<PAGE>

                       THE PROVIDENCE ENERGY CORPORATION

                                   FORM 10-Q

                      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        December 31, 1999
                               -----------------------------------------------

                                      OR

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

For the Transition period from ______________________ to _______________________

Commission file number                    1-10032
                       ---------------------------------------------------------

                         PROVIDENCE ENERGY CORPORATION
            (Exact name of registrant as specified in its charter)

            Rhode Island                                      05-0389170
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation               (I.R.S. Employer
             or organization)                              Identification No.)

             100 Weybosset Street, Providence, Rhode Island  02903
    ----------------------------------------------------------------------------
                   (Address of principal executive offices)
                                  (Zip Code)

                                 401-272-5040
--------------------------------------------------------------------------------
              Registrant's telephone number, including area code

(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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X  No ___.
    ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Common stock, $1.00 par value, 6,141,488 shares outstanding at January 31, 2000.
--------------------------------------------------------------------------------
<PAGE>

                         PROVIDENCE ENERGY CORPORATION

                                   FORM 10-Q

                               DECEMBER 31, 1999


<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
PART I:   FINANCIAL INFORMATION

Item 1    Financial Statements

          Consolidated Statements of Income for the
          three and twelve months ended
          December 31, 1999 and 1998                                        I-1

          Consolidated Balance Sheets as of
          December 31, 1999, December 31, 1998 and
          September 30, 1999                                                I-2

          Consolidated Statements of Cash Flows for the
          three months ended December 31, 1999 and 1998                     I-3

          Consolidated Statements of Capitalization as of
          December 31, 1999, December 31, 1998 and
          September 30, 1999                                                I-4

          Notes to Consolidated Financial Statements                        I-5

Item 2    Management's Discussion and Analysis of
          Financial Condition and Results of Operations                     I-11

PART II:  OTHER INFORMATION

Item 6    Exhibits and Reports on Form 8-K                                  II-1

          Signature                                                         II-2
</TABLE>
<PAGE>

PART I.  FINANCIAL INFORMATION
------   ---------------------
ITEM 1.  FINANCIAL STATEMENTS
------   --------------------

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                ----------------------------------------------
                       CONSOLIDATED STATEMENTS OF INCOME
                       ---------------------------------
                       FOR THE PERIODS ENDED DECEMBER 31
                       ---------------------------------
                                  (Unaudited)
                                  -----------

<TABLE>
<CAPTION>
                                                      THREE MONTHS             TWELVE MONTHS
                                                   --------------------     --------------------
                                                      1999      1998          1999        1998
                                                   --------------------     --------------------
                                                       (thousands, except per share amounts)
<S>                                                <C>         <C>          <C>          <C>
Energy revenues                                    $ 70,781    $ 64,722     $231,088     $218,892
Cost of energy                                       40,611      35,010      124,644      118,062
                                                   --------    --------     --------     --------
 Operating margin                                    30,170      29,712      106,444      100,830
                                                   --------    --------     --------     --------

Operating expenses:
 Operation and maintenance                           13,208      13,500       52,755       53,436
 Depreciation and amortization                        4,741       4,355       17,882       15,261
 Taxes:
  State gross earnings                                1,682       1,681        5,674        5,519
  Local property and other                            2,229       2,055        9,054        8,451
                                                   --------    --------     --------     --------
Total operating expenses                             21,860      21,591       85,365       82,667
                                                   --------    --------     --------     --------

Operating income                                      8,310       8,121       21,079       18,163

Other income (loss):
 Merger related expenses                             (1,084)     (1,084)           -            -
 Other                                                  332       1,104          351         (111)
                                                   --------    --------     --------     --------
Total other income (loss)                              (752)         20          351         (111)
                                                   --------    --------     --------     --------

Interest expense:
 Long-term debt                                       1,768       1,552        7,043        6,453
 Other                                                  830         516        2,576        1,917
 Interest capitalized                                   (59)        (76)        (372)        (249)
                                                   --------    --------     --------     --------
                                                      2,539       1,992        9,247        8,121
                                                   --------    --------     --------     --------

Income before Federal income taxes                    5,019       6,149       12,183        9,931

Provision for Federal income taxes                    1,735       2,078        4,197        3,473
                                                   --------    --------     --------     --------

Income before preferred dividends of
 subsidiary                                           3,284       4,071        7,986        6,458

Preferred dividends of subsidiary                        70         104          314          452
                                                   --------    --------     --------     --------

Net income                                         $  3,214    $  3,967     $  7,672     $  6,006
                                                   ========    ========     ========     ========

Net income per
common share - basic                               $    .53    $    .66     $   1.27     $   1.01
                                                   ========    ========     ========     ========

Net income per
common share - diluted                             $    .52    $    .66     $   1.26     $   1.01
                                                   ========    ========     ========     ========

Weighted average number of
shares outstanding:
 Basic                                              6,118.8     5,974.0      6,051.9      5,946.1
                                                   ========    ========     ========     ========

 Diluted                                            6,176.1     5,985.0      6,081.9      5,956.6
                                                   ========    ========     ========     ========
</TABLE>

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

                                      I-1
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                ----------------------------------------------
                          CONSOLIDATED BALANCE SHEETS
                          ---------------------------
                                  (thousands)

<TABLE>
<CAPTION>
                                                      (Unaudited)
                                                      -----------

                                             December 31,    December 31,    September 30,
                                                 1999            1998            1999
                                             ---------------------------------------------
<S>                                          <C>             <C>             <C>
ASSETS
------
Current assets:
 Cash and temporary cash investments         $  3,468         $  2,580         $  2,804
 Accounts receivable, less allowance of
  $4,293 at 12/31/99, $3,076 at
  12/31/98 and $2,883 at 9/30/99               31,518           28,794           13,684
 Unbilled revenues                             16,244           11,345            2,821
 Inventories, at average cost -
  Fuel oil and underground gas
   storage                                        503              517              558
  Materials and supplies                        1,245            1,246            1,283
 Prepaid and refundable taxes                   2,521            2,817            4,215
 Prepayments                                    1,991            1,874            2,214
                                             --------         --------         --------
                                               57,490           49,173           27,579
                                             --------         --------         --------

