SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]

- --------------------------------------------------------------------------------

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

Bay State Gas Company
(Name of Registrant as Specified In Its Charter)

[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

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BAY STATE GAS COMPANY

------------------------

NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS

Westborough, Massachusetts
December 9, 1997

To the Common Shareholders:

You are hereby notified that the annual meeting of common shareholders of
Bay State Gas Company will be held at the office of the Company, 300 Friberg
Parkway, Westborough, Massachusetts on the First Floor, on January 22, 1998 at
10:00 A.M., for the following purposes:

1. To elect two Directors.

2. To act on such other matters as may properly come before the meeting and
any adjournment thereof.

The enclosed form of proxy has been prepared at the direction of the Board
of Directors of the Company and is sent to you at its request. The persons named
in said proxy have been designated by the Board of Directors.

IF YOU DO NOT EXPECT TO BE PRESENT PERSONALLY AND YOU WISH YOUR STOCK VOTED
AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE PROXY BY MAIL IN THE
POSTAGE-PAID ENVELOPE SENT YOU HEREWITH FOR THAT PURPOSE. IF YOU LATER FIND THAT
YOU CAN BE PRESENT OR FOR ANY OTHER REASON DESIRE TO REVOKE OR CHANGE YOUR
PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED.

The Board of Directors fixed November 28, 1997 as the record date for the
determination of those shareholders entitled to notice of and to vote at this
meeting and all persons who were holders of record of Common Stock on such date
and no others are entitled to notice of and to vote at this meeting and any
adjournment thereof.

By Order of the Board of Directors,

ROGER A. YOUNG
Chairman of the Board of Directors

CHARLES H. TENNEY III
Clerk
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BAY STATE GAS COMPANY
300 FRIBERG PARKWAY
WESTBOROUGH, MASSACHUSETTS 01581

December 9, 1997

PROXY STATEMENT

ANNUAL MEETING OF COMMON SHAREHOLDERS, JANUARY 22, 1998

This proxy statement is furnished in connection with the solicitation by
the Board of Directors of proxies in the accompanying form for use at the 1998
annual meeting of common shareholders of Bay State Gas Company (the "Company").

The annual report of the Company for the fiscal year ending September 30,
1997 is enclosed herewith and includes financial statements which are not part
of the proxy statement.

The Company presently has two wholly-owned subsidiaries, Northern
Utilities, Inc. ("Northern") and Granite State Gas Transmission, Inc.
("Granite"). Granite has five wholly-owned subsidiaries: Bay State Energy
Enterprises, Inc., EnergyUSA, Inc., EnergyEXPRESS, Inc., LNG Development Corp.,
and Natural Gas Development, Inc.

The voting securities of the Company issued and outstanding on November 28,
1997 consisted of 13,505,974 shares of Common Stock, $3.33 1/3 par value,
entitling the holders thereof to one vote per share. Holders of Common Stock of
record on such date are entitled to notice of and to vote at the annual meeting
and any adjournment thereof.

No person holds of record and, to the knowledge of management, no person
owns beneficially more than five (5) percent of the Common Stock of the Company
which may be voted at the annual meeting and any adjournment thereof.
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1. AS TO THE ELECTION OF DIRECTORS

The By-Laws of the Company provide for a Board of Directors of not less
than eight nor more than thirteen Directors as the Board shall fix from time to
time. The Board has fixed the number of Directors comprising the Board at the
annual meeting at ten divided into three classes, two classes of four Directors
each and one class of two Directors, with their respective tenures so arranged
that the term of office of one class expires in each year at which time a
corresponding number of Directors is elected for a term of three years. At the
annual meeting, two Directors are to be elected to hold office for the ensuing
three years expiring in 2001. In accordance with the Company's By-Laws, in
fiscal 1998 the Directors intend to elect a third Director to the class of 2001
so that the classes of Directors will become as nearly equal in number as
possible.

Assuming a quorum is present, the favorable vote of a majority of the
shares of Common Stock represented and voting will be required for the election
of Directors and on any other matters which may come before the meeting. A
majority of the shares of Common Stock outstanding represented, in person or by
proxy, at the meeting constitutes a quorum. Election of Directors is conducted
by ballot. Shareholders of record may vote their shares either personally, by
execution of a ballot at the meeting, or through a duly authorized proxy. Each
proxy can be revoked at any time before it is voted by written notification to
the Clerk of the Company at the Company's address prior to the meeting or in
person at the meeting. Every properly signed proxy will be voted unless
previously revoked. All shares represented by valid proxies will be voted (or
withheld from voting) in accordance with the instructions contained therein. A
proxy will be voted in favor of the nominees for Director named therein unless a
direction is given to withhold from voting with respect to one or more of the
nominees. Withholding from voting will have the same effect as voting against
the nominees for Director.

INFORMATION ABOUT NOMINEES FOR DIRECTOR

Each nominee has been a member of the Board of Directors since the year
indicated and has previously been elected by the common shareholders. Management
intends to vote the proxies for the persons whose names are set forth below
unless instructed otherwise. If any nominee shall be unable to serve, the
proxies will be voted for such person who will be designated by management to
replace such nominee. Management has no reason to believe that any of the
nominees is not available or will not serve if elected.

THREE-YEAR TERM EXPIRING IN 2001

Jack E. McGregor, Age 63
Director since 1995
Since 1995, of Counsel to Cohen and Wolf, P.C., and partner of Bridgeport
Waterfront Investors, LLC. Mr. McGregor retired in 1996 as Chairman of the
Board of Directors of Aquarion Company, Bridgeport, CT, a water and
water-related services company. Mr. McGregor was President and Chief
Executive Officer of Aquarion Company prior thereto. Mr. McGregor remains a
Director of Aquarion Company and is also a Director of People's Bank,
Bridgeport, CT. Mr. McGregor serves on the Audit Committee and the
Corporate Governance Committee.

