December 1998



   To Our Shareholders:

        We are pleased to inform you that CTG Resources, Inc. has adopted a
   shareholder rights plan.  

        The plan is intended to protect the Company and its shareholders from
   potentially coercive takeover practices or takeover bids which are
   inconsistent with the interests of the Company and its shareholders.  The
   plan is not intended to deter unsolicited offers that would provide superior
   long-term value to all of the Company's shareholders.  The adoption of a
   shareholder rights plan has become common practice in major American
   companies and a well accepted approach to ensuring that all shareholders
   receive a fair price and are treated equally in the event of a takeover.

        This action was taken after careful study and not in response to any
   pending unsolicited attempt to take control of the Company.  Of course, the
   Company from time to time explores possibilities for strategic alliances,
   business combinations or other substantive transactions as part of its
   ongoing assessment of its business and strategies.

        To effect the rights plan, the Board of Directors declared a dividend
   of one share purchase right for each outstanding share of the Company's
   common stock.  The distribution is being made to shareholders of record as
   of the close of business on December 18, 1998.

        Under the plan, the rights will initially trade together with the
   Company's common stock and will not be exercisable.  In the absence of
   further board action, the rights generally will become exercisable and allow
   the holder to acquire the Company's common stock at a discounted price if
   any person or group acquires 10 percent or more of the Company's common
   stock.  Rights held by persons who exceed the applicable threshold will be
   void.  In certain circumstances, the rights will entitle the holder to buy
   shares in an acquiring entity at a discounted price.

        The plan also includes an exchange option.  In general, after the
   rights become exercisable, the Board of Directors may, at its option, effect
   an exchange of part or all of the rights (other than rights that have become
   void) for shares of the Company's common stock.  Under this option, the
   Company would issue one share of common stock for each right, subject to
   adjustment in certain circumstances.

        The Company's Board of Directors may, at its option, redeem all rights
   for $.01 per right, generally at any time prior to the rights becoming
   exercisable.  The rights will expire on December 18, 2008, unless earlier
   redeemed, exchanged or amended by the Board of Directors.









        The issuance of the rights is not a taxable event, will not affect the
   Company's reported financial condition or results of operations (including
   earnings per share), will not interfere with the Company's operating,
   financing or investing activities and will not change the way in which the
   Company's common stock is currently traded.

        A summary of the shareholder rights plan (which explains the terms and
   nature of the rights) is enclosed.  Shareholders are urged to review the
   summary carefully and retain it with their permanent records.

        In adopting the shareholder rights plan, the Board has expressed its
   confidence in the Company's future and its determination that you, our
   shareholders, be given every opportunity to participate fully in that
   future.

   On Behalf of the Board of Directors,



   Victor H. Frauenhofer
   Chairman of the Board