Gas plant, at original cost                   344,894          332,181          345,671
 Less - Accumulated depreciation
 and plant acquisition adjustments            125,728          129,723          127,481
                                             --------         --------         --------
                                              219,166          202,458          218,190
                                             --------         --------         --------

Other property, net                             2,769            2,610            2,628
Investments                                    12,883            3,143           11,186
Deferred environmental costs                   11,088            5,593            9,719
Deferred charges and other assets              28,824           18,771           28,731
                                             --------         --------         --------
                                               55,564           30,117           52,264
                                             --------         --------         --------

Total assets                                 $332,220         $281,748         $298,033
                                             ========         ========         ========


CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization
 (See accompanying statement)                $187,610         $174,066         $187,628
                                             --------         --------         --------

Current liabilities:
 Notes payable                                 51,845           27,159           38,250
 Current portion of long-term debt              3,369            3,337            3,515
 Accounts payable                              31,732           27,568           12,199
 Accrued compensation                           1,417            1,075            1,634
 Accrued environmental costs                    5,719            3,400            6,145
 Accrued interest                               1,507            1,321            1,647
 Accrued taxes                                  5,749            3,463            3,557
 Accrued vacation                               1,832            1,687            1,807
 Accrued workers compensation                     679              577              595
 Customer deposits                              2,962            3,022            2,973
 Deferred revenue                                 200                -              315
 Energy conservation liability                  1,241              721            1,261
 Other                                          2,434            2,928            2,776
                                             --------         --------         --------
                                              110,686           76,258           76,674
                                             --------         --------         --------
Deferred credits and reserves:
 Accumulated deferred Federal
  income taxes                                 24,295           22,836           24,151
 Unamortized investment tax credits             2,020            2,178            2,059
 Accrued pension                                7,087            5,880            6,982
 Other                                            522              530              539
                                             --------         --------         --------
                                               33,924           31,424           33,731
                                             --------         --------         --------
Commitments and contingencies

Total capitalization and liabilities         $332,220         $281,748         $298,033
                                             ========         ========         ========
</TABLE>

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

                                      I-2
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                ----------------------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
                    FOR THE THREE MONTHS ENDED DECEMBER 31
                    --------------------------------------

<TABLE>
<CAPTION>
                                                           (Unaudited)
                                                           -----------
                                                         1999       1998
                                                      ---------   ---------
                                                           (thousands)
<S>                                                   <C>         <C>
Cash provided by Operating Activities:
    Income after interest expense                      $  3,284   $  4,071
    Items not requiring cash:
        Depreciation and amortization                     4,741      4,355
        Gain on sale of financial instruments               (20)      (216)
        Deferred Federal income taxes                       140        539
        Amortization of investment tax credits              (39)       (39)
        Changes in assets and liabilities
           which provided (used) cash:
          Accounts receivable                           (17,811)   (14,727)
          Unbilled revenues                             (13,423)    (9,680)
          Inventories                                       100        326
          Prepaid and refundable taxes                    1,694      2,560
          Prepayments                                       223        (21)
          Accounts payable                               19,436     17,543
          Accrued compensation                             (217)      (262)
          Accrued interest                                 (140)      (175)
          Accrued taxes                                   2,174        754
          Accrued vacation, accrued workers
            compensation, customer deposits
            and other                                      (418)    (1,152)
          Accrued pension                                   105         68
          Deferred charges and other                        (62)     2,058
                                                       --------   --------
    Net cash provided by (used for) operating
      activities                                           (233)     6,002
                                                       --------   --------
Investing Activities:
    Expenditures for property, plant
      and equipment, net                                 (7,318)    (8,532)
    Expenditures for business acquisitions                 (300)         -
    Investment in joint venture                          (1,668)      (947)
    Proceeds from sale of financial
      instruments, net                                       27        162
                                                       --------   --------
    Net cash used in investing activities                (9,259)    (9,317)
                                                       --------   --------
Financing Activities:
    Proceeds from exercise of stock options                  29         14
    Payments on long-term debt                           (2,091)    (1,842)
    Increase in notes payable, net                       13,595      7,080
    Cash dividends on preferred shares                      (70)      (104)
    Cash dividends on common shares                      (1,307)    (1,259)
                                                       --------   --------
    Net cash provided by financing activities            10,156      3,889
                                                       --------   --------
Increase in cash and temporary cash investments             664        574
Cash and temporary cash investments at beginning
  of period                                               2,804      2,006
                                                       --------   --------
Cash and temporary cash investments at end
  of period                                            $  3,468   $  2,580
                                                       ========   ========

Supplemental disclosure of cash flow information:
  Cash paid during period for-
    Interest (net of amount capitalized)               $  2,552   $  2,115
    Income taxes (net of refunds)                      $     28   $     19
  Schedule of non-cash investing activities
    Capital lease obligations for equipment            $      -        115
</TABLE>

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

                                      I-3
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                ----------------------------------------------
                   CONSOLIDATED STATEMENTS OF CAPITALIZATION
                   -----------------------------------------
                                  (thousands)

<TABLE>
<CAPTION>
                                                             (Unaudited)
                                                             -----------

                                                      December 31,    December 31,   September 30,
                                                         1999             1998           1999
                                                     ---------------------------------------------
<S>                                                  <C>              <C>            <C>
Common stockholders' investment:
  Common stock, $1 par
    Authorized - 20,000 shares
    Outstanding - 6,142 at 12/31/99,
                   5,983 at 12/31/98
                   and 6,102 at
                   9/30/99                           $      6,142     $     5,983     $     6,102
  Amount paid in excess of par                             62,992          59,498          61,966
  Retained earnings                                        26,568          25,423          25,000
                                                     ------------     -----------     -----------
Total Common equity                                        95,702          90,904          93,068
                                                     ------------     -----------     -----------
Accumulated other comprehensive earnings:
  Unrealized gain on financial
    instruments                                                23              38              39
                                                     ------------     -----------     -----------
Total common equity                                        95,725          90,942          93,107
                                                     ------------     -----------     -----------