Joel L. Singer, Age 41
Director since 1995
President of the Company since 1996 and Chief Operating Officer since 1995.
Mr. Singer was Executive Vice President of the Company in 1995. Formerly he
was Director of Arthur D. Little Inc.'s North American Natural Gas
Practice, Cambridge, MA from 1993 to 1995. Mr. Singer held management
positions at American Petrofina and Exxon prior thereto.

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INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE

Lawrence J. Finnegan, Age 66
Director since 1982
Term expires 1999
Chairman of the Board of Directors, President and Chief Executive Officer
of Boston Mutual Life Insurance Company, Canton, MA. Mr. Finnegan is the
Chairman of the Audit Committee and serves on the Corporate Governance
Committee.

Douglas W. Hawes, Age 65
Director since 1992
Term expires 1999
Lawyer; senior partner in the law firm of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., New York, NY. Mr. Hawes is also a Director of United Water
Resources Inc., Harrington Park, NJ.

John H. Larson, Age 67
Director since 1991
Term expires 2000
Retired since 1989. Mr. Larson was President and Chief Executive Officer of
Connecticut Energy Corp., Bridgeport, CT, prior thereto. Mr. Larson is also
a Director of Bolt Technology Corp., Norwalk, CT. Mr. Larson serves on the
Compensation Committee and is the Chairman of the Corporate Governance
Committee.

Daniel J. Murphy III, Age 55
Director since 1986
Term expires 1999
Chairman of the Board of Directors of Northmark Bank, North Andover, MA.
Mr. Murphy is also a Director of Watts Industries, Inc., North Andover, MA.
Mr. Murphy is the Chairman of the Compensation Committee and serves on the
Audit Committee.

George W. Sarney, Age 58
Director since 1992
Term expires 2000
Since 1993 President of The Foxboro Company, Foxboro, MA, a manufacturer of
instruments and systems for industrial process automation. Dr. Sarney is
also President and Chief Operating Officer of Siebe Control Systems, a
Division of Siebe PLC, Windsor, U.K., of which The Foxboro Company is a
part. Dr. Sarney is also a Director of Siebe PLC and Bowthorpe PLC. Dr.
Sarney was a Senior Vice President of Raytheon Company, Lexington, MA prior
thereto. Dr. Sarney serves on the Compensation Committee and the Corporate
Governance Committee.

Thomas W. Sherman, Age 57
Director since 1975
Term expires 2000
Executive Vice President, Chief Financial Officer and since 1994 Treasurer
of the Company.

Charles H. Tenney II, Age 79(a)
Director since 1974
Term expires 2000
Retired since 1996 as Chairman of the Board of Directors; Chief Executive
Officer of the Company 1974-1990; Retired Chairman of the Board of
Directors and Chief Executive Officer of Fitchburg Gas and Electric Light
Company, Fitchburg, MA and UNITIL Corporation, Hampton, NH. Mr. Tenney
remains a Director of UNITIL Corporation. Mr. Tenney serves on the
Corporate Governance Committee.

Roger A. Young, Age 51(a)
Director since 1975
Term expires 1999
Chairman of the Board since 1996 and Chief Executive Officer of the
Company. Mr. Young was President of the Company prior thereto.

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NOTES:

Unless otherwise noted herein, each of the nominees and continuing
Directors has held the position(s) indicated for the last five years.

(a) Mr. Tenney is the stepfather of Mr. Young.

The Board of Directors of the Company met eight times in fiscal 1997. Each
Director during fiscal 1997 attended more than 95% of the aggregate of (i) the
total meetings of the Board and (ii) the total number of meetings of the
Committees of the Board on which he served, if any.

SECURITY OWNERSHIP OF MANAGEMENT

The following table shows, as of November 28, 1997, the number of equity
securities beneficially owned by each Director, by each of the named executive
officers in the Summary Compensation Table and by all directors and executive
officers of the Company as a group, together with the percentage of the
outstanding shares of the applicable class of equity securities.

AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP
------------------ PERCENT OF
BENEFICIAL OWNER COMMON STOCK(A) CLASS
- ----------------------------------------------------------- ------------------ ----------

Lawrence J. Finnegan....................................... 5,875 0.04%
William L. Glascock........................................ 2,158 0.02%
Douglas W. Hawes........................................... 1,000 0.01%
John H. Larson............................................. 1,309(c) 0.01%
Jack E. McGregor........................................... 1,408 0.01%
Daniel J. Murphy III....................................... 2,339 0.02%
George W. Sarney........................................... 1,000 0.01%
Thomas W. Sherman.......................................... 59,593(b)(d) 0.44%
James D. Simpson........................................... 4,547(b)(d) 0.03%
Joel L. Singer............................................. 2,380(d)(f) 0.02%
Charles H. Tenney II....................................... 558,496(b)(d) 4.11%
Roger A. Young............................................. 126,050(b)(d) 0.93%
Directors and executive officers of the Company as a group
(18 persons)............................................. 825,161 5.98%

BENEFICIAL OWNER PREFERRED STOCK(H)
- ----------------------------------------------------------- ------------------

Charles H. Tenney II....................................... 16 0.30%
Directors and executive officers of the Company as a group
(18 persons)............................................. 16 0.30%

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NOTES:

(a) Based on information furnished to the Company by the nominees and continuing
Directors and executive officers of the Company. The calculation of
percentages shown herein is based on the total outstanding shares of the
applicable class of equity securities, except for Messrs. Young, Sherman,
Simpson, and Tenney, and all Directors and executive officers of the Company
as a group, where the percentage is based on the total outstanding shares of
such Stock plus shares which such individuals have the right to acquire
pursuant to the Company's Key Employee Stock Option Plan ("KESOP"). There
are a total of 297,000 shares (2.15%) reflected in beneficial ownership
which various officers have the right to acquire pursuant to the KESOP.
Except as noted, each of said Directors and executive officers has voting
and investment power with respect to shares beneficially owned.

