (144)        (169)
      Total interest charges                         2,423      2,562       6,866        8,114

INCOME (LOSS) FROM CONTINUING OPERATIONS            (2,047)    (2,577)      6,827        5,325

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS             -          -           -         (386)

INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
  STOCK DIVIDENDS                                   (2,047)    (2,577)      6,827        4,939

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS                 320        363         991        1,383

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS             (2,367)    (2,940)      5,836        3,556

EXTRAORDINARY LOSS (NET OF TAX BENEFIT
  OF $575,000) (Note 2)                                  -     (1,117)          -       (1,117)

NET INCOME (LOSS)                                $  (2,367) $  (4,057)  $   5,836   $    2,439

COMMON STOCK (Note 3):
  Earnings (Loss) Per Share of Common Stock:
    Continuing operations                        $    (.24) $    (.31)  $     .61   $      .38
    Discontinued operations                              -          -           -         (.04)
    Income (loss) before discount (premium) on
      repurchase of subsidiary's preferred
      stock and extraordinary loss                    (.24)      (.31)        .61          .34
    Discount (premium) on repurchase of
      subsidiary's preferred stock                       -       (.01)        .08         (.13)
    Extraordinary loss                                   -       (.11)          -         (.11)
    Earnings (loss) per share of common stock    $    (.24) $    (.43)  $     .69   $      .10

  Weighted average shares outstanding            9,699,614  9,621,126   9,643,088   10,428,032

  Cash dividends per share                       $     .30  $    .275   $     .89   $     .825

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>
                                                  September 30,    December 31,
                                                       1997           1996     
                                                      (Thousands of Dollars)

ASSETS
<S>                                               <C>             <C>
UTILITY PLANT:
  At original cost                                $     344,242   $     319,205
  Accumulated depreciation                              (86,933)        (79,783)
                                                        257,309         239,422

OTHER PROPERTY AND INVESTMENTS:
  Nonutility property and equipment                      14,115          12,502
  Accumulated depreciation                               (4,742)         (4,674)
  Other                                                   1,734           1,720
                                                         11,107           9,548

CURRENT ASSETS:
  Cash and cash equivalents                               1,101           1,126
  Accounts receivable -
    Customers                                            16,420          22,464
    Others                                                  889             565
    Reserve for uncollectible accounts                   (1,452)         (1,233)
  Unbilled revenues                                       3,374          12,966
  Materials and supplies, at average cost                 3,201           2,865
  Gas held by suppliers, at average cost                 25,970          20,265
  Natural gas transition costs collectible                1,512           2,525
  Deferred cost of gas and supplier refunds, net          9,207          19,316
  Prepaid expenses and other                              1,513           1,438
                                                         61,735          82,297

DEFERRED CHARGES:
  Regulatory assets -
    Deferred taxes collectible                           30,712          29,771
    Other                                                 4,329           4,274
  Unamortized debt expense                                1,329           1,498
  Other                                                     457               -
                                                         36,827          35,543









TOTAL ASSETS                                      $     366,978   $     366,810




The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
                                      -3-
<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                  September 30,    December 31,
                                                       1997           1996     
                                                      (Thousands of Dollars)

CAPITALIZATION AND LIABILITIES
<S>                                               <C>             <C>
CAPITALIZATION:
  Common shareholders' investment                 $     117,538   $     117,651
  Preferred stock of PGE -
    Not subject to mandatory redemption, net             15,848          18,851
    Subject to mandatory redemption                         640             739
  Long-term debt                                        125,000          75,000
                                                        259,026         212,241

CURRENT LIABILITIES:
  Current portion of long-term debt                      14,720          38,721
  Preferred stock subject to repurchase or
    mandatory redemption                                     80             115
  Notes payable                                           4,500          10,000
  Accounts payable                                       14,064          19,945
  Accrued general business and realty taxes               1,691           2,350
  Accrued income taxes                                    2,966          14,525
  Accrued interest                                        1,470           1,243
  Accrued natural gas transition costs                    1,154           2,095
  Other                                                   2,807           3,904
                                                         43,452          92,898

DEFERRED CREDITS:
  Deferred income taxes                                  51,250          49,270
  Unamortized investment tax credits                      4,639           4,767
  Operating reserves                                      2,805           3,086
  Other                                                   5,806           4,548
                                                         64,500          61,671




COMMITMENTS AND CONTINGENCIES (Note 6)









