CONNECTICUT ENERGY CORP, 10-Q, 1995-05-12

CONNECTICUT ENERGY CORP
10-Q, 1995-05-12
NATURAL GAS DISTRIBUTION

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-8369

CONNECTICUT ENERGY CORPORATION
(Exact name of registrant as specified in its charter)

Connecticut 06-0869582
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

855 Main Street
Bridgeport, Connecticut 06604
(Address of principal executive offices) (Zip Code)

(203) 579-1732
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class Outstanding at May 3, 1995
----- --------------------------
Common Stock, $1 par value 8,796,070

<TABLE>
PART 1. FINANCIAL INFORMATION
CONNECTICUT ENERGY CORPORATION

ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share)
(Unaudited)

<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
--------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues..................... $ 103,284 $ 111,838 $ 168,807 $ 178,552 $ 231,128 $ 235,538
Purchased gas.......................... 49,998 61,348 83,275 97,955 112,190 126,608
--------- --------- --------- --------- --------- ---------
Gross margin........................... 53,286 50,490 85,532 80,597 118,938 108,930

Operating Expenses:
Operations........................... 14,777 14,965 27,914 26,325 51,798 45,461
Maintenance.......................... 1,020 1,357 1,996 2,220 3,811 4,025
Depreciation and depletion........... 3,473 3,269 6,949 6,477 13,503 12,515
Federal and state income taxes....... 8,981 7,507 11,911 10,188 7,125 5,808
Municipal, gross earnings and
other taxes........................ 6,047 6,662 9,702 10,585 15,431 16,659
--------- --------- --------- --------- --------- ---------
Total operating expenses............... 34,298 33,760 58,472 55,795 91,668 84,468
--------- --------- --------- --------- --------- ---------
Operating income....................... 18,988 16,730 27,060 24,802 27,270 24,462

Other deductions, net.................. 165 15 320 247 659 486
Interest Expense and Preferred Stock
Dividends:
Interest on long-term debt and
amortization of debt issue costs... 2,716 2,733 5,432 5,464 10,888 10,564
Other interest and preferred stock
dividends, net..................... 392 229 652 340 975 1,156
--------- --------- --------- --------- --------- ---------
Total interest expense and preferred
stock dividends...................... 3,108 2,962 6,084 5,804 11,863 11,720
--------- --------- --------- --------- --------- ---------
Net Income............................. $ 15,715 $ 13,753 $ 20,656 $ 18,751 $ 14,748 $ 12,256
========= ========= ========= ========= ========= =========
Net income per share................... $ 1.79 $ 1.77 $ 2.37 $ 2.45 $ 1.70 $ 1.63
========= ========= ========= ========= ========= =========
Dividends paid per share............... $ 0.325 $ 0.32 $ 0.65 $ 0.64 $ 1.30 $ 1.28
--------- --------- --------- --------- --------- ---------
Weighted average number of common
shares outstanding during period..... 8,755,722 7,781,564 8,732,151 7,638,322 8,679,436 7,535,421
--------- --------- --------- --------- --------- ---------

See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>

CONNECTICUT ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
Mar. 31, Sept. 30, Mar. 31,
1995 1994 1995
----------- ----------- -----------
(Unaudited) (Unaudited)
Assets
- ------
<S> <C> <C> <C>
Utility Plant:

Gross utility plant.............................................................. $344,851 $331,953 $323,799
Less--accumulated depreciation................................................... 102,317 97,458 97,251
-------- -------- --------
Net utility plant.............................................................. 242,534 234,495 226,548
Nonutility property, net......................................................... 2,492 2,492 9
-------- -------- --------
Net utility plant and other property............................................... 245,026 236,987 226,557
-------- -------- --------
Current Assets:
Cash and cash equivalents........................................................ 3,968 1,637 5,061
-------- -------- --------
Accounts receivable.............................................................. 57,799 27,445 64,397
Less--allowance for doubtful accounts............................................ 3,818 3,747 4,520
-------- -------- --------
Net accounts receivable............................................................ 53,981 23,698 59,877
-------- -------- --------
Accrued utility revenues, net.................................................... 7,519 2,630 6,822
Unrecovered purchased gas costs.................................................. --- 4,523 ---
Inventories...................................................................... 9,255 14,678 8,678
Prepaid expenses................................................................. 1,394 1,847 1,132
-------- -------- --------
Total current assets............................................................... 76,117 49,013 81,570
-------- -------- --------
Deferred Charges:
Unamortized debt expenses........................................................ 6,202 6,317 6,437
Unrecovered deferred taxes....................................................... 37,222 35,398 32,702
Other............................................................................ 24,351 25,205 25,955
-------- -------- --------
Total deferred charges............................................................. 67,775 66,920 65,094
-------- -------- --------
Total assets....................................................................... $388,918 $352,920 $373,221
======== ======== ========

See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONNECTICUT ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

<CAPTION>
Mar. 31, Sept. 30, Mar. 31,
1995 1994 1994
----------- ----------- -----------
(Unaudited) (Unaudited)
Capitalization and Liabilities
- ------------------------------
<S> <C> <C> <C>
Common Shareholders' Equity:

Common Stock--par value $1 per share: authorized--20,000,000 shares, issued and
outstanding--8,791,211 shares; 8,700,266 shares; 8,573,048 shares.............. $ 8,791 $ 8,700 $ 8,573
Capital in excess of par value................................................... 86,938 85,265 82,965
Retained earnings................................................................ 46,730 31,754 43,279
Adjustment for minimum pension liability......................................... --- --- (108)
-------- -------- --------
Total common shareholders' equity.................................................. 142,459 125,719 134,709
-------- -------- --------
Preferred Stock:
The Southern Connecticut Gas Company Redeemable Preferred Stock: authorized--
200,000 shares, par value $100 per share 4.75% cumulative series, none issued
authorized--600,000 shares, par value $1 per share, none issued................ --- --- ---
Preference Stock:
The Southern Connecticut Gas Company: authorized--1,000,000 shares, par value
$1 per share, none issued
Connecticut Energy Corporation: authorized--1,000,000 shares, par value $1 per
share, none issued
Preferred stock expense............................................................ --- --- ---
-------- -------- --------
Total preferred stock.............................................................. --- --- ---
-------- -------- --------
Long-term debt..................................................................... 119,776 119,917 120,371
-------- -------- --------
Total capitalization.............................................................. 262,235 245,636 255,080
-------- -------- --------
Current Liabilities:
Short-term borrowings............................................................ 14,000 18,800 9,100
Current maturities of long-term debt............................................. 594 594 595
Accounts payable................................................................ 12,417 10,886 15,930
Refunds due customers............................................................ --- --- 128
Federal, state and deferred income taxes......................................... 13,021 3,565 13,382
Property and other accrued taxes................................................. 8,754 5,289 9,567
Interest payable................................................................. 3,294 3,315 3,353
Customer deposits................................................................ 2,219 1,901 2,348
Refundable purchased gas costs................................................... 6,794 --- 2,495
Other accrued liabilities........................................................ 2,887 4,137 2,748
-------- -------- --------
Total current liabilities.......................................................... 63,980 48,487 59,646
-------- -------- --------
Deferred Credits:
Deferred income taxes and investment tax credits................................. 57,864 54,974 51,216
Other............................................................................ 4,839 3,823 7,279
-------- -------- --------
Total capitalization and liabilities............................................... $388,918 $352,920 $373,221
======== ======== ========

