FORM 10-Q                       Page 1 of 19

                   SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549




          (Mark One)

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


For the quarterly period ended           September 30, 1996             
                              --------------------------------------------- 
                                 OR

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

For the transition period from                          to                 
                              --------------------------  -----------------
Commission File Number                             1-3437-2
                      ----------------------------------------------------- 
             
                    AMERICAN WATER WORKS COMPANY, INC.
---------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)

            Delaware                               51-0063696         
-------------------------------         -----------------------------------
(State or other jurisdiction of         (IRS Employer Identification No.)
incorporation or organization)          

            1025 Laurel Oak Road, Voorhees, New Jersey  08043
---------------------------------------------------------------------------
           (Address of principal executive offices) (Zip Code)

                              (609) 346-8200
---------------------------------------------------------------------------
           (Registrant's telephone number, including area code)

                              Not Applicable
---------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed since     
   last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.     Yes  X  No    
                                                 -----  -----
At November 1, 1996, the number of shares of common stock, $1.25 par value,
outstanding was 78,196,975 shares, reflecting a two-for-one stock split in
the form of a 100% stock dividend consummated July 25, 1996.
                



<PAGE>                           Page 2                           FORM 10-Q
                       PART I FINANCIAL INFORMATION
                       ----------------------------
                       Item 1.  Financial Statements
                       -----------------------------
        AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
        -----------------------------------------------------------
    Consolidated Statements of Income and Retained Earnings (Unaudited)
                   (In thousands, except per share amounts)
<TABLE>
                                                      Three Months Ended 
                                                         September 30,   
                                                       1996         1995
                                                     --------     --------
<S>                                                  <C>          <C>
CONSOLIDATED INCOME
Operating revenues                                   $247,616     $222,961
                                                     --------     --------
Operating expenses                               
  Operation and maintenance                           112,012      105,631
  Depreciation and amortization                        23,620       20,054
  General taxes                                        20,439       19,137
                                                     --------     --------
                                                      156,071      144,822
                                                     --------     --------
Operating income                                       91,545       78,139
Allowance for other funds used during 
  construction                                            657        3,372
Other income                                            1,875          375
                                                     --------     --------
                                                       94,077       81,886
                                                     --------     --------
Income deductions
  Interest                                             34,068       29,715
  Allowance for borrowed funds used
    during construction                                  (615)      (2,557)
  Amortization of debt expense                            383          310
  Preferred dividends of subsidiaries                     901          923
  Other deductions                                        417          611
                                                     --------     --------
                                                       35,154       29,002
                                                     --------     --------
Income before income taxes                             58,923       52,884
Provision for income taxes                             22,617       20,285
                                                     --------     --------

Net income                                             36,306       32,599
Dividends on preferred stocks                             996          996
                                                     --------     --------
Net income to common stock                           $ 35,310     $ 31,603
                                                     ========     ========
Weighted average shares of common stock outstanding*   77,949       66,918

Earnings per common share on weighted average 
  shares outstanding*                                $   0.45     $   0.47
                                                     ========     ========






<PAGE>                         Page 3                            FORM 10-Q


                                                      Three Months Ended
                                                          September 30,
                                                       1996         1995
                                                     --------     --------
<S>                                                  <C>          <C>
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of period*                      $633,420     $595,263
Add - net income                                       36,306       32,599
Deduct - adjustment for 1996 two-for-one 
         stock split, in the form of a 
         100% stock dividend, on shares
         issued during the period                          73          445
                                                     --------     --------
                                                      669,653      627,417
                                                     --------     --------

Deduct - dividends 
  Preferred stock                                         882          882
  Preference stock                                        114          114
  Common stock* - $.175 per share in 1996;
                  $.16 per share in 1995               13,625       10,689
                                                     --------     --------
                                                       14,621       11,685
                                                     --------     --------
Balance at end of period*                            $655,032     $615,732
                                                     ========     ========

*Adjusted for a two-for-one stock split, in the form of a 100% stock
dividend, consummated on July 25, 1996.