Cumulative preferred stock of subsidiary:
    Redeemable 8.7% Series, $100 par
    Authorized - 80 shares
    Outstanding - 32 shares as of
      12/31/99 and 9/30/99 and 48
      shares as of 12/31/98                                 3,200           4,800           3,200
                                                     ------------     -----------     -----------

Long-term debt:
  First Mortgage Bonds                                     88,219          75,728          89,819
  Other long-term debt                                      3,511           4,750           4,461
  Capital leases                                              324           1,183             556
                                                     ------------     -----------     -----------

Total long-term debt                                       92,054          81,661          94,836

Less current portion                                        3,369           3,337           3,515
                                                     ------------     -----------     -----------

Long-term debt, net                                        88,685          78,324          91,321
                                                     ------------     -----------     -----------

Total capitalization                                 $    187,610     $   174,066     $   187,628
                                                     ============     ===========     ===========
</TABLE>

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

                                      I-4
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements



1.   Accounting Policies
     -------------------

     It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to a fair
statement of the results for the periods reported; however, such results are not
necessarily indicative of results to be expected for the year, due to the
seasonal nature of the Registrant's operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted in
this Form 10-Q pursuant to the rules and regulations of the Securities and
Exchange Commission. However, the disclosures herein when read with the annual
report for 1999 filed on Form 10-K are adequate to make the information
presented not misleading.

2.   Reclassifications
     -----------------

     Certain prior period amounts have been reclassified for consistent
presentation with the current period.

3.   Rates and Regulation
     --------------------

     The Providence Gas Company (ProvGas), a wholly owned subsidiary of the
Registrant, is subject to the regulatory jurisdiction of the Rhode Island Public
Utilities Commission (RIPUC) with respect to rates and charges, standards of
service, accounting and other matters. In August 1997, the RIPUC approved the
Price Stabilization Plan Settlement Agreement (Energize RI or the Plan) among
ProvGas, the Rhode Island Division of Public Utilities and Carriers (Division),
the Energy Council of Rhode Island, and The George Wiley Center. Effective
October 1, 1997 through September 30, 2000, Energize RI provides firm customers
with a price decrease of approximately 4.0 percent in addition to a three-year
price freeze. Under Energize RI, the Gas Charge Clause (GCC) mechanism has been
suspended for the entire term. Also, in connection with the Plan, ProvGas wrote
off approximately $1.5 million of previously deferred gas costs in October 1997.
Energize RI also provides for ProvGas to make significant capital investments to
improve its distribution system and support economic development. Specific
capital improvement projects funded under Energize RI are estimated to total
approximately $26 million over its three-year term. In addition, under Energize
RI, ProvGas provides funding for the Low-Income Assistance Program at an annual
level of $1.0 million, the Demand Side Management Rebate Program at an annual
level of $.5 million, and the Low-Income Weatherization Program at an annual
level of $.2 million. Energize RI also continues the process of unbundling by
allowing ProvGas to provide unbundled service offerings for up to 10 percent per
year of firm deliveries.

     As part of Energize RI, ProvGas has reclassified and is amortizing
approximately $4.0 million of prior environmental costs. These costs and all
environmental costs incurred during the term of the Plan will be amortized over
a 10-year period, in accordance with the levels authorized in Energize RI.

     Under Energize RI, ProvGas may earn up to 10.9 percent, but not less than
7.0 percent, annually on its average common equity, which is capped at $81.0
million, $86.2 million, and $92.0 million in fiscal 1998, 1999, and 2000,
respectively. In the event that ProvGas earns in excess of 10.9 percent or less
than 7.0 percent, ProvGas will defer revenues or costs through a deferred
revenue account over the term of the Plan. Any balance in the deferred revenue
account at the end of the Plan will be refunded to or recovered from customers
in a manner to be determined by all parties to the Plan and approved by the
RIPUC.

                                      I-5
<PAGE>

     As part of Energize RI, ProvGas is permitted to file annually with the
Division for the recovery of exogenous changes which may occur during the three-
year term of the Plan. Exogenous changes are defined as "...significant
increases or decreases in ProvGas' costs or revenues which are beyond ProvGas'
reasonable control." Any disputes between ProvGas and the Division regarding
either the nature or quantification of the exogenous changes are to be resolved
by the RIPUC. The impact of any such exogenous changes will be debited or
credited to a regulatory asset or liability account throughout the term of
Energize RI and will be recovered or refunded at the expiration of the Plan
through a method to be determined.

     In fiscal 1998, ProvGas did not earn its allowed rate of return primarily
as a result of the extremely warm winter weather and the loss of non-firm
margin. ProvGas believed the causes of these two events were beyond its
reasonable control and thus deemed them to be exogenous changes. In March 1999,
ProvGas reached an agreement with the Division, which allowed it to recover
$2.45 million in revenue losses attributable to exogenous changes experienced by
ProvGas in fiscal 1998. The RIPUC reviewed the exogenous changes agreement to
ensure consistency with the terms of Energize RI and affirmed the agreement at
its May 28, 1999 open meeting.

     During fiscal 1999, ProvGas recognized into revenue $2.45 million for the
exogenous changes recovery, and has deferred approximately $.5 million of
revenue under the provisions of the earnings cap of Energize RI.

     ProvGas intends to file for recovery of exogenous changes experienced in
1999 which resulted from factors similar to 1998. Absent further exogenous
recovery and/or other factors such as colder than normal weather, ProvGas'
ability to earn a 10.9 percent return on average common equity this year, the
final year of Energize RI, is substantially impaired.

