FALL RIVER GAS CO, 424A, 1997-10-15

FALL RIVER GAS CO
424A, 1997-10-15
NATURAL GAS DISTRIBUTION

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997.

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

FALL RIVER GAS COMPANY
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
MASSACHUSETTS 04-1298780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

155 NORTH MAIN STREET
FALL RIVER, MASSACHUSETTS 02722
508-675-7811
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------

PETER H. THANAS
SENIOR VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
FALL RIVER GAS COMPANY
155 NORTH MAIN STREET
FALL RIVER, MASSACHUSETTS 02722
508-675-7811
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
ERIC J. KRATHWOHL, ESQ. JONATHAN A. KOFF, ESQ.
Rich, May, Bilodeau & Flaherty, P.C. STATHY DARCY, ESQ.
294 Washington Street Chapman and Cutler
Boston, MA 02108 111 West Monroe Street
(617) 482-1360 Chicago, IL 60603-4080
(312) 845-3000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the effective date of this Registration Statement.
------------------------

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration number for
the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. /X/
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE* OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock,
$0.83- 1/3 par value....................... 391,000 shares $13.25 $5,180,750 $1,570
</TABLE>

* Used only for the purpose of calculating the amount of the registration fee
pursuant to Rule 457(b), based upon the average of the reported bid and
asked prices of such securities on September 15, 1997.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED OCTOBER 15, 1997

PURSUANT TO RULE 424(A)

340,000 SHARES

FALL RIVER GAS COMPANY

COMMON STOCK
($0.83 1/3 PAR VALUE)

All of the shares of Common Stock offered hereby are being sold by Fall River
Gas Company (the "Company"). The Common Stock of the Company is traded in the
over-the-counter market on the OTC Bulletin Board and is quoted under the symbol
"FALL." On October 13, 1997, the closing bid price of the Common Stock on the
OTC Bulletin Board was $13 3/8. See "Common Stock Dividends and Price Range".
The Common Stock has been approved for listing on the American Stock Exchange
("AMEX") under the trading symbol "FRG".

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

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION WHICH SHOULD BE
CAREFULLY CONSIDERED BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS (1) TO COMPANY (2)
<S> <C> <C> <C>
Per Share.............................................. $ $ $
Total (3).............................................. $ $ $
</TABLE>

(1) Does not reflect additional compensation payable to the Representative of
the Underwriters by the Company in the form of a non-accountable expense
allowance of $50,000. The Company has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting".

(2) Before deduction of expenses payable by the Company estimated at $161,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 51,000 shares solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting" for a discussion
of certain reimbursements that may be made by the Company to the
Underwriters in the event the over-allotment option is exercised.

The shares of Common Stock are offered by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, subject to the
right of the Underwriters to reject any order in whole or in part and certain
other conditions. It is expected that delivery of the certificates for such
shares will be made in Boston, Massachusetts on or about , 1997.

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

FIRST ALBANY CORPORATION

The date of this Prospectus is , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE SHARES OF COMMON
STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK
TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the Commission's Regional Offices
in Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois 60661) and in
New York (7 World Trade Center, Suite 1300, New York, New York 10048). Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at the Washington, D.C. address given above. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, including the Company. The address of such Web site is
http://www.sec.gov.

This prospectus constitutes a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth or
incorporated by reference in the Registration Statement, as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed or incorporated by
reference as a part thereof. Copies of the Registration Statement and the
exhibits thereto are on file at the offices of the Commission and may be
obtained upon payment of the prescribed fee or may be examined without charge at
the public reference facilities of the Commission described above. Statements
contained herein concerning the provisions of documents filed with, or
incorporated by reference in, the Registration Statement as exhibits are
necessarily summaries of such documents and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference: (a) the Company's Annual
Report on Form 10-K for the year ended September 30, 1996, File No. 0-449 and
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended December
31, 1996, March 31, 1997 and June 30, 1997, File No. 0-449.

Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.

THE COMPANY HEREBY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM
THIS PROSPECTUS IS DELIVERED, UPON THE ORAL OR WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN). REQUESTS SHOULD BE DIRECTED TO PETER H. THANAS, SR. VICE PRESIDENT AND
TREASURER, FALL RIVER GAS COMPANY, 155 NORTH MAIN STREET, FALL RIVER,
MASSACHUSETTS 02722--TELEPHONE (508) 675-7811.

2
<PAGE>
PROSPECTUS SUMMARY

THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE. UNLESS OTHERWISE INDICATED, ALL INFORMATION HEREIN HAS BEEN ADJUSTED
FOR THE TWO-FOR-ONE STOCK SPLIT EFFECTIVE JANUARY 14, 1994 AND ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED.

THE COMPANY

The Company is a regulated public utility primarily engaged in the distribution,
transportation and sale of natural gas for use by residential, commercial and
industrial customers. The Company currently serves approximately 47,000 natural
gas customers in southeastern Massachusetts. Of the Company's revenues from
regulated gas operations, approximately 71% was derived from residential
customers and 29% was derived from commercial and industrial customers,
including transportation customers, during the nine months ended June 30, 1997.
The Company obtains its primary supply of natural gas under a long-term contract
with a natural gas marketer.

Through its wholly-owned subsidiary, Fall River Gas Appliance Company, Inc.,
(the "Appliance Company"), the Company is also engaged in certain unregulated
activities, including leasing and selling gas burning equipment (primarily for
use by the Company's residential customers), including water heaters and
conversion burners. For the nine months ended June 30, 1997, net income
contributed by the Company's unregulated operations comprised approximately 29%
of the Company's total net income.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered hereby................ 340,000 shares

Common Stock to be outstanding after this
offering(1).............................. 2,127,261 shares

Indicated annualized dividend(2)........... $0.96 per share of Common Stock. See "Common
Stock Dividends and Price Range".

Use of proceeds............................ To repay short-term indebtedness primarily
incurred for the funding of additions to
property, plant and equipment. See "Use of
Proceeds".

Over-the-counter market trading symbol..... "FALL"

Range of high and low bid prices of Common
Stock (October 1, 1996 through September
30, 1997)................................ $18 1/4-$12 3/4

Closing Bid Price on October 13, 1997...... $13 3/8

Proposed American Stock Exchange symbol.... "FRG"

Share Owner Dividend Reinvestment and Stock
Purchase Plan............................ Offered by means of a separate prospectus.
</TABLE>

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

(1) Based on the number of shares of Common Stock outstanding as of June 30,
1997.

(2) Based on the quarterly dividend of $0.24 per share declared by the Board of
Directors. Such dividend is anticipated to be paid on November 15, 1997 to
shareholders of record on November 5, 1997. Shares of Common Stock offered
hereby and issued on or prior to November 5, 1997, would be entitled to
receive such dividend.

3
<PAGE>
SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)

<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED
JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------------------------------ -------------
1997 1996 1996 1995 1994 1993 1992(1)
--------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Gas operating revenues..................... $ 41,354 $ 44,141 $ 48,966 $ 44,418 $ 48,331 $ 44,819 $ 36,047
Operating income........................... 2,965 2,513 2,342 2,306 2,777 2,904 2,212
Earnings of Fall River Gas Appliance
Company, Inc............................. 585 549 779 753 799 683 539
Net income................................. 1,996 1,799 1,424 1,617 2,491 2,352 1,819
Earnings per share......................... 1.12 1.01 0.80 0.91 1.40 1.32 1.02
Dividends per share........................ 0.72 0.72 0.96 0.96 0.98 0.97 0.92
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
<S> <C> <C> <C> <C>
ACTUAL AS ADJUSTED (2)
---------------------- ----------------------

<CAPTION>
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CAPITALIZATION:
Common shareholders' equity........................................ $ 13,455 49.9% 17,580 47.4%
Long-term debt..................................................... 13,500 50.1 19,500 52.6
--------- ----- --------- -----
Total capitalization............................................... $ 26,955 100.0% $ 37,080 100.0%
--------- ----- --------- -----
--------- ----- --------- -----
Total short-term debt.............................................. $ 11,200 $ 1,075

OTHER BALANCE SHEET DATA:
Utility plant--net................................................. $ 38,708
Total assets....................................................... 51,385
Book value per share of Common Stock............................... 7.53
</TABLE>

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

(1) 1992 data is for the nine-month period ended September 30, 1992 due to
change in the Company's fiscal year.

(2) Adjusted to reflect the receipt and application of (i) the estimated net
proceeds from the sale of the shares of Common Stock offered hereby
estimated at $4,125,000, assuming an offering price of $13.375 per share,
and (ii) the estimated net proceeds of approximately $6,000,000 from the
proposed sale of $6,000,000 aggregate principal amount of First Mortgage
Bonds anticipated to occur by the end of the first quarter of fiscal 1998.
See "Use of Proceeds" and "Capitalization".

4
<PAGE>
THE COMPANY

Earnings from the Appliance Company are primarily the result of revenues from
the rental of water heaters and conversion burners, which allow oil-fired
heating systems to use natural gas primarily for residential and small
commercial applications. As of June 30, 1997, the water heater program had
14,830 rentals in service and the conversion burner program had 4,746 rentals in
service. The Appliance Company also derives revenues from the sale of central
heating and air-conditioning systems and water heaters.

SERVICE TERRITORY

[LOGO]

5
<PAGE>
RISK FACTORS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT,
PARTICULARLY IN THE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL RESOURCES" AND "BUSINESS"
SECTIONS. FORWARD-LOOKING STATEMENTS ARE GENERALLY IDENTIFIED WITH THE FOLLOWING
PHRASES: "BELIEVES", "EXPECTS", AND "ANTICIPATES", OR WORDS OF SIMILAR IMPORT.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
OTHER INFORMATION CONTAINED ELSEWHERE IN THE PROSPECTUS. IN ADDITION TO THE
OTHER INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE SECURITIES OFFERED HEREBY.

SPECIAL FACTORS AFFECTING THE NATURAL GAS DISTRIBUTION INDUSTRY

The natural gas industry is subject to numerous legislative and regulatory
requirements, standards and restrictions, which are subject to change and which
affect the Company to varying degrees. Significant industry factors that have
affected or may affect the Company from time to time include the following: (i)
fluctuations in demand for natural gas attributable to weather; (ii) difficulty
in obtaining rate increases from regulatory authorities in adequate amounts and
on a timely basis; (iii) difficulty in earning the authorized return on invested
capital; (iv) competition from alternative fuels for industrial and other
significant customers and fluctuations in the prices of oil, which can make oil
less costly than natural gas; (v) volatility in the supply and price of natural
gas; (vi) increasing competition with alternative gas sources caused by recent
deregulation in the natural gas industry; (vii) uncertainty in projected energy
requirements of the Company's customers; and (viii) potential costs of
compliance with environmental regulations. See also "Business--Competition" and
"Business--Rates and Regulation".

GAS SUPPLY

The Company currently obtains approximately 90% of its gas supplies from a
single source. Although the Company believes that such supplier is reliable and
is likely to be able to fulfill its contractual obligations to the Company,
should that supplier fail to deliver all natural gas supplies under contract,
the Company might have difficulties in arranging promptly for an economical
replacement supply. Though the Company would likely be able to obtain required
supplies on the spot market, there would be an increased risk concerning full
recovery of such costs, which could have a material adverse effect on the
Company's results of operations.

PRIOR LIMITED TRADING MARKET

There is currently a limited public trading market for the Company's Common
Stock. Although the Common Stock has been approved for listing on AMEX under the
trading symbol "FRG", there can be no assurance that an active trading market
will develop after the offering.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby, estimated to be $4,125,000 ($4,755,000 if the Underwriters'
over-allotment option is exercised in full) will be used to repay short-term
indebtedness. At August 31, 1997, the Company had $15,200,000 in short-term debt
outstanding, with a weighted average interest rate of 6.53%. Such indebtedness
was primarily incurred for funding of additions to property, plant and
equipment. In addition, the net proceeds of the proposed issuance of $6,000,000
aggregate principal amount of First Mortgage Bonds (anticipated to occur by the
end of the first quarter of fiscal 1998) will be applied to reduce short-term
indebtedness.

The Company continually replaces gas mains and services to maintain and improve
the reliability and capacity of its gas distribution system and will extend gas
mains to serve new customers if potential returns on the investments made to
serve these customers are adequate. The Company's capital expenditures totalled
approximately $3,000,000 in the twelve months ended June 30, 1997. Capital
expenditures for the twelve months ending June 30, 1998 are estimated to be
approximately $3,000,000.