TOTAL CAPITALIZATION AND LIABILITIES              $     366,978   $     366,810




The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
                                      -4-
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                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                               Nine Months Ended    
                                                                 September 30,      
                                                               1997         1996    
                                                             (Thousands of Dollars)
<S>                                                          <C>           <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Income from continuing operations, net of
    subsidiary's preferred stock dividends                   $   5,836     $  3,942 
  Effects of noncash charges to income -
    Depreciation                                                 7,095        6,266
    Extraordinary loss, net of tax benefit                           -       (1,117)
    Deferred income taxes, net                                     715          530 
    Provisions for self insurance                                  630          742
    Other, net                                                     902        1,861
  Changes in working capital, exclusive of cash 
   and current portion of long-term debt -
    Receivables and unbilled revenues                           16,221       18,751
    Gas held by suppliers                                       (5,705)     (10,299)
    Accounts payable                                            (6,568)      (3,583)
    Deferred cost of gas and supplier refunds, net              10,316      (16,801)
    Other current assets and liabilities, net                      (39)         992
  Other operating items, net                                      (335)      (4,583) 
      Net cash provided by (used for) continuing operations     29,068       (3,299)
  Net cash used for discontinued operations, principally
    for the payment of income taxes                            (13,655)     (35,470)
      Net cash provided by (used for) operating activities      15,413      (38,769)

CASH FLOW FROM INVESTING ACTIVITIES:
  Additions to utility plant                                   (22,810)     (18,501)
  Proceeds from the sale of discontinued operations                  -      261,752
  Acquisition of regulated business                             (2,019)           -
  Other, net                                                    (1,429)      (1,285)
      Net cash provided by (used for) investing activities     (26,258)     241,966 

CASH FLOW FROM FINANCING ACTIVITIES:
  Issuance of common stock                                       1,861          555
  Repurchase of common stock                                         -      (39,663)
  Dividends on common stock                                     (8,583)      (8,533)
  Repurchase/redemption of subsidiary's preferred stock         (3,137)     (15,364)
  Issuance of long-term debt                                    25,000            -
  Repayment of long-term debt                                        -      (81,906)
  Net decrease in bank borrowings                               (5,021)     (56,034)
  Other, net                                                       700       (1,390)
      Net cash provided by (used for) financing activities      10,820     (202,335)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS               (25)         862
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                 1,126          629
CASH AND CASH EQUIVALENTS AT END OF PERIOD                   $   1,101    $   1,491

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amount capitalized)                     $   6,000    $   8,700
    Income taxes                                             $  15,197    $  34,584

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
                                      -5-
<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of the Business.  Pennsylvania Enterprises, Inc. (the "Company") is a
holding company which, through  its  subsidiaries,  is engaged in both regulated
and nonregulated activities.   The  Company's regulated activities are conducted
by its principal subsidiary, PG Energy Inc. ("PGE"), a regulated public utility,
and PGE's wholly-owned subsidiary,  Honesdale  Gas Company ("Honesdale"), also a
regulated public utility which was acquired  on February 14, 1997.  Together PGE
and Honesdale distribute natural gas  to  a thirteen-county area in northeastern
Pennsylvania, a territory that includes  130  municipalities, in addition to the
cities of Scranton, Wilkes-Barre and Williamsport.  

    The  Company,  through  its  other  subsidiaries,  PG  Energy  Services Inc.
("Energy Services"),  formerly  known  as  Pennsylvania  Energy Resources, Inc.,
Theta  Land  Corporation   ("Theta")   and   Keystone  Pipeline  Services,  Inc.
("Keystone"), a  wholly-owned  subsidiary  of  Energy  Services,  is  engaged in
various nonregulated activities, including the marketing and sale of natural gas
and propane and  other  energy-related  services,  as  well as the construction,
maintenance  and   rehabilitation   of   natural   gas  distribution  pipelines.
Commencing in the  fourth  quarter  of  1997,  Energy  Services  will also begin
marketing  electricity  and  other  products  and  services  in  26  counties in
northeastern and central Pennsylvania  pursuant  to  a retail marketing alliance
agreement with CNG Energy  Services,  a  subsidiary  of Consolidated Natural Gas
Company.  Additionally, Theta  is  initiating several residential and commercial
real estate development projects on Company-owned land for which construction is
currently expected to commence in the fourth quarter of 1997.  

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

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

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

    The results for the interim periods are  not indicative of the results to be
expected for the year, primarily  due  to  the  effect of seasonal variations in

                                      -6-
<PAGE>

weather on energy sales and  services.    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  which  are difficult to
predict and are beyond the  control  of  the Company.  Therefore, actual amounts
could differ from these estimates.

(2) EXTRAORDINARY LOSS

    Defeasance of Senior Notes.  On September 30, 1996, the Company defeased the
$28.7 million outstanding  principal  amount  of  its  10.125% Senior Notes (the
"Senior Notes"), due June 15, 1999,  and  recorded an extraordinary loss of $1.1
million ($1.6 million, net of  $575,000  of  related  income tax benefits).  The
loss on the defeasance represented the interest expense on the Senior Notes from
the date of defeasance through June 15, 1997, the date on which the Senior Notes
were scheduled to be redeemed, plus  the  writeoff of the unamortized balance of
issuance expenses related to  the  Senior  Notes,  less  (i) the interest income
expected to be earned on the funds  that were deposited with the Trustee for the
Senior Notes in connection with their defeasance and (ii) the related income tax
benefit.