The accompanying notes are an integral part of these financial statements.

</TABLE>


























<PAGE>                           Page 4                           FORM 10-Q

        AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
        -----------------------------------------------------------
    Consolidated Statements of Income and Retained Earnings (Unaudited)
                   (In thousands, except per share amounts)
<TABLE>
                                                       Nine Months Ended 
                                                         September 30,   
                                                       1996         1995
                                                     --------     --------
<S>                                                  <C>          <C>
CONSOLIDATED INCOME
Operating revenues                                   $674,426     $604,467
                                                     --------     --------
Operating expenses                               
  Operation and maintenance                           321,081      298,186
  Depreciation and amortization                        68,113       58,990
  General taxes                                        61,465       57,351
                                                     --------     --------
                                                      450,659      414,527
                                                     --------     --------
Operating income                                      223,767      189,940
Allowance for other funds used during 
  construction                                          5,363        8,144
Gain from eminent domain litigation                         0        6,600
Other income                                            2,714          890
                                                     --------     --------
                                                      231,844      205,574
                                                     --------     --------
Income deductions
  Interest                                            101,388       87,632
  Allowance for borrowed funds used
    during construction                                (4,284)      (6,836)
  Amortization of debt expense                          1,100          951
  Preferred dividends of subsidiaries                   2,722        2,783
  Other deductions                                      1,204        1,601
                                                     --------     --------
                                                      102,130       86,131
                                                     --------     --------
Income before income taxes                            129,714      119,443
Provision for income taxes                             49,872       45,872
                                                     --------     --------

Net income                                             79,842       73,571
Dividends on preferred stocks                           2,988        2,988
                                                     --------     --------
Net income to common stock                           $ 76,854     $ 70,583
                                                     ========     ========
Weighted average shares of common stock outstanding*   73,347       66,237

Earnings per common share on weighted average 
  shares outstanding*                                $   1.05     $   1.07
                                                     ========     ========








<PAGE>                         Page 5                            FORM 10-Q


                                                      Nine Months Ended
                                                         September 30,
                                                       1996         1995
                                                     --------     --------
<S>                                                  <C>          <C>
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of period*                      $622,061     $578,051
Add - net income                                       79,842       73,571
Deduct - adjustment for 1996 two-for-one
         stock split, in the form of a
         100% stock dividend, on shares
         issued during the period                       6,269        1,175
                                                     --------     --------
                                                      695,634      650,447
                                                     --------     --------

Deduct - dividends 
  Preferred stock                                       2,646        2,646
  Preference stock                                        342          342
  Common stock* - $.525 per share in 1996;
                  $.48 per share in 1995               37,614       31,727
                                                     --------     --------
                                                       40,602       34,715
                                                     --------     --------
Balance at end of period                             $655,032     $615,732
                                                     ========     ========

*Adjusted for a two-for-one stock split, in the form of a 100% stock
dividend, consummated on July 25, 1996.

The accompanying notes are an integral part of these financial statements.

</TABLE>


























<PAGE>                           Page 6                           FORM 10-Q 
                                  
       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
                 Consolidated Balance Sheet (Unaudited)  
                              (In thousands)
<TABLE>                                                          
                                                                    **
                                              September 30     December 31
                                                  1996             1995   
                                              ------------     -----------
<S>                                           <C>              <C>
ASSETS

Property, plant and equipment
  Utility plant - at original cost less
    accumulated depreciation                  $ 3,343,169      $ 2,884,681
  Utility plant acquisition adjustments            52,615           34,974
  Other utility plant adjustments                     109              147
  Non-utility property, net of accumulated
    depreciation                                   24,872           20,144
  Excess of cost of investments in 
    subsidiaries over book equity at 
    acquisition                                    22,675           22,638
                                              -----------      -----------
                                                3,443,440        2,962,584
                                              -----------      -----------
                                                