6
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company on a consolidated basis as of June 30, 1997 and as adjusted as of such
date to give effect to the receipt and application of (i) the estimated net
proceeds from the sale of the shares of Common Stock offered hereby, and (ii)
the estimated net proceeds from the proposed sale of $6,000,000 aggregate
principal amount of First Mortgage Bonds anticipated to occur by the end of the
first quarter of fiscal 1998. See "Use of Proceeds." The information included in
the table below should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUAL AS ADJUSTED
-------------------------- --------------------------

<CAPTION>
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Common Equity:
Common Stock............................................. $ 1,834,445 $ 1,834,445
Capital in excess of par value........................... 1,440,511 4,419,166
Retained earnings(1)..................................... 11,576,051 11,576,051
Treasury stock(2)........................................ (1,396,088) (249,743)
------------- ----- ------------- -----
Total Common Equity................................ 13,454,919 49.9% 17,579,919 47.4%
Long-term Debt:
First Mortgage Bonds
9.44% series, due 2020................................. 6,500,000 6,500,000
7.99% series, due 2026................................. 7,000,000 7,000,000
Proposed % series, due ..................... 0 6,000,000
------------- ----- ------------- -----
Total long-term debt................................... 13,500,000 50.1 19,500,000 52.6
Less amounts due within one year.......................
------------- ----- ------------- -----
Total capitalization............................... $ 26,954,919 100.0% $ 37,079,919 100.0%
------------- ----- ------------- -----
------------- ----- ------------- -----
Total short-term debt.............................. $ 11,200,000 $ 1,075,000
</TABLE>

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

(1) The Company's use of retained earnings is subject to restrictions contained
in the Company's Indenture of First Mortgage, as amended. As of June 30,
1997, $4,426,791 of retained earnings was unrestricted and available for the
payment of dividends.

(2) The Common Stock offered hereby will be issued from Common Stock currently
held in treasury. Upon the issuance of the Common Stock, Treasury stock will
be reduced by the average price at which the Treasury stock is carried,
multiplied by the number of shares sold. The excess of the offering price
over the average price at which the Treasury stock is carried will be
credited to capital in excess of par value.

7
<PAGE>
COMMON STOCK DIVIDENDS AND PRICE RANGE

The holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors. The Company has paid dividends to
shareholders for 117 consecutive years. The Company currently intends to
continue its practice of declaring cash dividends on a quarterly basis, although
the declaration and amount of any future dividends will necessarily depend upon
future earnings, cash flow, the financial condition of the Company and other
factors. See "Description of Capital Stock" for a description of certain
limitations on the future payment of dividends. The Board of Directors of the
Company has declared a dividend of $.24 per share, anticipated to be paid on
November 15, 1997 to shareholders of record on November 5, 1997. Shares of
Common Stock offered hereby and issued on or prior to November 5, 1997 would be
entitled to receive such dividend.

The Company's Common Stock historically has been traded in the over-the-counter
market on the OTC Bulletin Board and quoted under the symbol "FALL". The Common
Stock has been approved for listing on AMEX under the trading symbol "FRG".

The following table shows the high and low bid prices, as well as cash dividends
declared per share of the Common Stock for the periods indicated. The quotations
reflect inter-dealer prices, without retail markup, markdown or commission and
may not necessarily represent actual transactions. As of June 30, 1997, there
were approximately 1,100 holders of record of the Company's Common Stock.

<TABLE>
<CAPTION>
CASH
DIVIDENDS
FISCAL YEAR LOW BID HIGH BID PER SHARE
- ---------------------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
October 1, 1994 through September 30, 1995
First Quarter................................................................... $ 25 1/4 $ 25 3/4 $ .24
Second Quarter.................................................................. 25 25 1/2 .24
Third Quarter................................................................... 25 25 .24
Fourth Quarter.................................................................. 24 25 .24

October 1, 1995 through September 30, 1996
First Quarter................................................................... 21 1/4 24 .24
Second Quarter.................................................................. 20 3/4 21 3/4 .24
Third Quarter................................................................... 18 21 .24
Fourth Quarter.................................................................. 18 18 1/4 .24

October 1, 1996 through September 30, 1997
First Quarter................................................................... 16 18 1/4 .24
Second Quarter.................................................................. 16 16 1/2 .24
Third Quarter................................................................... 13 16 .24
Fourth Quarter.................................................................. 12 3/4 13 1/2 .24

October 1, 1997 through September 30, 1998
First Quarter (through October 13, 1997)........................................ 13 13 3/4 --
</TABLE>

The Company's Share Owner Dividend Reinvestment and Stock Purchase Plan ("DRP")
provides holders of record of its Common Stock with the option to invest cash
dividends and/or optional cash payments (up to $5,000 per quarter) in newly
issued shares of the Company's Common Stock at current market prices, less a
three percent discount, without the payment of any brokerage commission or
service charge. Such shares are offered only by means of a separate prospectus,
which is available upon request from the Company.

8
<PAGE>
SELECTED FINANCIAL DATA

The following table sets forth certain financial data of the Company for the
five years ended September 30, 1996 and the nine months ended June 30, 1997 and
1996. The selected consolidated financial data as of and for the five fiscal
years ended September 30, 1996 was derived from the audited consolidated
financial statements of the Company, certain of which are included elsewhere
herein. The selected consolidated financial data as of and for the nine months
ended June 30, 1997 and 1996 was derived from unaudited consolidated financial
statements of the Company which, in the opinion of management, contain all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation thereof. The results of operations for the nine months ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the full year. The selected financial information is qualified by reference to
the Financial Statements and Notes thereto and other information and data set
forth elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF OR FOR AS OF OR FOR AS OF OR FOR
NINE MONTHS FISCAL YEAR ENDED NINE MONTHS ENDED
ENDED JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------------------------------ -------------------
1997 1996 1996 1995 1994 1993 1992(1)
--------- --------- --------- --------- --------- --------- -------------------
(UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets
Utility plant--net.................. $ 38,708 $ 37,561 $ 38,653 $ 36,209 $ 33,213 $ 30,726 $ 29,291
Non-utility plant--net.............. 2,948 2,724 2,762 2,613 2,327 2,022 1,828
Current assets...................... 7,386 7,596 8,449 9,934 12,150 12,275 5,170
Other assets........................ 2,343 2,081 2,688 2,201 1,936 1,462 1,394
--------- --------- --------- --------- --------- --------- ----------
Total......................... $ 51,385 $ 49,962 $ 52,552 $ 50,957 $ 49,626 $ 46,485 $ 37,683
--------- --------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- --------- ----------
Capitalization and liabilities
Capitalization
Common equity..................... $ 13,455 $ 13,439 $ 12,637 $ 12,922 $ 13,014 $ 12,268 $ 11,634
Long-term debt (less current
maturities)..................... 13,500 6,500 13,500 6,500 7,380 7,560 7,680
--------- --------- --------- --------- --------- --------- ----------
Total......................... 26,955 19,939 26,137 19,422 20,394 19,828 19,314
Current liabilities................. 16,747 22,638 18,848 24,165 22,419 20,481 12,455
Other liabilities................... 7,683 7,385 7,567 7,370 6,813 6,176 5,914
--------- --------- --------- --------- --------- --------- ----------
Total......................... $ 51,385 $ 49,962 $ 52,552 $ 50,957 $ 49,626 $ 46,485 $ 37,683
--------- --------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- --------- ----------
INCOME STATEMENT DATA:

Gas operating revenues................ $ 41,354 $ 44,141 $ 48,966 $ 44,418 $ 48,331 $ 44,819 $ 36,047
Operating expenses:
Cost of gas sold.................... 23,810 28,601 31,133 28,097 31,162 28,053 23,772
Other operation and maintenance..... 10,693 9,680 12,257 10,992 10,953 10,617 7,617
Depreciation........................ 1,886 1,515 1,609 1,499 1,392 1,304 939
Taxes--other than Federal income.... 1,322 1,225 1,348 1,139 1,233 1,132 888
-Federal income..................... 678 607 277 385 814 809 619
--------- --------- --------- --------- --------- --------- ----------
Total......................... 38,389 41,628 46,624 42,112 45,554 41,915 33,835
--------- --------- --------- --------- --------- --------- ----------
Operating income...................... 2,965 2,513 2,342 2,306 2,777 2,904 2,212
Other income--net of tax.............. 606 548 790 772 815 691 555
Total interest charges................ 1,575 1,262 1,708 1,461 1,101 1,243 948
--------- --------- --------- --------- --------- --------- ----------
Net income............................ $ 1,996 $ 1,799 $ 1,424 $ 1,617 $ 2,491 $ 2,352 $ 1,819
--------- --------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- --------- ----------
Shares outstanding--average........... 1,783,547 1,780,542 1,780,542 1,780,542 1,780,542 1,780,542 1,780,542
Earnings per share.................... $ 1.12 $ 1.01 $ 0.80 $ 0.91 $ 1.40 $ 1.32 $ 1.02
Dividends declared per share.......... $ 0.72 $ 0.72 $ 0.96 $ 0.96 $ 0.98 $ 0.97 $ 0.92
Appliance Company net income.......... $ 585 $ 549 $ 779 $ 753 $ 799 $ 683 $ 539
</TABLE>

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

(1) 1992 data is for the nine-month period ended September 30, 1992 due to the
change in the Company's fiscal year.

9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Operating results are derived from two major classifications - utility and
non-utility. Utility revenues are generated from the operations of the regulated
natural gas distribution company and include the sale and distribution, as well
as the transportation, of natural gas to firm and interruptible customers.
Non-utility revenues are almost entirely from the rental of water heaters and
conversion burners.

The sale and distribution, as well as the transportation, of natural gas to
customers on a year-round basis for heating, water heating, cooking and
processing are the sources of firm utility revenues, as described below. Firm
customers can be residential, commercial or industrial. The revenues from firm
sales customers are determined by regulated tariff schedules and through
Massachusetts Department of Public Utilities ("MDPU") approved commodity charge
factors. These factors include the Cost of Gas Adjustment clause ("CGAC"), which
requires the Company to collect from or return to customers changes in gas cost
from those included in the regulated tariffs, on a semi-annual basis. The CGAC
also provides for collection of: (i) carrying costs on gas purchases; (ii)
pipeline transition costs; (iii) costs, incentives and lost base revenues
associated with demand side management, (DSM) programs; and (iv) certain costs
of compliance with environmental regulations. In accordance with the Company's
approved CGAC, increases or decreases in the cost of gas sold continue to be
passed directly to firm customers, dollar for dollar.

On October 16, 1996 the MDPU authorized a $3,200,000 increase in the Company's
annual rates. At the same time, the MDPU approved the "unbundling" of the
Company's commercial and industrial tariffs. As a result, customers can choose
to buy gas from the Company or purchase their own gas supply from a third party
and have that supply transported up to and into the Company's distribution
system. These new rates are effective for gas sold on or after December 1, 1996.

Sales to other utilities ("off-system sales") and to dual-fuel customers
("interruptible sales") are made when excess gas supplies are available and
prices are competitive. Interruptible sales are generally made in non-winter
months and can be interrupted by the Company at any time.

Transportation, the delivery of gas purchased by customers from marketers and
other third parties through the Company's distribution system, has recently
become a growing portion of the Company's business. With the restructuring of
the natural gas pipeline industry and the development of the state-level policy
of unbundling of delivery and commodity sales functions, the Company's largest
customers have moved first from firm tariffed sales service to firm sales
service under special contracts and more recently to transportation service. The
movement to the Company's transportation service occurred primarily after
implementation of new rates on December 1, 1996. Under these rates, the Company
earns the same margins on transportation service as it does on bundled commodity
sales and delivery. Accordingly, the Company is generally indifferent as to
whether customers take bundled sales and delivery or unbundled transportation
service only. To date, only the Company's largest customers have moved to
transportation service, although it is likely that additional customers will as
well. Such movement to transportation results in reduced gas operating revenues,
because no commodity is bought from the Company for such customers.
Correspondingly, cost of gas sold is reduced. Consequently, there is no impact
on earnings because the Company, like all other Massachusetts gas companies,
earns no margin on the sale of natural gas itself. See "Business - Competition
and - Rates and Regulation".

The Appliance Company generates non-utility revenues primarily from the rental
of hot water heaters and conversion burners. The Appliance Company also sells
such equipment and other gas-burning appliances such as central heating and air
conditioning systems and water heaters. Such rentals and sales are made to the
Company's gas customers and thereby assist the utility sales efforts. For income
statement purposes, the net earnings of the Appliance Company are shown under
"Other Income." A breakdown of the revenue and expenses of the Appliance Company
is found in the Notes to Consolidated Financial Statements.

10
<PAGE>
SEASONALITY

The nature of the Company's business is highly seasonal and
temperature-sensitive. As a result, the Company's operating results in any given
period reflect, in addition to other matters, the impact of the weather, with
colder temperatures resulting in increased sales and transportation by the
Company. The substantial impact of this sensitivity to seasonal conditions is
reflected in the Company's results of operations and the Company anticipates
that it will continue to be so reflected in future periods.

Short-term borrowing requirements vary according to the seasonal nature of sales
and expense activities of the Company. Accordingly, there is a greater need for
short-term borrowings during periods when internally generated funds are not
sufficient to cover all capital and operating requirements, particularly in the
summer and fall. Short-term borrowings utilized for construction expenditures
generally are replaced by permanent financing when it becomes economical and
practical to do so and where appropriate to maintain an acceptable relationship
between borrowed and equity resources.

RESULTS OF OPERATIONS

NINE MONTHS ENDED JUNE 30, 1997 AND 1996

Gas operating revenues fell $2,787,000, or 6.3% from $44,141,000 recorded in
1996 to $41,354,000, mainly due to a decrease in firm sales volume. Firm sales
volume for the nine months ended June 30, 1997 was 5,390,124 Mcf(1) as compared
to the 5,749,248 Mcf reported in 1996, a 6.2% decrease. Somewhat offsetting such
decrease was an increase in total volumes attributable to special contract,
interruptible and transportation customers. Such volumes were 1,398,769 Mcf in
1997 and 1,148,951 Mcf in 1996. Temperature change was not a factor affecting
operating revenues and firm sales volume. Such decreases resulted from the
migration of several large customers from sales service to transportation
service. Degree Days(2) in the nine-month comparison increased slightly from
6,115 in the 1996 period to 6,131 in the 1997 period.

