PG ENERGY INC.
                        NOTICE OF GUARANTEED DELIVERY
                OF SHARES OF 4.10% CUMULATIVE PREFERRED STOCK

   This form, or a form  substantially  equivalent to this form, must be used to
accept  the Offer (as  defined  below) if  certificates  for the shares of 4.10%
Cumulative Preferred Stock of PG Energy Inc., formerly known as Pennsylvania Gas
and  Water  Company,  are  not  immediately  available,  if  the  procedure  for
book-entry  transfer  cannot be completed on a timely basis, or if time will not
permit all other documents required by the Letter of Transmittal to be delivered
to the Depositary on or prior to the Expiration Date (as defined in Section 5 of
the Offer to Purchase  defined  below).  Such form may be  delivered  by hand or
transmitted  by  mail,  or  (for  Eligible   Institutions   only)  by  facsimile
transmission,  to the  Depositary.  See Section 6 of the Offer to Purchase.  The
Eligible Institution,  which completes this form, must communicate the guarantee
to the Depositary and must deliver the Letter of  Transmittal  and  certificates
for shares to the  Depositary  within the time  shown  herein.  Failure to do so
could result in a financial loss to such Eligible Institution.

         TO: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY





                                                             
By Mail:                       By Facsimile Transmission:          By Hand or Overnight Courier:
Reorganization Department      (For Eligible Institutions Only)    Reorganization Department
P.O. Box 837                   (201) 296-4293                      120 Broadway
Midtown Station                To Confirm Receipt of Facsimile:    13th Floor
New York, NY 10018             (201) 296-4100                      New York, NY 10271



DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

   This form is not to be used to  guarantee  signatures.  If a  signature  on a
Letter of  Transmittal  is required to be guaranteed by an Eligible  Institution
under the  instructions  thereto,  such  signature  guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.





Ladies and Gentlemen:

   The undersigned hereby tenders to PG Energy Inc., a Pennsylvania  corporation
formerly known as Pennsylvania Gas and Water Company (the  "Company"),  upon the
terms and subject to the  conditions  set forth in the Offer to Purchase,  dated
March 11, 1996 (the "Offer to Purchase"),  and the related Letter of Transmittal
(which   together   constitute   the  "Offer"),   receipt  of  which  is  hereby
acknowledged,  the number of shares of 4.10%  Cumulative  Preferred  Stock,  par
value $100.00 per share,  voluntary  liquidation  preference  $105.50 per share,
involuntary  liquidation  preference  $100.00 per share (the  "Shares"),  of the
Company listed below, pursuant to the guaranteed delivery procedure set forth in
Section 6 of the Offer to Purchase.


Number of Shares:

__________________________________         _____________________________________
Certificates Nos.: (if available)                        Signature(s)


__________________________________         _____________________________________
                                                   Name(s) (Please Print)

__________________________________         _____________________________________
If Shares will be tendered by                           Address
book-entry transfer:
Name of Tendering Institution:


__________________________________         _____________________________________


Account No._______  at (check one)         _____________________________________
                                               Area Code and Telephone Number

[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
                                
                           
                                


                                  GUARANTEE
                   (NOT TO BE USED FOR SIGNATURE GUARANTEE)


The  undersigned,  a firm that is a member of a registered  national  securities
exchange or the National Association of Securities Dealers, Inc. or a commercial
bank or trust company  having an office or  correspondent  in the United States,
guarantees  (a) that the  above-named  person(s)  has a net long position in the
Shares being  tendered  within the meaning of Rule 14e-4  promulgated  under the
Securities  Exchange  Act of 1934,  as  amended,  (b) that such tender of Shares
complies  with  Rule  14e-4 and (c)  delivery  to the  Depositary  at one of its
addresses set forth above  certificate(s)  for the Shares  tendered  hereby,  in
proper form for transfer,  or a confirmation  of the book-entry  transfer of the
Shares tendered  hereby into the  Depositary's  account at The Depository  Trust
Company or the Philadelphia Depository Trust Company, in each case together with
a properly completed and duly executed Letter(s) of Transmittal (or facsimile(s)
thereof),  with any  required  signature  guarantee(s)  and any  other  required
documents, all within three business days after the date hereof.



__________________________________         _____________________________________
           Name of Firm                            Authorized Signature

__________________________________         _____________________________________
           Address                                        Name

__________________________________         _____________________________________
    City, State, Zip Code                                Title

__________________________________
  Area Code and Telephone Number



Dated: _____________________, 1996



                DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
                  YOUR STOCK CERTIFICATES MUST BE SENT WITH
                          THE LETTER OF TRANSMITTAL.