Current assets  
  Cash and cash equivalents                        36,638           23,204
  Temporary investments - at cost plus 
    accrued interest                                  515              513
  Customer accounts receivable                     74,200           61,786
  Allowance for uncollectible accounts             (1,161)          (1,030)
  Unbilled revenues                                57,357           47,790
  Miscellaneous receivables                         4,648            4,571
  Materials and supplies                           12,125            9,599
  Deferred vacation pay                            10,849            9,374
  Other                                            10,285            8,563
                                              -----------      -----------
                                                  205,456          164,370
                                              -----------      -----------
Regulatory and other long-term assets
  Regulatory asset - income taxes                                   
    recoverable through rates                     176,192          172,265
  Funds restricted for construction                 6,905           13,927
  Debt and preferred stock expense                 27,314           20,753
  Deferred pension expense                         16,997           16,468
  Deferred postretirement benefit expense          11,740           11,418
  Accrued revenue                                   8,410            1,717
  Deferred treatment plant costs                    8,533                0
  Tank painting costs                               9,621            8,901
  Other                                            42,455           30,738
                                              -----------      -----------
                                                  308,167          276,187
                                              -----------      -----------
                                              $ 3,957,063      $ 3,403,141
                                              ===========      ===========




<PAGE>                           Page 7                          FORM 10-Q


                                                                  **
                                              September 30     December 31
                                                  1996             1995   
                                              ------------     -----------
<S>                                           <C>              <C>
CAPITALIZATION AND LIABILITIES
Capitalization
  Common stock*                               $     97,655     $    84,783
  Paid-in capital                                  292,385         114,161
  Retained earnings*                               655,032         622,061
  Unearned compensation                             (2,058)         (2,066)
                                              ------------     -----------
    Common stockholders' equity                  1,043,014         818,939

  Preferred stocks with mandatory redemption
    requirements                                    40,000          40,000
  Preferred stocks without mandatory 
    redemption requirements                         11,673          11,673

  Preferred stocks of subsidiaries with 
    mandatory redemption requirements               41,349          42,326
  Preferred stocks of subsidiaries without
    mandatory redemption requirements                6,284           6,288

  Long-term debt
    American Water Works Company, Inc.             116,000         116,000
    Subsidiaries                                 1,598,459       1,268,649
                                              ------------     -----------
                                                 2,856,779       2,303,875
                                              ------------     -----------
Current liabilities
  Bank debt                                         97,998         148,639
  Current portion of long-term debt                 64,054          44,321
  Accounts payable                                  25,656          43,300
  Taxes accrued, including federal income           23,750          13,098
  Interest accrued                                  37,019          26,263
  Accrued vacation pay                              10,989           9,512
  Other                                             32,391          35,940
                                              ------------     -----------
                                                   291,857         321,073
                                              ------------     -----------

















<PAGE>                           Page 8                           FORM 10-Q

                                                                   **
                                              September 30     December 31 
                                                  1996             1995 
                                              ------------     -----------
<S>                                           <C>              <C>
Regulatory and other long-term liabilities 
  Advances for construction                   $    133,218     $   131,141
  Deferred income taxes                            372,641         356,608
  Deferred investment tax credits                   37,576          38,515
  Accrued pension expense                           27,882          30,652
  Accrued postretirement benefit expense             9,100           9,100
  Other                                             11,307           3,840
                                              ------------     -----------
                                                   591,724         569,856
                                              ------------     -----------
Contributions in aid of construction               216,703         208,337
                                              ------------     -----------
Commitments and contingencies                            0               0
                                              ------------     -----------
                                              $  3,957,063     $ 3,403,141
                                              ============     ===========


*Adjusted for a two-for-one stock split, in the form of a 100% stock
dividend, consummated on July 25, 1996.
**Restated


The accompanying notes are an integral part of these financial statements.