See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>

CONNECTICUT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

<CAPTION>
Six Months Ended Twelve Months Ended
Mar. 31, Mar. 31,
------------------ -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net cash provided by operating activities: $26,567 $13,350 $33,026 $15,879
------- ------- ------- -------
Cash flows from investing activities:
Capital expenditures................................ (15,111) (11,073) (30,685) (24,309)
Proceeds from sale of subsidiaries.................. 3 --- 9 ---
Contributions in aid of construction................ 16 24 43 86
Payments for retirement of utility plant............ (237) (381) (635) (652)
Other............................................... (50) --- (50) ---
------- ------- ------- -------
Net cash used by investing activities................. (15,379) (11,430) (31,318) (24,875)
------- ------- ------- -------
Cash flows from financing activities:
Dividends paid on common stock...................... (5,680) (5,137) (11,297) (9,900)
Issuance of common stock............................ 1,764 21,242 4,191 23,459
Issuance of long-term debt.......................... --- --- --- 12,000
Repayments of long-term debt........................ (141) (140) (595) (594)
Early redemption of preferred stock................. --- (638) --- (638)
(Decrease) increase in short-term borrowings........ (4,800) (14,400) 4,900 (15,800)
------- ------- ------- -------
Net cash (used by) provided by financing activities... (8,857) 927 (2,801) 8,527
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents.. 2,331 2,847 (1 093) (469)
Cash and cash equivalents at beginning of period...... 1,637 2,214 5,061 5,530
------- ------- ------- -------
Cash and cash equivalents at end of period............ $ 3,968 $ 5,061 $ 3,968 $ 5,061
======= ======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................ $ 6,023 $ 5,710 $11,645 $11,428
Income taxes........................................ $ 2,176 $ 226 $ 6,201 $ 1,650

See Notes to Consolidated Financial Statements.
</TABLE>

CONNECTICUT ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The unaudited consolidated financial statements presented
herein should be read in conjunction with the consolidated
financial statements of Connecticut Energy Corporation ("Company")
for the fiscal year ended September 30, 1994 as presented in the
Annual Report on Form 10-K . In the opinion of management, the
accompanying financial information reflects all adjustments which
are necessary to provide a fair presentation of the interim periods
shown. All such adjustments are of a normal recurring nature.

2. Because sales of gas for space heating purposes by the
registrant's principal subsidiary, The Southern Connecticut Gas
Company ("Southern"), are dependent upon weather conditions and
typically are greater during the winter months, the results of
operations for the six months ended March 31, 1995 are not
indicative of the results to be expected for the full fiscal year.

3. Included in other deferred charges are amounts related to
the deferral of certain hardship heating customer accounts
receivable arrearages totalling $8,428,000, $10,211,000 and
$6,553,000 at March 31, 1995, September 30, 1994 and March 31,
1994, respectively; the deferral of certain shortfalls in energy
assistance funding related to the 1991/92 and 1992/93 heating
seasons amounting to $2,309,000, $2,742,000 and $2,945,000 at March
31, 1995, September 30, 1994 and March 31, 1994, respectively;
prepaid pension contributions of $7,599,000, $6,355,000 and
$6,355,000 at March 31, 1995, September 30, 1994, and March 31,
1994, respectively, and an intangible pension asset of $101,000,
$101,000 and $3,652,000 at March 31, 1995, September 30, 1994 and
March 31, 1994, respectively.

4. Included in other deferred credits are amounts related to
a minimum pension liability totalling $101,000, $101,000 and
$3,816,000 at March 31, 1995, September 30, 1994 and December 31,
1994, respectively.

5. Southern has identified coal tar residue at three sites
in Connecticut. This residue results from historic coal
gasification operations conducted at those sites by Southern's
predecessors from the late 1800s through the first part of this
century. Many gas distribution companies throughout the country
carried on such gas manufacturing operations during the same
period. See section entitled "Environmental Matters" on page 16
for further detail.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Net Income
- ----------

Connecticut Energy Corporation's ("Company") consolidated net
income for the three, six and twelve months ended March 31, 1995 and
1994 is detailed below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------ ---------------- -------------------
(in thousands, except 1995 1994 1995 1994 1995 1994
per share) ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Income $15,715 $13,753 $20,656 $18,751 $14,748 $12,256
======= ======= ======= ======= ======= =======
Net Income Per Share $ 1.79 $ 1.77 $ 2.37 $ 2.45 $ 1.70 $ 1.63
Weighted Average ======= ======= ======= ======= ======= =======
Shares Outstanding 8,756 7,782 8,732 7,638 8,679 7,535
------- ------- ------- ------- ------- -------
</TABLE>

Factors affecting the increase to net income for the three
month period ended March 31, 1995 were additional interruptible
margins earned and retained by the Company's wholly-owned
subsidiary, The Southern Connecticut Gas Company ("Southern"),
primarily due to Southern's ability to serve interruptible customers
throughout the winter because of the combination of warm weather and
competitive natural gas prices; lower operating expenses primarily
in the area of labor costs due to less overtime payments because of
the warmer winter weather; and lower gross revenue taxes due to
lower revenues. Partially offsetting these decreases were higher
operating expenses in the areas of uncollectibles and insurance and
increased income taxes due to the combination of higher pre-tax
income and a higher effective tax rate.

For the six month period ended March 31, 1995, higher margins
were principally attributed to the ability to retain additional
interruptible margins earned for reasons previously mentioned, a
6.6% rate increase implemented by Southern on December 9, 1993, and
the continued conversion of existing non-heating customers to
heating customers. Lower gross revenue taxes due to lower revenues
combined with lower property taxes partially offset the higher
provision for income taxes resulting from a combination of higher
pre-tax income and a higher effective tax rate.

Margins for the twelve months ended March 31, 1995 were also
positively affected by the rate increase implemented by Southern,
retention of increased margins on interruptible services and the
conversion of non-heating customers to heating customers. Partially
offsetting these increases were higher operating expenses
predominantly in the areas of uncollectibles, rent and employee
benefit costs principally due to the adoption of Statement of
Financial Accounting Standards No. 106 ("SFAS 106") as well as
higher depreciation expense.