(b) Included are 108,000, 53,000, 4,500 and 90,000 shares which Messrs. Young,
Sherman, Simpson and Tenney, respectively, have the right to purchase
pursuant to the exercise of options under the KESOP (see "Stock Options --
Key Employee Stock Option Plan"); they have no voting power with respect to
these shares until the shares are purchased.

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(d) Included are 13,035, 830, 4,136, 47 and 20,056 shares which are held in
trust for Messrs. Young, Singer, Sherman, Simpson and Tenney, respectively,
under the terms of the Employee Savings Plan; they have voting power only
with respect to the shares credited to their accounts.

(e) Included are 600 shares held by Mr. Sherman as trustee for his parents.

(f) Included are 350 shares held by Mr. Singer as custodian for minor children.

(g) Included are 294,369 shares (2.17%) owned by two trusts in which Mr. Tenney
has a 1/6 beneficial interest and of which he is Co-Trustee with shared
voting and investment power, which shares are voted pro rata in accordance
with the wishes of each of the beneficiaries thereof. Mr. Tenney disclaims
beneficial ownership of such shares other than such 1/6 beneficial interests
in both trusts. Also included are 60 shares which are owned by Mr. Tenney's
wife. He has no voting or investment power with respect to, and no
beneficial interest in, these shares.

(h) Preferred Stock is Cumulative Preferred Stock, $3.80 Series, $50 par value,
of the Company. The percentage shown herein is based on 5,315 outstanding
shares of such Stock. No Director or officer has direct or indirect
beneficial ownership of any shares of any of the other series of the
Company's Cumulative Preferred Stock, $100 and $50 par value.

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit Committee of the Board of Directors, consisting of Lawrence J.
Finnegan (Chairman), Daniel J. Murphy III and Jack E. McGregor, met twice in
fiscal 1997. The Audit Committee Statement of Policy identifies, among other
things, that the Audit Committee shall have the following overall
responsibilities:

- As to financial reporting, to provide assurance that financial
disclosures made by management fairly and reasonably portray the
Company's financial condition and results of operations; and

- As to corporate governance, to provide assurance that the Company has and
is maintaining controls against employee conflicts of interest and fraud.

The duties of the Audit Committee identified in the aforementioned Audit
Committee Statement of Policy include, among other things, oversight with
respect to the independent accountants, review of the Company's significant
accounting policies and policy decisions, review of interim and annual financial
statements, review of other financial reports requiring Board approval, receipt
of reports from management, the independent accountants and the internal
auditor, review and approval of management's appointment and termination of the
Company's internal auditor and reporting to the Board of Directors from time to
time.

The Compensation Committee of the Board of Directors, consisting of Daniel
J. Murphy III (Chairman), John H. Larson and George W. Sarney, met five times in
fiscal 1997. The duties of this Committee include studying and making
recommendations to the Board with respect to salaries and other benefits to be
paid to the officers of the Company. (See "Report of the Compensation Committee"
below.)

The Executive Committee which consisted of Charles H. Tenney II (Chairman),
Lawrence J. Finnegan, John H. Larson, George W. Sarney and Roger A. Young met
twice in fiscal 1997. The duties of this Committee included reviewing and
overseeing corporate policies related to the Company's long-range strategic
business, financial and operating plans. The Executive Committee was dissolved
by the Board of Directors on September 25, 1997.

An ad hoc Committee of the Board of Directors which consisted of John H.
Larson, Jack E. McGregor and George W. Sarney was formed by the Board on July
24, 1997 to review the Company's corporate governance policies and procedures
and to prepare recommendations to the Board designed to improve the current
corporate governance system. Such Committee met once in fiscal 1997 and then was
dissolved by the Board of Directors on September 25, 1997 and replaced by the
Corporate Governance Committee of the Board of Directors, consisting of John H.
Larson (Chairman), Lawrence J. Finnegan, Jack E. McGregor,

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George W. Sarney and Charles H. Tenney II. The Corporate Governance Committee
also acts as a nominating committee of the Board, and in such regard coordinates
suggestions or searches for potential nominees for Board membership, reviews and
evaluates qualifications of potential Board members and recommends to the entire
Board nominees for vacancies occurring from time to time on the Board.

The Corporate Governance Committee Charter identifies that the purpose of
the Corporate Governance Committee shall be to:

- Advise the Board concerning appropriate composition of the Board and its
committees;

- Advise the Board regarding appropriate corporate governance practices and
assist the Board in achieving them; and

- Perform such other functions as the Board may assign to the Committee
from time to time.

The duties and responsibilities of the Corporate Governance Committee
include, among other things, developing for the Board written "Board of
Directors' Corporate Governance Guidelines" (the "Guidelines") relating to:

- Composition of the Board,

- Operation of the Board, and

- Board interaction with management, and
on an ongoing basis, assisting the Board in carrying out the specific elements
included in the Guidelines, monitoring the compliance by the Board and its
committees with the Guidelines, and proposing appropriate revisions to the
Guidelines.

An ad hoc Committee of the Board of Directors, consisting of Jack E.
McGregor (Chairman), Douglas W. Hawes and John H. Larson, was formed by the
Board on May 1, 1997, with the purpose of monitoring and advising on the options
being pursued by the Company in regards to Northern's capacity situation. Such
Committee met four times in fiscal 1997.

COMPENSATION OF DIRECTORS

Members of the Board of Directors who are not employees of the Company (the
"Outside Directors") currently receive an annual retainer fee of $11,000 and a
fee of $800 for attendance at each meeting of the Board. Effective January 1,
1997, the Company adopted the Bay State Gas Company Stock Accumulation Plan for
Outside Directors ("Stock Accumulation Plan") as a means to align the interests
of the Outside Directors of the Company or its subsidiaries more closely with
the interests of the Company's shareholders by paying a portion of their annual
retainer in Common Stock of the Company. Under terms of the Stock Accumulation
Plan, Outside Directors who do not have beneficial ownership of the Company's
Common Stock having a value at least equal to six times the annual retainer then
in effect (currently $66,000) will receive their annual retainer in shares of
Common Stock of equivalent value that will be credited to a stock account for
the benefit of such Directors and will vest, except for certain automatic
vesting provisions under the plan, upon completion of two (2) years of service
from the annual retainer payment date (the date of the Company's Annual Meeting
of Common Shareholders). At the time such shares vest, the Company will cause to
be paid to each Director in the plan the number of shares credited to his or her
stock account together with cash in an amount equal to all dividends which would
have been paid on such shares during the two year vesting period.