     As Energize RI is due to expire on September 30, 2000, several alternatives
are available to ProvGas to address the expiration of this program including the
possible extension or replication of Energize RI or filing a rate case. On
January 31, 2000, ProvGas filed for a two-month extension of Energize RI to
allow time for the Registrant to discuss its options with the appropriate
parties.

4.   Gas Supply
     ----------

     As part of the Price Stabilization Plan Settlement Agreement described
above in Rates and Regulations, ProvGas entered into a full requirements gas
         ---------------------
supply contract with Duke Energy Trading and Marketing, L.L.C. (DETM), a joint
venture of Duke Energy Corporation and Mobil Corporation, for a term of three
years commencing October 1, 1997. Under the contract, DETM guarantees to meet
ProvGas' supply requirements; however, ProvGas must purchase all of its gas
supply exclusively from DETM. In addition, under the contract, ProvGas
transferred responsibility for its pipeline capacity resources, storage
contracts, and liquified natural gas (LNG) capacity to DETM. As a result,
ProvGas' gas inventories of approximately $18 million at September 30, 1997 were
sold at book value to DETM on October 1, 1997.

     In addition to providing supply for firm customers at a fixed price, DETM
will provide gas at market prices to cover ProvGas' non-firm sales customers'
needs and to make up the supply imbalances of transportation customers. DETM
will also provide various other services to ProvGas' transportation service
customers including enhanced balancing, standby, and the storage and peaking
services available under ProvGas' approved Firm Transportation (FT-2) storage
service effective December 1, 1997. DETM will receive the supply-related
revenues from these services in exchange for providing the supply management
inherent in these services.

     Included in the DETM contract are a number of other important features.
ProvGas has retained the right to continue to make gas supply portfolio changes
to reduce supply costs. To the extent ProvGas makes such changes, ProvGas must
keep DETM whole for the value lost over the remainder of the contract period.
The outsourcing of day-to-day supply management relieves ProvGas of the need to
perform certain upstream supply management functions. This will make it possible
for ProvGas to take on the additional supply management workload required by the
further unbundling of firm sales customers without major staffing additions.

                                      I-6
<PAGE>

     ProvGas has entered into an agreement replacing its existing LNG service
contract with Algonquin Gas Transmission Company (Algonquin), a subsidiary of
Duke Energy Corporation. Algonquin is the owner and operator of a LNG tank
located in Providence, Rhode Island. ProvGas relies upon this service to provide
gas supply into its distribution system during the winter period. The service
provided for in the agreement began November 10, 1999. Under the terms of the
agreement, Algonquin replaced and expanded the vaporization capability at the
tank. ProvGas has received approximately $2.6 million from Algonquin. Of the
$2.6 million, approximately $.9 million represents reimbursement received by
ProvGas in 1999 for costs incurred related to the project including labor,
engineering, and legal expenses. The remaining portion of the payment, or
approximately $1.7 million was received in January 2000, and serves as
reimbursement for the additional costs that DETM will incur as a result of the
release of the Algonquin storage capacity to DETM as provided for in the gas
supply asset management contract described above.

     In June 1999, the Federal Energy Regulatory Commission (FERC) issued an
order in Docket Number CP99-113 approving Algonquin's project described above.
In that order FERC also approved the new 10-year contract between Algonquin and
ProvGas for service from the tank and ProvGas' parallel filing, PR99-8,
requesting regulatory authorization to charge Algonquin for displacement of gas
for other Algonquin customers.

     As a result of FERC Order 636 and other related orders, pipeline
transportation companies have incurred significant costs, collectively known as
transition costs. The majority of these costs will be reimbursed by the
pipeline's customers, including ProvGas. ProvGas estimates its transition costs
to be approximately $21.7 million, of which $16.2 million has been included in
the GCC and collected from customers through September 30, 1997. As part of the
above supply contract, DETM assumed liability for these transition costs during
the contract's three-year term. At the end of the three-year term of the
contract, ProvGas will assume any remaining liability, which is not expected to
be material.

5.   Environmental Matters
     ---------------------

     Federal, state, and local laws and regulations establishing standards and
requirements for the protection of the environment have increased in number and
in scope within recent years. The Registrant cannot predict the future impact of
such standards and requirements, which are subject to change and can take effect
retroactively. The Registrant continues to monitor the status of these laws and
regulations. Such monitoring involves the review of past activities and current
operations, and may include expending funds to investigate or clean up certain
sites. To the best of its knowledge, subject to the following, the Registrant
believes it is in substantial compliance with such laws and regulations.

     At December 31, 1999, the Registrant was aware of five sites at which
future costs may be incurred.

Plympton Sites (2)
------------------

     The Registrant has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 at two C. M. Brackett sites in Plympton, Massachusetts. Disposal
contractors employed in the past, either directly or indirectly by the
Registrant and other PRPs, allegedly deposited waste materials at the C. M.
Brackett sites. With respect to one of the sites, the Registrant has joined with
other PRPs in entering into an Administrative Consent Order with the
Massachusetts Department of Environmental Protection. The same group is
currently negotiating a similar agreement for the second site. The costs to be
borne by the Registrant in connection with both Plympton sites are not
anticipated to be material to the financial condition of the Registrant.

                                      I-7
<PAGE>

Providence Site
---------------

     During 1995, the Registrant began a study at its primary gas distribution
facility located at 642 Allens Avenue in Providence, Rhode Island. This site
formerly contained a manufactured gas plant operated by the Registrant. As of
December 31, 1999, approximately $3.0 million had been spent primarily on
studies and the formulation of remediation work plans under Rhode Island
Department of Environmental Management (DEM) supervision.

     The Registrant has completed the initial investigation to determine the
extent of environmental contamination for the most contaminated portions of the
property. The Registrant has compiled a preliminary range of costs, based on
removal and off-site disposal of the most contaminated soil, ranging from $7.0
million to in excess of $9.0 million. As of December 31, 1999, approximately
$2.7 million had been spent on the remediation of this soil. The remediation of
the most contaminated portions of the property is scheduled to be completed in
August 2000.