Operating Revenues
- ------------------

The Company's operating revenues for the three and six months
ended March 31, 1995 decreased approximately 8% and 5% when compared
to the corresponding periods ended March 31, 1994. These decreases
were attributed to lower collections through the operation of
Southern's Purchased Gas Adjustment Clause ("PGA") and weather that
was approximately 10% and 11% warmer than normal during the three
and six months ended March 31, 1995. Partially offsetting these
decreases were increases in operating revenues due to the collection
of approximately $4,009,000 and $6,198,000 for the three and six
months ended March 31, 1995 from firm customers through the Weather
Normalization Adjustment Clause ("WNA"). For the three months ended
December 31, 1993, the weather was approximately 2% colder than
normal which positively affected operating revenues for that period
since the WNA was not in effect.

For the twelve months ended March 31, 1995, operating revenues
were approximately 2% lower when compared with the corresponding
1994 period. The decrease can be principally attributed to the
lower collections through the operation of the PGA. For the twelve
months ended March 31, 1995, Southern collected approximately
$7,041,000 through the operation of the WNA but refunded
approximately $3,600,000 for the comparable 1994 period.

Total Sales and Transportation Volumes
- --------------------------------------

Southern's total volumes of gas sold and transported for the
three months ended March 31, 1995 was 17,151 MMcf, which represents
a 31% increase over the comparable 1994 period. This increase was
primarily attributable to volumes of gas transported in accordance
with a special contract for The Connecticut Light and Power
Company's ("CL&P") Devon generating station ("Devon Station") which
began in July 1994 as well as Southern's ability to sell gas off-
system in accordance with the Department of Public Utility Control's
("DPUC") decision regarding the implementation of Federal Energy
Regulatory Commission ("FERC") Order No. 636. For the six and
twelve months ended March 31, 1995, Southern's total volumes of gas
sold and transported of 29,813 MMcf and 41,392 MMcf were
approximately 38% and 39% higher, respectively, than the comparable
1994 periods principally due to higher transportation volumes to
CL&P's Devon Station and off-system sales volumes.

Firm Sales Volumes
- ------------------

Firm sales volumes sold by Southern for the three, six and
twelve months ended March 31, 1995 decreased approximately 14%, 15%
and 14%, respectively, as compared to the corresponding 1994
periods. This decrease was principally due to weather that was
approximately 18%, 17% and 15% warmer during the three, six and
twelve months ended March 31, 1995, respectively, as compared to the
corresponding 1994 periods.

Interruptible Sales and Transportation Volumes
- ----------------------------------------------

The chart below depicts total volumes of gas both sold to and
transported for interruptible customers, off-system sales volumes
and transportation volumes under special contract by Southern, as
well as gross margins earned and retained due to the margin sharing
mechanism on these services:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------ ---------------- -------------------
(in thousands) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross margin earned $4,114 $1,813 $ 7,066 $3,275 $11,212 $6,077
====== ====== ======= ====== ======= ======
Gross margin retained $4,103 $1,727 $ 4,819 $2,146 $ 8,019 $4,569
====== ====== ======= ====== ======= ======
Volumes sold and
transported (MMcf) 7,552 1,960 14,545 3,652 21,403 6,524
------ ------ ------- ------ ------- ------
</TABLE>

Margins earned on volumes delivered to interruptible customers
vary depending upon the relationship of the market price for
alternate fuels to the cost of natural gas and related
transportation. Additionally, margins earned, net of gross earnings
tax, from interruptible service in excess of an annual target are
allocated through a margin sharing mechanism between firm customers
and Southern. Margins earned and retained by Southern were higher
for the three and six months ended March 31, 1995 as compared with
the corresponding 1994 periods principally due to higher levels of
interruptible sales and higher per unit margins earned on those
sales. Southern's ability to sell and transport gas off-system
pursuant to the DPUC'S decision regarding the implementation of FERC
Order No. 636 also contributed to increased margins. The increase
in margins retained for the twelve months ended March 31, 1995 when
compared to the corresponding 1994 period is principally
attributable to the increased level of interruptible services
experienced during the period, the change in the margin sharing
year, an increase in the target margin level from $2,000,000 to
$4,000,000 in accordance with the DPUC's decision in Southern's
latest rate case and Southern's ability to sell and transport off-
system gas.

Purchased Gas Expense
- ---------------------

Purchased gas expense for the three, six and twelve months
ended March 31, 1995 decreased approximately 19%, 15% and 11%,
respectively, when compared to the corresponding 1994 periods
primarily due to lower firm sales volumes during the 1995 periods.
This decrease would have been greater but for the suspension of the
flow-through of approximately $3,704,000, $8,678,000 and $12,726,000
in interstate pipeline refunds to Southern's customers relating to
the recovery of previously deferred transition costs associated with
FERC Order 636 implementation by interstate pipelines serving
Southern for the three, six and twelve months ended March 31, 1995,
respectively.

Operations Expense
- ------------------

Operations expense for the six and twelve months ended March
31, 1995 increased approximately 6% and 14%, respectively, when
compared to the corresponding 1994 periods.

For the six months ended March 31, 1995, a higher expense for
uncollectible accounts was partially offset by lower expenses in the
areas of labor, conservation and insurance. For the twelve months
ended March 31, 1995, approximately 60% of the increase in
operations expense was the result of a higher expense for
uncollectibles. The remainder of the increase in operations expense
for the twelve months ended March 31, 1995 was due to higher
employee benefit costs relating to the adoption and the current
recovery of postretirement health care expenses as well as increases
in other operations expenses such as rent, pension costs and other
general and administrative expenses.

In December 1992, the DPUC allowed Southern to defer certain
shortfalls in energy assistance funding from various state and
federal agencies related to the 1991/92 and 1992/93 heating seasons.
The DPUC's action positively impacted Southern's provision for
uncollectible accounts for the fiscal year ended September 30, 1993.
Southern has been allowed to recover these costs as well as deferred
costs associated with Southern's certified hardship forgiveness
program beginning January 1, 1994 in accordance with the DPUC's
latest rate decision. Accordingly, included in operations expense
for the three, six and twelve months ended March 31, 1995, were
approximately $1,371,000, $2,047,000 and $3,027,000, respectively,
relating to these amortizations as compared to $747,000 for the
comparable 1994 periods.

Maintenance Expense
- -------------------

Maintenance expense for the three, six and twelve months ended
March 31, 1995 decreased approximately 25%, 10% and 5%,
respectively, as compared to the same 1994 periods. These decreases
were primarily attributable to lower labor and material costs
associated with Southern's mains due to a lower level of maintenance
activity resulting from the warmer weather experienced during the
1994/95 winter.