According to the provisions of the plan, in fiscal 1997 Mr. Larson, Mr.
McGregor, Mr. Murphy and Mr. Sarney all had 405 shares of Bay State Gas Company
Common Stock credited to their respective stock accounts subject to the above
referenced two-year vesting period. All other Outside Directors received their
annual retainer in cash.

Members of the various Board Committees currently receive an annual
Committee fee of $1,000 and a fee of $800 for attendance at each meeting of said
Committees. Members of any ad hoc Committee receive a fee of $800 for attendance
at each meeting of said Committees. Directors who are employees of the

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Company receive no fees as members of the Board or any Committee thereof. All
Directors are entitled to reimbursement of expenses incurred in connection with
attendance at meetings of the Board and any Committee on which they serve.

Mr. Tenney is a former executive officer of the Company and served as such
until his resignation as an employee of the Company in 1992, at which time he
became a consultant to the Company pursuant to a Senior Advisory Agreement
between himself and the Company. The Senior Advisory Agreement between Mr.
Tenney and the Company was extended on January 22, 1996 and has a two-year term,
subject to extension as provided therein. The current Senior Advisory Agreement
as amended on May 2, 1996 provides that Mr. Tenney receive an annual fee of
$72,500, plus reasonable and normal business related expenses. In fiscal 1997,
Mr. Tenney received $72,500 for services rendered under the Senior Advisory
Agreement. Mr. Tenney also received $24,000 for serving as Chairman of the
Executive Committee (now dissolved).

The Company has a directors' advisory council composed of retired members
of the Company's Board of Directors. Each member, known as a Director Emeritus,
is appointed yearly by the Board of Directors to render advisory services to the
Board. Directors Emeriti have no right to vote on any action that may come
before the Board, nor is their presence counted for purposes of determining a
quorum. On January 23, 1997, Endicott Smith and Richard L. Brickley were
reappointed Directors Emeriti. Directors Emeriti receive as compensation for
such advisory services an annual retainer of $11,000 and a fee of $800 for each
Board meeting attended, as well as reimbursement for any expenses incurred in
connection with attendance at any meeting.

DIRECTORS RETIREMENT PLAN

In 1994, the Company adopted the Bay State Gas Company Directors'
Retirement Plan for the purpose of providing retirement income to Directors of
the Company who are not officers of the Company. The plan provides for (a) a
minimum of five years of service as a Director to qualify, (b) an annual benefit
equaling ten percent of final year's retainer times the number of years of
service up to a maximum benefit equaling one hundred percent of final year's
retainer, (c) the benefit to be paid for the remainder of the life of said
Director but in no event for a period of time longer than the number of years of
service as a Director and (d) payments to begin at the later of retirement as a
Director, end of service as Director Emeritus, or age 65. No Directors have as
yet received any benefit under this plan.

On September 25, 1997 the Board of Directors voted to accept a mandatory
retirement age of 70 for Directors of the Company. Except for any current
Director age 70 or older who will be allowed to serve out his elected term, no
other Director will continue to serve in his/her capacity as a Director on or
after the next annual meeting of common shareholders after attaining age 70, the
retirement date for such Director.

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EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE

This report outlines the framework used for making compensation decisions,
the Company's management compensation philosophy, and the criteria used for
making compensation decisions in fiscal 1997 regarding the Chief Executive
Officer (the "CEO") and the other executive officers named in the Summary
Compensation Table below (the "Named Officers").

Framework for Compensation Decisions

The Board of Directors (the "Board") has overall responsibility for the
Company's compensation and benefit programs. The Board has appointed the
Compensation Committee (the "Committee"), consisting entirely of non-employee
Directors, to facilitate its fulfillment of this responsibility. The Committee
administers the Company's salary program and Profit Sharing Plan. The Committee
also administers and recommends to the Board of Directors awards under, and
changes to, the Stock Performance Sharing Plan.

The Committee reviews and recommends for Board approval all decisions
relating to the compensation of the CEO and all other officers. Decisions
relating to all other officers' compensation are based on recommendations of the
CEO, as reviewed and approved by the Committee.

Philosophy of Management Compensation

During 1997 the Company changed its compensation philosophy and programs to
more accurately reflect its competitive business environment and growth-oriented
culture. The new pay philosophy and programs strengthen the linkage between
executive pay and Company performance.

The Company has an aggressive goal to significantly improve shareholder
value creation by being an industry growth leader under deregulation. To assist
in accomplishing this goal the Company has designed compensation programs that
link executive pay to Company performance relative to: 1) its own ambitious
goals, and 2) the performance of a selected peer group of companies who are
aggressively managing issues under deregulation. These programs enable the
Company to attract, retain, and motivate employees who are committed to creating
shareholder value. When Company performance exceeds or falls below: 1) its
aggressive targets, or 2) that of the selected peer group companies, by design
of the Company's compensation programs, the executives' overall compensation
levels will exceed or fall below competitive levels respectively.

Criteria Used for Making Compensation Decisions in Fiscal 1997

This section describes the criteria used by the Board and the Committee
regarding Compensation decisions in fiscal 1997 affecting the CEO and other
executive officers (including the Named Officers).

Base Salary

Each year the Company, with the assistance of an outside consulting firm,
reviews various salary surveys to confirm that compensation levels for executive
officers are consistent with competitive practice. Salary increases are
determined using a formula as a guide, and are based on an individual's
performance during the year and his or her current compensation compared to
competitive market compensation. The formula is adjusted each year and approved
by the Committee, based on the rate of increase of competitive salaries in: 1)
general industry; 2) the gas utility industry; and 3) other companies in the
Company's geographic area.

