SCHEDULE 14A
                         (Rule 14a-101)

            INFORMATION REQUIRED IN PROXY STATEMENT

                   SCHEDULE 14A INFORMATION

   Proxy Statement Pursuant to Section 14(a) of the Securities
            Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant  [ ]
Filed by a Party other than the Registrant  [X]
Check the appropriate box:
[X]  Preliminary Proxy Statement    [ ]  Confidential, for Use of
                                         the Commission Only (as
                                         permitted by Rule 14a-
                                         6(e)(2))

[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-
     12

                   UNITED CITIES GAS COMPANY
- -----------------------------------------------------------------
        (Name of Registrant as Specified in Its Charter)

                    SOUTHERN UNION COMPANY
- -----------------------------------------------------------------
           (Name of Person(s) Filing Proxy Statement,
                 if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ]  $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
     6(i)(2) or Item 22(a)(2) of Schedule 14A.

[ ]  $500 per each party to the controversy pursuant to Exchange
     Act 14a-6(i)(3).

[ ]  Fee computed on table below per Exchange Act Rules 14a-
     6(i)(4) and 0-11.

     (1)  Title of each class of securities to which transaction
          applies:

- -----------------------------------------------------------------
     (2)  Aggregate number of securities to which transaction
          applies:

- -----------------------------------------------------------------
     (3)  Per unit price or other underlying value of transaction
          computed pursuant to Exchange Act Rule 0-11 (Set forth
          the amount on which the filing fee is calculated and
          state how it was determined):

- -----------------------------------------------------------------
     (4)  Proposed maximum aggregate value of transaction:

- -----------------------------------------------------------------
     (5)  Total fee paid:

- -----------------------------------------------------------------
[X]  Fee paid previously with preliminary materials.

     [  ]  Check box if any part of the fee is offset as provided
           by Exchange Act Rule 0-11(a)(2) and identify the
           filing for which the offsetting fee was paid
           previously.  Identify the previous filing by registra-
           tion statement number, or the Form or Schedule and the
           date of its filing.

     (1)   Amount previously paid:

- -----------------------------------------------------------------
     (2)   Form, Schedule or Registration Statement No.:

- -----------------------------------------------------------------
     (3)   Filing Party:

- -----------------------------------------------------------------
     (4)   Date Filed:

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



                      SUBJECT TO COMPLETION
        PRELIMINARY PROXY STATEMENT DATED NOVEMBER 1, 1996

                    OPPOSITION PROXY STATEMENT
                    --------------------------
                      SOUTHERN UNION COMPANY
                 504 Lavaca Street, Eighth Floor
                        Austin, Texas 78701

             PROXY STATEMENT OF SOUTHERN UNION COMPANY
           IN OPPOSITION TO THE PROPOSED MERGER BETWEEN
      UNITED CITIES GAS COMPANY AND ATMOS ENERGY CORPORATION
                  -------------------------------

TO ALL SHAREHOLDERS OF UNITED CITIES GAS COMPANY:

This Opposition Proxy Statement is being furnished to holders
(the "Shareholders") of the common stock, without par value (the
"Common Stock"), of United Cities Gas Company ("United Cities")
in connection with the solicitation of proxies by Southern Union
Company ("Southern Union") for use in connection with United
Cities' Special Meeting of Shareholders which is scheduled to be
held on November 12, 1996, at 10:30 a.m. at the Fifth Floor Audi-
torium of the First American Center, 326 Union Street, Nashville,
Tennessee (the "Special Meeting").  According to the Board's
Proxy Statement (defined below), as of the close of business on
October 2, 1996 (the "Record Date"), there were 13,174,794 shares
of Common Stock outstanding.  Each share of Common Stock is
entitled to one vote.  Only Shareholders of record on the Record
Date are entitled to vote at the Special Meeting.  As of the
Record Date, Southern Union was, and presently is, the beneficial
owner of 6.5% of the outstanding Common Stock of United Cities.
There is currently pending litigation challenging the validity
of Southern Union's ownership interest in and, accordingly, its
ability to vote its shares of, the Common Stock.  See "Background
and Reasons for the Opposition Proxy Solicitation - Litigation."
This Opposition Proxy Statement and form of proxy are first being
sent to Shareholders on or about November    , 1996.
                                          ---

Southern Union opposes the proposed merger (the "Merger") between
United Cities and Atmos Energy Corporation ("Atmos") and is
seeking your support in opposing the Merger by urging you to (i)
VOTE AGAINST THE MERGER and (ii) ASSERT YOUR DISSENTERS' RIGHTS
under the Illinois Business Corporation Act of 1983.  The Board
of Directors and executive officers of Southern Union, along with
other persons who may participate in this opposition solicita-
tion, are listed on Appendix A attached hereto.  Southern Union
knows of no matter to come before the Special Meeting other than
those outlined herein.  Southern Union has not made and may
determine not to make a competing offer for United Cities, but
has reserved its right to do so in the future.  Accordingly,
Southern Union's interest in opposing the Merger may conflict
with those of other Shareholders.  See "Risks Associated with
Accepting the Opposition Proxy and Asserting Dissenters'
Rights" - There Is No Assurance of Success in Selling United
Cities to Another Acquiror or on Better Terms.