Depreciation and Depletion
- --------------------------

Depreciation expense for the three, six and twelve months ended
March 31, 1995 increased approximately 6%, 7% and 8%, respectively,
as compared to the corresponding 1994 periods primarily due to
additions to plant in service by Southern.

Federal and State Income Taxes
- ------------------------------

The total provision for federal and state income taxes for the
three, six and twelve months ended March 31, 1995 increased
approximately 20%, 17% and 23%, respectively, when compared to the
corresponding 1994 periods. These increases were primarily due to
higher pre-tax income, coupled with a higher effective tax rate, for
all 1995 periods due to the flow-through tax effect of the
amortization of previously deferred costs.

Municipal, Gross Earnings and Other Taxes
- -----------------------------------------

Municipal, gross earnings and other taxes decreased for the
three, six and twelve months ended March 31, 1995 approximately 9%,
8% and 7%, respectively, when compared to the corresponding 1994
periods. The decreases were primarily due to lower provisions for
gross earnings taxes because of lower revenues as well as lower
provisions for property taxes.

Interest Expense and Preferred Stock Dividends
- ----------------------------------------------

Total interest expense and preferred stock dividends increased
approximately 5% for the three and six months ended March 31, 1995
as compared to the corresponding 1994 periods. This increase was
primarily due to lower amounts of interest income relating to the
deferral and current recovery of transition costs arising from the
implementation of FERC Order No. 636 by interstate pipelines in
addition to higher short-term interest costs due to higher average
interest rates during the 1995 periods. Partially offsetting the
increase were lower interest costs related to interstate pipeline
refunds.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities
- --------------------

The seasonal nature of Southern's business creates large short-
term cash demands primarily to finance gas purchases, customer
accounts receivable and certain tax payments. To provide these
funds, as well as funds for its capital expenditure program and
other corporate purposes, Southern has committed lines of credit
with a number of banks totalling $30,000,000 and uncommitted lines
of credit with two of its banks totalling $14,000,000, in addition
to a revolving credit line agreement for up to $20,000,000 with one
of its banks. This latter agreement has a revolving credit feature
through December 21, 1996, followed by a term loan period through
December 21, 2000. At March 31, 1995, Southern had unused lines of
credit of $50,000,000. Because of the availability of short-term
credit and the ability to issue long-term debt and additional
equity, management believes it has adequate financial flexibility to
meet its anticipated cash needs.

Operating cash flows for the six months ended March 31, 1995
were positively affected by higher net income, the receipt of
approximately $8,678,000 in interstate pipeline refunds utilized to
offset previously deferred transition costs and a higher refundable
purchased gas cost balance. Operating cash flows for the six months
ended March 31, 1995 as compared to the six months ended March 31,
1994 were also positively affected by a lower accounts receivable
balance.

Operating cash flows for the twelve months ended March 31, 1995
were positively affected by higher net income and the receipt of
approximately $12,726,000 in interstate pipeline refunds used to
offset previously deferred transition costs. Operating cash flows
for the twelve months ended March 31, 1995 as compared to the twelve
months ended March 31, 1994 were positively affected by a higher
refundable purchased gas cost balance.

Investing Activities
- --------------------

Capital expenditures approximated $15,095,000 and $11,049,000
for the six months ended March 31, 1995 and 1994, respectively, and
$30,642,000 and $24,223,000 for the twelve months ended March 31,
1995 and 1994, respectively. On an annual basis, Southern relies
upon cash flows from operating activities to fund a portion of these
expenditures, with the remainder funded by short-term borrowings
and, at some later date, long-term debt and capital stock
financings.

FERC Order No. 636 Transition Costs
- -----------------------------------

As a result of FERC Order No. 636, costs are being incurred by
Southern's interstate pipeline suppliers to convert existing
"bundled" sales services to "unbundled" transportation and storage
services. These transition costs include: (1) unrecovered gas
costs, (2) gas supply realignment costs, (3) stranded investment
costs and (4) new facilities costs.

As of March 31, 1995, Southern has paid approximately
$16,250,000 in transition costs which represents Southern's total
expected obligation for transition costs. Of the amount paid,
$4,468,000 represents unrecovered gas costs and $11,782,000
represents gas supply realignment costs and stranded investment
costs. On July 8, 1994, the DPUC issued a Decision regarding
implementation of FERC Order No. 636 by the Connecticut local gas
distribution companies. The DPUC prescribed, among other things,
various mechanisms for the recovery of deferred transition costs.
As of March 31, 1995, Southern has recovered all of its deferred
transition costs through the use of the recovery mechanisms allowed
by the DPUC.

Environmental Matters
- ---------------------

Southern has identified coal tar residue at three sites in
Connecticut resulting from coal gasification operations conducted at
those sites by Southern's predecessors from the late 1800s through
the first part of this century. Many gas distribution companies
throughout the country carried on such gas manufacturing operations
during the same period. The coal tar discovered at Southern's three
sites is not designated a hazardous material by any federal or
Connecticut agency, but some of its constituents are classified as
hazardous.

On April 27, 1992, Southern notified the Connecticut Department
of Environmental Protection ("DEP") and the United States
Environmental Protection Agency of the presence of coal tar residue
on the three sites. On November 9, 1994, the DEP informed Southern
that it had performed a preliminary review of the information
provided to it by Southern and had determined that, based on current
priorities and limited staff resources, a comprehensive review of
site conditions and subsequent participation by the DEP "are not
possible at this time". Until the DEP conducts a comprehensive
review, no discussions with it addressing the extent, timing and
type of remedial action, if any, can occur.

Given the DEP's response, management cannot at this time
predict the costs of any future site analysis and remediation, if
any, nor can it estimate when any such costs, if any, would be
incurred. While such future analytical and cleanup costs could
possibly be significant, management believes, based upon the
provisions of the Partial Settlement in Southern's last rate order,
that Southern will be able to recover these costs through its
customer rates. Although the method, timing and extent of any
recovery remain uncertain, management currently does not expect that
the incurrence of such costs will materially adversely impact the
Company's financial condition or results of operations.<PAGE>

PART II- OTHER INFORMATION

Items 1, 2, 3 and 5 are inapplicable.

Item 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------

(a) The annual meeting of the registrant was held
on January 31, 1995.

(b) Election of Directors:

Non-
For Against Abstain Vote
--- ------- ------- ----
Henry Chauncey, Jr. 7,064,384 111,356 0 0
Richard M. Hoyt 7,064,982 110,758 0 0
Christopher D. Turner 7,073,097 102,643 0 0

(c) Election to employ the firm of Coopers &
Lybrand L.L.P. as the independent accountants
to audit the books and affairs of the
registrant and its subsidiaries for the 1995
fiscal year:
Non-
For Against Abstain Vote
--- ------- ------- ----
Coopers & Lybrand L.L.P. 7,053,465 34,788 87,487 0

Item 6. Exhibits and Reports on Form 8-K
--------------------------------

(a) Exhibits:

Exhibit 4(a) - The Amended and Restated By-Laws of
Connecticut Energy Corporation.

