SEC Filings
10-Q
SOUTHERN UNION CO filed this Form 10-Q on 11/10/1997
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            SOUTHERN UNION COMPANY AND SUBSIDIARIES

 
            MANAGEMENT'S DISCUSSION AND ANALYSIS
       OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The Company's principal line of business is the distribution of
natural gas as a public utility through Southern Union Gas and
Missouri Gas Energy, each of which is a division of the Company.
In addition, subsidiaries of Southern Union have been established
to support and expand natural gas sales and to capitalize on the
Company's gas energy expertise.  These subsidiaries market
natural gas to end-users, operate natural gas pipeline systems,
distribute propane and sell commercial gas air conditioning and
other gas-fired engine-driven applications.  By providing "one-
stop shopping," the Company can serve its various customers'
specific energy needs, which encompass substantially all of the
natural gas distribution and sales businesses from natural gas
sales to specialized energy consulting services.  Certain sub-
sidiaries own or hold interests in real estate and other assets,
which are primarily used in the Company's utility business.

Several of these business activities are subject to regulation by
federal, state or local authorities where the Company operates.
Thus, the Company's financial condition and results of operations
have been and will continue to be dependent upon the receipt of
adequate and timely adjustments in rates.  In addition, the Com-
pany's business is affected by seasonal weather impacts, com-
petitive factors within the energy industry and economic
development and residential growth in its service areas.

RESULTS OF OPERATIONS

Three Months Ended September 30, 1997 and 1996
- ----------------------------------------------

The Company recorded a net loss attributable to common stock of
$4,909,000 for the three-month period ended September 30, 1997
compared to a net loss of $5,405,000 for the three-month period
ended September 30, 1996.  Net loss per common share, based on
weighted average shares outstanding during the period, was $.29
in 1997 compared with a net loss per common share of $.32 in
1996.  Due to the seasonal nature of the gas utility business,
the three-month period ending September 30 is typically a loss
period.

Operating revenues were $74,039,000 for the three-month period
ended September 30, 1997, compared with operating revenues of
$80,830,000 in 1996.  Gas purchase costs for the three-month
period ended September 30, 1997 were $32,442,000, compared with
$39,415,000 in 1996.  The Company's operating revenues are
affected by the level of sales volumes and by the pass-through of
increases or decreases in the Company's gas purchase costs
through its purchased gas adjustment clauses.  Additionally,
revenues are affected by increases or decreases in gross receipts
taxes (revenue-related taxes) which are levied on sales revenue
as collected from customers and remitted to the various taxing
authorities.  The decrease in operating revenues and gas purchase
costs between periods was primarily the result of a 10% decrease
in gas sales volumes to 11,953 MMcf in 1997 from 13,258 MMcf in
1996.  The decrease in sales volume was due to warmer weather in
certain service territories during the three-month period ended
September 30, 1997, and a reduction in pipeline and marketing
sales which typically have lower margins.  Additionally,
operating revenues and gas purchase costs were effected by a
decrease in the average cost of gas from $2.96 per Mcf in 1996 to
$2.68 per Mcf in 1997.  The decrease in the average cost of gas
is the result of lower gas costs billed to the Missouri customers
due to various regulatory limitations imposed on Missouri Gas
Energy by the MPSC during this past summer.  The differential
between such actual billings to these customers and the actual
purchased gas costs is then recorded in the deferred purchase gas
cost accounts for subsequent billing to the customers.  Spot
market gas prices throughout the company's distribution system
remained fairly constant during the periods.

Net operating margin (operating margin less revenue-related
taxes) increased $1,108,000 for the three-month period ended
September 30, 1997 compared with the same period in 1996.  Net
operating margin increased due to an $8,847,000 annual increase
to revenues granted by the Missouri Public Service Commission
(MPSC) effective as of February 1, 1997.  Additionally, net
operating margin increased $332,000 for the three-month period
ended September 30, 1997 compared with the same period in 1996
due to various acquisitions by SUPro Energy Company, a wholly-
owned subsidiary of the Company, which provides propane gas
services to 5,600 customers in Texas.


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