SECURITIES AND EXCHANGE COMMISSION 
                           WASHINGTON, D.C. 20549 
  
                                  FORM 8-K 
  
                               CURRENT REPORT 
                  PURSUANT TO SECTION 13 OR 15(d) OF THE  
                      SECURITIES EXCHANGE ACT OF 1934 
  
  
                             December 11, 1998 
              ________________________________________________ 
              Date of Report (Date of Earliest Event Reported) 
  
  
                        New England Electric System 
              ________________________________________________ 
              (Exact Name of Registrant as Specified in Charter) 
  
  
        Massachusetts             1-3446            04-1663060 
  _____________________        ___________        _____________ 
(State or Other Jurisdiction   (Commission        (IRS Employer  
 of Incorporation)             File Number)       Identification No.) 
  
  
                                25 Research Drive
                        Westborough, Massachusetts 01582
            ___________________________________________________ 
           (Address of Principal Executive Offices and Zip Code) 
  
                               (508) 389-2000 
            ___________________________________________________ 
            (Registrant's Telephone Number, Including Area Code) 
  
  
                                    N/A 
          ________________________________________________________ 
       (Former Name or Former Address, if Changed Since Last Report) 
  
  

 ITEM 5.  OTHER EVENTS. 
  
      On December 11, 1998, New England Electric System, a Massachusetts
 business trust, (the "Company"), The National Grid Group plc, a public
 limited company incorporated under the laws of England and Wales with
 registration number 2367004 ("National Grid") and Iosta LLC, a
 Massachusetts limited liability company which is directly and indirectly
 wholly owned by National Grid ("Iosta"), entered into an Agreement and Plan
 of Merger, dated as of December 11, 1998 (the "Merger Agreement"),
 providing for a merger transaction among the Company, National Grid and
 Iosta.  The Merger Agreement and the press release issued in connection
 therewith are filed herewith as Exhibits 10 (mm) and 99, respectively, and
 are incorporated herein by reference.  The description of the Merger
 Agreement set forth herein does not purport to be complete and is qualified
 in its entirety by the provisions of the Merger Agreement. 
  
      Pursuant to the Merger Agreement, Iosta will merge with and into the
 Company (the "Merger"), with the Company being the surviving entity and
 becoming a wholly-owned subsidiary of National Grid (the "Surviving
 Entity").  The Merger, which was unanimously approved by the boards of
 directors of each of the Company, National Grid and Iosta, is expected to
 occur shortly after all of the conditions to the consummation of the
 Merger, including the receipt of certain regulatory approvals, are met or
 waived.  The Company anticipates that the Merger can be consummated in
 early 2000. 
  
      Under the terms of the Merger Agreement, each outstanding share of the
 Company's common stock, $1.00 par value per share (the "Company Common
 Stock"), other than shares, if any, owned by the Company as treasury shares
 (except those treasury shares which are held pursuant to the Company's
 Rabbi Trust), National Grid, Iosta or any other wholly-owned subsidiary of
 National Grid, will be converted into the right to receive $53.75 in cash,
 as may be adjusted (the "Merger Consideration").  Such adjustment will
 occur if the Closing Date does not occur on or prior to the date that is
 the six month anniversary of the date on which the Company Shareholders'
 Approval is attained (the "Adjustment Date") then the per share amount
 shall be increased by $.003288 each day up to a maximum adjustment of $0.60
 per share, for a total of $54.35 per share.  
  
      The Board of Directors of the Company has received an opinion from its
 investment banker, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to
 the effect that, as of the date of the Merger Agreement, the Merger
 Consideration to be received by the holders of Company Common Stock in the
 Merger is fair from a financial point of view to holders of Company Common
 Stock.  
  