</TABLE>





























<PAGE>                          Page 9                            FORM 10-Q

       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
             Consolidated Statement of Cash Flows (Unaudited)
                           (In thousands)
<TABLE>
                                                       Nine Months Ended
                                                          September 30,     
                                                       1996         1995  
                                                     --------     --------
<S>                                                  <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                         $ 79,842     $ 73,571
  Adjustments
    Depreciation and amortization                      68,113       58,990
    Provision for deferred income taxes                13,751       10,929
    Provision for losses on accounts receivable         4,051        3,121
    Allowance for other funds used during                                
      construction                                     (5,363)      (8,144)
    Employee benefit expenses less  
      than funding                                     (1,064)      (3,169)
    Common stock contributions to employee                              
      benefit plans                                     3,000        2,481
    Deferred acquisition expense                       (3,826)           0
    Deferred tank painting costs                       (1,466)        (672)
    Deferred rate case expense                         (1,676)      (1,955)
    Amortization of deferred charges                    7,495        5,495
    Other, net                                           (871)        (927)
    Changes in assets and liabilities,
      net of effects from acquisition
     Accounts receivable                              (10,469)     (21,380)
     Unbilled revenues                                 (9,567)      (2,288)
     Other current assets                              (2,740)      (1,106)
     Accounts payable                                 (17,644)     (11,514)
     Taxes accrued, including federal income           10,356       10,322
     Interest accrued                                   8,356        6,155
     Other current liabilities                         (3,549)         574 
                                                     --------     --------
  Net cash from operating activities                  136,729      120,483
                                                     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Construction expenditures                          (173,438)    (223,616)
  Allowance for other funds used during 
    construction                                        5,363        8,144
  Water system acquisition, net of acquired cash     (263,526)      (4,676)
  Proceeds from the disposition of property,                 
    plant and equipment                                 2,982       15,938
  Removal costs from property, plant and 
    equipment retirements                              (3,264)      (3,581)
  Funds restricted for construction activity            7,022        3,407
  Temporary investments                                    (2)         731
                                                     --------     --------
  Net cash used in investing activities              (424,863)    (203,653)
                                                     --------     --------







<PAGE>                          Page 10                          FORM 10-Q  

                                                       Nine Months Ended
                                                          September 30,     
                                                      1996          1995 
                                                    ---------     --------
<S>                                                  <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from long-term debt                      $ 231,700     $ 92,794
  Proceeds from common stock                          181,114       24,422
  Net borrowings (repayments)                        
    under line-of-credit agreements                   (50,641)      21,563
  Advances and contributions for construction,          
    net of refunds                                      7,652       12,852
  Debt and stock issuance costs                        (3,521)      (1,505)
  Repayment of long-term debt                         (23,153)     (35,896)
  Redemption of preferred stocks                         (981)      (1,110)
  Dividends paid                                      (40,602)     (34,715)
                                                    ---------     --------
Net cash from financing activities                    301,568       78,405
                                                    ---------     --------
 Net increase/(decrease) in cash and
  cash equivalents                                     13,434       (4,765)
Cash and cash equivalents at beginning 
  of period                                            23,204       30,091
                                                    ---------     --------

Cash and cash equivalents at end of period          $  36,638     $ 25,326
                                                    =========     ========

Cash paid during the period for:
  Interest, net of capitalized amount               $  93,155     $ 83,399
                                                    =========     ========
  Income taxes                                      $  28,690     $ 25,179
                                                    =========     ========


Common stock issued in lieu of cash in connection with the Employees Stock
Ownership Plan and the Savings Plan for Employees totaled $3,000 in 1996
and $2,481 in 1995.

Debt and liabilities of $141 million and $7 million, respectively, were
assumed in connection with the Acquisition.
                
The accompanying notes are an integral part of these financial statements.