     An investigation of the remaining property was begun in December 1999. The
Registrant anticipates this investigation to be completed in March 2000 at a
cost of approximately $1.5 million. In addition, as of December 31, 1999 the
Registrant has not begun its groundwater investigation at this site.

     Because of the uncertainties associated with the pending investigations,
the Registrant can not offer any conclusions as to the total future cost of
remediation of the property at this time. Based on the proposals for remediation
work, the Registrant has an accrual balance of $5.7 million at December 31, 1999
for anticipated future remediation and investigation costs at this site.

Westerly Site
-------------

     The Registrant acquired the Westerly, Rhode Island operations center in
1990 from another company. In 1996 an environmental investigation revealed the
existence of coal tar waste on the site. The Registrant never operated a
manufactured gas plant at this location, but the previous owner did. The former
manufactured gas plant is allegedly the source of the coal tar waste. In
February 1999, DEM issued the Registrant and the previous owner a letter of
responsibility for the site. As of December 31, 1999, the Registrant had removed
an underground oil storage tank and regulators containing mercury from the site,
as well as some localized contamination. The costs associated with the
investigation and removal of localized contamination were shared equally with
the former owner of the property.

     The Registrant is currently engaged in negotiations to transfer the
property back to the previous owner, who would continue to remediate the site at
no cost to the Registrant. The purchase and sale agreement is anticipated to be
signed during the current fiscal year, at which time the previous owner will
assume responsibility for removal of coal tar waste. The Registrant has
completed the required cleanup related to any mercury-containing regulators and
remains responsible for cleanup of any mercury released into adjacent water.
Costs incurred by the Registrant to remediate this site were approximately $.1
million.

Allens Avenue Site
------------------

     In November 1998, the Registrant received a letter of responsibility from
DEM relating to possible contamination on previously-owned property at 170
Allens Avenue in Providence. The current operator of the property has also
received a letter of responsibility. A work plan has been created and approved
by DEM. An investigation has begun to determine the extent of contamination as
well as the extent of the Registrant's responsibility. The Registrant has
entered into a cost-sharing agreement with the current operator of the property,
under which the Registrant is responsible for approximately 20 percent of the
costs related to the investigation. Costs of testing at this site as of December
31, 1999 were approximately $.2 million. Until the results of the investigation
are known, the Registrant cannot offer any conclusions as to its responsibility.

                                      I-8
<PAGE>

General
-------

     In prior rate cases filed with the RIPUC, ProvGas requested that
environmental investigation and remediation costs be recovered by inclusion in
its depreciation factors consistent with the rate recovery treatment for all
types of cost of removal. Due to the magnitude of ProvGas' environmental
investigation and remediation expenditures, ProvGas sought current recovery for
these amounts. As a result, in accordance with the Price Stabilization Plan
Settlement Agreement described in Rates and Regulations, effective October 1,
1997, all environmental investigation and remediation costs incurred through
September 30, 1997, as well as all costs incurred during the three-year term of
the Plan, will be amortized over a 10-year period, in accordance with the levels
authorized in Energize RI. Additionally, it is ProvGas' practice to consult with
the RIPUC on a periodic basis when, in management's opinion, significant amounts
might be expended for environmental-related costs. As of December 31, 1999,
ProvGas has incurred environmental assessment and remediation costs of $6.7
million and has an accrual balance of $5.7 million for future costs.

     Management has begun discussions with other parties who may assist ProvGas
in paying the costs associated with the remediation of the above sites.
Management believes that its program for managing environmental issues, combined
with rate recovery and financial contributions from others, will likely avoid
any material adverse effect on its results of operations or its financial
condition as a result of the ultimate resolution of the above sites.

6.  Net Income per Common Share
    ---------------------------

     A reconciliation of the weighted average number of shares outstanding used
in the computation of the basic and diluted earnings per share for each of the
periods ended December 31 is as follows:

                              Three Months             Twelve Months
                            1999      1998           1999       1998
                            ----      ----           ----       ----

Weighted average
shares                    6,118.8   5,974.0        6,051.9    5,946.1

Effect of dilutive
stock options                57.3      11.0           30.0       10.5
                          -------   -------        -------    -------

Weighted average
shares diluted            6,176.1   5,985.0        6,081.9    5,956.6
                          =======   =======        =======    =======

     The net income used in the calculation for basic and diluted earnings per
share agrees with the net income appearing in the consolidated financial
statements.

7.  Comprehensive Income
    --------------------

     Effective October 1, 1998, the Registrant adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", which requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.

                                      I-9
<PAGE>

     The following is a summary of the reclassification adjustments and the
income tax effects for the components of other comprehensive loss for the three
months ended December 31:


                          Unrealized Holding    Reclassification
                            Losses on           Adjustments for
                            Investments             Gains             Other
                          Arising During         Included in      Comprehensive
(thousands of dollars)      the Period           Net Income           Loss
----------------------      ----------           ----------           ----
2000
Pretax income              $     (10)             $     (14)       $     (24)
Income tax expense                (3)                    (5)              (8)
                           ---------              ---------        ---------
   Net change              $      (7)             $      (9)       $     (16)
                           =========              =========        =========

8.   Commitments and Contingencies
     -----------------------------

     The Registrant has employment agreements with 11 officers which become
operative upon a change in control of the Registrant and continue in effect for
a range of two to three years. Potential salary severance expense under the
agreements could total approximately $5.0 million.

                                     I-10
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------  -------------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS
         -----------------------------------

  Providence Energy Corporation (the Registrant) and its subsidiaries and their
representatives may from time to time make written or oral statements, including
statements contained in the Registrant's filings with the Securities and
Exchange Commission (SEC) and in its reports to shareholders, which constitute
or contain "forward-looking" statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules,
regulations, and releases.