      The Merger is subject to certain customary closing conditions,
 including, without limitation, the receipt of the required approval of the
 Company's shareholders, the receipt of the required approval of National
 Grid's shareholders, and the receipt of all necessary governmental
 approvals and the making of all necessary governmental filings, including
 the consent or approval of certain state utility regulators, the approval
 of the Federal Energy Regulatory Commission ("FERC"), the approval of the
 Securities and Exchange Commission under the Public Utility Holding Company
 Act of 1935, as amended (the "1935 Act"), the approval of the Nuclear
 Regulatory Commission, the filing of the requisite notification with the
 Federal Trade Commission and the Department of Justice under the Hart-
 Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
 expiration of the applicable waiting period thereunder, and the filing of
 the requisite notification under the Exon-Florio Provisions of the Omnibus
 Trade and Competitiveness Act of 1988, and the termination of the review
 and investigation with no action taken by the President thereunder.  A
 meeting of the Company's shareholders to vote upon the Merger will be
 convened as soon as practicable and is expected to be held in the first
 quarter of 1999.  A meeting of National Grid's shareholders to vote upon
 the Merger will be convened as soon as practicable and is expected to be
 held in the first quarter of 1999. 
  
      The Merger Agreement contains certain covenants of the parties pending
 the consummation of the Merger.  Generally, except as required by the terms
 of the Company's Settlement Agreements with FERC and certain state utility
 regulators, the Company must carry on its business in the ordinary course
 consistent with past practice, comply with all laws and preserve intact its
 goodwill.  The Company is permitted to declare and pay its regular
 quarterly dividends.  The Merger Agreement contains certain restrictions on
 the Company including limitations on, or procedures for: issuance of
 securities, termination or failure to renew material contracts, amendments
 to the Company's Declaration of Trust or similar governing documents of the
 Company's Subsidiaries, capital expenditures, acquisitions, dispositions,
 incurrence of indebtedness, modification of employee compensation and
 benefits, rate matters, changes in accounting policies and discharge of
 liabilities. (See Article VI of the Merger Agreement.) 
  
      The Merger Agreement prevents the Company and its subsidiaries from
 knowingly initiating, soliciting or encouraging, directly or indirectly,
 any inquiry or proposal or offer, or engaging in negotiations with, or
 providing confidential information to any third party relating to a
 business combination proposal, and requires the Company to terminate
 immediately any existing discussions or negotiations and notify National
 Grid of any such inquiries relating to a business combination proposal,
 unless prior to the Company shareholder approval: (i) the Company's Board
 determines, in good faith based upon the advice of  its outside legal
 counsel with respect to the Board's fiduciary duties, that taking such
 action is necessary for the Board to act in a manner consistent with its
 fiduciary duties under applicable law; (ii) the Company's Board reasonably
 concludes, in good faith after consultation with its financial advisors,
 that (A) the party making such proposal has adequate financing sources and
 (B) such proposal is likely to be more favorable to stockholders of the
 Company than the Merger (a "Superior Proposal"); (iii) prior to furnishing
 nonpublic information or entering into negotiations, the Company notifies
 National Grid in writing of such furnishing of information or negotiations
 (identifying the party making the proposal and the material terms of such
 proposal) and enters into a confidentiality agreement with such third
 party; and (iv) the Company keeps National Grid promptly informed of the
 status and all material information with respect to such discussions or
 negotiations.  The Company may terminate the Merger Agreement to accept a
 Superior Proposal (in which case, the termination fee provision described
 below would be applicable).  However, before so terminating, the Company
 must negotiate with National Grid to adjust the Merger Agreement so as to
 enable the parties to proceed with the adjusted Merger Agreement, and the
 Company's Board must determine that, based on advice of counsel with
 respect to the Board's fiduciary duties and notwithstanding a binding
 commitment to consummate the Merger Agreement and notwithstanding all
 concessions that may be offered by National Grid in further negotiations
 with the Company, the Superior Proposal is more favorable to the Company's
 shareholders than the Merger.   (See Section 7.08 and Article IX of the
 Merger Agreement.) 
  
      The Company CEO and one outside director of the Company's Board of
 Directors, mutually determined by National Grid and the Company, will be
 appointed to the Board of Directors of National Grid.  In addition, the
 Surviving Entity will have an advisory board, with eleven members from the
 Company's Board immediately prior to the Closing, that will advise the
 Surviving Entity with respect to general business, among other things.  The
 Merger Agreement provides that, after the effectiveness of the Merger (the
 "Effective Time"), the headquarters of the Surviving Entity will be in
 Massachusetts, and utility operations offices will remain in Massachusetts,
 New Hampshire and Rhode Island.  (See Section 7.07 of the Merger
 Agreement.) 
  