(3)  COMMON STOCK

    Common Stock Split.  Pursuant to  resolutions adopted by the Company's Board
of Directors on February 19, 1997, a Certificate of Amendment was filed with the
Secretary of State  of  the  Commonwealth  of  Pennsylvania  on  March 20, 1997,
amending the Company's Restated  Articles  of  Incorporation to (i) increase the
number of authorized shares of  its  common  stock  from 15 million shares to 30
million shares and (ii) reduce the  stated  value of such shares from $10.00 per
share to $5.00 per share.  This amendment had no effect on the Company's capital
accounts.  On February 19, 1997, the Board of Directors also declared a two-for-
one split of the Company's common stock effective March 20, 1997.  The number of
shares of common stock reflected  in these consolidated financial statements and
the earnings per share of common stock for both the three and nine-month periods
ended September 30, 1996, were restated to give retroactive effect to this stock
split.

(4)  RATE MATTERS

    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers, which totaled $2.4 million through June 30, 1997,
was deferred, without carrying charges, until July, 1997.  



                                      -7-
<PAGE>

    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs  of  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs. 

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

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

(5)  ACCOUNTING CHANGES

    Earnings Per Share.  In  February,  1997,  FASB Statement 128, "Earnings per
Share"  was  issued.    The  provisions  of  this  statement,  which  supersedes
Accounting Principles Board Opinion No.  15,  "Earnings per Share", simplify the
computation of earnings per share.    FASB  Statement  128 will be effective for
financial statements for both interim  and  annual periods ending after December
15, 1997.  The Company does  not  expect  the  adoption of FASB Statement 128 to
have a material effect on its calculation of earnings per share.

    Reporting  Comprehensive  Income.    In   June,  1997,  FASB  Statement  130
"Reporting Comprehensive Income", was issued.  The provisions of this statement,
which  are  effective  for  fiscal  years  beginning  after  December  15, 1997,
establish standards for reporting  and  display  of comprehensive income and its
components in financial statements.   The reporting provisions of FASB Statement
130, which the Company will adopt in  1998,  are not expected to have a material
impact on the reported results of operations of the Company.

    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 in 1998.

(6)  COMMITMENTS AND CONTINGENCIES

    Environmental Matters.   PGE,  like  many  gas  distribution companies, once
utilized manufactured gas plants in connection with providing gas service to its
customers.  None of these plants  has  been in operation since 1972, and several
of the plant sites are no  longer  owned  by PGE.  Pursuant to the Comprehensive

                                      -8-
<PAGE>

Environmental Response, Compensation and  Liability  Act of 1980 ("CERCLA"), PGE
filed notices with the United States Environmental Protection Agency (the "EPA")
with respect to the former plant sites.  None of the sites is or was formerly on
the proposed or final  National  Priorities  List.    The EPA has conducted site
inspections and made preliminary assessments of each site and has concluded that
no further remedial action  is  planned.   Notwithstanding this determination by
the EPA, some of the sites  may  ultimately  require remediation.  One site that
was owned by PGE 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 PGE 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 PGE. PGE, 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, PGE 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
no further remedial action  with  respect  to  the  sites  at which PGE 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.

    Subsequent Event.  On October  3,  1997,  the Company signed an agreement to
acquire a 25-megawatt cogeneration  plant  and  related facilities located on an
approximate 260 acre site in Lackawanna County, Pennsylvania.  The Company plans
to convert the plant, which  was  closed  in July, 1997, from burning anthracite
culm to natural gas.  The consideration  to  be paid for the facilities and real
estate will consist  of  approximately  33,500  shares  of  the Company's common
stock.  In addition, approximately $8.0  million will be expended by the Company
in converting the plant so that it  can  burn  natural gas.  The closing on this
acquisition is expected to occur in November, 1997.
























                                      -9-
<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

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

STOCK SPLIT

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

RESULTS OF CONTINUING OPERATIONS

    The following table expresses  certain  items  in the Company's consolidated
statements of income as percentages of  total operating revenues for each of the
three and nine-month periods ended September 30, 1997, and September 30, 1996:
<TABLE>
<CAPTION>
                                                  Percentage of Operating Revenues  
                                               Three Months Ended  Nine Months Ended
                                                  September 30,      September 30,  
                                                1997       1996     1997       1996 
<S>                                             <C>        <C>      <C>        <C>
OPERATING REVENUES:
  Regulated..................................    67.2%      72.3%    83.2%      88.0%
  Nonregulated -
    Gas sales and services...................    18.7       11.4     11.5        5.7
    Pipeline construction and services.......    13.8       16.0      5.2        6.2
    Other....................................     0.3        0.3      0.1        0.1
      Total operating revenues...............   100.0      100.0    100.0      100.0