In January 1997, the Committee recommended and the Board approved merit
increases in base salary for each of the Named Officers based on successful
achievement of specific quantitative and qualitative measures including: growth
in earnings per share and net gas sales; reduced operating, maintenance, and
capital expenses; regulated community leadership; performance in restructuring
the Company; and managing major change initiatives.

In evaluating the performance of the CEO, the Committee noted that fiscal
1996 quantifiable objectives were met or exceeded in the areas listed above. The
Committee further noted accomplishment in the areas of

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dramatically changing the business to prepare the Company to be a leader in a
deregulated environment; favorably influencing the regulated community's
perception of the Company as a New England leader in deregulation; implementing
a process-based organization; surfacing new leaders with a common predilection
for accelerated movement toward profitable growth and cost management
opportunities; entry into a new business segment (EnergyUSA, Inc.); developing a
structured approach to evaluating and entering into new energy-related
businesses (Energy Ventures business segment); and assimilating a new president
into the organization. Effective January 1, 1997, the Committee recommended and
the Board approved a $10,000 increase in Mr. Young's base salary.

Profit Sharing Plan

Bonuses paid under the Profit Sharing Plan (formerly known as the Key
Employee Incentive Compensation Plan) are recommended by the Committee and
approved by the Board based on a specified formula. In fiscal 1997 the Company
implemented changes to this program to be better aligned with the competitive
practice of other utilities aggressively managing deregulation. Target awards,
ranging from 30% to 50% of base salary were established for each salary grade.
Actual awards had the potential of ranging from 0% to 200% of target (300% of
target for EnergyUSA), based on corporate and business unit performance.

The Committee had established corporate performance targets in three
different areas for the CEO and other Named Officers. These measures include
financial performance, business unit non-financial performance, and major change
initiatives. The financial measure compares the Company's actual earnings per
share amount to a predetermined target level. The business unit non-financial
measure pertains to the Utility Segment only and measures the business unit's
performance in the areas of customer satisfaction and safety to that of
predetermined targets. The major change initiatives measure evaluates the
Company's performance in implementing major earnings growth oriented
initiatives. Utilizing the formula and approach described above, the Board of
Directors approved a Profit Sharing Plan award earned for fiscal 1997 to the CEO
of $238,855 which was 143% of the target award.

Stock Performance Sharing Plan

Beginning October 1, 1995 the Committee recommended and the Board approved
annual awards of performance shares granted to all executive officers and
certain exempt employees. All or a portion of the performance shares subject to
each award shall become vested and earned at the end of the three-year period
beginning on the date the award was granted depending on the Company's total
return to shareholders for such period. The performance shares granted to the
CEO and the other Named Officers were awarded as part of the officers' total
compensation based on recommendations made by an outside consulting firm. The
number of performance shares granted to the CEO in fiscal 1997 was 14,000. (See
"Long-Term Compensation -- Stock Performance Sharing Plan" for a description of
the Plan.)

Compensation Committee
- ----------------------
Daniel J. Murphy III, Chairman
John H. Larson
George W. Sarney

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PERFORMANCE GRAPH

The following table shows a line graph comparing the yearly percentage
change in the cumulative total return assuming price appreciation and
reinvestment of dividends for the Company's Common Stock, the S&P 500 Index,
which is a broad equity market index, and the Edward Jones Gas Distribution
Index, a published industry index consisting of natural gas distribution
companies weighted by market capitalization which includes the Company.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BAY STATE GAS COMPANY, S&P 500 INDEX AND EDWARD JONES GAS DISTRIBUTION INDEX

9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----

Bay State Gas Company $100 $119 $110 $113 $132 $152
S&P 500 Index $100 $113 $117 $152 $183 $256
Edward Jones Gas Distribution Index $100 $125 $110 $125 $152 $179

E.D. Jones & Co. Gas Distribution Index includes the following companies: AGL
Resources, Atmos Energy, Bay State Gas, Berkshire Gas, Brooklyn Union Gas,
Cascade Natural Gas, Colonial Gas, Connecticut Energy, Corning Natural Gas Corp,
CTG Resources Inc., Delta Natural Gas, Energy West, Energynorth, Essex County
Gas, Fall River Gas Co., Indiana Energy, Laclede Gas, Mobile Gas Service, New
Jersey Resources, North Carolina Natural Gas, Northwest Natural Gas, NUI,
Pacific Enterprises, Pennsylvania Enterprises, Inc., Peoples Energy, Piedmont
Natural Gas, Providence Energy, Pubic Service of NC. Roanoke Gas Co., South
Jersey Industries, Southern Union, United Cities Gas, Washington Energy,
Washington Gas Light, and Yankee Energy System.

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COMPENSATION OF OFFICERS

The following table shows all compensation awarded to, earned by or paid to
the Chief Executive Officer of the Company and each of the other four most
highly compensated executive officers of the Company for services rendered in
all capacities to the Company and its subsidiaries for each of the past three
fiscal years ended September 30, 1995, 1996 and 1997.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
------------------------------------- PAYOUTS
OTHER -------------
ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(A) ($)(B) ($) ($)(C)
- --------------------------------------------------------------------------------------------------

Roger A. Young 1997 332,500 238,855 1,196 -- 21,595(d)
Chairman of the Board & 1996 307,733 98,293 2,259 -- 17,854
Chief Executive Officer 1995 273,099 88,416 770 -- 9,989

Joel L. Singer 1997 236,250 171,120 137 -- 7,584(e)
President & Chief 1996 217,500 73,560 19 -- 1,237
Operating Officer 1995 -- -- -- -- --

Thomas W. Sherman 1997 177,000 76,790 463 -- 12,356(f)
Executive Vice 1996 167,875 32,884 1,004 -- 10,716
President, Treasurer & 1995 161,425 31,663 480 -- 7,047
Chief Financial Officer

William L. Glascock 1997 135,783 78,512 39,327(g) -- 1,404(h)
Senior Vice President 1996 -- -- -- -- --
1995 -- -- -- -- --

James D. Simpson 1997 132,550 50,000 -- -- 7,751(i)
Senior Vice President 1996 119,350 24,605 -- -- 4,281
1995 102,475 18,431 -- -- 3,792

- ---------------

NOTES:

(a) Awards pursuant to the Profit Sharing Plan are shown for the fiscal year
upon which performance was measured. (See "Report of the Compensation
Committee -- Profit Sharing Plan".)