Exhibit 4(b) - The Amended and Restated By-Laws of The
Southern Connecticut Gas Company.

Exhibit 27 - Financial Data Schedule
Submitted only in electronic format to the
Securities and Exchange Commission.

(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during
the quarter.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

CONNECTICUT ENERGY CORPORATION
(Registrant)

DATE: May 11, 1995 /s/ Vincent L. Ammann, Jr.
------------ ---------------------------
Vincent L. Ammann, Jr.
Vice President and
Chief Accounting Officer

Effective as of 04/25/95
------------------------

CONNECTICUT ENERGY CORPORATION (a)

AMENDED and RESTATED BY-LAWS

ARTICLE 1.
Meetings of Shareholders.

SECTION 1. Annual Meeting. The annual meeting of the
shareholders of the Corporation for the election of Directors and
the transaction of any other proper business shall be held on the
last Tuesday of January in each year, if not a legal holiday, and,
if a legal holiday, then on the next succeeding business day. The
annual meeting of the shareholders of the Corporation shall be held
within the franchise area of the Company or as designated by the
Board of Directors.

SECTION 2. Special Meeting. Special meetings of the
shareholders may be called at any time by the Chairman of the Board
of Directors, the President or by the Board of Directors and shall
be held within the Cities of Bridgeport or New Haven or within the
franchise area of the Company, as designated in the call for the
meeting.

SECTION 3. Notice of Meeting. A notice in writing of each
meeting of the shareholders, stating the place, day and hour
thereof, and -- when such meeting is a special meeting -- the
general purpose or purposes for which it is called, shall be given
by the Secretary or an Assistant Secretary or the officer or person
calling the meeting to each shareholder, by leaving such notice
with him or at his residence or usual place of abode, or by mailing
a copy thereof addressed to him at his last known post office
address as last shown on the stock records of the Company, postage
prepaid. Such notice shall be given, in the case of an annual
meeting of shareholders, not less than seven days nor more than
fifty days before the date of the meeting and, in the case of a
special meeting, shall be given at least thirty days before the
date of the meeting, unless the Board of Directors, acting by a
majority of the directors then in office, shall determine
otherwise. No business shall be transacted at any special meeting
of shareholders which was not specified in the notice thereof.

SECTION 4. Prescribing the date on which shareholders of
record shall be entitled to notice and to vote. The Board of
Directors of the Corporation, prior to each annual or special
meeting of the shareholders of the Corporation, may by resolution
fix a date not more than seventy days and not less than ten full
days prior to the date of such meeting as of which shareholders of
record shall be entitled to notice of such meeting and to vote
thereat, and only shareholders of record as of said date shall be
entitled to notice of such meeting and to vote thereat.

SECTION 5. Voting. At each meeting of shareholders, each
shareholder then entitled to vote may vote in person or by proxy,
and shall, unless otherwise provided in the Certificate of
Incorporation, have one vote for each share of stock registered in
such shareholder's name on the record date fixed by the Board of
Directors.

SECTION 6. Rules of Order. At each meeting of shareholders,
the time and manner of discussions shall be as set forth in the
applicable provisions of Roberts Rules of Order.

ARTICLE 2.
Directors.

SECTION 1. Number and Election. The business, property and
affairs of the Corporation shall be managed by, or under the
direction of, its Board of Directors. The number of directors of
the Corporation (exclusive of directors (the "Preference Stock
Directors") who may be elected by a separate vote of the holders of
then outstanding shares of any class or series of Preference Stock)
shall be ten. The Board of Directors (exclusive of Preference
Stock Directors) shall be divided into three classes, as nearly
equal in number as possible. At the annual meeting of shareholders
in 1984, one class shall be elected to hold office for a term
expiring at the 1985 annual meeting, one class shall be elected to
hold office for a term expiring at the 1986 annual meeting, and one
class shall be elected to hold office for a term expiring at the
1987 annual meeting. At each annual meeting of shareholders of the
Corporation the date of which shall be fixed by or pursuant to the
By-Laws of the Corporation, the successors of the class of
directors whose terms shall expire at that meeting shall be elected
for a term expiring at the annual meeting of shareholders held in
the third year following their year of election. Each director
shall hold office until his successor shall have been duly elected
and qualified. The election of directors need not be by ballot
unless the By-Laws so provide. No decrease in the number of
directors shall shorten the term of any incumbent director.

SECTION 2. Notification of Nominations. Subject to the
rights of the holders of any class or series of Preference Stock
then outstanding, nominations for the election of directors may be
made by the Board of Directors or by any shareholder entitled to
vote for the election of directors. Any shareholder entitled to
vote for the election of directors at a meeting may nominate
persons for election as directors only if written notice of such
shareholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (i) with respect to an
election to be held at an annual meeting of shareholders, 90 days
in advance of such meeting, and (ii) with respect to an election of
directors to be held at a special meeting of shareholders, the
close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such
notice shall set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the shareholder
is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be
nominated, by the Board of Directors and (e) the consent of each
nominee to serve as a director of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the
nomination of any person made without compliance with the foregoing
procedure.

SECTION 3. Vacancies. Subject to the rights of the holders
of any class or series of Preference Stock then outstanding, newly
created directorships resulting from any increase in the authorized
number of directors or any vacancies in the Board of Directors from
death, resignation, retirement, disqualification, removal from
office or other cause shall be filled solely by the Board of
Directors, acting by the affirmative vote of not less than a
majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director so chosen shall
hold office until the next election of the class for which such
director shall have been chosen and until his successor shall be
elected and qualified. The shareholders of the Corporation shall
have no right to fill any vacancies, whether resulting from an
increase in the authorized number of directors or otherwise.

SECTION 4. Removal. Subject to the rights of the holders of
any class or series of Preference Stock then outstanding, any
director or the entire Board of Directors of the Corporation may be
removed only for cause and only by affirmative vote of (1) the
Board of Directors, acting by not less than a majority of the
Directorships or (2) the holders of 80% of the combined voting
power of the then outstanding shares of Voting Stock, voting
together as a single class. For the purposes of this Section 4,
(1) "cause" shall exist only if a director (i) has been convicted
of a felony in a final adjudication or (ii) has been adjudged in a
final adjudication to have wilfully engaged in gross misconduct
materially and demonstrably injurious to the Corporation, and (2)
"final adjudication" shall mean a judgment by a court of competent
jurisdiction which becomes final (x) after completion or all
proceedings for direct review or (y) after expiration of the time
to obtain initial or further direct review, no such review having
been taken.