OPERATING EXPENSES:
  Cost of gas................................    45.8       39.4     58.2       51.2
  Operation and maintenance..................    45.8       55.7     20.8       25.7
  Depreciation...............................     9.8       10.9      4.6        5.0
  Income taxes...............................    (8.5)     (10.6)     2.3        2.1
  Taxes other than income taxes..............     8.3        8.5      6.2        6.8
    Total operating expenses.................   101.2      103.9     92.1       90.8

OPERATING INCOME (LOSS)......................    (1.2)      (3.9)     7.9        9.2

OTHER INCOME, NET............................     2.7        3.8      0.9        1.7

INTEREST CHARGES (1).........................   (10.0)     (13.2)    (4.4)      (6.6)     

INCOME (LOSS) FROM CONTINUING OPERATIONS.....    (8.5)     (13.3)     4.4        4.3      

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS.       -          -        -       (0.3)     

INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
  STOCK DIVIDENDS............................    (8.5)     (13.3)     4.4        4.0      

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS(1)....    (1.3)      (1.9)    (0.6)      (1.1)     

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS......    (9.8)     (15.2)     3.8        2.9      

EXTRAORDINARY LOSS...........................       -       (5.8)       -       (0.9)     

NET INCOME (LOSS)............................    (9.8)     (21.0)     3.8        2.0
                    
(1)   None  of  the  Company's  interest  expense  nor  any  of the subsidiary's
preferred stock dividends was allocated to the discontinued operations.
</TABLE>
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<PAGE>

                Three Months Ended September 30, 1997, Compared
                  With Three Months Ended September 30, 1996   

    Operating Revenues.  Operating revenues  increased $4.9 million (25.1%) from
$19.4 million for the  three-month  period  ended  September  30, 1996, to $24.2
million for the three-month period ended September 30, 1997, largely as a result
of a $2.3 million (16.3%)  increase  in  regulated operating revenues and a $2.3
million (104.7%) increase in gas sales  and  services by PG Energy Services Inc.
("Energy Services"), a nonregulated affiliate  of  the Company formerly known as
Pennsylvania Energy Resources, Inc.

    The $2.3 million (16.3%) increase in regulated operating revenues from $14.0
million for the quarter  ended  September  30,  1996,  to  $16.3 million for the
quarter ended September 30, 1997, was  primarily the result of the rate increase
granted PG Energy Inc.  ("PGE")  by  the  Pennsylvania Public Utility Commission
(the "PPUC") which became effective  on  January  15, 1997 (see "Rate Matters"),
higher levels in PGE's gas cost rate and the operating revenues of Honesdale Gas
Company ("Honesdale"), which was acquired  by  the Company on February 14, 1997,
totaling $323,000.  Also contributing  to  the  increase  was a 56 million cubic
feet (3.7%) increase in deliveries  to  PGE's residential and commercial heating
customers that  was  largely  attributable  to  cooler  weather.    There was an
increase of 47 heating degree days from  163 (135.8% of normal) during the third
quarter of 1996 to 210 (175.0% of normal) during the third quarter of 1997. 

    The $2.3 million (104.7%)  increase  in  nonregulated gas sales and services
from $2.2 million for the quarter ended  September 30, 1996, to $4.5 million for
the quarter ended September 30,  1997,  was  primarily  the result of an 877,000
cubic feet (146.3%) increase in sales  of  natural gas by Energy Services during
the quarter.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, increased $4.4 million  (21.9%)  from  $20.1  million for the three-month
period ended September 30,  1996,  to  $24.5  million for the three-month period
ended September  30,  1997.    As  a  percentage  of  operating  revenues, total
operating expenses decreased from  103.9%  during  the  third quarter of 1996 to
101.2% during the third quarter of 1997, largely as a result of a proportionally
greater increase in revenues.

    The cost of gas increased  $3.5  million  (45.4%)  from $7.6 million for the
three-month period ended September  30,  1996,  to  $11.1 million for the three-
month period ended September 30,  1997,  primarily because of the aforementioned
increase in sales by both PGE  and  Energy  Services, the higher levels in PGE's
gas cost rate  (see  "-Rate  Matters")  and  $194,000  of  gas  costs related to
Honesdale.
 
    Other than the cost of gas and income taxes, operating expenses increased by
$955,000 (6.6%) from $14.5  million  for  the three-month period ended September
30, 1996, to $15.5 million for  the three-month period ended September 30, 1997.
This increase was partially attributable to a $385,000 (23.5%) increase in taxes
other than income taxes  resulting  from  a  higher  level of gross receipts tax
because of the increased sales by PGE and the sales of Honesdale.  Operation and
maintenance expense increased $311,000 (2.9%)  as  a result of $206,000 of costs
relative to Honesdale in the third quarter of 1997, as well as increased payroll
and other costs  attributable  to  the  expansion  of the Company's nonregulated
activities.  Also contributing to  the  higher operating expenses was a $259,000
(12.3%) increase in depreciation expense, primarily  as a result of additions to
utility plant.