The most significant operation expense--cost of gas sold--decreased by
$4,791,000 for the nine-month comparison primarily due to a reduction in the
1997 period of $3,000,000 in gas costs and interest deferred in prior periods
through the CGAC, and $1,800,000 due to a 700,000 Mcf decrease in firm sales
volumes (including special contract volumes).

Depreciation expense increased $370,703, or 24.0%, due to increased depreciation
accrual rates authorized by the MDPU in an order dated October 16, 1996. Other
operation expenses including health benefits, payroll, materials and supplies,
and regulatory commission expense increased by $916,000, or 11.0%.

Total operating expenses, excluding Federal and state income taxes, decreased
8.1% from $40,891,000 to $37,566,000, a decrease of $3,325,000.

Other income increased to $585,000 from $549,000 in the 1996 period, a result of
increased net earnings of the Appliance Company attributable to increased
merchandise sales and appliance rental revenues.

Interest expense increased by $314,000, 24.9%, for the nine month comparison due
to increased interest cost on Long-term Debt related to the issuance of
$7,000,000 of 30 year First Mortgage Bonds with a 7.99% coupon rate, offset by
lower interest cost on reduced short-term borrowings. The proceeds from the
issue were used to reduce the Company's short-term debt.

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

(1) An Mcf is a volumetric measurement of quantity of gas, specifically one
thousand cubic feet. Other volumetric units commonly referenced include
"MMcf", or one thousand Mcf. Quantities of natural gas are also measured in
millions of cubic feet (MMcf) and are measured on a thermal (energy content)
basis. One Mcf is approximately equivalent to one million BTU's ("MMBtu").

(2) A degree day is a means of measuring temperature over some period.
Specifically, the number of degree days is the multiple of the difference
between the lowest number of degrees (Fahrenheit) on a given day and 65 DEG.
Fahrenheit, and the number of days in which the temperature was less than
65 DEG. Fahrenheit.

11
<PAGE>
Net income increased to $1,996,000 during the nine months ended June 30, 1997
compared to $1,800,000 for the same period in 1996. Earnings per share for the
nine months ended June 30, 1997 were $1.12 compared to $1.01 in 1996. Of the
$196,000 increase in net income, $36,000 related to increased income in the
Appliance Company primarily due to increased merchandise sales and appliance
rentals.

FISCAL 1996 VERSUS FISCAL 1995

Gas operating revenues in fiscal 1996 totalled $48,966,000, an increase of 10.2%
over fiscal 1995. Revenues from sales to firm customers increased 12.8% over the
prior year, primarily as a result of higher gas sales due in large part to
weather which was 9.8% colder than the prior year. Included in the increased
revenues was an increase of $3,675,000 in gas costs recovered by the Company's
CGAC. Gas sales volumes to firm customers totalled 6,222,000 Mcf, an increase of
11.8% over fiscal 1995.

Cost of gas sold includes costs for gas operation including supplemental fuels,
such as propane, liquefied natural gas ("LNG"), and storage, which are used to
augment the Company's primary supply of natural gas during periods of peak
usage. The average cost of gas per Mcf in fiscal 1996 and fiscal 1995 was $4.10
and $3.88, respectively. The increase in gas costs was primarily due to colder
temperatures, as higher priced supplemental sources were required to serve
customers' needs.

Other operations expenses increased 14.1% over fiscal 1995, primarily due to
wage increases, escalating health care costs, and inflation.

Taxes, other than Federal income, increased to $807,000 in fiscal 1996, an
increase of 31.3% over fiscal 1995. Increased construction and increases in
local tax rates over the years has resulted in increased property taxes. The
Company's effective local tax rate increased from $19.83 per $1,000 assessed
value in 1995 to $22.08 per $1,000 assessed value in 1996. Federal income taxes
decreased due to lower taxable income.

Other income totalled $791,000 in fiscal 1996, compared to $773,000 in fiscal
1995. This increase is primarily attributable to the increased earnings of the
Appliance Company, to $779,000 in fiscal 1996 from $753,000 in fiscal 1995,
primarily a result of increased rental revenue.

Interest expense in fiscal 1996 was $1,708,000, an increase of 16.9% over 1995.
Increased short-term borrowing for additions to property, plant and equipment
was primarily responsible for this increase. The Company's average daily balance
of short-term credit lines increased to $17,900,000 from $14,586,000, while the
weighted average interest rate decreased to 6.1% from 6.4%. In addition, on
September 20, 1996 the Company issued $7,000,000 of thirty year First Mortgage
Bonds with a 7.99 % coupon rate.

Net income in fiscal 1996 was $1,426,000 compared to $1,616,000 in fiscal 1995.
Earnings per share for fiscal 1996 were $0.80 compared with $0.91 in fiscal
1995.

FISCAL 1995 VERSUS FISCAL 1994

Gas operating revenues totalled $44,418,000 in fiscal 1995, representing an 8.1%
decrease from fiscal 1994. Revenues from sales to firm customers decreased 12.1%
from 1994 because of decreased gas sales due to warmer weather and lower gas
prices, which resulted in a $4,286,000 reduction in gas costs recovered through
the CGAC. Special contract sales, made to certain large customers in place of
bundled tariff sales, totalled $1,853,000 in fiscal 1995 and $248,000 in fiscal
1994, offsetting a portion of the firm gas sales decrease.

The average cost of gas during fiscal 1995 was $3.88 per Mcf compared to $4.86
the prior fiscal year. The decrease in gas costs was primarily due to warmer
weather and consequently less use of higher cost supplemental gas supplies.

Operation expenses decreased by 1.9% during fiscal 1995. Normal wage increases
and inflation in other areas were offset by decreases in the Company's reserve
for bad debts and the cost of health insurance.

Maintenance expense in fiscal 1995 was $1,994,000, an increase of 11.9% over the
prior fiscal year. Expenses related to the Company's distribution system were
primarily responsible for this increase.

12
<PAGE>
Other income in fiscal 1995 was $772,000 a decrease of $42,000 or 5.5% from
fiscal 1994. This decrease was primarily attributable to lower Appliance Company
earnings largely due to decreased merchandise sales.

Interest expense in fiscal 1995 totalled $1,460,000, an increase of 32.7% over
fiscal 1994. During fiscal 1995 the Company's average daily balance of
short-term borrowing increased to $14,586,000 from $13,052,000, and the weighted
average interest rate rose to 6.4% from 4.3%.

Earnings per share for fiscal 1995 were $0.91 compared with $1.40 in fiscal
1994. Net income in fiscal 1995 was $1,616,000 compared to $2,491,000 in fiscal
1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's major capital requirements result from upgrading the efficiency of
existing plant and expanding plant to serve additional customers. Such capital
expenditures are primarily for expansion and improvements of the Company's
distribution system. For the nine months ended June 30, 1997, capital
expenditures totalled approximately $1,800,000. For fiscal 1996, 1995 and 1994,
capital expenditure totals were: $3,780,000, $4,294,000 and $3,711,000,
respectively.

Capital expenditures and accounts receivable balances were financed by
internally generated funds and supplemented by short-term borrowings. During
fiscal 1996 gas cost billings were higher than the Company's cost of gas,
thereby having a positive effect on cash flow of approximately $2,600,000.
Higher gas cost billings also reduced the Company's deferred gas balance to
$200,000 in fiscal 1996 from $2,800,000 in fiscal 1995.

The Company's net cash generated from operating activities in fiscal 1996 was
$1,215,000 compared to $5,507,000 and $6,784,000 in fiscal years 1995 and 1994,
respectively. The Company had capital expenditures for utility and non-utility
operations in the amounts of $4,247,000, $4,883,000, and $4,303,000 in fiscal
years 1996, 1995, and 1994, respectively. As is customary in the utility
industry, cash for construction requirements in excess of internally generated
funds were provided through short-term borrowing that is eventually repaid with
the proceeds of long-term debt as deemed appropriate by management. On September
20, 1996 the Company issued $7,000,000 of thirty year First Mortgage Bonds with
a 7.99 % coupon rate. The proceeds from the issue were used to reduce the
Company's short-term debt.

The Company currently has four short-term credit lines with an aggregate limit
of $25,000,000 at rates based upon prevailing short-term interest rates. At
September 1, 1997 the Company had $15,200,000 of short-term borrowings
outstanding under its lines of credit. After application of funds to be received
from this offering and a proposed issuance of $6,000,000 of First Mortgage Bonds
during the first quarter of fiscal 1998, the Company's remaining outstanding
short-term debt will approximate $5,275,000. The Company believes that
internally generated funds, along with available credit lines, will be adequate
to meet its capital requirements over the next fiscal year.

Cash flow patterns reflect the seasonality of the Company's business. Sales of
natural gas are seasonal, generating approximately seventy percent of the
Company's annual revenues between November 1 and March 31. The greatest demand
for cash is in the late fall and winter as construction projects are brought to
completion and accounts receivable balances rise. See "Management's Discussion
and Analysis-- Seasonality".

The Company anticipates utility construction expenditures over the next fiscal
year to be approximately $3,000,000 and non-utility capital expenditures to be
approximately $450,000 over the same period. The Company expects that funds for
these capital needs will come from internal cash generation and short-term
borrowings. See "Use of Proceeds".

13
<PAGE>
BUSINESS

GENERAL

The Company, organized as a Massachusetts corporation on September 25, 1880, is
an investor-owned public utility company that sells, distributes and transports
natural gas (mixed with propane and liquefied natural gas during winter months)
at retail through a pipeline distribution system in the City of Fall River and
the towns of Somerset, Swansea and Westport, all located within the southeastern
portion of the Commonwealth of Massachusetts. The principal markets served by
the Company are (1) residential customers using gas for heating, cooking and
water heating, (2) industrial customers using gas for processing items such as
textile and metal goods, (3) commercial customers using gas for cooking and
heating, and (4) federal and state housing projects using gas for heating,
cooking and water heating.

The Company is engaged in only one line of business as described above, and in
activities incidental thereto. The Company has one wholly-owned subsidiary, Fall
River Gas Appliance Company, Inc., a Massachusetts corporation, which rents
water heaters and conversion burners (primarily for residential use) in the
Company's gas service area. Earnings from the Appliance Company are primarily
the result of revenues from the rental of water heaters and conversion burners.
As of June 30, 1997, the water heater program had 14,830 rentals in service and
the conversion burner program had 4,746 rentals in service. The Appliance
Company also derives revenues from the sale of central heating and
air-conditioning systems and water heaters.

SALES AND TRANSPORTATION

The Company's service territory is approximately 50 square miles in the area
surrounding the City of Fall River, Massachusetts. The Company had an average of
47,427 sales customers during the nine months ended June 30, 1997, of which
approximately 94% were residential and 6% were commercial and industrial. For
the nine months ended June 30, 1997 approximately 71% of the Company's gas
operating revenues were derived from sales to residential customers and 29% were
derived from sales or transportation to commercial and industrial customers. At
June 30, 1997 the Company had 10 commercial and industrial transportation
customers, which, in the aggregate, accounted for 21% of the total gas carried
over the Company's pipeline system ("throughput") and approximately 3% of gas
operating revenues for the nine months ended June 30, 1997. The Company's
tariffs currently do not allow for residential transportation service. The
Company's residential customers take service only under firm sales tariffs and
use natural gas for heating, cooking and water heating, of which heating use
constitutes most of such consumption. Commercial customers (such as stores,
restaurants and offices) generally use gas for cooking and heating. Under
currently effective tariffs, commercial customers may take the Company's
transportation service and purchase their own gas. At this time, however, most
commercial customers take firm sales service from the Company. Industrial
customers primarily use natural gas in manufacturing and processing
applications, such as for metal or textile goods. Such firm industrial sales and
transportation load is fairly level throughout the year because generally a
small part of those customers' usage is for heating. Certain of the Company's
industrial customers also take interruptible service-- either on a sales or
transportation basis. These customers are subject to service discontinuance on
short notice as system firm requirements may demand. Such customers generally
use interruptible natural gas service for boiler or plant heating and are able
to change to an alternate fuel when there are supply constraints (generally
during the heating season). Also, the prices of alternative sources of energy
impact the interruptible markets. Prices for these customers are based on the
price of the customers' alternative fuel.

14
<PAGE>
The following table shows the Company's throughput during each of the periods
shown below in millions of cubic feet ("MMcf"):
<TABLE>
<CAPTION>
FOR THE NINE FOR THE FISCAL
MONTHS ENDED YEAR ENDED
JUNE 30, SEPTEMBER 30,
---------------------- ------------------------------------------
1997 1996 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Residential........................................... 3,779 4,046 4,351 3,858 4,309 4,212
Commercial............................................ 1,276 1,334 1,454 1,262 1,327 1,250
Industrial--- firm.................................... 335 369 418 443 850 1,041
Industrial----interruptible........................... 5 46 71 430 317 350
Special Contracts..................................... 0 414 498 441 78 0
Transportation........................................ 1,394 690 1,101 818 716 514
----- --------- --------- --------- --------- ---------
TOTAL................................................. 6,789 6,899 7,893 7,252 7,597 7,367
----- --------- --------- --------- --------- ---------
----- --------- --------- --------- --------- ---------

<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
---------------
1992
---------------
<S> <C>
Residential........................................... 3,230
Commercial............................................ 928
Industrial--- firm.................................... 790
Industrial----interruptible........................... 369
Special Contracts..................................... 0
Transportation........................................ 303
-----
TOTAL................................................. 5,620
-----
-----
</TABLE>

The Company's utility sales business is seasonal. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Seasonality".