SECTION 5. Meetings. Regular meetings of the Board of
Directors shall be held on the fourth Tuesday of each calendar
month, except for the months of February, June, August and
December. The meeting for the month of January shall be held on
the last Tuesday immediately after the annual meeting for
shareholders. If any such meeting date occurs on a legal holiday,
then such meeting shall be held on the next succeeding business
day.

Special meetings of the Board of Directors may be called by
the Chairman of the Board, the President, the Secretary of the
Corporation or any three Directors.

SECTION 6. Notice of Meeting. Notice of all regular and
special meetings of the Board of Directors shall be given to each
member of the Board of Directors, at least two days before any such
meeting orally, or by mailing at least seven days before to each
such member at his last known post office address a written notice
thereof, giving the time and place of such meeting.

SECTION 7. Quorum. A majority of the number of directorships
at the time shall constitute a quorum; and a majority of the
Directors in attendance at any meeting of the Board of Directors
shall, in the presence of a quorum, decide its action. A minority
of the number of directorships at the time present at any regular
or special meeting may, in the absence of a quorum, adjourn to a
later date but may not transact any business, except as provided in
Section 3 of this Article.

SECTION 8. Age of Directors. No person shall be elected or
re-elected as a Director after attaining the age of seventy years.

SECTION 9. Election of Officers. As soon as may be
convenient after the annual meeting of the shareholders of the
Corporation, the Board of Directors shall meet and elect the
officers of the Corporation in accordance with these By-Laws.

SECTION 10. Executive Committee. The Board of Directors of
the Corporation, by the affirmative vote of Directors holding a
majority of the directorships, may elect from its membership an
Executive Committee having such number of members as may be
prescribed from time to time by the Board of Directors.

Members of the Executive Committee may be elected for such
terms as may be prescribed by the Board of Directors provided,
however, that the term of office of any member of the Executive
Committee shall not extend beyond the term for which such member is
elected as a Director of the Corporation.

The Board of Directors may fill any vacancy in the Executive
Committee.

During the intervals between the meetings of the Board of
Directors, the Executive Committee shall possess and may exercise
all of the powers of the Board of Directors in the management and
direction of the affairs of the Corporation in all matters in which
specific direction shall not be given by the Board of Directors.

All action by the Executive Committee shall be reported to the
Board of Directors at the next meeting succeeding such action and
shall be subject to review and alteration by the Board of
Directors, providing that no rights of third parties shall be
affected by any such review or alteration

Regular minutes of the proceedings of the Executive Committee
shall be kept in a book provided for that purpose.

The Executive Committee shall determine and fix its rules with
respect to meetings and procedure and the number required for a
quorum and shall conduct business as provided by such rules.

Meetings of the Executive Committee shall be held on such
dates as may be fixed from time to time by the Board of Directors
and may be called at any time by the Chairman of the Board of
Directors or by the President of the Corporation.

SECTION 11. Audit Committee. There shall be an Audit
Committee having such number of members as prescribed by the Board
of Directors from time to time. Members of the Audit Committee
shall be Directors who are neither officers nor employees of the
Corporation. The Audit Committee shall recommend the employment of
independent accountants to audit the financial statements of the
Corporation, determine the scope of the audit, confer with the
auditors respecting their examination and accounting practices,
review the Corporation's financial and accounting practices and
controls, and report its doings to the Board of Directors.

SECTION 12. Pension Committee There shall be a Pension
Committee having such number of members as prescribed by the Board
of Directors from time to time. Members of the Pension Committee
shall be Directors who are neither officers nor employees of the
Corporation. The Pension Committee shall perform the duties
specified in the Company's pension plans and other employee benefit
plans and such further duties respecting such plans as may be
prescribed by law. The Pension Committee shall report its doings
to the Board of Directors.

SECTION 13. Committees. The Board of Directors may, from
time to time, elect or appoint such other committees and prescribe
the duties and authority thereof as the Board of Directors may deem
necessary or convenient.

ARTICLE 3.
Officers.

SECTION 1. Election and Qualifications. The Directors shall
elect annually from their own number a President of the Corporation
and may also elect from their own number a Chairman of the Board of
Directors and shall elect or appoint a Treasurer and a Secretary
and such other officers as the Board of Directors may, from time to
time, deem necessary or advisable. No employee of the Corporation
who has (a) for the last two consecutive years, held a bona fide
executive or high policymaking position with the Corporation (b)
become entitled to nonforfeitable annual retirement benefits from
the Corporation which equal or exceed, in the aggregate, $44,000 or
such other amount as required by law, exclusive of Social Security
benefits and (c) attained the age of sixty-five years, shall
thereafter be elected an officer of the Corporation.

SECTION 2. Term of Office. The term of office of all
officers of the Corporation shall be one year and until their
respective successors shall have been chosen and qualified; but any
officer may be removed from office at any time by the affirmative
vote of a majority of the members of the Board of Directors then in
office.

SECTION 3. Chairman of the Board of Directors. The Chairman
of the Board of Directors, if one shall be elected, shall preside
at all meetings of the shareholders and of the Board of Directors
at which he is present and shall have such powers and duties as
may, from time to time, be prescribed by the Board of Directors.

The Chairman of the Board of Directors, when designated by
said Board as the Chief Executive Officer, shall provide general
direction to the activities of the Corporation in conjunction with
and acting through the President and shall have the final decision
in all matters pertaining to the management of the business of the
Corporation, all subject, however, to the control of the Board of
Directors.

The Chairman of the Board of Directors shall possess the same
power as the President to execute on behalf of the Corporation all
deeds, leases, conveyances, certificates of stock and contracts.

SECTION 4. President. The President shall report to the
Chairman of the Board of Directors when such Chairman has been
designated by the Board of Directors as the Chief Executive Officer
and shall have general supervision of the affairs of the
Corporation and over its several officers, subject, however, to the
control of the Board of Directors. The President shall have the
power to execute all deeds, leases, conveyances, certificates of
stock and contracts on behalf of the Company, shall make reports to
the Board of Directors and shareholders and shall perform such
other duties as are incident to the office of President or are
properly required of the President by the Board of Directors.

The President, in the absence of the Chairman of the Board,
shall preside at all meetings of the shareholders and Board of
Directors.

The President shall, whenever it may in his opinion be
necessary, prescribe the duties of officers and employees of the
Corporation where duties are not otherwise prescribed by the Board
of Directors.

SECTION 5. Vice President and Assistant Vice President. The
Vice Presidents and Assistant Vice Presidents shall perform duties
as may be prescribed from time to time by the Board of Directors or
required by law.

SECTION 6. Treasurer. The Treasurer shall plan and direct
the collection, receipt, custody and disbursement of funds and the
handling of other financial assets. The Treasurer shall direct the
Corporation's banking and credit functions and perform such other
duties as are commonly incident to the Office of Treasurer or
required by law.