</TABLE>














<PAGE>                          Page 11                          FORM 10-Q
       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
        Information Accompanying Financial Statements (Unaudited)
           (In thousands, except share and per share amounts)
                                                 September 30  December 31
                                                      1996         1995  
                                                   ----------  -----------
Capital Stock of American Water Works Company, Inc.
Preferred stocks with mandatory redemption requirements
  Cumulative preferred stock - $25 par value
    Authorized - 1,770,000 shares
      8.50% series (non-voting) - 1,600,000 shares
        outstanding                                $   40,000  $    40,000
                                                   ----------  -----------
                                                   $   40,000  $    40,000
                                                   ==========  ===========
Preferred stocks without mandatory redemption requirements
  Cumulative preferred stock - $25 par value
      5% series (one-tenth of a vote per share)
        - 101,777 shares outstanding               $    2,544  $     2,544
  Cumulative preference stock - $25 par value
    Authorized - 750,000 shares
      5% series (non-voting) - 365,158 shares 
        outstanding                                     9,129        9,129
  Cumulative preferential stock - $35 par value
    Authorized - 3,000,000 shares                           0            0
                                                   ----------  -----------
                                                   $   11,673  $    11,673
                                                   ==========  ===========
The terms of the 8.50% preferred stock provide that all shares of the
series shall be redeemed on December 1, 2000.
                                                   
Common stockholders' equity
Common stock - $1.25 par value
  Authorized*- 300,000,000 shares
  Outstanding*- 78,123,830 shares at September 30, 1996;                    
                67,826,670 at December 31, 1995    $   97,655  $    84,783
Paid-in capital                                       292,385      114,161
Retained earnings*                                    655,032      622,061
Unearned compensation                                  (2,058)      (2,066)
                                                   ----------  -----------
                                                   $1,043,014  $   818,939
                                                   ==========  ===========
During the first nine months of 1996*, 8,400,000 shares of common stock
were issued in connection with public and private offerings, 1,320,634
shares were issued in connection with the Dividend Reinvestment and Stock
Purchase Plan, 132,458 shares were issued in connection with the Employees'
Stock Ownership Plan, 202,496 shares were issued in connection with the
Savings Plan for Employees and 241,572 shares were issued in connection
with the Long-Term Performance-Based Incentive Plan.  At September 30,
1996, common shares reserved for issuance in connection with the Company's
stock plans were 60,923,162 shares for the Stockholder Rights Plan,
7,281,694 shares for the Dividend Reinvestment and Stock Purchase Plan,
937,240 shares for the Employees' Stock Ownership Plan, 371,970 shares for
the Savings Plan for Employees and 458,428 shares for the Long-Term
Performance-Based Incentive Plan.

*Adjusted for a two-for-one stock split, in the form of a 100% stock
dividend, consummated on July 25, 1996.

<PAGE>                          Page 12                          FORM 10-Q

       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
          Notes to Consolidated Financial Statements (Unaudited)
                            September 30, 1996

NOTE 1 -- Financial Statement Presentation
The information presented in this Form 10-Q is unaudited.  In the opinion
of management the information reported reflects all adjustments, consisting
of normal recurring adjustments, which were necessary to a fair statement
of the results for the periods reported.  Certain reclassifications have
been made to conform previously reported data to the current presentation.

NOTE 2 -- Acquisition
On February 16, 1996, Pennsylvania-American Water Company ("PAWC"), a
subsidiary of American Water Works Company, Inc. (the "Company"), purchased
the water utility operations of Pennsylvania Gas and Water Company ("PG&W,"
now known as PG Energy Inc.) for approximately $414 million (subject to
certain adjustments) (the "Acquisition"). The operations acquired generated
revenues of $66.3 million in calendar year 1995.  The Company accounted for
the Acquisition as a purchase.  The purchase price was subject to
adjustment based upon the actual value of the net assets of the acquired
operations as of the date of consummation of the Acquisition as compared to
the estimated value of the net assets as of December 31, 1995.  The
purchase price, as adjusted, was $409.4 million consisting of $262.5
million in cash and the assumption of $146.9 million of PG & W's
liabilities, including $141.0 million of its long-term debt.  The purchase
was funded through short-term borrowings and the assumption of the long-
term debt and other liabilities.  A portion of the short-term debt was
repaid with proceeds from the Company's public and private offerings.  The
remaining short-term indebtedness was repaid with a portion of the proceeds
from PAWC's offering of $150 million principal amount 7.8% General Mortgage
Bonds due September 1, 2026.  For additional discussion on the public and
private offerings, and the PAWC bond offering, see Item 2 of Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Capital Resources and Liquidity on page 17.  Included in the Company's net
income to common stock for the third quarter and first nine months of 1996
was approximately $2.6 million ($.03 per share) and $4.2 million ($.06 per
share), respectively, attributable to the Acquisition.