RATES AND REGULATION

The Company is subject to the regulatory authority of the MDPU with respect to
various matters, including the rates it charges for services, financings,
certain gas supply contracts and planning and safety matters.

The Company's principal firm sales rate classifications are residential,
commercial and industrial. The Company also provides transportation service and,
from time to time subject to specific MDPU approval, may provide service under
special contracts. As of September 1, 1997, the Company had no special
contracts. The Company's rate structure is based on the cost of providing
service to each class of customer. The Company's firm rate structure is based on
generally seasonal rates, whereby base rates are higher in the winter (November
through April) and lower in the summer (May through October). In addition to its
base rates, the Company has a seasonal cost of gas adjustment rate schedule (the
"CGAC"), which provides for the recovery from firm customers of all purchased
gas costs. Through the CGAC, the Company also imposes charges, subject to MDPU
approval, that are estimated semi-annually and include credits for gas pipeline
refunds and profit margins applicable to interruptible sales. Actual gas costs
are reconciled annually and any difference is included as an adjustment in the
calculation of the CGAC charges for the two subsequent six-month periods.
Charges under the CGAC rate schedule are added to the base rates and are
designed generally to recover higher costs in the winter and refund lower gas
costs in the summer. Pursuant to MDPU approvals, the Company has collected all
FERC Order 636 transition costs billed to it (constituting most of its total
exposure to such costs) and is collecting the remaining FERC Order 636
transition costs from its customers through the CGAC on a current basis, as
billed.

On May 17, 1996 the Company filed revised tariffs with the MDPU to unbundle its
commercial and industrial service classes and to increase annual revenues. By
order dated October 16, 1996, the MDPU authorized the Company to increase its
rates for sales of gas effective December 1, 1996. The amount of this increase
on an annualized basis was $3,200,000. That MDPU order also approved various
changes to the Company's commercial and industrial rates to facilitate the
ability of customers on such rates to choose between purchasing their gas
supplies from the Company on a "bundled" basis or purchasing from third parties
and having the Company transport and deliver such supplies. Such rates were also
designed to make the Company economically indifferent to a customer's choice of
bundled sales service or transportation service.

The regulation of prices, terms and conditions of interstate pipeline
transportation and sales of natural gas is subject to the jurisdiction of the
Federal Energy Regulatory Commission ("FERC"). Although the

15
<PAGE>
Company is not under the direct jurisdiction of FERC, the Company monitors, and
periodically participates in, proceedings before FERC that affect the Company's
pipeline gas transporters, the Company's operations and other matters pertinent
to the Company's business.

The Company is also subject to standards prescribed by the Secretary of
Transportation under the Natural Gas Pipeline Safety Act of 1968 with respect to
the design, installation, testing, construction and maintenance of pipeline
facilities. The enforcement of these standards has been delegated to the MDPU.

GAS SUPPLY AND STORAGE

For several decades, until 1993, the Company primarily relied upon a single
supplier, Algonquin Gas Transmission Company ("Algonquin"), for its gas supply
needs. In its merchant role, Algonquin provided all the Company's
pipeline-supplied natural gas and storage, as well as transported such pipeline
and storage supplies to the Company's system. This supply paradigm changed,
however, in 1993 following FERC's issuance of Order 636. Order 636 was intended
to encourage more competition among natural gas suppliers and required
interstate pipelines to unbundle or separate gas sales, transportation and
storage services. With the implementation of Order 636, most pipeline companies
(including Algonquin) discontinued their traditional merchant function. Order
636 allowed pipeline companies to recover from their customers, gas distribution
companies such as the Company, costs associated with the service unbundling and
discontinuation of merchant service. This resulted in each local distribution
company becoming responsible for obtaining all of its gas supply in the open
market. While unbundling of these services allows a local distribution company,
such as the Company, more flexibility in selecting and managing the type of
services required to provide its customers with the lowest possible priced gas
while maintaining a reliable gas supply, it also places additional
responsibility on a distribution company to obtain its natural gas supply in the
open market on a timely basis to fulfill commitments during peak demand periods.

With the advent of FERC Order 636, which was implemented on June 1, 1993, the
Company assumed the full responsibility for aggregating, gathering and arranging
for the transmission of all required pipeline gas supplies to its distribution
system.

The pipelines serving the Company, Algonquin and its affiliate Texas Eastern
Transmission Company ("Texas Eastern"), have made the required compliance
filings of tariff sheets and have fully implemented the provisions of Order 636.
The primary related issue of the billing by Algonquin and Texas Eastern of
transition costs has been resolved. The Company has made appropriate
arrangements for supplies to replace the sales service formerly provided by
Algonquin, or "Conversion Supplies").

The Company is required to obtain the approval of the MDPU for gas supplies that
are to be purchased over a period in excess of one year, including any
Conversion Supplies. Through its arrangements for the Conversion Supplies, the
Company has contracted for a "city gate management service", which includes the
provision of transportation, sales and storage services by a third party. The
Company expects to maintain reliability and flexibility of service through this
arrangement at a cost very competitive with any other combination of unbundled
services, but with much less administrative risk and costs than would pertain to
alternatives. Approximately 90% of the Company's Conversion Supplies are
provided under a multi-year contract with CNG Energy Services Corporation
("CNG") in quantities described below. In June 1995, the MDPU approved the
Company's contract with CNG. The Company also has short-term arrangements in
place for supplemental supplies for the 1997-1998 winter heating season. The
Company is currently analyzing the proper amount of such supply for future
years.

The Company has contracted with CNG for the purchase of all pipeline commodity
supplies for delivery to the Company's distribution system, as well as storage
services, management of Company-owned pipeline and storage capacity and
provision of significant amounts of back-up deliveries from a different gas
production area. CNG's firm, year-round contract deliveries to the Company
provide for an annual contract quantity of 5,219,255 Mcf delivered to the
Company's facilities ("City Gate") on a 365--day basis and for deliveries into
storage for the Company in an annual amount of 841,355 Mcf. The maximum daily

16
<PAGE>
quantity ("MDQ") of City Gate deliveries are 17,461 Mcf and the storage MDQ is
11,441 Mcf with 7,124 Mcf of that total MDQ available for City Gate deliveries
from November 16 through April 15 as winter service supplies delivered via
Algonquin.

The remainder of the MDQ is available each day of the year. All commodity
deliveries are priced at an index price reflective of the market price. This
type of pricing mechanism is designed to allow the Company to obtain its gas
supply at competitive prices. The CNG supply contract includes a mechanism
whereby alternative market indices may be used in conjunction with the futures
market to fix the price of all or part of the gas supplied if the market is such
that additional price security is deemed prudent. The CNG contract commenced on
June 1, 1993 and continues for 6 years.

In addition to the supplemental gas supplies described below, the Company has
requirements for a supply of approximately 1,328,000 Mcf during the 1997-1998
heating season (November through March). To fulfill this portion of its supply
portfolio, the Company has obtained bids from several potential suppliers and
has entered into a supply contract with a term encompassing that period with
Distrigas of Massachusetts Corporation. ("DOMAC")

The Company has a renewable one-year Firm Liquid Contract with DOMAC for 225,000
MMBTU of liquefied natural gas ("LNG"), to be delivered by truck to the
Company's storage tank for use in "peak shaving" operations which supplement
pipeline volumes in peak requirement situations.

In addition to the LNG peak shaving facilities, the Company also maintains
storage and send out facilities for liquefied propane gas ("LPG") that provide
an additional 88,000 MMBTU of sendout capacity when needed. The Company's
projected peak day requirements are 63,800 Mcf for the 1997-1998 heating season
compared to the Company's peak day capacity of 64,859 Mcf.

The Company's peak day capacity is comprised of 29,859 Mcf of pipeline
deliveries pursuant to the CNG contracts to the City Gate; 9,000 Mcf of DOMAC
gas, delivered by pipeline; vaporization of Company stored liquid propane ("LP")
into gas for injection (all by Company-owned equipment) into the Company's
distribution system in daily amounts of about 6,000 Mcf; and vaporization of
Company-stored LNG and injection into the distribution system in daily amounts
of about 20,000 Mcf.

COMPETITION

Historically, the Company was not subject to competition from any other gas
public utility or gas marketers, but rather only from electricity, oil, coal and
other fuels for heating, water heating, cooking, air conditioning and other
purposes. The principal considerations in the competition between the Company
and other suppliers of fuel or energy include price, equipment operational
efficiencies and ease of delivery. In addition, the type of equipment already
installed in the businesses and residences significantly affects the customer's
choice of fuel or energy source.

The price of natural gas currently compares favorably to electricity but is
generally higher than fuel oil, especially the grade of oil used by certain
commercial and industrial customers. As price is generally considered the most
significant factor affecting competition among the various energy sources, there
is always uncertainty in the continuing competition among such energy sources,
due to variations in price. Equipment operational efficiencies and ease of
delivery give natural gas advantages over oil and also makes natural gas
comparable to electricity in these respects. Because of the environmental
advantages associated with natural gas and the efficiency and security of its
supply, the demand for natural gas is expected to continue to increase. Also,
manufacturing, processing and other equipment requirements are such that the use
of gas rather than another fuel is virtually a necessity for certain large
commercial and industrial customers. Heating, water heating and other domestic
or commercial equipment is generally designed for a particular energy source,
and especially with respect to heating equipment, the cost of conversion is a
disincentive for individuals and businesses to change their energy source.
Currently, the

17
<PAGE>
Company estimates that its gas heating saturation in areas in which it has been
in active service is approximately 89%.

While the Company has been subject to competition from electricity, oil,
propane, coal and other fuels, the regulatory changes brought about by Order 636
have created competition among existing and new suppliers or brokers of natural
gas. Also, regulatory changes at the state level have led to increased
competition in retail sales of natural gas. As a result, marketers are currently
selling natural gas to several large volume end-users to whom the Company has
historically made sales. Marketers can be expected to seek to provide an
increasing volume of sales services to end-users located within the Company's
service territory. At the current time, for all third-party commodity sales that
are occurring in the Company's service territory, the Company transports those
gas supplies within the Company's service territory and delivers the supplies to
the customers. The margins earned by the Company for such transportation
services are the same as margins earned on bundled supply/delivery sales to the
same end-users. Similar opportunities may exist for the Company to broker gas to
new or existing customers, whether or not located within the Company's service
territory, although the Company has not done so to date.

For all of these reasons, the Company believes that competition from other fuel
sources, as well as from natural gas brokers and marketers, will intensify in
the future.

LEGAL PROCEEDINGS/ENVIRONMENTAL MATTERS

In January 1990 the Company received notification from the Massachusetts
Department of Environmental Protection ("DEP") that it is one of numerous
"potentially responsible parties" under Massachusetts laws in connection with
two sites in Massachusetts which were the subject of alleged releases of
hazardous materials, including lead, by a company which had purchased scrap
meters from various utilities including the Company. The Company has entered
into an agreement with a group of other potentially responsible parties ( the
"Group") to respond jointly and to share costs associated with the DEP's
investigation. The Group negotiated an agreement with the DEP to conduct limited
response actions at one of the sites without admission of liability at a cost of
about $100,000 to the entire Group, pursuant to which members of the Group would
be released from any further liability at the site. Remedial actions were
commenced September 5, 1995 and are substantially complete, subject to final DEP
approval of the action taken. The investigation of the second site is in the
early stages and potential remediation costs at the second site and the
Company's degree of responsibility have not been determined. The Company does
not expect its allocated share of costs of response actions at the first site or
of any response actions which it may take or which may be required at the second
site to be significant.

Although the Company is not involved in any material litigation at this time, it
may from time to time be involved in litigation in the ordinary course of its
business.

PROPERTIES

The Company owns approximately 635 miles of distribution mains, the major
portion of which are constructed of coated steel, plastic or cast iron. The
Company owns and operates LP vaporizing equipment with an approximate daily
capacity of 14,000 Mcf and six LP storage tanks with a total capacity of
approximately 320,000 gallons. The Company also owns and operates an LNG storage
tank with a capacity of 45,000 barrels, equivalent to approximately 157,000 Mcf
of vaporized gas, as well as and LNG vaporization equipment with a daily
vaporization rate of approximately 20,000 Mcf. The Company has three gate
stations receiving gas from the Algonquin pipeline. The Company also owns four
office and operations buildings in the service area.

All of the principal properties of the Company are owned in fee, subject to the
lien of the mortgage securing the Company's First Mortgage Bonds (the "Indenture
of First Mortgage"), and further subject to covenants, restrictions, easements,
leases, rights-of-way and other similar minor encumbrances common to properties
of comparable size and character, and none of which, in the opinion of the
Company's

18
<PAGE>
management, materially interferes with the Company's use of its properties for
the conduct of its business. The Company's gas mains are primarily located under
public highways and streets. Where they are under private property, the Company
has obtained easements or rights-of-way from the record holders of title. These
easements and rights are deemed by the Company to be adequate for the purpose
for which they are being used.