  All statements other than statements of historical facts included in this 10-Q
including without limitation statements regarding the Registrant's financial
position, strategic initiatives, the effect of its proposed merger with Southern
Union Company (Southern Union), and statements addressing industry developments
are forward-looking statements.  Where, in any forward-looking statement, the
Registrant or its management expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.  The following
are some of the factors which could cause actual results to differ materially
from those anticipated:  general economic, financial, and business conditions;
changes in government regulations, the actions taken or decisions rendered by
any regulatory body, and the impact such changes, actions, or decisions might
have on the Registrant, including the regulatory approvals or the timeliness of
such approvals of the Registrant's proposed merger with Southern Union;
competition in the energy services sector; regional weather conditions; the
availability and cost of natural gas and oil;  development and operating costs;
the success and costs of advertising and promotional efforts; the availability
and terms of capital; unanticipated environmental liabilities; the Registrant's
ability to grow its business through acquisitions and/or significant customer
growth;  the costs and effects of unanticipated legal proceedings; the impacts
of unusual items resulting from ongoing evaluations of business strategies and
asset valuations; and changes in business strategy.

RESULTS OF OPERATIONS

  The Registrant's energy revenues, operating margin, and net income for the
three and twelve months ended December 31, 1999 and for comparable periods ended
December 31, 1998 are as follows:

<TABLE>
<CAPTION>

                                  (thousands)
                       Three Months          Twelve Months
                     Ended December 31     Ended December 31
<S>                  <C>         <C>       <C>          <C>

                       1999      1998        1999       1998
                       ----      ----        ----       ----

 Energy revenues      $70,781   $64,722    $231,088   $218,892
                      =======   =======    ========   ========


 Operating margin     $30,170   $29,712    $106,444   $100,830
                      =======   =======    ========   ========


 Net income           $ 3,214   $ 3,967    $  7,672   $  6,006
                      =======   =======    ========   ========
</TABLE>

Operating Margin
----------------

  Operating margin increased approximately $.5 million or 1.5 percent compared
to the same quarter last year and approximately $5.6 million or 5.6 percent for
the twelve months ended December 31, 1999 versus the same period last year.


                                      I-11
<PAGE>

  During the latest quarter, the Registrant experienced weather that was .7
percent warmer than the same quarter last year. This warmer weather resulted in
a margin decrease of approximately $.3 million.

  Non-regulated operating margin for the current quarter increased approximately
$.4 million when compared to the same period last year.  The increase was
primarily due to the acquisition of oil companies in July 1999 and increased
commercial sales.

  The Registrant experienced weather that was 7.1 percent colder for the twelve
months ended December 31, 1999 versus the same period last year. The colder
temperatures resulted in increased margin of approximately $1.8 million compared
to last year. Also contributing to the increase was $1.9 million related to the
1998 exogenous change recovery, $.5 million in non-firm margin and $.5 million
in customer growth.

  For the current twelve-month period, non-regulated operating margin increased
approximately $2.3 million.  As in the quarter increase, this increase was
primarily attributable to the acquisition of oil companies and increased
commercial sales.

Operating and Maintenance Expenses
----------------------------------

  Overall, operating and maintenance expenses decreased approximately $.3
million or 2.2 percent from the same quarter last year and approximately $.7
million or 1.3 percent for the twelve months ended December 31, 1999 when
compared to the same twelve month period last year. The twelve-month decrease is
primarily attributable to a one-time reimbursement of approximately $.9 million
for costs incurred under a FERC-approved contract with Algonquin Gas
Transmission Company. Offsetting the reimbursement was an increase of
approximately $.6 million in non-regulated operating and maintenance expenses
which was partially attributable to the Registrant's acquisition of oil
companies. The remaining decrease is attributable to cost control measures which
were implemented in response to warmer weather.

  The Registrant continually reviews its operating expenses in order to keep
expenses as low as possible; however, expenses can vary from year to year.


Depreciation and Amortization Expenses
--------------------------------------

  Depreciation and amortization expense increased approximately $.4 million or
8.9 percent compared to the same quarter last year and approximately $2.6
million or 17.2 percent for the twelve months ended December 31, 1999 versus the
same period last year. This increase is the result of increased capital spending
for Energize RI commitments; technology projects; Year 2000 costs, which were
capitalized as authorized under the provisions of Energize RI; and the
amortization of environmental costs.  Effective October 1, 1997, the Registrant
began amortizing environmental and Year 2000 costs over 10-year and 5-year
periods, respectively, in accordance with the levels authorized in Energize RI.
The Registrant will have increased environmental amortization expense in future
years as its planned environmental remediation program continues.  Also,
amortization expense for Year 2000 costs will increase in the future as higher
levels of costs have been incurred from those originally anticipated.

Taxes
-----

  Taxes for the current quarter versus last year increased approximately $.2
million or 4.7 percent and approximately $.8 million or 5.4 percent for the
current twelve-month period versus last year. The increases are primarily due to
increases in local property taxes as a result of capital spending.


                                      I-12
<PAGE>

Other Income (Loss)
-------------------

  Other income (loss) decreased approximately $.8 million in the current quarter
versus the same quarter last year. The decrease is primarily the result of a
$1.1 million fee paid in the current quarter for investment banking services
related to the Registrant's proposed merger with Southern Union.  Additional
investment banking fees and other expenses relating to the proposed merger will
be incurred during the balance of the year.  As part of the agreement with the
investment banker, the remainder of the fee is payable in two installments of
$1.1 million each upon the occurrence of the following two events:  (a) upon the
Registrant's shareholder approval of the proposed merger and (b) at the closing
of the proposed merger.  Partially offsetting the fee was approximately $.2
million in investment interest income.

  Other income (loss) increased approximately $.5 million for the twelve months
ended December 31, 1999. Other income decreased $1.1 million for the investment
banking fee. In 1998, the Registrant established a reserve for a refund under an
order which was subsequently vacated in 1999, at which time the original reserve
was reversed, contributing approximately $.5 million to the twelve-month
increase. Also increasing other income was approximately $.5 million in
investment interest income.