The pro forma results listed below were prepared as if the Acquisition and
the public and private offerings had occurred on January 1, 1995 and
include the historical results of the Company and the acquired operations. 
This unaudited pro forma information is not necessarily indicative of the
results of operations that might have occurred had the Acquisition actually
taken place on the date indicated, or of future results of operations of
the combined entities (dollars in thousands, except per share data):


                                            Nine months ended
                                              September 30,
                                           1996          1995
                                         --------      --------  

Revenues                                 $681,970      $655,069
Net income                                 80,344        79,939

Earnings per common share                $   1.00      $   1.03
 

<PAGE>                          Page 13                           FORM 10-Q

       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
      Notes to Consolidated Financial Statements (Unaudited)(contd.)
                            September 30, 1996

NOTE 3 -- Public and Private Offerings of Common Stock (This note reflects  
          share amounts on a pre-split basis)
On April 5, 1996, the Company filed a registration statement with the
Securities and Exchange Commission for a proposed public offering of
3,643,100 shares of its common stock.  

Concurrently with and conditioned upon the completion of this offering,
certain members of families that are existing large holders of common stock
(the "Ware Family Buyers") agreed to purchase from the Company and the
Company agreed to sell to the Ware Family Buyers 556,900 shares of common
stock at the price to public less underwriting discounts and commissions in
a private offering.

The Ware Family Buyers include a special purpose company of which Marilyn
Ware Lewis is Manager, which was established by three trusts for the
benefit of the children of John H. Ware, 3rd and his wife Marian S. Ware
and which agreed to purchase 450,000 of the 556,900 shares to be sold to
the Ware Family Buyers.  The Ware Family Buyers also include Rhoda C. Ware
(through a limited partnership controlled by her) and certain members of
her family who agreed to purchase a total of 106,900 of the 556,900 shares
to be sold to the Ware Family Buyers (including 10,000 to be purchased by
William R. Cobb).

Marilyn Ware Lewis, the Chairman of the Board of the Company, and Paul W.
Ware, a director of the Company, are the daughter and son of John H. Ware,
3rd and Marian S. Ware.  Nancy W. Wainwright and William R. Cobb are
directors of the Company and the daughter and son-in-law, respectively, of
Rhoda C. Ware.

As of March 27, 1996, members of the Ware Family, and charitable
foundations set up by such members, beneficially owned approximately 9.2
million (or approximately 27%) of the outstanding shares of common stock.

On May 9, 1996, the Company sold 3,643,100 shares of common stock to the
public at $37.625 per share and 556,900 shares to the Ware Family Buyers at
the price to the public of the public offering, less underwriting discounts
and commissions.  The net proceeds from the sale were $152.6 million, after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by the Company.

NOTE 4 -- Stock Split
On July 3, 1996, the Company's Board of Directors authorized a two-for-one
common stock split, in conjunction with stockholder's approval of an
increase in the number of shares of common stock the Company is authorized
to issue.  Stockholders of the Company approved the increase in the number
of shares of common stock the Company is authorized to issue from
100,000,000 shares to 300,000,000 shares at the Company's Annual Meeting of
Stockholders held May 2, 1996.  The stock split was paid in the form of a
100% stock dividend whereby each holder of shares of common stock received
one additional share of common stock for each share owned.  The stock
dividend was paid on July 25, 1996 to shareholders of record on July 15,
1996.  Upon effecting the stock dividend, the Company's dividend was
adjusted accordingly.