EMPLOYEES

The Company employed 172 full-time and 12 part-time employees as of June 30,
1997. Of those employees, 75 are represented by the Utility Workers Union of
America, AFL-CIO, Local No. 431. The Company and its union employees currently
have a contract through April 30, 1999. The Company believes that it enjoys
generally good labor relations.

19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September 1,
1997 by (i) each shareholder who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) each of the Company's directors, (iii)
each of the Company's executive officers and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power with
respect such shares, subject to community property laws where applicable.

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT
NAME OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED(1) CLASS
- ----------------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Barbara N. Jarabek........................................................... 295,710(2) 16.5 %
Ronald J. Ferris............................................................. 145,059(3) 8.1
Cindy L.J. Audette........................................................... 13,910(4) *
Thomas K. Barry.............................................................. 1,200 *
Thomas H. Bilodeau, Jr....................................................... 7,746(5) *
John F. Fanning.............................................................. 0 *
Bradford J. Faxon............................................................ 40,306(6) 2.3
Raymond H. Faxon............................................................. 57,370(7) 3.2
Wallace E. Fletcher.......................................................... 0 *
Jack R. McCormick............................................................ 4,754(8) *
Gilbert C. Oliveira, Jr...................................................... 12,529(9) *
Donald R. Patnode............................................................ 1,750 *
Robert J. Pollock............................................................ 5,140 *
Peter H. Thanas.............................................................. 2,699(10) *
All directors and executive officers as a group (13 persons) 292,463 16.33
</TABLE>

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

* Less than one percent.

(1) As used herein, "beneficial ownership" means direct or indirect, sole or
shared power to vote, or to direct the voting of, and/or investment power to
dispose of, or to direct the disposition of, shares of the Common Stock of
the Company. Except as otherwise indicated, the listed beneficial owners
hold direct and sole voting and investment power with respect to the stated
shares.

(2) The address of Mrs. Jarabek is 103 South Washington Drive, Sarasota,
Florida. Consists of shares held in two trusts for which Barbara N. Jarabek
is trustee, and with respect to which Mrs. Jarabek possesses sole power to
vote and sole investment power.

(3) The business address of Mr. Ferris is c/o Venus De Milo, Inc. (a restaurant
banquet facility), 75 GAR Highway, Swansea, Massachusetts. Includes 5,852
shares owned jointly with Dale Ferris, 4,000 shares owned jointly with
children of Mr. Ferris, 36,990 shares owned by Lee's River Realty, Inc.,
3,926 shares held in trusts for the children of Mr. Ferris, and 53,594
shares owned by the Swansea Lounge, Inc. Pension Trust for which Mr. Ferris
is a co-trustee. Mr. Ferris has shared voting and investment power with
respect to all shares beneficially owned by him except for 40,697 shares
owned directly and of record by him, with respect to which he has sole
voting and investment power. Mr. Ferris disclaims beneficial ownership with
respect to the 3,926 shares held in trust for his children and the 53,594
shares owned by the Swansea Lounge, Inc. Pension Trust.

(4) Includes 660 shares held jointly with spouse (with shared voting and
investment power).

(5) Includes 7,746 shares held in trust for Thomas H. Bilodeau's children.

(6) Includes 5,233 shares held as custodian for Bradford J. Faxon's children.

(7) Comprised of 57,370 shares held in trust, for which Raymond H. Faxon is a
trustee.

(8) Includes 1,154 shares held jointly with spouse (with shared voting and
investment power).

(9) Comprised of 12,529 shares held by Mr. Oliveira's spouse as custodian for a
minor child of Mr. Oliveira.

(10) Includes 936 shares held jointly with spouse (with shared voting and
investment power).

20
<PAGE>
MANAGEMENT

All officers are either elected or appointed at the Directors' Meeting following
the annual Stockholders' meeting. Their terms of office are to be for one year
or until their successors have been duly elected or appointed.

DIRECTORS

Cindy L. J. Audette, 35, A Director since 1992. Chair of the Compensation
Committee and member of the Audit and Executive Committees. Sister-in-law of
Gilbert C. Oliveira, Jr., a Director of the Company.

Thomas K. Barry, 52, President and Chief Executive Officer of Corning Natural
Gas Corporation since 1984. A Director since 1992. Member of the Audit
Committee. Director also of Corning Natural Gas Corporation.

Thomas H. Bilodeau, 55, Vice President-Finance, Medical & Environmental Coolers,
Inc., a medical equipment provider since 1990; formerly, Partner, R. A. Kingrey
Co., 1988-1990. A Director since 1987. Member of the Pension Committee. Director
also of Corning Natural Gas Corporation.

Bradford J. Faxon, 59, Chairman of the Board of Directors, President and a
Director of the Company. His current business function is Chief Executive
Officer. Positions held with the Company for the past five years are as follows:
12/1/78 to Present--Director; 8/1/86 to Present--President; 1/1/94 to Present--
Chairman of the Board of Directors. He is the son of Raymond H. Faxon. His
principal occupation for the past five years has been employment with the
Company. Chairman of the Pension Committee and a member of both the Audit and
Executive Committees.

Raymond H. Faxon, 89, Vice Chairman of the Board of Directors and Assistant
Treasurer of the Company. Positions held for the past five years are as follows:
1/1/88 - 12/31/93--Chairman of the Board of Directors and Assistant Treasurer;
1/1/94 to Present--Vice Chairman of the Board of Directors and Assistant
Treasurer. His principal occupation for the past five years has been employment
with the Company. Chairman of the Executive Committee and a member of the
Pension Committee. Mr. Faxon is the father of Bradford J. Faxon.

Ronald J. Ferris, 55, President of Venus de Milo, Inc., a restaurant banquet
facility, Interstate Motel Corp. and Ferris Realty since prior to 1988. A
Director since 1984. A member of both the Pension and Compensation Committees.

Jack R. McCormick, 73, financial consultant to the Company. Previously served as
President of the Company, 1973-1986. A Director since 1974. Chairman of the
Audit Committee and a member of the Compensation Committee. Director also of
Corning Natural Gas Corporation.

Gilbert C. Oliveira, Jr., 41, Vice President, Gilbert C. Oliveira Insurance
Agency, and President, G. Curt Oliveira Insurance Agency since 1988. A Director
since 1992. Member of the Pension and Compensation Committees. Brother-in-law of
Cindy L. J. Audette, a Director of the Company.

Donald R. Patnode, 69, Retired. Formerly, Business Consultant; President of
Industrial Filters & Equipment Corporation, 1989-1994; President of North East
Water Service, 1957-1989. A Director since 1984. A member of both the Audit and
Executive Committees. Director also of Corning Natural Gas Corporation.

EXECUTIVE OFFICERS:

Peter H. Thanas, 53, Senior Vice President and Treasurer of the Company. His
current business function is Chief Financial and Accounting Officer of the
Company. Positions held for the past five years are as follows: 8/ 1/86 to
9/19/94--Financial Vice President and Treasurer; 9/20/94 to Present--Senior Vice
President and Treasurer.

21
<PAGE>
John F. Fanning, 50, Vice President of Production and Gas Supply. His current
business function is Vice President of Production and Gas Supply of the Company.
Positions held with the Company for the past five years are as follows: 7/ 1/87
- -12/31/89--Manager of Gas Supply; 1/ 1/90 - 9/20/93--Superintendent of
Production and Gas Supply; 9/21/93 to Present--Vice President of Production and
Gas Supply.

Wallace E. Fletcher, 63, Comptroller and Assistant Treasurer. His current
business function is Comptroller and Assistant Treasurer of the Company.
Positions held with the Registrant for the past five years are as follows:
5/27/92 to Present--Comptroller and Assistant Treasurer.

22
<PAGE>
DESCRIPTION OF CAPITAL STOCK

As of June 30, 1997 the authorized capital stock of the Company consisted of
2,201,334 shares of Common Stock, $0.83 1/3 par value, of which 1,787,261 were
issued and outstanding, and 414,073 shares were held in the Company's treasury.
All of the shares being offered hereby will be issued directly from the
Company's treasury.

DIVIDEND RIGHTS

The holders of Common Stock shall be entitled to receive such dividends as may
be declared by the Board of Directors. The Company currently intends to continue
its practice of declaring cash dividends on a quarterly basis, although the
declaration and amount of any future dividends will necessarily depend upon
future earnings, cash flow, the financial condition of the Company and other
factors.

LIMITATION ON PAYMENT OF DIVIDENDS ON COMMON STOCK

The provisions of the Indenture impose certain restrictions on the payment of
cash dividends on, or repurchases of, Common Stock. Under the most restrictive
of these provisions, $4,426,791 of retained earnings was unrestricted at June
30, 1997.

VOTING RIGHTS

Except as provided by law or otherwise provided below, the holders of Common
Stock have the sole voting rights and are entitled to one vote for each share
held of record. In addition, holders of fractional shares are permitted a vote
equal to their fractional interest. The Company's Board of Directors is
classified into three classes of three directors serving staggered three-year
terms. Because there are no cumulative voting rights in the election of
directors, holders of a majority of the Common Stock voting at any election can
elect the three directors of the class whose term then expires.

The Company's Charter and By-laws contain provisions specifying the shareholder
vote necessary to take certain actions. The approval of a business combination
(e.g. a consolidation or merger with another corporation) not approved by
two-thirds vote of the Board of Directors requires an affirmative vote of 75%
the outstanding shares of Common Stock. The approval of Charter amendments
removing or altering the foregoing provision and provisions concerning
classification of directors, filling vacancies in the Board of Directors and
notice requirements for stockholder meetings requires an affirmed vote of 75% of
the outstanding shares of Common Stock.

LIQUIDATION RIGHTS

The Common Stock is entitled to receive all net assets in liquidation after
repayment of the Company's indebtedness.

CHARTER PROVISIONS THAT MAY AFFECT ATTEMPTS TO CHANGE CONTROL OF THE COMPANY

The Company's Charter and By-Laws contain provisions that may have the effect of
delaying or deterring a change in control of the Company by requiring a vote of
the holders of 75% of outstanding shares of the Company's Common Stock for
approval of certain business combinations of the Company and another entity,
which the Company's Board of Directors has not approved by a two-thirds vote.
Other provisions concerning classification of the Board, filling vacancies on
the Board and notice requirements may have such an effect, but those provisions
operate regardless of whether or not extraordinary corporate transactions are
proposed.

MISCELLANEOUS

The Common Stock has no conversion rights and is not subject to redemption. The
outstanding shares of Common Stock are, and the shares offered hereby, will,
when issued and paid for, be fully paid and non-assessable.

The transfer agent of the Company's Common Stock is State Street Bank and Trust
Company, Boston, Massachusetts.

23
<PAGE>
UNDERWRITING

The underwriters of this offering of Common Stock (the "Underwriters"), for whom
First Albany Corporation ("First Albany") is serving as representative (the
"Representative"), have agreed, severally and not jointly, subject to the terms
and conditions of the Underwriting Agreement (the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part) to
purchase, and the Company has agreed to sell to them, the number of shares of
Common Stock set forth opposite their respective names below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ---------------------------------------------------------------------------- ----------------
<S> <C>
First Albany Corporation

-------
Total....................................................................... 340,000
-------
-------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters to
purchase shares of Common Stock are subject to certain conditions, and that if
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all shares of Common Stock agreed to be purchased by
the Underwriters pursuant to the Underwriting Agreement must be so purchased.
The Company has been advised that the Underwriters propose to offer the shares
of Common Stock directly to the public initially at the initial public offering
price set forth on the cover page of this Prospectus, and to certain selected
dealers (who may include the Underwriters) at such public offering price less a
concession not in excess of $. per share. The Underwriters may allow, and the
selected dealers may reallow, a concession not in excess of $. per share to
certain other brokers and dealers. After the initial public offering, the public
offering price, the concession to selected dealers and the reallowance to other
dealers may be changed by the Underwriters.

The Company has granted to the Underwriters an option to purchase up to an
additional 51,000 shares of Common Stock, at the public offering price, less the
underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any, made in connection with
this offering. The option may be exercised at any time up to 30 days after the
date of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, severally and not jointly,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment. As to additional shares
purchased by the Underwriters to cover over-allotments, the Company has agreed
to reimburse the Underwriters in an amount equal to the $.24 per share dividend
declared on the Common Stock which is anticipated to be paid on November 15,
1997, to the extent such additional shares are delivered to the Underwriters
subsequent to the anticipated record date (November 5, 1997) for such dividend.
In addition, the Underwriting Agreement provides for a payment by the Company of
the $50,000 non-accountable expense allowance to the Representative.

In connection with the offering, the rules of the Commission permit the
Representative to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in connection
with the offering, i.e., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus, the Representative may reduce that
short position by purchasing Common Stock in the open market. The

24
<PAGE>
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. The Representative may also
impose a penalty bid on certain Underwriters and selling group members. This
means that if the Representative purchases shares of Common Stock in the open
market to reduce the Underwriters' short position or to stabilize the price of
the Common Stock, they may reclaim the amount of the selling concession from the
selling group members who sold those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither the Company nor the Underwriters
make any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company nor the Underwriters make any
representation that the Representative will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.