(b) Unless otherwise indicated, "Other Annual Compensation" includes interest in
excess of 120% of the applicable Federal long-term rate ("above-market
interest") on compensation paid or payable during the fiscal year but
deferred at the officer's election pursuant to the Key Employee Deferred
Compensation Plan ("KEDCP").

(c) "All Other Compensation" includes the following: (i) employer matching
contributions under the Company's Employee Savings Plan ("ESP"), (ii)
above-market interest earned during the fiscal year on compensation deferred
prior to the fiscal year pursuant to the KEDCP and (iii) term life insurance
premiums paid by the employer for the benefit of the Named Officers.

(d) Included for Mr. Young is an employer contribution of $4,750 under the ESP
and above-market interest of $16,845.

(e) Indicated for Mr. Singer is a an employer contribution of $6,266 under the
ESP, above-market interest of $26 and a term life insurance premium $1,292.

(f) Included for Mr. Sherman is an employer contribution of $4,066 under the
ESP, above-market interest of $6,307 and a term life insurance premium of
$1,983.

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(g) Included for Mr. Glascock is above-market interest of $52 and a
reimbursement of $39,275 for the payment of taxes as part of a moving
allowance.

(h) Included for Mr. Glascock is a term life insurance premium of $1,404.

(i) Included for Mr. Simpson is an employer contribution of $6,116 under the ESP
and a term life insurance premium of $1,635.

OTHER COMPENSATION ARRANGEMENTS

STOCK OPTIONS

Key Employee Stock Option Plan

In 1989 the Company adopted the Key Employee Stock Option Plan ("KESOP") to
provide for grants of options to key employees to purchase Common Stock of the
Company. The maximum exercise period for any option is ten years. No stock
options were granted to any employee in fiscal 1997 pursuant to the KESOP.

Options granted under the KESOP have been entirely non-qualified stock
options. The option price per share for options granted under the KESOP was
determined at 100% of the fair market value of the closing price for the Common
Stock on the New York Stock Exchange as of the date preceding the date the
option was granted. All options granted under the KESOP are presently
exercisable.

The following table provides information with respect to options to
purchase shares of the Company's Common Stock exercised in fiscal 1997 and the
value of unexercised options granted in prior years under the KESOP to the named
executive officers in the Summary Compensation Table and held by them as of
September 30, 1997. The Company has no compensation plan under which SARs are
granted.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)(B)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($)(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------

Roger A. Young 0 $0 108,000 0 $ 966,000 0
Joel L. Singer 0 0 0 0 0 0
Thomas W. Sherman 0 0 53,000 0 458,500 0
William L. Glascock 0 0 0 0 0 0
James D. Simpson 0 0 4,500 0 32,063 0

- ---------------

NOTES:

(a) Fair market value of the shares acquired on the date of exercise minus the
exercise price of the options.

(b) Represents the difference between the exercise prices of the options and the
closing price of $29.125 for the Company's Common Stock as quoted by the New
York Stock Exchange on September 30, 1997 times the number of options held.

LONG-TERM COMPENSATION

Stock Performance Sharing Plan

The Company has in effect a Stock Performance Sharing Plan (formerly known
as the Key Employee Long-Term Incentive Plan adopted in 1994). The Stock
Performance Sharing Plan provides for the award of performance shares,
exchangeable for shares of the Company's Common Stock in accordance with the
terms of the Stock Performance Sharing Plan, to eligible employees. The Stock
Performance Sharing Plan is

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intended to promote the interests of the Company by providing long-term
performance incentives to certain employees and by increasing the opportunity
for ownership in the Company by those employees who are directly responsible for
the management, growth and success of the Company's business.

Performance shares are awarded under the Stock Performance Sharing Plan
upon the recommendation of the Compensation Committee and approval by the Board
of Directors. Awards may be granted as of October 1 of each year from 1994
through 2003. An employee to whom an award has been made becomes vested and
entitled to payment of all or a portion of the performance shares subject to the
award at the end of the three-year period beginning on the date the award is
granted (the "Performance Period") depending on the Company's total return to
shareholders for the Performance Period. The percentage of the award to which
the employee becomes entitled is determined by the Company's performance in
relation to companies listed in the Edward Jones Gas Distribution Index.
Performance shares will, upon vesting, be exchangeable for (i) a cash payment of
equivalent value on the condition that the employee receiving such cash payment
will immediately invest all of such payment in an equal number of shares of the
Company's Common Stock and (ii) a cash payment equal to the dividends that would
have been paid on such Stock during the Performance Period.

If a "Change of Control" of the Company occurs during a Performance Period,
an employee to whom an award has been made for that Performance Period becomes
vested and entitled to immediate payment of 50% of the performance shares
subject to the award. The term "Change of Control" is defined in substantially
the same manner as in the severance agreements. (See "Severance Agreements"
below.)

The following table provides information with respect to the estimated
range of share payouts under the Stock Performance Sharing Plan for awards of
performance shares granted in fiscal 1997 to the named executive officers in the
Summary Compensation Table.

LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR

ESTIMATED FUTURE PAYOUTS
UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLANS
NUMBER OF PERIOD UNTIL ----------------------------
SHARES MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#)(A) (#)(B) (#)(C)
- ---------------------------------- --------- --------------- --------- ------ -------

Roger A. Young 14,000 10/1/96-9/30/99 3,500 7,000 14,000
Joel L. Singer 7,120 10/1/96-9/30/99 1,780 3,560 7,120
Thomas W. Sherman 4,000 10/1/96-9/30/99 1,000 2,000 4,000
William L. Glascock 4,000 10/1/96-9/30/99 1,000 2,000 4,000
James D. Simpson 4,000 10/1/96-9/30/99 1,000 2,000 4,000

- ---------------

NOTES

(a) Threshold refers to the minimum amount payable for a certain level of
performance (33rd percentile) under the Plan. If performance is below this
minimal level, no award will be paid.

(b) Target refers to the amount payable if the specified performance target is
reached. Pursuant to the Plan, the specified performance target is the 50th
percentile.

For percentiles between those mentioned above, the percentage of an award
to which a participant becomes entitled shall be determined on the basis of
straight-line interpolation between such values.

RETIREMENT PLANS

The Company has in effect a funded, qualified Pension Plan and related
Trust Agreement, which Plan provides retirement benefits for all non-union
employees, including all officers. No amounts were set aside or allocated for
the benefit of any of the named executive officers in the Summary Compensation
Table under

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any pension or retirement plan except for unidentified amounts paid into the
Trust pursuant to the Plan. Directors who are not, or have not been, officers of
the Company or Northern do not participate in the Plan.

The formula for determining annual benefits under the life annuity option
of the Plan is (a) 1.4% of average annual earnings (average annual earnings
during the three consecutive years of employment that are the highest average
earnings) up to the Covered Compensation (thirty-five year average of the Social
Security taxable wage bases ending with the last day of the calendar year in
which the employee attains or will attain Social Security retirement age) amount
for each of the first twenty-five years of benefit service, plus (b) 1.875% of
average annual earnings in excess of the Covered Compensation amount for each of
the first twenty-five years of benefit service, plus (c) .5% of average annual
earnings for benefit service greater than twenty-five years, minus (d) any
affiliated plan benefit. Average annual earnings includes incentive compensation
and overtime pay up to certain limits and 100% of sales commissions. All salary
and Profit Sharing Plan bonuses listed in the Summary Compensation Table are
included in the calculation of average annual earnings for the named executive
officers. The average annual earnings used for computing qualified pensions are
subject to a $160,000 limitation on earnings in 1997. Messrs. Young, Singer,
Sherman, Glascock and Simpson have 29, 2, 31, 1, and 16 credited years of
benefit service, respectively, under the Plan.

In 1986 the Company adopted a Supplemental Executive Retirement Plan
("SERP"), a non-qualified defined benefit plan which provides for supplemental
retirement benefits to certain officers. The Chairman of the Board of Directors,
the President, and Vice Presidents of the Company who are approved for
participation in the SERP by the Compensation Committee are designated as
eligible for benefits under the SERP. The formula for determining annual
benefits under the life annuity option of the SERP is 4% of average annual
earnings (average annual earnings during the three consecutive years of
employment that are the highest average earnings) for each of the first fifteen
years of benefit service minus the benefit payable under any qualified Pension
Plan covering such persons.

The following table sets forth, for various years of service and average
compensation levels, estimated combined annual amounts payable upon retirement
to those executive officers who are participants in both the applicable Pension
Plan and the SERP, assuming continued active service until retirement at age 65
and that the present Pension Plan and the SERP are in effect at such time.

PENSION PLAN TABLE

AVERAGE
ANNUAL 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 35 YEARS OF
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------ ----------- ----------- ----------- ----------- -----------

$125,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000
150,000 90,000 90,000 90,000 90,000 90,000
175,000 105,000 105,000 105,000 105,000 105,000
200,000 120,000 120,000 120,000 120,000 120,000
225,000 135,000 135,000 135,000 135,000 135,000
250,000 150,000 150,000 150,000 150,000 150,000
300,000 180,000 180,000 180,000 180,000 180,000
400,000 240,000 240,000 240,000 240,000 240,000
450,000 270,000 270,000 270,000 270,000 270,000
500,000 300,000 300,000 300,000 300,000 300,000

SEVERANCE AGREEMENTS

The Company has entered into severance agreements with various key
employees, including each of the executive officers of the Company named in the
Summary Compensation Table. The intent of the severance agreements is to assure
continuity in the Company's administration and operations in the event of a
Change in Control (as hereinafter described).

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17

Each severance agreement provides that the employee's stipulated
compensation, benefits, position, responsibilities and other conditions of
employment will not be reduced during the term of the agreement. The term of
each agreement is for either 12, 24 or 36 months, effective upon the date on
which a Change in Control of the Company occurs. Each of the executive officers
named in the Summary Compensation Table is party to a severance agreement having
a term of 36 months. A Change in Control is defined as occurring when (i) any
person, group, corporation, or other entity is the beneficial owner, directly or
indirectly, of 25% or more of the Common Stock of the Company; (ii) any person
other than the Company purchases shares pursuant to a tender offer or exchange
offer to acquire any Common Stock of the Company (or securities convertible into
Common Stock) for cash, securities or any other consideration, provided that
after consummation of the offer, the Person in question is the beneficial owner
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 25% or more of the outstanding Common Stock; (iii) the
shareholders of the Company approve any consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which the shares of Common Stock would be converted into cash, securities or
other property or any sale, lease, exchange or other transfer of all or
substantially all of the Company's assets; or the Company is the continuing or
surviving corporation but in which the common shareholders of the Company
immediately prior to the consolidation or merger do not hold at least a majority
of the outstanding Common Stock of the corporation which owns all of the Common
Stock of the Company; or where, after the merger or consolidation, one Person
owns 100% of the shares of stock of the Company (except where the common holders
of the Company's stock immediately prior to such merger or consolidation own at
least 90% of the outstanding stock of such Person immediately after such merger
or consolidation) or (iv) there is a change in a majority of the members of the
Company's Board of Directors within a 25-month period unless approved by
two-thirds of the Directors then still in office who were in office at the
beginning of the 25-month period. Each agreement further provides that in the
event (i) the employee's employment is terminated by the Company, except for the
employee's acceptance of a position with another company or for cause; or (ii)
the employee terminated employment due to (a) a material change in the
employee's responsibilities, (b) assignment to a location more than 50 miles
from the current place of employment, (c) liquidation, merger, or sale of all or
substantially all of the assets of the Company, unless the successor corporation
has a net worth at least equal to that of the Company, (d) reduction in total
compensation, or (e) any other material breach of the agreement by the Company,
the employee is entitled to a severance benefit. The amount payable to the
employee upon the occurrence of any of the foregoing events is a lump sum cash
amount equal to (i) the present value of either one, two or three years' base
salary and bonus; (ii) the present value of the additional amount the employee
would have received under the Pension Plan, and the SERP if applicable, if the
employee had continued to be employed for such 12, 24 or 36 month period; and
(iii) the present value of contributions that would have been made by the
Company under the ESP and Deferred Compensation Plan if the employee had been
employed for such 12, 24 or 36 month period. Each agreement also provides for
the continuation of all employee benefits for a period of 12, 24 or 36 months.
In addition, for those employees covered by a 36 month agreement, the Company is
required to make an additional payment to the employee sufficient on an
after-tax basis to satisfy any tax liability incurred under the "parachute" tax
rules of the Internal Revenue Code.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