Southern Union believes that Shareholders should vote AGAINST the
Merger and ASSERT THEIR DISSENTERS' RIGHTS for the following rea-
sons: (i) until the Board of Directors seeks competing proposals
for United Cities from third parties (which it may not be legally
obligated to do), Shareholders should not be satisfied that the
Merger provides them the maximum value for their investment in
United Cities; (ii) the termination fee of $15,000,000 (the "Ter-
mination Fee"), which United Cities must pay to Atmos in the
event United Cities enters into a competing transaction or the
Merger is not consummated under certain circumstances, inhibits
competing offers for United Cities by effectively decreasing the
value to Shareholders of such offers by such amount; (iii) the
awards to certain executive officers of United Cities of addi-
tional benefits, including a payment of up to $8.9 million to its
executive officers in the event of a change of control of United
Cities with any party other than on the same terms providing for
the payment of $5.1 million to certain executive officers of
United Cities under certain circumstances, further inhibits the
success of any competing offer for United Cities by conditioning
any such competing offer on the payment of such benefits and
thereby decreasing the amount to be retained by United Cities
and its Shareholders; (iv) the Board of United Cities did not
obtain price protection despite the historical fluctuations in
the market price of the Atmos stock offered in the Merger; and
(v) the $2,000,000 to be paid to PaineWebber Incorporated
("PaineWebber") if the Merger is completed should have been
used to assist United Cities in pursuing competing proposals
to maximize Shareholder value.

Southern Union urges Shareholders to assert their Dissenters'
Rights because such action may potentially block the Merger,
not because Shareholders would necessarily receive considera-
tion in an appraisal proceeding greater than that being
offered in the Merger.  Under its terms, the Merger Agreement
may be terminated and thus, the Merger may be blocked, if (i)
Shareholders owning 10% or more of the Common Stock assert
their Dissenters' Rights or (ii) Shareholders owning a
majority or greater of the Common Stock vote against the
Merger or abstain from voting on the Merger.

          PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



As a Shareholder of United Cities, WHETHER TO PROCEED WITH THE
MERGER IS A DECISION OVER WHICH YOU HAVE AUTHORITY TO ACT.
Southern Union urges you to take the time to understand (i) the
Joint Proxy Statement of United Cities and Atmos, which includes
the Prospectus of Atmos and, as an exhibit thereto, the Agreement
and Plan of Reorganization, dated July 19, 1996, between United
Cities and Atmos, as amended by Amendment No. 1 to Agreement and
Plan of Reorganization, dated October 3, 1996, and the related
Plan of Merger (together, the "Merger Agreement") which contains
the terms of the Merger (the "Board's Proxy Statement"), which
you receive from United Cities, to be sure that you understand
the proposed Merger as it stands as of the time that you vote,
and (ii) why Southern Union objects to the proposed Merger and
certain risks associated with accepting the Opposition Proxy and
asserting your Dissenters' Rights, as set forth in this Opposi-
tion Proxy Statement.

November    , 1996
         ---






         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



                 THE BLUE OPPOSITION PROXY CARD

Southern Union urges you to vote AGAINST the proposed Merger
between United Cities and Atmos on the BLUE OPPOSITION PROXY CARD
(the "Opposition Proxy"), which will be provided to Shareholders
of record of the Common Stock as of the Record Date.  Further,
Southern Union recommends that you assert your dissenters' rights
("Dissenters' Rights") with respect to your shares and the pro-
posed Merger, pursuant Sections 11.65 and 11.70 of the Illinois
Business Corporation Act of 1983 (the "Illinois Act").  See
"DISSENTERS' RIGHTS" below.

Southern Union presently intends to vote against the Merger and
to assert its Dissenters' Rights.  The obligation of United
Cities and Atmos to effect the Merger is subject to certain con-
ditions (which may be waived by Atmos and/or United Cities)
including, among other things, the following conditions which
may be waived by Atmos:  that the holders of fewer than 10% of
the outstanding shares of United Cities Common Stock have
asserted their Dissenters' Rights; and that Atmos has received
the written opinion of its independent accountants that the
Merger can be accounted for as a pooling of interests.  If the
holders of 10% or more of the outstanding shares of United
Cities Common Stock as of the Record Date assert their
Dissenters' Rights as to the Merger, it is unlikely that the
Merger could be accounted for as a pooling of interests.