All of the executive officers, directors and principal shareholders of the
Company have agreed that for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of the
Representative: (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, sell any right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities were then owned or are acquired after the date of such agreement) or
(2) enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction is described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The Company has also agreed to the foregoing, except that the Company
may continue to sell shares of Common Stock directly to its shareholders, in
accordance with the Share Owner Dividend Reinvestment and Stock Purchase Plan.

The Representative has been retained by the Company to act as placement agent in
connection with the Company's private placement of $6,000,000 aggregate
principal amount of First Mortgage Bonds expected to be issued during the first
quarter of the Company's 1998 fiscal year and will receive compensation
therefor.

LEGAL OPINIONS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Rich, May, Bilodeau & Flaherty, P.C., Boston, Massachusetts. Certain
legal matters will be passed upon for the Underwriter by Chapman and Cutler,
Chicago, Illinois, counsel to the Underwriters. Chapman and Cutler will rely
upon the opinion of Rich, May, Bilodeau & Flaherty, P.C. as to all matters
governed by the law of the Commonwealth of Massachusetts.

EXPERTS

The audited financial statements and schedules of the Company included in this
Prospectus and elsewhere in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon their
authority as experts in accounting and auditing in giving said reports.

25
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE

<S> <C>
Report of Independent Auditors............................................................................. F-2

Consolidated Statements of Income and Retained Earnings for the Nine-Months Ended June 30, 1997 and 1996
and the three years ended September 30, 1996.............................................................. F-3

Consolidated Balance Sheets at June 30, 1997 and September 30, 1996 and 1995............................... F-4

Consolidated Statements of Cash Flows for the Nine-Months Ended June 30, 1997 and 1996 and the three years
ended September 30, 1996.................................................................................. F-5

Notes to Financial Statements.............................................................................. F-6
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Fall River Gas Company:

We have audited the accompanying consolidated balance sheets of FALL RIVER GAS
COMPANY (a Massachusetts corporation) and subsidiary as of September 30, 1996
and 1995 and the related consolidated statements of income, retained earnings
and cash flows for each of the three years in the period ended September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fall River Gas Company and
subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting principles.

[LOGO]

Boston, Massachusetts

November 19, 1996

F-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME

FALL RIVER GAS COMPANY AND SUBSIDIARY

FOR THE 9-MONTH PERIODS ENDED JUNE 30, 1997 AND

1996 AND THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30
----------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(unaudited)
GAS OPERATING REVENUES (Note 1)............... $41,353,963 $44,140,731 $48,965,547 $44,418,114 $48,330,933

OPERATING EXPENSES:
Operations --
Cost of gas sold (Note 1)................. 23,810,156 28,600,804 31,132,828 28,097,557 31,161,990
Other..................................... 9,132,313 8,216,575 10,268,772 8,998,223 9,170,829
Maintenance................................. 1,560,588 1,463,226 1,987,782 1,994,445 1,781,601
Depreciation (Note 1)....................... 1,886,094 1,515,391 1,608,641 1,498,948 1,391,981
Taxes --
Local property and other.................. 1,321,526 1,225,033 1,283,389 1,052,756 1,058,539
Federal and state income (Note 4)......... 678,394 607,171 341,432 471,421 988,466
---------- ---------- ---------- ---------- ----------
38,389,071 41,628,200 46,622,844 42,113,350 45,553,406
---------- ---------- ---------- ---------- ----------
OPERATING INCOME.............................. 2,964,892 2,512,531 2,342,703 2,304,764 2,777,527

OTHER INCOME (EXPENSE):
Earnings of Fall River Gas Appliance Company
Inc. (Note 3)............................. 585,431 549,481 778,813 752,913 799,326
Interest income............................. 14,489 15,059 15,944
Other....................................... 21,066 (613) (2,505) 4,397 (417)
---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST EXPENSE................ 3,571,389 3,061,399 3,133,500 3,077,133 3,592,380
---------- ---------- ---------- ---------- ----------
INTEREST EXPENSE:
Long-term debt............................ 879,675 514,450 683,387 697,600 711,163
Other..................................... 695,981 747,157 1,024,405 763,327 390,117
---------- ---------- ---------- ---------- ----------
1,575,656 1,261,607 1,707,792 1,460,927 1,101,280
---------- ---------- ---------- ---------- ----------
NET INCOME.................................... $1,995,733 $1,799,792 $1,425,708 $1,616,206 $2,491,100
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(Note 2).................................... 1,783,547 1,780,542 1,780,542 1,780,542 1,780,542
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
EARNINGS PER AVERAGE COMMON SHARE (Note 2).... $ 1.12 $ 1.01 $ 0.80 $ 0.91 $ 1.40
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

FOR THE 9-MONTH PERIODS ENDED JUNE 30, 1997 AND

1996 AND THE YEARS ENDED SEPTEMBER 30, 1996,

1995, AND 1994

<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30
----------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(unaudited)
BALANCE AT BEGINNING OF PERIOD................ $10,865,648 11,149,260 $11,149,260 $11,242,375 $10,496,206
Net Income.................................... 1,995,731 1,799,792 1,425,708 1,616,206 2,491,100
---------- ---------- ---------- ---------- ----------
Total................................... 12,861,379 12,949,052 12,574,968 12,858,581 12,987,306
Dividends declared............................ 1,285,328 1,281,990 1,709,320 1,709,321 1,744,931
---------- ---------- ---------- ---------- ----------
BALANCE AT END OF PERIOD...................... $11,576,051 11,667,062 $10,865,648 $11,149,260 $11,242,375
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS

FALL RIVER GAS COMPANY AND SUBSIDIARY

JUNE 30, 1997 AND SEPTEMBER 30, 1996 AND 1995

<TABLE>
<CAPTION>
JUNE
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS (unaudited)

PROPERTY, PLANT AND EQUIPMENT, at original cost:
Gas...................................................................... $57,786,995 $56,156,164 $52,770,211
Nonutility, principally rented gas appliances............................ 5,014,220 4,911,102 4,852,644
---------- ---------- ----------
62,801,215 61,067,266 57,622,855
Less-Accumulated depreciation (Note 1)................................... 21,145,050 19,651,954 18,801,699
---------- ---------- ----------
41,656,165 41,415,312 38,821,156
CURRENT ASSETS:
Cash..................................................................... 436,524 393,935 315,309
Accounts receivable, less allowance for doubtful account of $1,101,000,
$670,000, $687,000 in 1997, 1996 and 1995 respectively................. 3,411,843 2,676,322 2,159,170
Inventories, at average cost --
Liquefied natural gas, propane, and natural gas in storage............... 2,358,402 3,242,688 2,754,655
Materials and supplies................................................. 1,351,573 1,387,077 1,386,242
Deferred gas costs (Note 1)............................................ (835,193) 201,265 2,808,882
Prepaid and Deferred Taxes............................................. 252,243 555,983 0
Prepayments and other.................................................. 676,719 630,938 510,001
---------- ---------- ----------
7,652,111 9,088,208 9,934,259
---------- ---------- ----------
DEFERRED CHARGES:
Regulatory asset (Notes 1 and 7)......................................... 600,775 1,204,420 771,853
Other.................................................................... 1,742,018 1,483,213 1,429,239
---------- ---------- ----------
2,342,793 2,687,633 2,201,092
---------- ---------- ----------
$51,651,069 $53,191,153 $50,956,507
---------- ---------- ----------
---------- ---------- ----------
CAPITALIZATION:
Stockholders' investment
Common stock, par value $.83- 1/3 per share, 2,201,334 shares authorized
and issued (Note 2).................................................... $1,834,445 $1,834,445 $1,834,445
Premium paid-in on common stock.......................................... 1,440,511 1,356,043 1,356,043
Retained earnings (Note 5)............................................... 11,576,051 10,865,648 11,149,260
---------- ---------- ----------
14,851,007 14,056,136 14,339,748
Less--420,792 shares in 1996 and 1995 of common stock held in treasury,
at cost (Note 2)....................................................... 1,396,088 1,418,743 1,418,743
---------- ---------- ----------
13,454,919 12,637,393 12,921,005
Long-term debt, less current sinking fund requirements (Note 5).......... 13,500,000 13,500,000 6,500,000
---------- ---------- ----------
Total capitalization............................................... 26,954,919 26,137,393 19,421,005
---------- ---------- ----------
CURRENT LIABILITIES:
Current sinking fund requirements (Note 5)............................... 0 0 880,000
Notes payable to banks (Note 5).......................................... 11,200,000 14,300,000 15,600,000
Dividends payable........................................................ 429,142 427,330 427,330
Accounts payable......................................................... 3,613,845 3,554,624 3,585,300
Gas supplier refunds due customers....................................... 0 0 1,367,969
Accrued taxes............................................................ 0 0 838,617
Other.................................................................... 2,297,590 1,732,241 1,993,043
---------- ---------- ----------
17,540,577 20,014,195 24,692,259
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
DEFERRED CREDITS:
Accumulated deferred income taxes (Note 4)............................... 4,123,986 4,123,986 3,905,117
Unamortized investment tax credits (Note 4).............................. 539,227 567,695 605,653
Other.................................................................... 2,069,700 1,925,224 1,832,385
Regulatory liability (Note 4)............................................ 422,660 422,660 500,088
---------- ---------- ----------
7,155,573 7,039,565 6,843,243
---------- ---------- ----------
$51,651,069 $53,191,153 $50,956,507
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FALL RIVER GAS COMPANY AND SUBSIDIARY

FOR THE 9-MONTH PERIODS ENDED JUNE 30, 1997

AND 1996 AND THE YEARS ENDED SEPTEMBER 30, 1996,

1995 AND 1994
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30
----------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Provided by (Used for)
Operating Activities:
Net Income............................................... $1,995,731 $1,799,792 $1,425,708 $1,616,206 $2,491,100
Items not requiring (providing) cash:
Depreciation........................................... 2,086,978 1,786,080 1,807,808 1,695,854 1,587,278
Deferred income taxes.................................. 91,260 95,517 218,869 274,184 (734,131)
Investment tax credits, net............................ (28,468) (28,467) (37,958) (38,049) (38,445)
Change in working capital.............................. 2,135,313 (748,509) (1,573,387) 2,180,393 2,961,892
Other sources, net..................................... 323,289 (165,718) (626,514) (221,380) 515,933
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities............ 6,604,103 2,738,695 1,214,526 5,507,208 6,783,627
---------- ---------- ---------- ---------- ----------
Investing Activities:
Additions to utility property, plant and equipment....... (1,804,632) (2,700,025) (3,779,718) (4,294,225) (3,711,116)
Additions to nonutility property......................... (373,367) (368,269) (466,862) (589,172) (591,939)
---------- ---------- ---------- ---------- ----------
Net cash used for investing activities................. (2,177,999) (3,068,294) (4,246,580) (4,883,397) (4,303,055)
---------- ---------- ---------- ---------- ----------
Financing Activities:
Cash dividends paid on common stock...................... (1,283,516) (1,281,990) (1,709,320) (1,709,320) (1,736,028)
Retirement of long-term debt through sinking fund........ 0 (880,000) (880,000) (160,000) (140,000)
Proceeds from 7.99% Debt Issue........................... 0 0 7,000,000 0 0
Increase(decrease) in notes payable to banks, net........ (3,100,000) 2,500,000 (1,300,000) 1,200,000 (600,000)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used for) financing
activities......................................... (4,383,516) 338,010 3,110,680 (669,320) (2,476,028)
Increase (decrease) in cash.................................. 42,588 8,411 78,626 (45,509) 4,544
Cash, beginning of period.................................... 393,935 315,309 315,309 360,818 356,274
---------- ---------- ---------- ---------- ----------
Cash, end of period.......................................... $ 436,523 $ 323,720 $ 393,935 $ 315,309 $ 360,818
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Changes in Components of Working Capital (excluding cash):
(Increase) decrease in current assets:
Accounts receivable.................................... (735,520) (1,867,636) $ (517,152) $ 492,836 $ (612,385)
Inventories............................................ 919,789 357,290 (488,868) (37,438) 800,611
Prepayments and other.................................. 290,016 9,174 (676,920) (72,874) (36,207)
Deferred gas cost...................................... 1,036,458 3,900,182 2,607,617 1,787,937 (5,633)
Increase (decrease) in current liabilities:..............
Accounts payable....................................... 59,222 (1,362,265) (30,676) 311,467 1,168,353
Gas supplier refunds due customers..................... 0 (1,448,964) (1,367,969) 237,366 (390,890)
Accrued taxes.......................................... 0 (504,261) (838,617) (660,616) 1,499,233
Other.................................................. 565,348 167,971 (260,802) 121,715 538,810
---------- ---------- ---------- ---------- ----------
Change in Working Capital............................ $2,135,313 $ (748,509) $(1,573,387) $2,180,393 $2,961,892
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest............................................... $1,236,119 $1,188,338 $1,743,878 $1,695,329 $1,632,681
Income taxes........................................... 786,299 1,446,259 2,111,259 813,052 1,513,114
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

1) ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Consolidated financial statements include the accounts of Fall River Gas
Company and subsidiary (the Company), Fall River Gas Appliance Company, Inc. The
Company's principal business is the operation of a regulated gas distribution
company in southeastern Massachusetts, while its wholly-owned subsidiary rents
gas appliances. All significant intercompany accounts and transactions have been
eliminated in consolidation.