<PAGE>                          Page 14                           FORM 10-Q

       AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
       -----------------------------------------------------------
     Notes to Consolidated Financial Statements (Unaudited) (contd.)
                            September 30, 1996


NOTE 5 -- Regulatory Decision
On March 13, 1996, the New Jersey Board of Public Utilities approved a
$39.5 million per annum rate increase for New Jersey-American Water Company
("New Jersey-American"), including an estimated $13.5 million in annual
revenues from potential wholesale customers.  The increase reflects the
completion of the Tri-County Water Supply Project that takes water from the
Delaware River to a new treatment plant and then delivers it throughout the
southern New Jersey area by way of a 29 mile pipeline.  This regional
project was designed partly as a supply source for certain water resellers
who have been mandated by the state to reduce their intake from an aquifer
that is suffering from declining water levels.  The actual revenues that
New Jersey-American receives will depend on many factors, including the
number of potential wholesale customers that ultimately enter into
contracts to use water from the project as their alternative source of
supply and the volume of water sold.  A subsequent appeal has been filed
with the Superior Court of New Jersey, Appellate Division, within the time
provided in the applicable court rules.  The appeal has challenged the
design of the rate, but not the level of revenues established by the New
Jersey Board of Public Utilities order.  New Jersey-American is contesting
this appeal, and in the opinion of its management, such appeal is not
likely to succeed.  However, should this appeal be upheld, the result would
not have a material adverse effect on the operating results or financial
position of New Jersey-American or the Company.






























<PAGE>                           Page 15                       FORM 10-Q
                     PART I - FINANCIAL INFORMATION
 Item 2.  Management's Discussion and Analysis of Financial Condition
                       and Results of Operations                      
--------------------------------------------------------------------------

Results of Operations
---------------------
Operating revenues for the third quarter and the first nine months of 1996
were higher than for the same periods of 1995 by 11% and 12%, respectively. 
The increases are due to the acquisition of the regulated water operations
of PG Energy Inc. (formerly known as Pennsylvania Gas and Water Company) on
February 16, 1996 (The "Acquisition"), and authorized rate increases and
increased sales volume for several subsidiaries.  Revenues for the third
quarter and first nine months of 1996 reflect $17.2 million and $40.9
million, respectively, related to the Acquisition.

During the first ten months of 1996, eleven regulated subsidiaries received
rate orders which are expected to provide approximately $61.6 million in
additional annual revenues.  On March 13, 1996, the New Jersey Board of
Public Utilities approved a $39.5 million per annum rate increase for the
Company's subsidiary in New Jersey.  See Note 5 to the "Notes to
Consolidated Financial Statements (Unaudited)" on page 14 for more
information on the regulatory decision.  Three subsidiaries have rate
increase applications on file before regulatory agencies which, if granted
in full, would provide approximately $6.0 million in additional annual
revenues.

The water sales volume during the third quarter of 1996 of 71.3 billion
gallons was approximately equal to the 71.2 billion gallons sold in the
second quarter of 1995.  Sales volume for the first nine months of 1996
increased 5% to 187.2 billion gallons versus 178.6 billion gallons in the
same period of 1995.  Residential, commercial, industrial, and other
customers accounted for 49%, 21%, 19%, and 11%, respectively, of the 5%
increase in the first nine months.   The acquisition accounted for
approximately 3.5 billion gallons of water sold in the third quarter of
1996 and 7.9 billion gallons for the first nine months of 1996.

Total operating expenses for the third quarter and the first nine months of
1996 increased by 8% and 9%, respectively, over the same periods last year. 
Operating expenses in 1996 include expenses related to the Acquisition. 
Increases in operation and maintenance expenses were limited by continuing
efforts to achieve cost efficiencies.  Depreciation expense was higher due
to growth in utility plant in service.  Higher general tax expense reflects
higher property values and increased gross receipts.

Income deductions, primarily interest, were 21% higher for the third
quarter and 19% higher for the first nine months when compared to 1995. 
This increase can be attributed primarily to an increase in debt to fund
the Acquisition.

Income taxes increased 11% in the third quarter and 9% in the first nine
months of 1996 when compared to the same periods in 1995.  The third
quarter and first nine months increases can be attributed to increased
earnings in 1996. 