      The Merger Agreement may be terminated under certain circumstances,
 including:  (i) by mutual written agreement of the boards of directors of
 the parties; (ii) by either party if the Merger has not been effected by
 the date nine months from the receipt of the Company shareholder approval
 (the "Initial Termination Date"), provided that if the parties are
 otherwise ready to close, but certain statutory approvals are not yet
 obtained, the Initial Termination date will be extended to the date fifteen
 months from the receipt of the Company shareholder' approval (the "Extended
 Termination Date"), and provided further that if on the Initial or Extended
 Termination Date, a "Financial Disruption" exists, then the Company will
 have the right, but not the obligation, to extend such Termination Date six
 months beyond such Termination Date (a "Financial Disruption" means any
 significant disruption in the financial or capital markets which makes it
 impracticable for a company having financial characteristics similar to
 those of National Grid as of the date of the Merger Agreement to finance a
 transaction of the size and nature as that contemplated under the Merger
 Agreement on commercially reasonable financing terms that are available as
 of the date of such financing); and (iii) by either party if: (A) the
 Company shareholder approval or the National Grid shareholder approval has
 not been obtained; or (B) any law, rule or regulation is adopted which
 makes the Merger illegal or any final order or injunction permanently
 prohibits the Merger.  In addition, the Company may terminate the Merger
 Agreement:  (i) under certain circumstances, in order to accept a Superior
 Proposal (subject to the limitations and procedures described above and to
 payment of the termination fee described below); (ii) if there has been a
 material breach of certain of National Grid's representations and
 warranties or a failure by National Grid to perform and comply with its
 covenants under the Merger Agreement and such breach or failure has not
 been cured; (iii) if National Grid fails to deliver the merger
 consideration at a time when all conditions to National Grid's obligation
 to close have been satisfied or waived, and such failure is as a result of
 Financial Disruption; and (iv) if the Board of National Grid withdraws or
 modifies its approval of the merger or its recommendation to its
 shareholders.  National Grid may terminate the Merger Agreement if:  (i)
 the Board of the Company approves, recommends or takes no position with
 respect to an alternative business combination proposal; (ii) twelve months
 after the Company Shareholders' Approval is obtained, the order of the SEC
 approving the Merger under the 1935 Act has not been issued, and National
 Grid certifies to the Company that it reasonably believes that the SEC will
 not issue an order that would comply with the requirements of the
 regulatory condition; (iii) the Board of the Company withdraws or modifies
 its approval of the merger or its recommendation to its shareholders; and
 (iv) there has been a material breach of the Company's representations and
 warranties or a failure by the Company to perform and comply with its
 covenants under the Merger Agreement and such breach or failure has not
 been cured.  (See Articles VIII and IX of the Merger Agreement.) 
  
      National Grid will pay the Company a termination fee of: (i) $100
 million if the Company terminates the Merger Agreement because National
 Grid was unable to pay the merger consideration, at a time when all of the
 National Grid's closing conditions were met or waived, because of a
 Financial Disruption; (ii) $75 million plus up to $10 million for
 documented out-of-pocket expenses if National Grid terminates after the
 twelve month anniversary of the Company's shareholder approval because an
 order from the SEC approving the Merger has not been issued, and National
 Grid certifies to the Company that it reasonably believes that the SEC will
 not issue an order that would comply with the requirements of the
 regulatory condition; and (iii) documented out-of-pocket expenses up to $10
 million if the Company terminates because of National Grid's (A) material
 breach of its representations and warranties, (B) failure to perform and
 comply with its covenants under the Merger Agreement or (C) failure to
 obtain its shareholder vote.   (See Articles VIII and IX of the Merger
 Agreement.) 
  
      The Company will pay National Grid a termination fee of (i) $100
 million plus up to $10 million for documented out-of-pocket expenses if the
 Company terminates the Merger Agreement because the Company became the
 target of a third party alternative proposal, and the Company's Board
 determined in good faith based upon the advice of outside counsel with
 respect to the Board's fiduciary duties, that termination was necessary for
 the Board to act consistently with its fiduciary duties under applicable
 law; (ii) $100 million plus up to $10 million for documented out-of-pocket
 expenses if, at a time when an alternative business proposal is pending,
 National Grid terminates the Merger Agreement because: (A) the Company has
 materially breached its representations and warranties or has failed to
 materially perform and comply with its covenants under the Merger
 Agreement, (B) the Company shareholder approval was not obtained, or (C)
 the Company terminates the Merger Agreement because the Closing has not
 occurred by the termination date, provided, that in the case of (A), (B) or
 (C), the Company enters into a merger or acquisition agreement with the
 party offering such alternative proposal within two years of such
 termination; and (iii) documented out-of-pocket expenses up to $10 million
 if National Grid terminates at a time when no alternative business proposal
 was outstanding because of the Company's (A) material breach of its
 representations and warranties, (B) failure to perform and comply with its
 covenants under the Merger Agreement or (C) failure to obtain its
 shareholder vote.   (See Article IX of the Merger Agreement.) 
  