Interest Expense
----------------

  Interest expense increased approximately $.5 million or 27.5 percent during
the latest quarter compared to the same quarter last year and approximately $1.1
million or 13.9 percent during the latest twelve months compared to the same
twelve months last year. Long-term interest expense increased as a result of
ProvGas' Series T First Mortgage Bond issuance in February 1999, which
refinanced short-term borrowings.  The Series T issuance enabled the Company to
secure a favorable long-term financing rate.  However, this increase was
partially offset by the Series S First Mortgage Bond issuance in April 1998,
which refinanced higher cost long-term debt.  Additionally, short-term interest
expense has increased as a result of increased notes payable, which was used
primarily as bridge financing for the Registrant's investment in the Providence
Place Mall.

FUTURE OUTLOOK

Regulatory

  Under the Price Stabilization Plan Settlement Agreement (Energize RI or the
Plan), ProvGas may earn up to 10.9 percent, but not less than 7.0 percent,
annually on its average common equity, which is capped at $81.0 million, $86.2
million, and $92.0 million in fiscal 1998, 1999, and 2000, respectively.  In the
event that ProvGas earns in excess of 10.9 percent or less than 7.0 percent,
ProvGas will defer revenues or costs through a deferred revenue account over the
term of the Plan.  Any balance in the deferred revenue account at the end of the
Plan will be refunded to or recovered from customers in a manner to be
determined by all parties to the Plan and approved by the RIPUC.

  As part of Energize RI, ProvGas is permitted to file annually with the Rhode
Island Division of Public Utilities and Carriers (Division) for the recovery of
exogenous changes which may occur during the three-year term of the Plan.
Exogenous changes are defined as "...significant increases or decreases in
ProvGas' costs or revenues which are beyond ProvGas' reasonable control."  Any
disputes between ProvGas and the Division regarding either the nature or
quantification of the exogenous changes are to be resolved by the Rhode Island
Public Utilities Commission (RIPUC).  The impact of any such exogenous changes
will be debited or credited to a regulatory asset or liability account
throughout the term of Energize RI and will be recovered or refunded at the
expiration of the Plan through a method to be determined.

  In fiscal 1998, ProvGas did not earn its allowed rate of return primarily as a
result of the extremely warm winter weather and the loss of non-firm margin.
ProvGas believed the causes of these two events were beyond its reasonable
control and thus deemed them to be exogenous changes.  In March 1999, ProvGas
reached an agreement with the Division, which allowed it to recover $2.45
million in revenue losses attributable to exogenous changes experienced by
ProvGas in fiscal 1998.  The RIPUC reviewed the exogenous changes agreement to
ensure consistency with the terms of Energize RI and affirmed the agreement at
its May 28, 1999 open meeting.


                                      I-13
<PAGE>

  During fiscal 1999, ProvGas recognized into revenue $2.45 million for the
exogenous changes recovery, and has deferred approximately $.5 million of
revenue under the provisions of the earnings cap of Energize RI.

  ProvGas intends to file for recovery of exogenous changes experienced in 1999
which resulted from factors similar to 1998.  Absent further exogenous recovery
and/or other factors such as colder than normal weather, ProvGas' ability to
earn a 10.9 percent return on average common equity this year, the final year of
Energize RI, is substantially impaired.

  As Energize RI is due to expire on September 30, 2000, several alternatives
are available to ProvGas to address the expiration of this program including the
possible extension or replication of Energize RI or filing a rate case. On
January 31, 2000, ProvGas filed for a two-month extension of Energize RI to
allow time for the Registrant to discuss its options with the appropriate
parties.

  On August 31, 1999, ProvGas' settlement agreement for enhancements to its
Business Choice program was approved by the RIPUC in Docket 2902 and became
effective September 1, 1999.  Specifically, there will now be rolling enrollment
for transportation service, which will allow customers to execute transportation
agreements throughout the year, rather than during limited enrollment periods.
The program now has approximately 1,700 firm transportation customers with
annual deliveries of over 5 billion cubic feet per year, which is approximately
25 percent of ProvGas' total annual firm deliveries.  There are 14 marketers
serving ProvGas' customers and transporting on the system.  Additional
enhancements to the Business Choice program were filed with the RIPUC under a
supplemental settlement agreement in Docket 2902 on October 8, 1999 and were
approved on October 27, 1999.  These enhancements do not generate additional
revenue.

Business Opportunities

  The Registrant's non-regulated operation continues to increase its
contribution to operating margin by adding customers and sales volume, although
it continues to generate a net loss consistent with the expansion of our oil
businesses.  The Registrant intends to continue to grow its residential oil
customer base through future customer acquisitions to build the operational
scale needed to compete effectively in the marketplace.  On January 19, 2000,
the Registrant acquired the full service oil business assets of the Woonsocket
Consumers Coal Company (Consumers).  Consumers is a full service oil company in
Northern Rhode Island and has approximately 5,000 residential oil customers.
The acquisition is a significant step in the Registrant's strategic plan to
expand its retail oil distribution business and strengthen its position as a
leader in the New England energy industry.  Furthermore, the New England gas
utilities continue to unbundle the sale of the gas commodity from the
distribution of that gas, which will also enable future growth.

  The Registrant's joint venture to provide electricity, HVAC, and related
services for most of the Providence Place Mall (the Mall) began with the Mall's
August 1999 opening.

  Energize RI provides opportunities for ProvGas to expand sales.  For example,
high pressure service to Quonset/Davisville Industrial Port & Commerce Park, a
key area for State economic development, provides opportunities for sales growth
as commercial and industrial businesses locate within the park.  In addition,
Demand Side Management, an equipment rebate program, provides opportunities to
expand sales to non-traditional applications, such as air conditioning and fuel
cells.  ProvGas has redirected its sales and marketing efforts to leverage
Energize RI, as well as other opportunities to promote sales growth within its
service territory.