                                     -11-
<PAGE>

    Operating Income (Loss).   As  a  result  of  the  above, the operating loss
decreased by $460,000 (61.3%) from a loss of $751,000 for the three-month period
ended September 30, 1996, to a loss of $291,000 for the three-month period ended
September 30, 1997, and decreased  as  a  percentage of total operating revenues
for such periods from a negative 3.9% in 1996 to a negative 1.2% in 1997.

    Other Income, Net.  Other income, net decreased $69,000 (9.4%) from $736,000
for the three-month period ended September  30, 1996, to $667,000 for the three-
month period ended September 30, 1997, largely because the third quarter of 1996
included income from the temporary investment  of certain proceeds from the sale
of PGE's regulated water utility operations  in  February, 1996.  The absence of
such investment income was partially offset  by an inducement fee paid to Energy
Services relative to its participation in a retail marketing alliance. 

    Interest Charges.  Interest charges  decreased  by $139,000 (5.4%) from $2.6
million for the three-month period ended September 30, 1996, to $2.4 million for
the three-month period ended  September  30,  1997.    This decrease was largely
attributable  to  the  Company's  defeasance  of  its  10.125%  Senior  Notes on
September 30, 1996.

    Income  (Loss)  From  Continuing  Operations.    The  loss  from  continuing
operations decreased $530,000 (20.6%)  from  $2.6  million for the quarter ended
September 30, 1996, to $2.0  million  for  the quarter ended September 30, 1997.
This decrease was largely the result of the matters discussed above, principally
the increase in operating  revenues  and  the  decrease in interest charges, the
effects of which were partially offset by the increased operating expenses.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased  $43,000  (11.8%)  from  $363,000  for  the  three-month  period ended
September 30, 1996, to $320,000  for  the three-month period ended September 30,
1997, primarily as a result of the repurchase by PGE in 1997 of 30,375 shares of
its 4.10% cumulative preferred stock.

    Income (Loss) Before Extraordinary Loss.    The decrease of $573,000 (19.5%)
in the loss before  extraordinary  loss,  from  $2.9 million for the three-month
period ended September 30,  1996,  to  $2.4  million  for the three-month period
ended September 30, 1997, was  largely  the  result  of the decrease in the loss
from continuing operations  and  the  reduced  dividends  on preferred stock, as
discussed above.

    Extraordinary Loss.  On September  30,  1996, the Company defeased the $28.7
million outstanding principal amount  of  its  10.125% Senior Notes (the "Senior
Notes"),  due  June  15,  1999,  and  recorded  an  extraordinary  loss  on such
defeasance of $1.1 million ($1.6 million,  net of $575,000 of related income tax
benefits).  The loss on the  defeasance  represented the interest expense on the
Senior Notes from the date  of  defeasance  through  June  15, 1997, the date on
which the Senior Notes were scheduled  to  be redeemed, plus the writeoff of the
unamortized balance of issuance expenses  related  to the Senior Notes, less (i)
the interest income expected to be earned  on the funds that were deposited with
the Trustee for the Senior  Notes  in  connection with their defeasance and (ii)
the related income tax benefit.

    Net Income (Loss).  The decrease  of  $1.7  million (41.7%) in the net loss,
from $4.1 million for the three-month  period  ended September 30, 1996, to $2.4
million for the three-month  period  ended  September  30,  1997, as well as the
decrease in the loss per share of common  stock  of $.19 from a loss of $.43 per
share for the third quarter of 1996  to  a  loss of $.24 per share for the third
quarter of  1997,  were  primarily  the  result  of  the  decrease  in loss from

                                     -12-
<PAGE>

continuing operations and the  recording  in  the  third  quarter of 1996 of the
extraordinary loss on the defeasance of the Company's Senior Notes, as discussed
above.  Also contributing to the decrease  in the loss per share of common stock
was the inclusion in the third quarter  of  1996  of a $.01 per share premium of
the repurchase of  shares  of  preferred  stock  by  PGE.    While discounts and
premiums on the repurchase of preferred stock are reflected in retained earnings
and are not a determinant of  net  income, the discounts and premiums associated
with repurchases must be taken  into  account in calculating the earnings (loss)
per share of common stock.

                Nine Months Ended September 30, 1997, Compared
                  With Nine Months Ended September 30, 1996   

    Operating Revenues.  Operating revenues increased $31.9 million (25.8%) from
$123.7 million for the nine months  ended  September 30, 1996, to $155.6 million
for the nine months ended September  30,  1997,  largely  as a result of a $20.6
million (18.9%) increase in  regulated  operating  revenues  and a $10.8 million
(152.5%) increase in nonregulated gas sales and services by Energy Services.