      If  the Merger Agreement is terminated because either party's Board
 has withdrawn or changed its recommendation with respect to the Merger
 prior to such party's shareholder meeting, then the other party must pay a
 $100 million termination fee plus documented out-of-pocket expenses up to
 $10 million.   (See Article IX of the Merger Agreement.) 
  

 ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
 EXHIBITS.
  
      (c)  Exhibits. 
  
      10(mm)   Agreement and Plan of Merger, dated as of December 11, 1998,
               by and among The National Grid Group plc, Iosta LLC and New
               England Electric System. 
  
      99       Press Release of New England Electric System issued December
               14, 1998. 
               

                                 SIGNATURE 
  
      Pursuant to the requirements of the Securities Exchange Act of 1934,
 the registrant has duly caused this report to be signed on its behalf by
 the undersigned hereunto duly authorized. 
  
 Date:  December 16, 1998 
                                 NEW ENGLAND ELECTRIC SYSTEM 
  

                                 By:  /s/ Michael E. Jesanis 
                                      __________________________
                                      Michael E. Jesanis 
                                      Senior Vice President and 
                                      Chief Financial Officer 
  
  

                               Exhibit Index 
  
 Exhibit   Description 
  
 10(mm)    Agreement and Plan of Merger, dated as of December 11, 1998,
           among New England Electric System, The National Grid Group plc,
           and Iosta LLC. 
  
 99        Press Release of New England Electric System issued December 14,
           1998.
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SECURITIES AND EXCHANGE COMMISSION 
                           WASHINGTON, D.C. 20549 
  
                                  FORM 8-K 
  
                               CURRENT REPORT 
                  PURSUANT TO SECTION 13 OR 15(d) OF THE  
                      SECURITIES EXCHANGE ACT OF 1934 
  
  
                             December 11, 1998 
              ________________________________________________ 
              Date of Report (Date of Earliest Event Reported) 
  
  
                        New England Electric System 
              ________________________________________________ 
              (Exact Name of Registrant as Specified in Charter) 
  
  
        Massachusetts             1-3446            04-1663060 
  _____________________        ___________        _____________ 
(State or Other Jurisdiction   (Commission        (IRS Employer  
 of Incorporation)             File Number)       Identification No.) 
  
  
                                25 Research Drive
                        Westborough, Massachusetts 01582
            ___________________________________________________ 
           (Address of Principal Executive Offices and Zip Code) 
  
                               (508) 389-2000 
            ___________________________________________________ 
            (Registrant's Telephone Number, Including Area Code) 
  
  
                                    N/A 
          ________________________________________________________ 
       (Former Name or Former Address, if Changed Since Last Report) 
  
  

 ITEM 5.  OTHER EVENTS. 
  
      On December 11, 1998, New England Electric System, a Massachusetts
 business trust, (the "Company"), The National Grid Group plc, a public
 limited company incorporated under the laws of England and Wales with
 registration number 2367004 ("National Grid") and Iosta LLC, a
 Massachusetts limited liability company which is directly and indirectly
 wholly owned by National Grid ("Iosta"), entered into an Agreement and Plan
 of Merger, dated as of December 11, 1998 (the "Merger Agreement"),
 providing for a merger transaction among the Company, National Grid and
 Iosta.  The Merger Agreement and the press release issued in connection
 therewith are filed herewith as Exhibits 10 (mm) and 99, respectively, and
 are incorporated herein by reference.  The description of the Merger
 Agreement set forth herein does not purport to be complete and is qualified
 in its entirety by the provisions of the Merger Agreement. 
  