LIQUIDITY AND CAPITAL RESOURCES

  During the current year, the Registrant's cash flow from operating activities
decreased approximately $6.2 million for the quarter ended December 31, 1999
compared to the same period last year. On a comparative basis, the current year
cash flow decreased as a result of an increase in unbilled revenues due to the
time period covered in cycle billing.

                                      I-14
<PAGE>

  Capital expenditures for the quarter ended December 31, 1999 of $7.3 million
decreased $1.2 million or 14.2 percent when compared to $8.5 million for the
same period last year.  This spending decrease was due primarily to technology
projects, which were completed during fiscal 1999.  Capital expenditures for the
remainder of fiscal year 2000 and fiscal year 2001 are expected to be
approximately $49.0 million in total.

  During the current quarter, the Registrant's cash flow from financing
activities increased $6.3 million due primarily to a temporary increase in
short-term borrowings, which was used primarily as bridge financing for the
Registrant's investment in the Mall.  The Registrant has reached an agreement
with an institutional lender for permanent financing (the Mall Financing) to
replace its bridge financing for the Mall, which is expected to close during the
second quarter of fiscal 2000.  The Mall Financing loan provides for a 15-year
non-recourse project financing, secured by the equipment assets of the 6.6
megawatt generating plant located at the Mall.  Upon execution of the Mall
Financing agreement, ProvEnergy will receive 50 percent of the loan proceeds
(estimated to be between $11.0 million and $12.5 million) at which time, the
Registrant's equity investment in the Mall project will be approximately $3.0 to
$3.5 million.


YEAR 2000 UPDATE

  Year 2000 (Y2K) readiness was a top priority for the Registrant.  The
Registrant's company-wide Y2K Project was completed on schedule and all mission
critical systems and devices essential to providing safe, reliable service to
its customers were Y2K ready. The Registrant's operations were not in any way
disrupted by the rollover to January 1, 2000.

  The Registrant has capitalized Year 2000 costs for ProvGas and is amortizing
those costs over a five-year amortization period consistent with the regulatory
levels authorized by the RIPUC under the Energize RI program.  As of December
31, 1999, the Registrant deferred total Year 2000 costs of approximately $7.7
million and has amortized approximately $.5 million of these costs.  In
addition, approximately $.1 million of additional costs, which were expensed in
fiscal 1999, had been incurred by the non-regulated operation.


                                      I-15
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
                ----------------------------------------------


PART II. OTHER INFORMATION
-------  -----------------

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

     The annual meeting of shareholders was held on January 20, 2000 and the
following nominees to the Registrant's Board of Directors were elected as
Directors for terms expiring at the time of the 2003 annual meeting by the
following vote:

Mr. James H. Dodge            4,837,975 FOR   77,756 WITHHELD
Mr. Kenneth W. Washburn       4,835,171 FOR   80,560 WITHHELD


Item 6 (a). Exhibits
--------------------

     10a.  Employment Agreement dated October 1, 1999 between Gerald A.
Yurkevicz, Vice President, Business Development and Marketing and the
Registrant.

     10b.  Employment Agreement dated October 1, 1999 between James A. Grasso,
Vice President, Public and Government Affairs and Assistant Secretary and the
Registrant.

     10c.  Employment Agreement dated October 1, 1999 between James DeMetro,
Executive Vice President and the Registrant.

     10d.  Employment Agreement dated October 1, 1999 between James H. Dodge,
Chairman, President and Chief Executive Officer and the Registrant.

     10e.  Employment Agreement dated October 1, 1999 between James M. Stephens,
President and Providence Energy Services, Inc.

     10f.  Employment Agreement dated October 1, 1999 between Kenneth W. Hogan,
Vice President, Chief Financial Officer, and Treasurer and the Registrant.

     10g.  Employment Agreement dated October 1, 1999 between Royalynne
Hourihan, Vice President, Human Resources and the Registrant.

     10h.  Employment Agreement dated October 1, 1999 between Susann G. Mark,
Vice President, General Counsel, and Secretary and the Registrant.

     10i.  Employment Agreement dated October 1, 1999 between Peter J. Gill,
Vice President, Information Technology and ProvGas. (Filed as exhibit 10a. to
the report of The Providence Gas Company on Form 10-Q for the period ended
December 31, 1999, incorporated herein by this reference.)

     10j.  Employment Agreement dated October 1, 1999 between Robert W. Owens,
Senior Vice President, Gas Distribution and ProvGas. (Filed as exhibit 10b. to
the report of The Providence Gas Company on Form 10-Q for the period ended
December 31, 1999, incorporated herein by this reference.)

     10k.  Employment Agreement dated October 1, 1999 between Timothy S. Lyons,
Vice President, Marketing and Regulatory Affairs and ProvGas. (Filed as exhibit
10c. to the report of The Providence Gas Company on Form 10-Q for the period
ended December 31, 1999, incorporated herein by this reference.)

Item 6 (b). Reports on Form 8-K
-------------------------------

     On November 15, 1999, the Registrant filed a report on Form 8-K regarding
the Registrant's Agreement and Plan of Merger with Southern Union Company.

                                      II-1
<PAGE>

                PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES


It is the opinion of management that the financial information contained in this
report reflects all adjustments necessary for a fair statement of results for
the periods reported, but such results are not necessarily indicative of results
to be expected for the year due to the seasonal nature of the Registrant's
operations. All accounting policies and practices have been applied in a manner
consistent with prior periods.



                                   SIGNATURE
                                   ---------

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.



                         Providence Energy Corporation
                         (Registrant)



                         BY: /s/  KENNETH W. HOGAN
                            -------------------------------------
                                  KENNETH W. HOGAN
                                  Vice President, Chief Financial
                                  Officer, and Treasurer



Dated:  February 10, 2000
        -----------------

                                      II-2