    The $20.6 million  (18.9%)  increase  in  regulated  operating revenues from
$108.9 million for the nine months  ended  September 30, 1996, to $129.4 million
for the nine months ended September 30, 1997, was primarily the result of higher
levels in PGE's gas cost rate and the effect of the rate increase granted PGE by
the PPUC which became effective on  January  15, 1997 (see "Rate Matters").  The
effect of the increases in rates  was  partially  offset by an 896 million cubic
feet (5.0%) decrease in deliveries  to  PGE's residential and commercial heating
customers.  There was a decrease  of  192  (4.4%) heating degree days from 4,356
(106.9% of normal) during the  first  nine  months  of  1996 to 4,164 (102.2% of
normal) during the first nine months  of  1997.  Operating revenues of Honesdale
totaling $1.9 million  from  its  February  14,  1997,  acquisition date through
September 30,  1997,  also  contributed  to  the  increased  regulated operating
revenues.

    The $10.8 million (152.5%) increase  in  nonregulated gas sales and services
from $7.1 million for the nine months ended September 30, 1996, to $17.9 million
for the nine months ended September 30,  1997, was primarily the result of a 3.4
million cubic feet (214.6%) increase in  sales of natural gas by Energy Services
during the period.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, increased $30.9 million (27.5%)  from  $112.4  million for the first nine
months of 1996 to $143.3  million  for  the  first  nine  months  of 1997.  As a
percentage of operating revenues, total  operating expenses increased from 90.8%
during the first nine months of  1996  to  92.1% during the first nine months of
1997, largely as a result of an increase in the cost of gas.

    Cost of gas increased $27.2 million (42.9%) from $63.3 million for the first
nine months of  1996  to  $90.5  million  for  the  first  nine  months of 1997,
primarily because of higher levels in PGE's gas cost rate (see "-Rate Matters"),
and the aforementioned increase in sales  by Energy Services.  Also contributing
to the increase was $1.3  million  of  gas  costs  related to Honesdale from its
February 14, 1997, acquisition date through September 30, 1997.  

    Other than the cost of gas and income taxes, operating expenses increased by
$2.7 million (5.9%) from $46.4  million  for  the  first  nine months of 1996 to
$49.1 million for the first nine  months  of  1997.  This increase was partially
attributable to a $1.3 million (15.6%) increase in taxes other than income taxes
resulting from a higher level  of  gross  receipts  tax because of the increased

                                     -13-
<PAGE>

sales by PGE and the sales  of  Honesdale  from its acquisition date.  Operation
and maintenance  expense  increased  $580,000  (1.8%)  largely  as  a  result of
$470,000 of expenses relative to  Honesdale  since its acquisition date, as well
as increased payroll  and  other  costs  attributable  to  the  expansion of the
Company's nonregulated activities.   Also  contributing  to the higher operating
expenses was an $831,000 (13.4%)  increase in depreciation expense, primarily as
a result of additions to utility plant.

    Income taxes increased $1.0 million  (38.6%)  from $2.6 million in the first
nine months of 1996 to $3.6 million in  the  first nine months of 1997 due to an
increase in income before income  taxes  (for this purpose, operating income net
of interest charges).

    Operating Income  (Loss).    As  a  result  of  the  above, operating income
increased by $955,000 (8.4%) from $11.3  million for the nine-month period ended
September 30, 1996, to $12.3  million  for the nine-month period ended September
30, 1997.   However,  as  a  percentage  of  total operating revenues, operating
income decreased for  such  periods  from  9.2%  in  the nine-month period ended
September 30, 1996, to 7.9% in  the  nine-month period ended September 30, 1997,
largely as a result  of  the  proportionately  higher  ratio  of  cost of gas to
operating revenues.

    Other Income, Net.  Other  income,  net decreased $701,000 (33.4%) from $2.1
million for the nine-month period ended  September 30, 1996, to $1.4 million for
the nine-month period ended September  30,  1997, largely because the first nine
months of 1996 included income from the temporary investment of certain proceeds
from the sale of  PGE's  regulated  water  utility operations in February, 1996.
The absence of  such  investment  income  in  1997  was  partially  offset by an
inducement fee paid to Energy Services relative to its participation in a retail
marketing alliance.

    Interest Charges.  Interest charges decreased $1.2 million (15.4%) from $8.1
million for the first nine months  of  1996  to  $6.9 million for the first nine
months of 1997.  This  decrease  was  largely  attributable to the the Company's
defeasance of its 10.125% Senior Notes on September 30, 1996.