<PAGE>                           Page 16                       FORM 10-Q

                     PART I - FINANCIAL INFORMATION
 Item 2.  Management's Discussion and Analysis of Financial Condition
                   and Results of Operations (contd.)              
--------------------------------------------------------------------------

Results of Operations
------------------------------
Net income to common stock was $35.3 million for the third quarter of 1996
compared with $31.6 million for the same period in 1995.  Net income to
common stock for the first nine months of 1996 was $76.9 million compared 
with $70.6 million for the first nine months of 1995.  A one-time after-tax
gain of $3.9 million was recorded in the second quarter of 1995 reflecting
proceeds of $6.6 million from the conclusion of eminent domain litigation
relating to the sale of water system assets in Grafton, Massachusetts. 
Without this one-time gain, net income to common stock for first nine
months of 1995 was $66.7 million.  The net income to common stock for the
third quarter and first nine months of 1996 included approximately $2.6
million and $4.2 million, respectively, attributed to the Acquisition.









































<PAGE>                         Page 17                            FORM 10-Q

                     PART I - FINANCIAL INFORMATION
 Item 2.  Management's Discussion and Analysis of Financial Condition
                   and Results of Operations (contd.)              
--------------------------------------------------------------------------

Capital Resources and Liquidity
--------------------------------
During the balance of 1996, the Company plans to continue issuing common
stock through its Dividend Reinvestment and Stock Purchase Plan and the
Savings Plan for Employees.  Proceeds from the issuance of common stock
will fund additional equity investments in subsidiaries.

Nine regulated subsidiaries issued $237.4 million of long-term debt during
the first nine months of 1996.  One subsidiary, Pennsylvania-American Water
Company, assumed $141 million of long-term debt in conjunction with the
Acquisition.  In addition, the Company invested $69.9 million in the common
stock of nine subsidiaries.  The proceeds from these financing arrangements
have been used to partially fund the Acquisition, fund construction
programs and repay bank borrowings.  It is anticipated that some
subsidiaries will sell long-term debt to institutional investors and common
stock to the Company during the remainder of 1996, with the proceeds used
to repay bank loans and to fund construction projects.

In May, the Company's public offering of 3,643,100 shares of common stock
at $37.625 per share was completed.  All of the shares were sold by the
Company.  In addition, a private offering of 556,900 shares occurred at the
price to the public of the public offering, less underwriting discounts and
commissions.  The Company used the proceeds from the sale of the common
stock to invest in the equity of its subsidiary, Pennsylvania-American
Water Company, which in turn reduced short-term indebtedness incurred to
finance the Acquisition.  See Notes 2 and 3 to the "Notes to Consolidated
Financial Statements (Unaudited)" on pages 12 and 13 for additional
information relating to the Acquisition and the public and private
offerings.

The Company paid a 100 percent stock dividend on July 25, 1996 to
shareholders of record on July 15, 1996.  The Company also declared its
regular quarterly dividend of 17.5 cents per share on its post-split common
stock, payable August 15, 1996 to shareholders of record on August 2, 1996. 
For additional information relating to the stock split, see Note 4 to the
"Notes to Consolidated Financial Statements (Unaudited)" on page 13.  On
October 3, 1996, the Company declared its quarterly dividend of 17 1/2
cents per share of common stock, payable November 15, 1996, to shareholders
of record on October 25, 1996.
















<PAGE>                          Page 18                           FORM 10-Q

                      PART II - OTHER INFORMATION

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


A.  Exhibits
    --------

Exhibit number (27), Financial Data Schedule, is filed herewith
electronically.


B.  Reports on Form 8-K
    -------------------

No report on Form 8-K was filed by the registrant during the quarter ended
September 30, 1996.

   








































<PAGE>                         Page 19                            FORM 10-Q





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.


                                   AMERICAN WATER WORKS COMPANY, INC.



Date November 12, 1996             /s/ George W. Johnstone
----------------------             --------------------------------------
                                   George W. Johnstone, President and CEO
                                            (Authorized Officer)





Date November 12, 1996             /s/ Robert D. Sievers
----------------------             --------------------------------------
                                   Robert D. Sievers, Comptroller
                                         (Chief Accounting Officer)