Bay State Gas to introduce free-market competition to Massachusetts residential natural gas customers.

WESTBOROUGH, Mass.--(BUSINESS WIRE)--July 16, 1996--Bay State Gas Co. (NYSE:BGC) announced today that its residential pilot program, Pioneer Valley Customer Choice, has been approved by the Massachusetts Department of Public Utilities. This pilot will introduce free-market competition to residential natural gas consumers in the Pioneer Valley region in and around Springfield, Massachusetts. This pilot will be the first program of its kind in New England, and will be one of the largest and most aggressive programs in the country.

Residents can begin signing up for the pilot program on Aug. 1, 1996 and will be eligible on a first-come, first-serve basis. The two-year pilot will enable residential natural gas customers to choose from independent gas marketers competing on Bay State's transportation system, beginning November 1996, while continuing to rely on Bay State to deliver the gas to their homes.

"The goal of the pilot program is to attract 10,000 customers to participate during the first year, with a possible expansion during year two," said Joel L. Singer, president and chief operating officer for Bay State Gas. The pilot is open to residents of 16 cities and towns in Western Massachusetts: Agawam, Chicopee, East Longmeadow, Easthampton, Granby, Hampden, Longmeadow, Ludlow, Monson, Northampton, Palmer, South Hadley, Southwick, Springfield, West Springfield and Wilbraham.

"We are very pleased to offer customers the additional choices and services made possible by utility restructuring," continued Singer. "This is a win-win-win situation, in which everyone -- customers, independent natural gas marketers, and our company -- will benefit from increased competition. Customers will enjoy competitive prices and a much wider variety of energy products and services; independent marketers will have direct access to customers; and our company hopes to achieve increased throughput."

"Additionally," said Singer, "we anticipate that allowing independent gas marketers into the Pioneer Valley will provide further economic benefits through new employment opportunities. Similar programs elsewhere in the country have resulted in marketers establishing local offices and investing in the communities."

To encourage marketers' participation and ensure the success of Pioneer Valley Customer Choice, Bay State took an innovative and aggressive approach to the program, collaborating with marketers, regulatory agencies, other gas and electric utilities, and other key stakeholders in the development of the pilot program.

"By encouraging competition on our system, we believe we will add value for our customers and increase the volume of gas transported over our system," said Singer.

Bay State will continue to maintain and expand its natural gas distribution system, read customers' meters, service appliances and equipment and respond to customers' safety calls. The company already successfully introduced competition for its commercial and industrial customers over a year ago.

Bay State Gas Company operates in three distinct, but related energy business segments -- Local Transportation, Energy Products & Services and Energy Ventures. Bay State's Local Transportation business serves almost 300,000 customers within the largest geographic area of any natural gas distribution company in New England, and is the region's only gas utility serving three states (Massachusetts, New Hampshire, and Maine). The company's Energy Products & Services segment offers energy commodities and related equipment and services. In addition, the company, through Energy Ventures, expects to develop major energy projects.

This release contains forward-looking statements. Investors should be aware that factors affecting the pilot program include, but are not limited to, the regulatory environment, customers' preferences, independent gas marketers' efforts and other uncertainties, all of which are difficult to predict and are beyond the control of the company.

CONTACT: Bay State Gas Company, Westborough

Carol Churchill, 508/836-7370