    Income (Loss) From Continuing Operations.  Income from continuing operations
increased $1.5 million (28.2%) from $5.3 million for the nine-month period ended
September 30, 1996, to $6.8  million  for  the nine-month period ended September
30, 1997.  This increase was largely  the result of the matters discussed above,
principally the increase in operating revenues and decrease in interest charges,
the effects of which were  partially  offset by increased operating expenses and
the lower level of other income, net.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased $392,000 (28.3%) from  $1.4  million  for  the nine-month period ended
September 30, 1996, to $991,000  for  the  nine-month period ended September 30,
1997, primarily as a result of the  repurchase  by PGE in 1996 of 134,359 shares
of its 9%  cumulative  preferred  stock,  9,408  shares  of its 5.75% cumulative
preferred stock and  20,330  shares  of  its  4.10%  cumulative preferred stock,
largely during the second quarter of that  year, as well as its repurchase of an
additional 30,375 shares of the 4.10% cumulative preferred stock in 1997.

    Income (Loss) Before  Extraordinary  Loss.    The  increase in income before
extraordinary loss of $2.3 million (64.1%)  from $3.6 million for the nine-month
period ended September 30, 1996, to $5.8 million for the nine-month period ended
September 30, 1997,  was  largely  the  result  of  the  increase in income from
continuing operations and the reduced dividends on preferred stock, as discussed
above, and the absence of any loss with respect to discontinued operations.

                                     -14-
<PAGE>

    Extraordinary Loss.  On September  30,  1996, the Company defeased the $28.7
million outstanding principal amount  of  its  10.125% Senior Notes (the "Senior
Notes"),  due  June  15,  1999,  and  recorded  an  extraordinary  loss  on such
defeasance of $1.1 million ($1.6 million,  net of $575,000 of related income tax
benefits).  The loss on the  defeasance  represented the interest expense on the
Senior Notes from the date  of  defeasance  through  June  15, 1997, the date on
which the Senior Notes were scheduled  to  be redeemed, plus the writeoff of the
unamortized balance of issuance expenses  related  to the Senior Notes, less (i)
the interest income expected to be earned  on the funds that were deposited with
the Trustee for the Senior  Notes  in  connection with their defeasance and (ii)
the related income tax benefit.

    Net Income.  The increase in  net  income of $3.4 million (139.3%) from $2.4
million for the first nine months  of  1996  to  $5.8 million for the first nine
months of 1997 was the result  of  the higher income from continuing operations,
the reduced dividends on subsidiary's preferred stock and the extraordinary loss
in 1996, as discussed above, as well as  the absence of any loss with respect to
discontinued operations.  These same  factors,  along  with premiums of $.13 per
share during the first  nine  months  of  1996  and  discounts of $.08 per share
during the first nine  months  of  1997  on  the  repurchase of preferred stock,
accounted for the increase in earnings  per  share  of common stock of $.59 from
$.10 per share for the first nine months of 1996 to $.69 per share for the first
nine months of 1997.  Also contributing to the increase in earnings per share of
common stock  was  the  reduction  in  the  weighted  average  number  of shares
outstanding as a result of the  repurchase  of shares, largely during the second
quarter of 1996, with proceeds from  the  sale of PGE's water utility operations
in February, 1996.

RATE MATTERS

    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers, which totaled $2.4 million through June 30, 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  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs.  














                                     -15-
<PAGE>

    In accordance with these  procedures,  PGE  has  been  permitted to make the
following changes since January 1, 1996,  to  the gas costs contained in its gas
tariff rates:
[CAPTION]
                                    Change in              Calculated
             Effective             Rate per MCF        Increase/(Decrease)
                Date              From     To           in Annual Revenue 
           [S]                    [C]     [C]             [C]
           December 1, 1997       $4.49   $3.95           $(15,700,000)
           March 1, 1997           4.18    4.49              8,300,000
           December 1, 1996        3.01    4.18             32,400,000
           September 1, 1996       2.88    3.01              3,600,000
           June 1, 1996            2.75    2.88              3,400,000

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

    Recovery of FERC Order 636 Transition  Costs.   By Order of the PPUC entered
August 26, 1994, PGE  began  recovering  the  Non-Gas Transition Costs (i.e. Gas
Supply Realignment and Stranded Costs)  that  it estimates it will ultimately be
billed pursuant to Federal Energy  Regulatory  Commission Order 636, through the
billing of a surcharge to  its  customers  effective  September 12, 1994.  It is
currently estimated that  $10.7  million  of  Non-Gas  Transition  Costs will be
billed to PGE, generally  over  a  six-year  period extending through January 1,
1999, of which $9.3 million had  been  billed  to  PGE and $9.2 million had been
recovered from its customers as  of  September  30,  1997.  PGE has recorded the
estimated Non-Gas Transition  Costs  that  remain  to  be  billed  to it and the
amounts remaining to be recovered from its customers.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

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

    Additionally, as  the  Company's  nonregulated  activities expand, increased
capital will be required for those activities, especially the cogeneration plant
the Company has agreed to acquire and the residential and commercial real estate
development projects that are planned for  certain Company-owned land.  The real
estate development projects that  are  currently  planned  by the Company are in
their initial phases, and the  amount  and  type  of funding that those projects
will require  has  not  yet  been  finalized.    Likewise,  the  costs which the
cogeneration plant will  involve  are  still  being  finalized.   However, it is
currently anticipated that the expenditures for both the real estate development
projects and the cogeneration plant will  be  funded by a combination of capital
provided by the Company, bank borrowings and other debt financing.