SECTION 7. Secretary. The Secretary shall attend the
meetings of the shareholders, the Board of Directors and Executive
Committee and keep minutes thereof. He shall send out notices of
all meetings required by law or these By-Laws. He shall have the
custody of the papers and books other than books of account and of
the seal of the Corporation, and he shall affix the seal to all
proper documents and shall attest the same; and he shall perform
the usual duties incident to the Office of the Secretary and such
other duties as may be prescribed, from time to time, by the Board
of Directors or required by law.

ARTICLE 4.
Seal.

The Corporation shall have a common seal, which shall contain
the words
CONNECTICUT ENERGY CORPORATION
in a circle, within which the words and figures
Incorporated 1970 Seal
shall be contained.

ARTICLE 5.
Stock Certificates and Transfers

SECTION 1. Form. Stock certificates shall be in such form as
the Board of Directors may, from time to time, determine and shall
be signed by the President and by the Secretary or the Treasurer
and sealed with the common seal of the Corporation.

When such stock certificates shall be signed by a transfer
agent or an assistant transfer agent or a registrar, the respective
signatures of such President, Secretary or Treasurer may be
facsimiles of such signatures, and the seal of the Corporation may
be a facsimile of such seal.

SECTION 2. Transfer. Transfer of shares shall be made only
upon the books of the Corporation by the registered holder in
person or by attorney, duly authorized, and upon surrender of the
certificate or certificates for such shares properly assigned for
transfer.

SECTION 3. Lost or Destroyed Certificates. The holder of any
certificate representing shares of stock of the Corporation may
notify the Corporation of any loss, theft or destruction thereof,
and the Board of Directors may thereupon, in its discretion, cause
a new certificate of the same number of shares to be issued to such
holder upon satisfactory proof of such loss, theft or destruction,
and the deposit of indemnity by way of bond or otherwise, in such
form and amount and with such surety or sureties as the Board of
Directors may require, to indemnify the Corporation against loss or
liability by reason of the issuance of such new certificate.

ARTICLE 6.
Negotiable Instruments.

SECTION 1. Signatures. All bills, notes, checks or other
negotiable instruments shall be made in the name of the Corporation
and shall be signed by such officer or officers of the Corporation
and in such manner as the Board of Directors shall designate.

SECTION 2. Endorsements. No officer or agent of this
Corporation shall have power to endorse in the name of or on behalf
of the Corporation any note, bill of exchange, draft, check or
other written instrument for the payment of money--save only for
the purpose of collection of said instrument--except upon the
express authority of the Directors.

ARTICLE 7.
Indemnification of Directors, Officer and Employees.

The Corporation shall indemnify the persons described in
Section 33-320a of the Connecticut General Statutes or the
equivalent section of the Connecticut Stock Corporation Act to the
full extent and in the manner required by such law.

ARTICLE 8.
Amendments.

Notwithstanding any other provisions in the Certificate of
Incorporation or these By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified
by law or the Certificate of Incorporation of the Corporation),
these By-Laws may be adopted, repealed or amended only upon the
affirmative vote of (i) the holders of 80% of the combined voting
power of the then outstanding shares of Voting Stock, voting
together as a single class, or (ii) the Board of Directors acting
by not less than a majority of the entire Board of Directors.

Effective as of 04/25/95
------------------------

THE SOUTHERN CONNECTICUT GAS COMPANY (b)

AMENDED and RESTATED BY-LAWS

ARTICLE 1.
Meeting of Shareholders.

SECTION 5. Order of Business. So far as consistent with the
purpose of the meeting, the order of business at all shareholders'
meetings shall be as follows:
1. Roll call of shareholders
2. Reading of Minutes of preceding meeting and action thereon
3. Reports of Directors, Officers and Committees
4. Election of Directors -- if an annual meeting
5. Unfinished business
6. New business.

SECTION 6. Rules of Order. At each meeting of shareholders,
the time and manner of discussion shall be as set forth in the
Roberts Rules of Order.

ARTICLE 2.
Directors.

SECTION 1. Number and Election. The business, property and
affairs of the Corporation shall be under the care, control and
management of not less than nine nor more than twenty-four
Directors who shall be elected annually by the shareholders.

SECTION 2. Vacancies. Vacancies in the Board of Directors
created by an increase in the number of directorships shall be
filled at a meeting of shareholders of the Corporation, and any
other vacancies in the Board of Directors, because of death,
resignation, or for any other reason, may be filled by the
remaining Directors.

SECTION 3. Meetings. Regular meetings of the Board of
Directors shall be held on the fourth Tuesday of each calendar
month, except for the months of February, June, August, October and
December. The meeting for the month of January shall be held on
the last Tuesday immediately after the annual meeting for
shareholders. If any such meeting date occurs on a legal holiday,
then such meeting shall be held on the next succeeding business
day.

Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, the Secretary of the
Corporation or any three Directors.

SECTION 4. Notice of Meeting. Notice of all regular and
special meetings of the Board of Directors shall be given to each
member of the Board of Directors, at least two days before any such
meeting orally, or by mailing at least seven days before to each
such member at his last known post office address a written notice
thereof, giving the time and place of such meeting.

SECTION 5. Quorum. A majority of the number of directorships
at the time shall constitute a quorum; and a majority of the
Directors in attendance at any meeting of the Board of Directors
shall, in the presence of a quorum, decide its action. A minority
of the number of directorships at the time present at any regular
or special meeting,may, in the absence of a quorum, adjourn to a
later date but may not transact any business.

SECTION 6. Age of Directors. No person shall be elected or
re-elected as a Director after attaining the age of seventy years.

SECTION 7. Election of Officers. As soon as may be convenient
after the annual meeting of the shareholders of the Corporation,
the Board of Directors shall meet and elect the officers of the
Corporation in accordance with the By-Laws.

SECTION 8. Executive Committee. The Board of Directors of the
Corporation, by the affirmative vote of Directors holding a
majority of the directorships, may elect from its membership an
Executive Committee having such number of members as may be
prescribed from time to time by the Board of Directors.

The Board of Directors may fill any vacancy in the Executive
Committee.

Regular minutes of the proceedings of the Executive Committee
shall be kept in a book provided for that purpose.

The Executive Committee shall determine and fix its rules with
respect to meetings and procedure and the number required for a
quorum and shall conduct business as provided by such rules.

Meetings of the Executive Committee shall be held on such dates
as may be fixed from time to time by the Board of Directors and may
be called at any time by the Chairman of the Board of Directors or
by the President of the Corporation.