In fiscal 1997 the Company, Northern and Granite retained the legal
services of the firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P., of which Douglas
W. Hawes, a Director of the Company, is a senior partner. The firm of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., has acted as legal counsel for the Company on
various matters for many years and is expected to be retained by the Company in
this capacity in the future.

The Company believes that the transactions described herein have been on
terms representing competitive market prices which are as favorable to the
Company and its subsidiaries as those available from third party entities.

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18

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports with the Securities and
Exchange Commission (the "SEC") reflecting their ownership and changes in
ownership of the Company's Common Stock.

Based on its review of reports of beneficial ownership and changes in
beneficial ownership required under Section 16(a), the Company believes that
during fiscal 1997 all of its directors and executive officers filed all reports
of beneficial ownership and changes in beneficial ownership required under
Section 16(a) on a timely basis.

2. AS TO OTHER MATTERS TO COME BEFORE THE MEETING

The favorable vote of a majority of the shares of Common Stock represented
and voting will be required on any other matters which may come before the
meeting. Management does not intend to bring before the meeting any matters
other than those referred to above and knows of no other matters which may come
before the meeting. If any other matters or motions come before the meeting, it
is the intention of the persons named in the accompanying form of proxy to vote
such proxy in accordance with the conduct of the meeting.

INDEPENDENT AUDITORS

Upon recommendation of the Audit Committee, the Board of Directors has
selected and employed the firm of KPMG Peat Marwick LLP as the Company's
independent certified public accountants to audit its financial statements for
the fiscal year 1998. This will be the fifteenth year in which such firm has
acted in this capacity.

It is anticipated that a representative of KPMG Peat Marwick LLP will be
present at the annual meeting and will be available to respond to appropriate
questions. It is not anticipated that such representative will make a prepared
statement at the meeting; however, he or she will be free to do so if he or she
so chooses.

MISCELLANEOUS

This solicitation is by the Board of Directors of the Company and the
expense of the solicitation will be borne by the Company. Such expense will also
include reimbursement for postage and clerical expenses to brokerage houses and
other custodians, nominees or fiduciaries for forwarding documents to beneficial
owners of stock held in their names. Directors, officers or employees of the
Company may solicit proxies by telephone or in person, the cost of which will be
nominal.

Any proposal submitted by a shareholder of the Company for inclusion in the
proxy material for the 1999 annual meeting must be received by the Company at
its corporate office in Westborough, Massachusetts, not later than 120 days
prior to December 8, 1998.

By Order of the Board of Directors,

ROGER A. YOUNG
Chairman of the Board of Directors

THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE
AT THE ANNUAL MEETING OF COMMON SHAREHOLDERS TO BE HELD JANUARY 22, 1998 A COPY
OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE FISCAL YEAR 1997 UPON WRITTEN REQUEST TO ELIZABETH A. FOLEY, DIRECTOR OF
INVESTOR RELATIONS, BAY STATE GAS COMPANY, 300 FRIBERG PARKWAY, WESTBOROUGH,
MASSACHUSETTS 01581.

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[LOGO]

DETACH HERE BSG F

BAY STATE GAS COMPANY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, revoking all previous proxies, hereby appoints ROGER
A. YOUNG, JOEL L. SINGER and THOMAS W. SHERMAN, and each of them, proxies,
P with power of substitution to each, to vote and act at the annual meeting
of common shareholders of BAY STATE GAS COMPANY to be held at the office of
R the Company, 300 Friberg Parkway, Westborough, Massachusetts, on Thursday,
January 22, 1998, at 10:00 A.M., and at any adjournment thereof, on and
O with respect to the Common Stock of the undersigned, or on and with respect
to which the undersigned is entitled to vote or act.
X
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
Y MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, AND AT ANY ADJOURNMENT
THEREOF.

-----------
SEE REVERSE
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE SIDE
-----------
20

-------------------------------------------------------------
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.

Regardless of whether you plan to attend the Annual Meeting
of Common Shareholders, you can be sure your shares are
represented at the Meeting by promptly returning your proxy
(attached below) in the enclosed envelope. Thank you for your
attention to this important matter.
-------------------------------------------------------------

DETACH HERE BSG F

[X] Please Mark
votes as in
this example.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEM 1.

1. To elect two Directors:
Nominees: Jack E. McGregor,
Joel L. Singer
FOR WITHHELD
[ ] [ ]

[ ]
--------------------------------------
For all nominees except as noted above

MARK HERE FOR COMMENTS AND NOTE ABOVE [ ]

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]

Please sign your name(s) exactly as it appears
hereon. If signing as attorney or for estates,
trusts or corporations, title or capacity should
be indicated. PLEASE RETURN THIS PROXY PROMPTLY.