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

                                     -16-
<PAGE>

    In order to temporarily  finance  construction  expenditures and to meet its
seasonal borrowing requirements, PGE has made  arrangements for a total of $68.5
million of unsecured revolving  bank  credit,  which  is deemed adequate for its
presently anticipated needs.  Specifically,  PGE  currently has seven bank lines
of credit with an aggregate  borrowing  capacity  of $68.5 million which provide
for borrowings at interest rates generally less than prime and mature at various
times during 1998 and 1999 and  which  PGE  intends  to renew or replace as they
expire.  As of November 3, 1997, PGE had $21.2 million of borrowings outstanding
under these bank lines of credit.

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

Long-Term Debt and Capital Stock Financings

    Both the Company and its subsidiaries, most notably PGE, periodically engage
in long-term debt and capital stock financings in order to obtain funds required
for construction expenditures,  the  refinancing  of  existing  debt and various
working capital purposes.

    On September 12, 1997, PGE  borrowed  $25.0  million pursuant to a five-year
term loan agreement dated  August  14,  1997  (the "Term Loan Agreement"), which
matures on August 14,  2002.    Borrowings  under  the  Term Loan Agreement bear
interest at LIBOR ("London  Interbank  Offered  Rates")  plus one-quarter of one
percent (5.875% as of November  3,  1997).    Under  the  terms of the Term Loan
Agreement, PGE can  choose  interest  rate  periods  of  one,  two, three or six
months.  PGE utilized the proceeds from  such loan to repay $25.0 million of its
bank borrowings.

    On September 30, 1997, PGE  issued  $25.0  million of its 6.92% Senior Notes
due September 30, 2004 (the "Senior Notes").   The proceeds from the issuance of
the Senior Notes were used by PGE to repay $25.0 million of its bank borrowings.

    No capital stock financings were  consummated  by  either the Company or PGE
during the nine-month period ended September 30, 1997.

    The Company also  obtains  external  funds  from  the  sale  of common stock
through its Dividend Reinvestment and Stock  Purchase Plan (the "DRP"), its 1992
Stock Option Plan and its Employees' Savings Plan.  During the nine-month period
ended September  30,  1997,  the  Company  realized  $1.3  million,  $51,000 and
$547,000 ($1.9 million in total)  from  the  issuance  of common stock under the
DRP, 1992 Stock Option Plan and Employees' Savings Plan, respectively.

Capital Expenditures and Related Financings

    Capital expenditures totaled $25.5 million  during  the first nine months of
1997, including $22.7 million  of  expenditures  for the construction of utility
plant.  

    The Company estimates that its capital expenditures will total $16.7 million
for the remainder of the year,  consisting  of $10.9 million relative to utility
plant and $5.8 million  with  respect  to the Company's nonregulated activities.
It  is  anticipated  that  such  capital  expenditures  will  be  financed  with
internally generated funds and bank borrowings, pending the periodic issuance of
stock and long-term debt.

                                     -17-
<PAGE>

Current Maturities of Long-Term Debt and Preferred Stock

    As of September 30, 1997, $14.7  million of PGE's long-term debt and $80,000
of its preferred stock was required to be repaid within twelve months.

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  and  electric industries and general
economic  conditions  and  uncertainties  relating  to  new  projects  like  the
residential and commercial development projects on Company-owned land.











































                                     -18-
<PAGE>

                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10-1  Form of Stock Option Agreement,  dated  as  of June 20, 1997, between
           the Company and certain of its Officers -- filed herewith.

     10-2  Form of Stock Option Agreement,  dated  as  of June 20, 1997, between
           the Company  and  certain  of  its  non-employee  directors  -- filed
           herewith.

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

     27-1  Financial Data Schedule -- filed herewith.

(b)  Reports on Form 8-K

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






































                                     -19-
<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:  November 7, 1997              By:           /s/ Thomas J. Ward          
                                                       Thomas J. Ward
                                                         Secretary



Date:  November 7, 1997              By:         /s/ John F. Kell, Jr.         
                                                     John F. Kell, Jr.
                                            Vice President, Financial Services
                                             (Principal Financial Officer and
                                               Principal Accounting Officer)




























                                     -20-
<PAGE>