AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT

     This Amendment No. 1 to the Rights  Agreement (the  "Amendment") is entered
into as of November  30, 1999 by and between  Valley  Resources,  Inc.,  a Rhode
Island  corporation (the  "Company"),  and The Bank of New York, as rights agent
(the "Rights Agent"),  amending the Rights  Agreement (the "Rights  Agreement"),
dated as of June 18, 1991 between the Company and the Rights Agent.

                               W I T N E S S E T H


     WHEREAS,  there does not exist as of the date hereof any  Acquiring  Person
(as defined in the Rights Agreement); and

     WHEREAS,  the Company  desires to amend the Rights  Agreement in accordance
with Section 27 thereof;

     NOW THEREFORE,  in consideration of the premises and the mutual  agreements
set forth in the Rights  Agreement and this Amendment,  the parties hereby agree
as follows:

     Section 1. Defined Terms. Capitalized terms defined in the Rights Agreement
and used herein shall have the meanings given to them in the Rights Agreement.

     Section 2. Amendment to Section 1. Section 1(a) of the Rights  Agreement is
hereby amended to add the following sentence at the end thereof:

          "Notwithstanding  anything in this Agreement to the contrary,  neither
          Southern  Union Company  ("Southern  Union") nor any of its Affiliates
          shall become an Acquiring  Person as a result of the  execution of the
          Agreement and Plan of Merger among  Southern  Union,  SUG  Acquisition
          Corporation, a Rhode Island corporation ("Newco"), and the Company (as
          the same may be  modified  or amended  from time to time,  the "Merger
          Agreement")  or  the  consummation  of the  transactions  contemplated
          thereby, including the mergers contemplated by the Merger Agreement."

     Section 3. Amendment to Section 3. Section 3(a) of the Rights  Agreement is
hereby amended to add the following sentence at the end thereof:

          "Notwithstanding  anything  in  this  Agreement  to  the  contrary,  a
          Distribution  Date shall not be deemed to have occurred  solely as the
          result of the  approval,  execution,  delivery or  performance  of the
          Merger   Agreement  or  the   consummation   of  any  of  the  mergers
          contemplated therein."

     Section 4. Amendment to Section 7(a).  Section 7(a) of the Rights Agreement
is hereby amended by:

          (a) deleting the word "and"  immediately  before the phrase "(iii) the
          date"; and

          (b) inserting the following  phrase  immediately  after the phrase "as
          provided in Section 24 hereof":  "and (iv) such time as duly  executed
          articles of merger are duly filed with the  Secretary  of State of the
          State of Rhode Island pursuant to Section 1.3 of the Merger  Agreement
          or at such later effective time as is specified in such document."

     Section 5. Amendment to Section 13.  Section 13 of the Rights  Agreement is
hereby   amended   to  add  the   following   sentence   at  the  end   thereof:
"Notwithstanding  the  foregoing,  the  provisions  of this Section 13 shall not
apply to the execution and delivery of the Merger  Agreement or the consummation
of the transactions contemplated thereby."

     Section 6.  Effectiveness.  This Amendment shall be deemed  effective as of
the date hereof.  Except as specifically  amended hereby,  the Rights  Agreement
shall remain in full force and effect and shall be otherwise unaffected hereby.

     Section 7.  Counterparts.  This  Amendment may be executed in any number of
counterparts,  and each of such counterparts shall for all purposes be deemed an
original,  but all such counterparts  shall together  constitute but one and the
same instrument.

     Section 8. Governing  Law. This Amendment  shall be deemed to be a contract
made under the laws of the State of Rhode Island and for all  purposes  shall be
governed by and construed in accordance  with the laws of such State  applicable
to contracts made and to be performed entirely within such State.

                [remainder of the page intentionally left blank]


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly executed as of the date hereof.



                                   VALLEY RESOURCES, INC.


                                   By:  /s/ Alfred P. Degen
                                       ---------------------------------------
                                   Name:   Alfred P. Degen
                                   Title:  President and Chief Executive Officer



                                   THE BANK OF NEW YORK


                                   By:  /s/ Raymond Poplansky
                                       ---------------------------------------
                                   Name:   Raymond Poplansky
                                   Title:  Assistant Vice President