FROM: ROBERT J. LOPATTO
RELEASE: UPON RECEIPT
PHONE: 717/829-8814

         PG ENERGY INC. (FORMERLY PENNSYLVANIA GAS AND WATER COMPANY)
                TO REPURCHASE ITS DEPOSITARY PREFERRED SHARES
                      AND 4.10% CUMULATIVE PREFERRED STOCK

   WILKES-BARRE,   PA,  March  11,  1996  --  PG  Energy  Inc.,  a  Pennsylvania
corporation (formerly Pennsylvania Gas and Water Company),  announced today that
it has commenced an offer to purchase any and all of its outstanding  Depositary
Preferred Shares,  each representing a one-fourth  interest in a share of its 9%
Cumulative Preferred Stock, at a price of $27.00 per share, net to the seller in
cash, and any and all of its outstanding  shares of 4.10%  Cumulative  Preferred
Stock at a price of $50.00  per  share,  net to the  seller  in cash.  The offer
begins  today,  March 11,  1996,  and is  subject  to the  terms and  conditions
described in the offering materials, which are being mailed to record holders of
shares.

   The offer is one of the recapitalizations being undertaken in connection with
the sale on February 16, 1996, by the Company of its regulated water  operations
and certain  related assets.  The Company  believes that the offer and the other
recapitalizations  will have a positive  effect on the  Company's  financial and
capital  ratios  and credit  rating.  In  addition,  the  repurchases  of shares
pursuant to the offer will adjust the  Company's  capital  structure  to a level
more  appropriate to the size and nature of its operations after the sale of the
water  operations.  Finally,  the offer will  enable  the  Company to reduce its
dividend  requirements  and annual  administrative  expenses in connection  with
servicing  the  accounts  of holders of these  shares.  The offer will afford to
stockholders the opportunity to sell shares without the usual  transaction costs
associated with open-market sales.

   The offer will expire at 5:00 p.m.,  New York City time, on Monday,  April 8,
1996,  unless extended.  The offer is not conditioned upon any minimum number of
shares being tendered.

     The Dealer  Manager for the offer is Legg Mason Wood Walker,  Incorporated.
D.F. King & Co., Inc. is serving as the Information Agent.

   PG Energy  provides  natural gas to  approximately  142,000  customers in ten
counties in northeastern Pennsylvania.