REGULATION

The Company's rates, operations, accounting and certain other practices are
subject to the regulatory authority of the Massachusetts Department of Public
Utilities (MDPU). The Company's accounting policies conform to generally
accepted accounting principles applicable to rate regulated enterprises and
reflect the effects of the rate making process in accordance with statement of
Financial Accounting Standards No. 71, "Accounting For Certain Type of
Regulations."

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting, principles requires the Company to make estimates and assumptions
that affect the reporting and disclosure of assets and liabilities, including
those that are of a contingent nature, at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.

DEPRECIATION AND AMORTIZATION

Depreciation of property, plant and equipment is provided using the
straight-line method at rates designed to amortize the cost of these assets over
their estimated useful lives. The composite depreciation rate for gas plant is
3%. Rented gas appliances have estimated useful lives of 10 to 20 years.
Installation costs of rented appliances are amortized over the estimated life of
the lease period.

GAS OPERATING REVENUES AND COST OF GAS SOLD

Gas operating revenues are recorded based on meter readings made on a cycle
basis throughout the month. Accordingly, in any period, the actual volume of gas
supplied to customers may be more or less than the usage for which the customers
have been billed.

The Company's approved rate tariffs include a cost of gas adjustment (CGAC)
factor allowing dollar-for-dollar recovery of the cost of gas sendout to firm
customers. Actual costs incurred at the end of any period may differ from
amounts recovered through application of the CGAC. Any excess or deficiency in
amounts billed as compared to costs is deferred and either refunded to, or
recovered from, the customers over a subsequent period.

REGULATORY ASSETS

Regulatory assets relate to unrecovered SFAS 106 expenses, unrecovered
Conservation and Load Management expenses and other unrecovered regulatory
costs. These regulatory assets do not earn a return on investment.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Because of the short maturity of certain assets, which include cash and
temporary cash investments and accounts receivable, and certain liabilities,
which include accounts payable and notes payable to banks, these instruments are
stated at amounts which approximate fair value.

F-6
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

1) ACCOUNTING POLICIES (CONTINUED)
The fair market value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. Management
believes the carrying value of the debt approximates its fair value at September
30, 1996.

2) STOCK SPLIT

On September 21, 1993 the stockholders of Fall River Gas Company authorized a
two-for-one common stock split. As a result, one additional share of common
stock was issued on January 14, 1994 and for each share of common stock held on
the close of business on December 31, 1993.

3) FALL RIVER GAS APPLIANCE COMPANY, INC.

The earnings of the Fall River Gas Appliance Company, Inc. are shown as Other
Income in the accompanying Consolidated Statements of Income. Condensed
operating information of the Appliance Company for the years ended September 30,
1996, 1995, and 1994 and the nine months ended June 30, 1997 and 1996 is as
follows:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30
--------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating revenues............................... $ 2,299,083 $ 2,133,711 $ 2,941,885 $ 2,680,609 $ 2,629,591
Costs and expenses............................... 1,312,729 1,207,773 1,629,693 1,412,244 1,285,120
------------ ------------ ------------ ------------ ------------
Income before income taxes................... 986,354 925,938 1,312,192 1,268,365 1,344,471
Income tax expense............................... 400,923 376,457 533,379 515,452 545,145
------------ ------------ ------------ ------------ ------------
Net income................................... $ 585,431 $ 549,481 $ 778,813 $ 752,913 $ 799,326
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

4) INCOME TAXES

The Company and its subsidiary file a consolidated Federal income tax return.
Each company provides Federal income taxes on a separate company basis. The
following is a summary of the provision for Federal and State income taxes:

<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
FEDERAL STATE FEDERAL STATE FEDERAL STATE
---------- ---------- ---------- ---------- ------------ ----------
Current........................................ $ 535,480 $ 159,195 $ 583,815 $ 167,951 $ 1,024,154 $ 260,342
Deferred....................................... 181,356 37,513 227,763 46,421 239,018 47,902
Investment tax credits......................... (37,958) -- (38,049) -- (38,445) --
---------- ---------- ---------- ---------- ------------ ----------
Total provision............................ $ 678,878 $ 196,708 $ 773,529 $ 214,372 $ 1,224,727 $ 308,244
---------- ---------- ---------- ---------- ------------ ----------
---------- ---------- ---------- ---------- ------------ ----------
Provision for income taxes included in:
Operating expenses........................... $ 277,028 $ 64,404 $ 384,950 $ 86,471 $ 814,223 $ 174,243
Other income-Fall River Gas Appliance
Company.................................... 401,207 132,172 387,725 127,727 411,035 134,110
Other........................................ 643 132 854 174 (531) (109)
---------- ---------- ---------- ---------- ------------ ----------
Total provision............................ $ 678,878 $ 196,708 $ 773,529 $ 214,372 $ 1,224,727 $ 308,244
---------- ---------- ---------- ---------- ------------ ----------
---------- ---------- ---------- ---------- ------------ ----------
</TABLE>

F-7
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

4) INCOME TAXES (CONTINUED)
On October 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 109, "Accounting for Income Taxes". SFAS 109 requires
adjustments of deferred tax assets and liabilities to reflect the future tax
consequences, at currently enacted tax laws and rates, of items already
reflected in the financial statements. The implementation of SFAS 109 resulted
in the recognition of a regulatory liability of approximately $412,000 for the
tax benefit of unamortized investment tax credits, which SFAS 109 requires to be
treated as a temporary difference. This benefit is being passed on to customers
over the lives of the property giving rise to the investment tax credit. Also, a
regulatory liability of approximately $88,000 was established for the excess
reserves for deferred taxes for pre-July 1987 deferred income taxes that were
recorded in excess of the current Federal statutory income tax rate.

The tax effect of the cumulative differences that gave rise to the deferred tax
liabilities and deferred tax assets for the year ended September 30, 1996 and
1995 are detailed below:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts..................................................... $ 250,917 $ 267,794
Unamortized investment tax credits.................................................. 221,401 236,205
Contributions in aid of construction................................................ 188,611 198,765
Unbilled revenue.................................................................... 443,497 308,759
Deferred pension.................................................................... 202,786 202,786
Deferred compensation............................................................... 235,461 235,461
Regulatory liability................................................................ 195,035 195,035
Other............................................................................... 399,738 254,267
------------ ------------
Total Deferred Tax Assets............................................................. 2,137,446 1,899,072
Deferred Tax Liabilities:
Property related.................................................................... 4,964,711 5,044,529
Deferred gas costs.................................................................. 78,493 1,095,464
Other............................................................................... 442,460 161,693
------------ ------------
Total Deferred Tax Liabilities........................................................ 5,485,664 6,301,686
------------ ------------
Net Deferred Tax Liability............................................................ $ 3,348,218 $ 4,402,614
------------ ------------
------------ ------------
</TABLE>

The combined Federal and State income tax provision set forth above represents
approximately 38% of income taxes in 1996 and 39% in 1995 and 1994. The combined
statutory rate for Federal and State income tax was approximately 39% in 1996,
1995, and 1994. The difference between the effective income tax rate and
statutory rate results primarily from the amortization of investment tax
credits.

Investment tax credits are amortized over the life of the property giving rise
to the credits.

F-8
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

5) LONG-TERM DEBT AND NOTES PAYABLE TO BANKS

Long-term debt consists of:
<TABLE>
<CAPTION>
AMOUNTS OUTSTANDING
----------------------------
<S> <C> <C> <C> <C>
AMOUNTS JUNE 30, SEPT 30, SEPT. 30,
AUTHORIZED 1997 1996 1995
------------- ------------- ------------- ------------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
FIRST MORTGAGE BONDS:
8.75% Series, due 1996.............................. $ 3,200,000 $ 0 $ 0 $ 880,000
9.44% Series, due 2020.............................. 6,500,000 6,500,000 6,500,000 6,500,000
7.99% Series, due 2026.............................. 7,000,000 7,000,000 7,000,000 0
------------- ------------- ------------
13,500,000 13,500,000 7,380,000
Less--Current sinking fund requirements and
maturities.......................................... 0 0 880,000
------------- ------------- ------------
$ 13,500,000 $ 13,500,000 $ 6,500,000
------------- ------------- ------------
------------- ------------- ------------
</TABLE>

There are no aggregate maturities and sinking fund requirements for the next
five years applicable to the issues outstanding at September 30, 1996. The First
Mortgage Bonds are secured by a lien on substantially all of the Company's gas
plant. Under the terms of the most restrictive supplemental indenture, retained
earnings of $7,149,260 were restricted against payment of dividends at June 30,
1997.

The Company maintains lines of credit with various banks under which it may
borrow up to $25,000,000. These lines are reviewed periodically by the various
banks and may be renewed or cancelled. The Company pays a commitment fee on the
lines of credit at rates ranging from 5/16 of 1% to 3/8 of 1%. At August 31,
1997, there were $15,100,000 borrowings under these lines of credit.

The following table summarizes certain information related to the Company's
short-term borrowings for the years ended September 30, 1996, and 1995:

<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Average daily balance outstanding for the period................................... $ 17,900,000 $ 14,586,000
Weighted average interest rate for the period...................................... 6.1% 6.4%
Maximum amount outstanding during the period based on month-end balances........... $ 20,400,000 $ 17,900,000
Weighted average interest rate at end of period.................................... 6.6% 7.5%
</TABLE>

6) EMPLOYEES' PENSION PLANS

The Company has defined benefit plans covering substantially all of its
employees. The benefits under these plans are based on years of service and
employees' compensation levels. The Company's policy is to fund pension costs
accrued including amortization of past service costs.

F-9
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

6) EMPLOYEES' PENSION PLANS (CONTINUED)
The following table sets forth the funding status of the pension plan as of
September 30, 1996 and 1995:

Actuarial present value of benefit obligations:

<TABLE>
<CAPTION>
1996 1995
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
UNION SALARIED UNION SALARIED
------------- ------------- ------------- -------------
Vested.............................................. $ (5,743,317) $ (5,236,341) $ (5,119,504) $ (4,449,398)
Nonvested........................................... (14,534) (27,096) (9,224) (70,461)
------------- ------------- ------------- -------------
Total accumulated benefit obligation................ $ (5,757,851) $ (5,263,437) $ (5,128,728) $ (4,519,859)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligation........................ $ 6,256,298 $ 6,756,755 $ (5,508,398) $ (5,822,854)
Plan assets at fair value............................. 6,400,940 5,205,804 6,037,834 4,293,447
------------- ------------- ------------- -------------
Projected benefit obligation (in excess) or less than
plan assets......................................... 144,642 (1,550,951) 529,436 (1,529,407)
Unrecognized net gain................................. (462,279) (521,690) (1,046,210) (804,592)
Unrecognized prior service cost due to plan
amendment........................................... 0 1,299,360 0 1,417,484
Unrecognized net obligation........................... 449,424 169,321 524,328 197,540
------------- ------------- ------------- -------------
Prepaid pension cost (pension liability) recognized on
the consolidated balance sheet $ 131,787 $ (603,960) $ 7,554 $ (718,975)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -----------
<S> <C> <C> <C>
Net Pension cost included the following components:
Service cost......................................................... $ 365,511 $ 375,838 $ 408,466
Interest cost........................................................ 906,500 866,021 837,690
Return on assets..................................................... (1,320,522) (1,287,810) (56,166)
Net deferral and amortization........................................ 520,684 757,372 (463,664)
------------- ------------- -----------
Net periodic pension cost............................................ $ 472,173 $ 711,421 $ 726,326
------------- ------------- -----------
------------- ------------- -----------
</TABLE>

Assumptions used to determine the projected benefit obligation were:

<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Discount rate....................................................................................... 8.0% 8.0%
Rate of increase in future compensation levels...................................................... 3.0% 4.0%
Expected long-term rate of return on assets......................................................... 9.0% 8.0%
</TABLE>

7) OTHER POST-EMPLOYMENT BENEFITS

In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits to qualified retired employees.

In 1994, the Company adopted Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
106). Prior to 1994, expense was recognized when benefits were paid. In
accordance with SFAS 106, the Company began recording the Cost

F-10
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

7) OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
for this plan on an accrual basis for 1994. As permitted by SFAS 106, the
Company is recording the transition obligation over a twenty year period.