      Pursuant to the Merger Agreement, Iosta will merge with and into the
 Company (the "Merger"), with the Company being the surviving entity and
 becoming a wholly-owned subsidiary of National Grid (the "Surviving
 Entity").  The Merger, which was unanimously approved by the boards of
 directors of each of the Company, National Grid and Iosta, is expected to
 occur shortly after all of the conditions to the consummation of the
 Merger, including the receipt of certain regulatory approvals, are met or
 waived.  The Company anticipates that the Merger can be consummated in
 early 2000. 
  
      Under the terms of the Merger Agreement, each outstanding share of the
 Company's common stock, $1.00 par value per share (the "Company Common
 Stock"), other than shares, if any, owned by the Company as treasury shares
 (except those treasury shares which are held pursuant to the Company's
 Rabbi Trust), National Grid, Iosta or any other wholly-owned subsidiary of
 National Grid, will be converted into the right to receive $53.75 in cash,
 as may be adjusted (the "Merger Consideration").  Such adjustment will
 occur if the Closing Date does not occur on or prior to the date that is
 the six month anniversary of the date on which the Company Shareholders'
 Approval is attained (the "Adjustment Date") then the per share amount
 shall be increased by $.003288 each day up to a maximum adjustment of $0.60
 per share, for a total of $54.35 per share.  
  
      The Board of Directors of the Company has received an opinion from its
 investment banker, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to
 the effect that, as of the date of the Merger Agreement, the Merger
 Consideration to be received by the holders of Company Common Stock in the
 Merger is fair from a financial point of view to holders of Company Common
 Stock.  
  
      The Merger is subject to certain customary closing conditions,
 including, without limitation, the receipt of the required approval of the
 Company's shareholders, the receipt of the required approval of National
 Grid's shareholders, and the receipt of all necessary governmental
 approvals and the making of all necessary governmental filings, including
 the consent or approval of certain state utility regulators, the approval
 of the Federal Energy Regulatory Commission ("FERC"), the approval of the
 Securities and Exchange Commission under the Public Utility Holding Company
 Act of 1935, as amended (the "1935 Act"), the approval of the Nuclear
 Regulatory Commission, the filing of the requisite notification with the
 Federal Trade Commission and the Department of Justice under the Hart-
 Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
 expiration of the applicable waiting period thereunder, and the filing of
 the requisite notification under the Exon-Florio Provisions of the Omnibus
 Trade and Competitiveness Act of 1988, and the termination of the review
 and investigation with no action taken by the President thereunder.  A
 meeting of the Company's shareholders to vote upon the Merger will be
 convened as soon as practicable and is expected to be held in the first
 quarter of 1999.  A meeting of National Grid's shareholders to vote upon
 the Merger will be convened as soon as practicable and is expected to be
 held in the first quarter of 1999. 
  
      The Merger Agreement contains certain covenants of the parties pending
 the consummation of the Merger.  Generally, except as required by the terms
 of the Company's Settlement Agreements with FERC and certain state utility
 regulators, the Company must carry on its business in the ordinary course
 consistent with past practice, comply with all laws and preserve intact its
 goodwill.  The Company is permitted to declare and pay its regular
 quarterly dividends.  The Merger Agreement contains certain restrictions on
 the Company including limitations on, or procedures for: issuance of
 securities, termination or failure to renew material contracts, amendments
 to the Company's Declaration of Trust or similar governing documents of the
 Company's Subsidiaries, capital expenditures, acquisitions, dispositions,
 incurrence of indebtedness, modification of employee compensation and
 benefits, rate matters, changes in accounting policies and discharge of
 liabilities. (See Article VI of the Merger Agreement.) 
  