SECTION 9. Audit Committee. There shall be an Audit Committee
having such number of members as prescribed by the Board of
Directors from time to time. Members of the Audit Committee shall
be Directors who are neither officers nor employees of the
Corporation. The Audit Committee shall recommend the employment of
independent accountants to audit the financial statements of the
Corporation, determine the scope of the audit, confer with the
auditors respecting their examination and accounting practices,
review the Corporation's financial and accounting practices and
controls, and report its doings to the Board of Directors.

SECTION 10. Pension Committee. There shall be a Pension
Committee having such number of members as prescribed by the Board
of Directors from time to time. Members of the Pension Committee
shall be Directors who are neither officers nor employees of the
Corporation. The Pension Committee shall perform the duties
specified in the Company's pension plans and other employee benefit
plans and such further duties respecting such plans as may be
prescribed by law. The Pension Committee shall report its doings
to the Board of Directors.

SECTION 11. Committees. The Board of Directors may, from time
to time, elect or appoint such committees and prescribe the duties
and authority thereof as the Board of Directors may deem necessary
or convenient.

ARTICLE 3.
Officers.

SECTION 1. Election and Qualifications. The Directors shall
elect annually from their own number a President of the Corporation
and may also elect from their own number a Chairman of the Board of
Directors and shall elect or appoint one or more Vice Presidents,
a Treasurer and a Secretary and such other officers as the Board of
Directors may, from time to time, deem necessary or advisable. No
employee of the Corporation who has (a) for the last two
consecutive years, held a bona fide executive or high policymaking
position with the Corporation, (b) become entitled to
nonforfeitable annual retirement benefits from the Corporation
which equal or exceed, in the aggregate, $44,000 or such other
amount as required by law, exclusive of Social Security benefits
and (c) attained the age of sixty-five years, shall thereafter be
elected an officer of the Corporation.

SECTION 2. Term of Office. The term of office of all officers
of the Corporation shall be one year and until their respective
successors shall have been chosen and qualified; but any officer
may be removed from office at any time by the affirmative vote of
a majority of the members of the Board of Directors then in office.

The Chairman of the Board of Directors, when designated by said
Board as the Chief Executive Officer, shall provide general
direction to the activities of the Corporation in conjunction with
and acting through the President and shall have the final decision
in all matters pertaining to the management of the business of the
Corporation, all subject, however, to the control of the Board of
Directors.

The Chairman of the Board of Directors shall possess the same
power as the President to executive on behalf of the Corporation
all deeds, leases, conveyances, certificates of stock and
contracts.

SECTION 4. President. The President shall report to the
Chairman of the Board of Directors when such Chairman has been
designated by the Board of Directors as the Chief Executive Officer
and shall have general supervision of the affairs of the
Corporation and over its several officers, subject, however, to the
control of the Board of Directors. He shall have the power to
execute all deeds, leases, conveyances, certificates of stock and
contracts on behalf of the Corporation, shall make reports to the
Board of Directors and shareholders and shall perform such other
duties as are incident to the office of President or are properly
required of him by the Board of Directors.

The President, in the absence of the Chairman of the Board,
shall preside at all meetings of the shareholders and Board of
Directors.

SECTION 5. Executive Vice President. The Executive Vice
President shall act as chief assistant to the President of the
Corporation. He shall, in the President's absence and subject to
the President's direction, exercise the authority and perform all
of the duties which the President of the Corporation is authorized
by its By-Laws to exercise, or to perform such other duties as may,
from time to time, be assigned to the Executive Vice President by
the Board, by the Chairman of the Board when designated the Chief
Executive Officer or by the President of the Corporation. He is
also designated as the Vice President to assume the duties of the
President in the absence of the latter, as specified in Article 3,
Section 4 of the By-Laws. In the absence of or failure to
designate an Executive Vice President, the Senior Vice President
shall perform the foregoing duties and have the foregoing
authority.

SECTION 6. Vice President and Assistant Vice President. The
Vice Presidents and Assistant Vice Presidents shall perform duties
as may be prescribed from time to time by the Board of Directors or
required by law.

SECTION 7. Vice President - Finance. The Vice President -
Finance shall direct the Corporation's financial and related
activities, including supervision of the Corporation's treasury
accounts, tax payments and insurance. He shall be responsible for
formulating and appraising financial plans to insure provision of
adequate funds to meet long-term and short-term requirements and
shall perform such other duties as may be prescribed from time to
time by the Board of Directors.

SECTION 8. Treasurer. The Treasurer shall plan and direct the
collection, receipt, custody and disbursement of funds and the
handling of other financial assets. The Treasurer shall direct the
Corporation's banking and credit functions and perform such other
duties as are commonly incident to the Office of the Treasurer or
required by law.

SECTION 9. Secretary. The Secretary shall attend the meetings
of the shareholders, the Board of Directors and Executive Committee
and keep minutes thereof. He shall send out notices of all
meetings required by law or these By-Laws. He shall have the
custody of the papers and books other than books of account and of
the seal of the Corporation, and he shall affix the seal to all
proper documents and shall attest the same; and he shall perform
the usual duties incident to the Office of the Secretary and such
other duties as may be prescribed, from time to time, by the Board
of Directors or required by law.

SECTION 10. Assistant Treasurer. In the absence or disability
of the Treasurer, the duties of the Treasurer shall be performed by
an Assistant Treasurer.

SECTION 11. Assistant Secretary. In the absence or disability
of the Secretary, the duties of the Secretary shall be performed by
an Assistant Secretary.

ARTICLE 4.
Seal.

The Corporation shall have a common seal, which shall contain
the words
SOUTHERN CONNECTICUT GAS COMPANY
in a circle, within which the words and figures
Incorporated 1967 Seal
shall be contained.

ARTICLE 5.
Stock Certificates and Transfers.

SECTION 1. Form. Stock certificates shall be in such form as
the Board of Directors may, from time to time, determine and shall
be signed by the President or any Vice President and by the
Secretary or Assistant Secretary or by the Treasurer or Assistant
Treasurer and sealed with the common seal of the Corporation.

When such stock certificates shall be signed by a transfer
agent or an assistant transfer agent or a registrar, the respective
signatures of such Chairman of the Board of Directors, President,
Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer may be facsimiles of such signatures, and the
seal of the Corporation may be a facsimile of such seal.

ARTICLE 6.
Negotiable Instruments.

SECTION 1. Signatures All bills, notes, checks or other
negotiable instruments shall be made in the name of the Corporation
and shall be signed by such officer or officers of the Corporation
and in such manner as the Board of Directors shall designate.

ARTICLE 7.
Indemnification of Directors, Officers and Employees.

ARTICLE 8.
Amendments.

These By-Laws may be amended or repealed at any regular of
special meeting of the Board of Directors by the vote of a majority
of the Directors, provided that notice of the consideration of such
amendment or repeal shall be included in the notice of said
meeting.

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