The following table sets forth the status of the plans at September 30, 1996 and
1995:

<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................................................... $ (1,150,310) $ (871,487)
Fully eligible active plan participants........................................... (109,934) (110,362)
Other active plan participants.................................................... (875,107) (949,071)
------------- -------------
(2,135,351) (1,930,920)
Plan assets......................................................................... 200,786 0
Unrecognized transition obligation.................................................. 2,403,554 2,544,938
Unrecognized past service costs..................................................... 123,494 134,600
Unrecognized (Gain)................................................................. (1,042,080) (1,275,643)
------------- -------------
Accrued postretirement benefit cost................................................. $ (449,597) $ (527,025)
------------- -------------
------------- -------------
</TABLE>

Net periodic postretirement benefit cost for fiscal 1996 and 1995 included the
following components:

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Service Costs-benefits attributable to service during the period............. $ 80,022 $ 66,601 $ 144,234
Interest cost on accumulated postretirement benefit obligation............... 140,210 107,320 219,734
Net amortization and deferral................................................ 141,385 141,385 141,385
Recognized past service...................................................... 11,106 11,106 --
Recognized (Gain)............................................................ (59,909) (79,353) --
---------- ---------- ----------
312,814 247,059 505,353
Regulatory asset............................................................. 123,358 183,735 343,290
---------- ---------- ----------
Net expense.................................................................. $ 189,456 $ 63,324 $ 162,063
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

For measurement purposes, a 7% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1996. The rate was assumed to
decrease gradually to 4% by fiscal 2005, and to remain at that level thereafter.
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
by 1% in each year would increase the accumulated postretirement benefit
obligation as of September 30, 1996 by $604,881 and the aggregate of the service
and the interest cost components of net periodic postretirement benefit cost
(NPPBC) for the year by $89,398. The discount rate was 7% for the development of
the NPPBC and for disclosure.

Included in the regulatory asset of $1,204,420, as of September 30, 1996, the
Company has a regulatory asset amounting to $650,383 related to unrecovered SFAS
106 expenses. On October 16, 1996 the MDPU approved a settlement agreement
between the Company and intervenors for an increase in rates effective December
1, 1996. As part of the settlement agreement, the Company was allowed recovery
of annual

F-11
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)

7) OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
SFAS 106 expenses, as well as, amounts recorded as regulatory assets during the
three year period ended September 30, 1996.

8) COMMITMENTS AND CONTINGENCIES

In January 1990, the Company received notification from the Massachusetts
Department of Environmental Protection that it is one of several "potentially
responsible parties" under Massachusetts law in connection with a site operated
by a company which purchased scrap meters from various utilities including the
Company. The investigation is in the discovery stage and the cost to clean up
the site and the Company's degree of responsibility has not yet been determined.
However, management does not expect the costs to be significant.

9) UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following is unaudited quarterly information for the fiscal years ended
September 30, 1996 and 1995. Quarterly variations between periods are caused
primarily by the seasonal nature of the gas distribution business.
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30
--------- --------- --------- --------- --------- --------- --------- ---------

<CAPTION>
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues................... $ 11,455 $ 22,373 $ 10,313 $ 4,825 $ 9,990 $ 19,483 $ 9,858 $ 5,087
Operating Income (Loss).............. 338 1,874 301 (170) 429 1,667 375 (166)
Net Income (Loss).................... 94 1,615 91 (374) 263 1,449 233 (329)
Net Income (Loss) per Share.......... 0.05 0.91 0.05 (0.21) 0.15 0.81 0.13 (0.18)
</TABLE>

F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary.............................. 3
The Company..................................... 5
Risk Factors.................................... 6
Use of Proceeds................................. 6
Capitalization.................................. 7
Common Stock Dividends and Price Range.......... 8
Selected Financial Data......................... 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 10
Business........................................ 14
Security Ownership of Certain Beneficial Owners
and Management................................ 20
Management...................................... 21
Description of Capital Stock.................... 23
Underwriting.................................... 24
Legal Opinions.................................. 25
Experts......................................... 25
Index to Financial Statements................... F-1
</TABLE>

[LOGO]
FALL
RIVER
- ---------------
GAS
COMPANY
340,000 SHARES

FALL RIVER GAS COMPANY

COMMON STOCK

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

PROSPECTUS

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

FIRST ALBANY

CORPORATION

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses in connection with the proposed issuance and distribution
of the common stock are set forth below:

<TABLE>
<S> <C>
Registration Fee.................................................................. $ 1,570
Printing.......................................................................... 10,000
Accounting Fees................................................................... 10,000
Legal Fees........................................................................ 65,000
NASD Filing Fee................................................................... 1,018
Transfer Agent Fee................................................................ 1,000
Blue Sky Fees and Expenses........................................................ 2,000
Representative's Non-accountable Expense Allowance................................ 50,000
Miscellaneous Expenses............................................................ 5,012
Total (estimated)......................................................... $ 145,600
</TABLE>

II-1
<PAGE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

INDEMNIFICATION

The Company's By-Laws permit the Company's directors and officers (and persons
who occupy such positions in other companies at the request of the Company) to
be indemnified for liabilities arising in connection with any action, suit or
proceeding prosecuted to a final determination on the merits (except any costs
or expenses as to which such person shall be finally adjudged to be liable), and
any action, suit or proceeding which is settled with the approval of the court
having jurisdiction thereof, but only in such amount (which shall not include
any sum ordered to be paid by him to the Company) as such court shall determine
to be fair and reasonable under the circumstances. Indemnification payments
properly authorized may include reimbursement for the amount of the claim or
judgment and expenses of defense, including legal fees. Massachusetts law allows
such indemnification, but limits provision of indemnification where a person is
adjudicated not to have acted in good faith in the reasonable belief that such
action was in the best interest of the corporation. Indemnification is also
available to officers and directors in connection with certain actions taken by
them in reliance upon governmental regulations, rules, orders and
determinations. Certain liabilities arising under the Securities Act of 1933 may
be covered by this indemnification provision, although the By-Laws provide that
indemnification of liabilities arising under such Act shall be available only to
the extent that such rights of indemnification may be determined to be valid by
a court of competent jurisdiction. Massachusetts law also allows a corporation
to purchase and maintain insurance on behalf of such persons against any
liabilities incurred in the capacity of director or officer and the Company has
such insurance.

The Company's Articles of Organization provide that, to the fullest extent that
the General Laws of the Commonwealth of Massachusetts permit the limitation or
elimination of the liability of directors, no director of the Company shall be
personally liable to the Company or its shareholders for monetary damages for
breach of fiduciary duty, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the Company
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

ITEM 16. LIST OF EXHIBITS

See Exhibit Index at page II-5.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by

II-2
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Fall River,
Massachusetts, on the 18th day of September, 1997.

<TABLE>
<S> <C> <C>
FALL RIVER GAS COMPANY

By: /s/ BRADFORD J. FAXON
-----------------------------------------
(Bradford J. Faxon, President)
</TABLE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Bradford J. Faxon and Peter H. Thanas, and each of
them, his/her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any Registration Statement filed
pursuant to Rule 462(b) relating thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about said matters
as fully to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons and in the capacities
indicated on September 18, 1997.

<TABLE>
<C> <S>
(i) Principal Executive Officer:

/s/ BRADFORD J. FAXON
------------------------------------------
President
(Bradford J. Faxon)

(ii) Principal Financial Officer
and
Principal Accounting Officer:

/s/ PETER H. THANAS Senior Vice President and
------------------------------------------
Treasurer
(Peter H. Thanas)

(iii) Directors

/s/ CINDY L.J. AUDETTE
------------------------------------------
(Cindy L.J. Audette)

/s/ THOMAS K. BARRY
------------------------------------------
(Thomas K. Barry)

/s/ THOMAS H. BILODEAU
------------------------------------------
(Thomas H. Bilodeau)

/s/ BRADFORD J. FAXON
------------------------------------------
(Bradford J. Faxon)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
/s/ RAYMOND H. FAXON
------------------------------------------
(Raymond H. Faxon)

/s/ RONALD J. FERRIS
------------------------------------------
(Ronald J. Ferris)

/s/ JACK R. MCCORMICK
------------------------------------------
(Jack R. McCormick)

/s/ GILBERT C. OLIVEIRA, JR.
------------------------------------------
(Gilbert C. Oliveira, Jr.)

/s/ DONALD R. PATNODE
------------------------------------------
(Donald R. Patnode)
</TABLE>
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS SEQUENTIAL DESCRIPTION OF EXHIBIT PAGE NUMBER
- --------- ---------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
*1 Form of Underwriting Agreement.

4(a) Instruments defining the rights of security holders, including indentures. Filed as Exhibit 4
to Report on Form 10-K, File No. 0-449, for calendar year ended December 31, 1982 and
incorporated herein by reference.

4(b) Eleventh Supplemental Indenture, dated as of December 15, 1989, between the Company and First
National Bank of Boston (Trustee). Filed as Exhibit 4(b) to the Company's Registration
Statement, File No. 333-13995 and incorporated herein by reference.

4(c) Twelfth Supplemental Indenture, dated as of December 20, 1989, between the Company and First
National Bank of Boston (Trustee). Filed as Exhibit 4(c) to the Company's Registration
Statement, File No. 333-13995 and incorporated herein by reference.

4(d) Thirteenth Supplemental Indenture, dated as of September 19, 1996, between the Company and
State Street Bank and Trust Company (Trustee), as Successor in interest to First National Bank
of Boston. Filed as Exhibit 4(c) to the Company's Registration Statement, File No. 333-13995
and incorporated herein by reference.

*5 Opinion of Rich, May, Bilodeau & Flaherty, P.C.

10(a) Employment and Consulting Agreement dated as of September 18, 1984, between the Company and
Jack R. McCormick. Filed as, Exhibit 10(d) to Report on Form 10-K, File No. 0-449, for
calendar year ended December 31, 1984 and incorporated herein by reference.

10(b) Employment and Consulting Agreement dated as of September 18, 1984, between the Company and
Bradford J. Faxon. Filed as Exhibit 10(e) to Report on Form 10-K, File No. 0-449, for calendar
year ended December 31, 1984 and incorporated herein by reference.

10(c) Employment and Consulting Agreement dated as of September 18, 1984, between the Company and
Norman J. Meyer. Filed as Exhibit 10(f) to Report on Form 10-K, File No. 0-449, for calendar
year ended December 31, 1984 and incorporated herein by reference.

10(d) Agreement, Combined Supplementary Agreement, and Amendment to Agreement for Employment and
Consulting Services between the Company and Raymond H. Faxon. Filed as Exhibit 10(h) to Report
on Form 10-K, File No. 0-449, for calendar year ended December 31, 1984 and incorporated
herein by reference.

10(e) Amendment to Employment and Consulting Agreement dated January 1, 1987 between the Company and
Bradford J. Faxon. Filed as Exhibit 10(i) to Report on Form 10-K, File No. 0-449, for calendar
year ended December 31, 1986 and incorporated herein by reference.

10(f) Amendment to Employment and Consulting Agreement dated January 1, 1987 between the Company and
Norman J. Meyer. Filed as Exhibit 10(j) to Report on Form 10-K, File No. 0-449, for calendar
year ended December 31, 1986 and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS SEQUENTIAL DESCRIPTION OF EXHIBIT PAGE NUMBER
- --------- ---------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10(g) Employment and Consulting Agreement dated as of August 1, 1986 between the Company and Peter
H. Thanas. Filed as Exhibit 10(k) to Report on Form 10-K, File No. 0-449, for calendar year
ended December 31, 1986 and incorporated herein by reference.

10(h) Amendment to Employment and Consulting Agreement dated January 1, 1987 between the Company and
Peter H. Thanas. Filed as Exhibit 10(l) to Report on Form 10-K, File No. 0-449, for calendar
year ended December 31, 1986 and incorporated herein by reference.

10(i) Service Agreement for Firm Liquid Service between Distrigas and Company. Filed as Exhibit
10(p) to Report on Form 10-K, File No. 0-449, for calendar year ended December 31, 1988 and
incorporated herein by reference.

10(j) Service Agreement for Interruptible Vapor Service between Distrigas and Company. Filed as
Exhibit 10(q) to Report on Form 10-K, File No. 0-449, for calendar year ended December 31,
1988 and incorporated herein by reference.

10(k) Service Agreement for Firm Vapor Service between Distrigas and Company. Filed as Exhibit 10(r)
to Report on Form 10-K, File No. 0-449, for calendar year ended December 31, 1988 and
incorporated herein by reference.

10(l) Deferred Compensation Agreement with Bradford J. Faxon. Filed as Exhibit 10(s) to Report on
Form 10-K, File No. 0-449, for calendar year ended December 31, 1989 and incorporated herein
by reference.

10(m) Deferred Compensation Agreement with Peter H. Thanas. Filed as Exhibit 10(t) to Report on Form
10-K, File No. 0-449, for calendar year ended December 31, 1989 and incorporated herein by
reference.

10(n) Employment Contract with Bradford J. Faxon. Filed as Exhibit 10(n) to Report on Form 10-K,
File No. 0-449, for calendar year ended December 31, 1991 and incorporated herein by
reference.

10(o) Employment Contract with Peter H. Thanas. Filed as Exhibit 10(w) to Report on Form 10-K, File
No. 0-449, for calendar year ended December 31, 1991 and incorporated herein by reference.

10(p) Contract between the Company and Utility Workers Union of America, AFL-CIO and Local 431,
dated May 1, 1995. Filed as Exhibit 10(x) to Report on Form 10-K, File No. 0-449, for calendar
year ended September 30, 1995 and incorporated herein by reference.

*10(q) Gas Sales Agreement between CNG Energy Services Corporation (formerly known as CNG Gas
Services Corporation) and Fall River Gas Company dated as of June 1, 1993.

*24(a) Consent of Arthur Andersen LLP, independent certified public accountants.

*24(b) Consent of Rich, May, Bilodeau & Flaherty, P.C. (included in opinion filed as Exhibit 5 to
this Registration Statement).

*25(a) Power of Attorney (set forth on page II-4 of this Registration Statement).
</TABLE>

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

* Filed herewith