      The Merger Agreement prevents the Company and its subsidiaries from
 knowingly initiating, soliciting or encouraging, directly or indirectly,
 any inquiry or proposal or offer, or engaging in negotiations with, or
 providing confidential information to any third party relating to a
 business combination proposal, and requires the Company to terminate
 immediately any existing discussions or negotiations and notify National
 Grid of any such inquiries relating to a business combination proposal,
 unless prior to the Company shareholder approval: (i) the Company's Board
 determines, in good faith based upon the advice of  its outside legal
 counsel with respect to the Board's fiduciary duties, that taking such
 action is necessary for the Board to act in a manner consistent with its
 fiduciary duties under applicable law; (ii) the Company's Board reasonably
 concludes, in good faith after consultation with its financial advisors,
 that (A) the party making such proposal has adequate financing sources and
 (B) such proposal is likely to be more favorable to stockholders of the
 Company than the Merger (a "Superior Proposal"); (iii) prior to furnishing
 nonpublic information or entering into negotiations, the Company notifies
 National Grid in writing of such furnishing of information or negotiations
 (identifying the party making the proposal and the material terms of such
 proposal) and enters into a confidentiality agreement with such third
 party; and (iv) the Company keeps National Grid promptly informed of the
 status and all material information with respect to such discussions or
 negotiations.  The Company may terminate the Merger Agreement to accept a
 Superior Proposal (in which case, the termination fee provision described
 below would be applicable).  However, before so terminating, the Company
 must negotiate with National Grid to adjust the Merger Agreement so as to
 enable the parties to proceed with the adjusted Merger Agreement, and the
 Company's Board must determine that, based on advice of counsel with
 respect to the Board's fiduciary duties and notwithstanding a binding
 commitment to consummate the Merger Agreement and notwithstanding all
 concessions that may be offered by National Grid in further negotiations
 with the Company, the Superior Proposal is more favorable to the Company's
 shareholders than the Merger.   (See Section 7.08 and Article IX of the
 Merger Agreement.) 
  
      The Company CEO and one outside director of the Company's Board of
 Directors, mutually determined by National Grid and the Company, will be
 appointed to the Board of Directors of National Grid.  In addition, the
 Surviving Entity will have an advisory board, with eleven members from the
 Company's Board immediately prior to the Closing, that will advise the
 Surviving Entity with respect to general business, among other things.  The
 Merger Agreement provides that, after the effectiveness of the Merger (the
 "Effective Time"), the headquarters of the Surviving Entity will be in
 Massachusetts, and utility operations offices will remain in Massachusetts,
 New Hampshire and Rhode Island.  (See Section 7.07 of the Merger
 Agreement.) 
  
      The Merger Agreement may be terminated under certain circumstances,
 including:  (i) by mutual written agreement of the boards of directors of
 the parties; (ii) by either party if the Merger has not been effected by
 the date nine months from the receipt of the Company shareholder approval
 (the "Initial Termination Date"), provided that if the parties are
 otherwise ready to close, but certain statutory approvals are not yet
 obtained, the Initial Termination date will be extended to the date fifteen
 months from the receipt of the Company shareholder' approval (the "Extended
 Termination Date"), and provided further that if on the Initial or Extended
 Termination Date, a "Financial Disruption" exists, then the Company will
 have the right, but not the obligation, to extend such Termination Date six
 months beyond such Termination Date (a "Financial Disruption" means any
 significant disruption in the financial or capital markets which makes it
 impracticable for a company having financial characteristics similar to
 those of National Grid as of the date of the Merger Agreement to finance a
 transaction of the size and nature as that contemplated under the Merger
 Agreement on commercially reasonable financing terms that are available as
 of the date of such financing); and (iii) by either party if: (A) the
 Company shareholder approval or the National Grid shareholder approval has
 not been obtained; or (B) any law, rule or regulation is adopted which
 makes the Merger illegal or any final order or injunction permanently
 prohibits the Merger.  In addition, the Company may terminate the Merger
 Agreement:  (i) under certain circumstances, in order to accept a Superior
 Proposal (subject to the limitations and procedures described above and to
 payment of the termination fee described below); (ii) if there has been a
 material breach of certain of National Grid's representations and
 warranties or a failure by National Grid to perform and comply with its
 covenants under the Merger Agreement and such breach or failure has not
 been cured; (iii) if National Grid fails to deliver the merger
 consideration at a time when all conditions to National Grid's obligation
 to close have been satisfied or waived, and such failure is as a result of
 Financial Disruption; and (iv) if the Board of National Grid withdraws or
 modifies its approval of the merger or its recommendation to its
 shareholders.  National Grid may terminate the Merger Agreement if:  (i)
 the Board of the Company approves, recommends or takes no position with
 respect to an alternative business combination proposal; (ii) twelve months
 after the Company Shareholders' Approval is obtained, the order of the SEC
 approving the Merger under the 1935 Act has not been issued, and National
 Grid certifies to the Company that it reasonably believes that the SEC will
 not issue an order that would comply with the requirements of the
 regulatory condition; (iii) the Board of the Company withdraws or modifies
 its approval of the merger or its recommendation to its shareholders; and
 (iv) there has been a material breach of the Company's representations and
 warranties or a failure by the Company to perform and comply with its
 covenants under the Merger Agreement and such breach or failure has not
 been cured.  (See Articles VIII and IX of the Merger Agreement.) 
  
      National Grid will pay the Company a termination fee of: (i) $100
 million if the Company terminates the Merger Agreement because National
 Grid was unable to pay the merger consideration, at a time when all of the
 National Grid's closing conditions were met or waived, because of a
 Financial Disruption; (ii) $75 million plus up to $10 million for
 documented out-of-pocket expenses if National Grid terminates after the
 twelve month anniversary of the Company's shareholder approval because an
 order from the SEC approving the Merger has not been issued, and National
 Grid certifies to the Company that it reasonably believes that the SEC will
 not issue an order that would comply with the requirements of the
 regulatory condition; and (iii) documented out-of-pocket expenses up to $10
 million if the Company terminates because of National Grid's (A) material
 breach of its representations and warranties, (B) failure to perform and
 comply with its covenants under the Merger Agreement or (C) failure to
 obtain its shareholder vote.   (See Articles VIII and IX of the Merger
 Agreement.) 
  
      The Company will pay National Grid a termination fee of (i) $100
 million plus up to $10 million for documented out-of-pocket expenses if the
 Company terminates the Merger Agreement because the Company became the
 target of a third party alternative proposal, and the Company's Board
 determined in good faith based upon the advice of outside counsel with
 respect to the Board's fiduciary duties, that termination was necessary for
 the Board to act consistently with its fiduciary duties under applicable
 law; (ii) $100 million plus up to $10 million for documented out-of-pocket
 expenses if, at a time when an alternative business proposal is pending,
 National Grid terminates the Merger Agreement because: (A) the Company has
 materially breached its representations and warranties or has failed to
 materially perform and comply with its covenants under the Merger
 Agreement, (B) the Company shareholder approval was not obtained, or (C)
 the Company terminates the Merger Agreement because the Closing has not
 occurred by the termination date, provided, that in the case of (A), (B) or
 (C), the Company enters into a merger or acquisition agreement with the
 party offering such alternative proposal within two years of such
 termination; and (iii) documented out-of-pocket expenses up to $10 million
 if National Grid terminates at a time when no alternative business proposal
 was outstanding because of the Company's (A) material breach of its
 representations and warranties, (B) failure to perform and comply with its
 covenants under the Merger Agreement or (C) failure to obtain its
 shareholder vote.   (See Article IX of the Merger Agreement.) 
  
      If  the Merger Agreement is terminated because either party's Board
 has withdrawn or changed its recommendation with respect to the Merger
 prior to such party's shareholder meeting, then the other party must pay a
 $100 million termination fee plus documented out-of-pocket expenses up to
 $10 million.   (See Article IX of the Merger Agreement.) 
  

 ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
 EXHIBITS.
  
      (c)  Exhibits. 
  
      10(mm)   Agreement and Plan of Merger, dated as of December 11, 1998,
               by and among The National Grid Group plc, Iosta LLC and New
               England Electric System. 
  
      99       Press Release of New England Electric System issued December
               14, 1998. 
               

                                 SIGNATURE 
  
      Pursuant to the requirements of the Securities Exchange Act of 1934,
 the registrant has duly caused this report to be signed on its behalf by
 the undersigned hereunto duly authorized. 
  
 Date:  December 16, 1998 
                                 NEW ENGLAND ELECTRIC SYSTEM 
  

                                 By:  /s/ Michael E. Jesanis 
                                      __________________________
                                      Michael E. Jesanis 
                                      Senior Vice President and 
                                      Chief Financial Officer 
  
  

                               Exhibit Index 
  
 Exhibit   Description 
  
 10(mm)    Agreement and Plan of Merger, dated as of December 11, 1998,
           among New England Electric System, The National Grid Group plc,
           and Iosta LLC. 
  
 99        Press Release of New England Electric System issued December 14,
           1998.