You may use the Opposition Proxy to Vote For or Against the pro-
posed Merger.  Because the Merger requires the approval of a
majority of the shares of Common Stock outstanding as of the
Record Date, failure to vote or to return neither the Opposition
Proxy nor the proxy accompanying the Board's Proxy Statement will
have the same effect as a vote against the Merger.  Abstentions
and broker non-votes also will have the same effect as votes
against the Merger.

Southern Union urges you to complete, sign and date the enclosed
OPPOSITION PROXY and to return it in the enclosed prepaid
envelope as soon as possible.  This will not prevent you from
attending the Special Meeting and voting your shares in person
even if you have previously returned a proxy card since a proxy
is revocable up to the time it is voted.  IF YOU HAVE VOTED FOR
THE MERGER ON A UNITED CITIES PROXY, YOU MAY STILL VOTE AGAINST
THE PROPOSED MERGER ON THE OPPOSITION PROXY MERELY BY SIGNING,
DATING AND MAILING THE ENCLOSED BLUE PROXY CARD.

Southern Union also urges you to assert your Dissenters' Rights.
A vote against the Merger, a non-vote or an abstention from
voting is not enough, by itself, to assert your Dissenters'
Rights.  See "DISSENTERS' RIGHTS" below.

Shares represented by a valid unrevoked Opposition Proxy will be
voted as specified.  If no specification is made, shares repre-
sented by an Opposition Proxy will be voted AGAINST the Merger,
as described in the Board's Proxy Statement, and will be voted in
the discretion of the persons named therein on any other matters
that may properly come before the Special Meeting or any adjourn-
ments or postponements thereof.  Opposition Proxies may be
revoked at any time provided that a written revocation which
clearly identifies the proxy being revoked is executed and
delivered to Southern Union Company, c/o Georgeson & Company Inc.
at Wall Street Plaza, New York, New York 10005.  A later dated
proxy automatically revokes an earlier dated one.  You may also
revoke any proxy given by attending the Special Meeting and
voting your shares of Common Stock.  Attendance at the Special
Meeting will not itself constitute the revocation of a proxy.

If you own your shares in the name of a bank, brokerage house or
other custodian, nominee or other fiduciary, only such fiduciary
can vote your shares of Common Stock and assert your Dissenters'
Rights.  Accordingly, you should contact such fiduciary and give
instructions with respect to the granting your proxy and
asserting your Dissenters' Rights.  Such fiduciary cannot vote
your shares or assert your Dissenters' Rights unless he or she
receives your specific instructions.

         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



IF YOU HAVE ANY QUESTIONS OR HAVE ANY DIFFICULTY GRANTING PROXIES
OR ASSERTING YOUR DISSENTERS' RIGHTS, YOU ARE INVITED TO CONTACT
GEORGESON & COMPANY INC. TOLL-FREE AT (800)          .  BANKS AND
                                            ---------
BROKERS CALL (212)             (COLLECT).
                   -----------

       RISKS ASSOCIATED WITH ACCEPTING THE OPPOSITION PROXY
                AND ASSERTING DISSENTERS' RIGHTS

Shareholders should carefully consider the matters described
below as well as all of the information contained in the Board's
Proxy Statement and elsewhere in this Opposition Proxy Statement.

There Is No Assurance of Success in Selling United Cities to
Another Acquiror or on Better Terms
- -----------------------------------------------------------------

Although the proposed Merger consideration is in excess of both
the book value and market value of United Cities as of June 30,
1996, Southern Union believes that it is possible that the terms
to which a third-party acquiror or merger partner would agree
might be more favorable to the Shareholders but for certain terms
of the Merger approved by the United Cities Board such as the
Termination Fee and certain management perquisites.  However,
there can be no assurance that an alternative transaction will
occur if the Merger is not consummated or that Shareholders will
receive terms more favorable than in the Merger if they vote
against the Merger and an alternative transaction is subsequently
approved; nor can there be any accurate prediction with respect
to the prices at which United Cities Common Stock would trade
under any such circumstances.

As disclosed in its Schedule 13D filed with the Securities and
Exchange Commission (the "SEC") on August 1, 1996, Southern Union
has reserved its right to pursue a combination with United Cities
through, among other means, a tender offer, exchange offer or
similar transaction, but, in part due to the Termination Fee
being payable under certain circumstances, Southern Union
presently has not made such a proposal.  Accordingly, Share-
holders should note that they are being asked to vote AGAINST the
Merger on the BLUE PROXY CARD -- THEY ARE NOT BEING ASKED TO VOTE
ON ANY ALTERNATIVE TO THE MERGER.  The existence or implementa-
tion of any such alternative plan is speculative.  Since Southern
Union has reserved its right to pursue a competing offer for
United Cities or might otherwise consider an extraordinary trans-
action involving United Cities, its interest in opposing the
Merger may conflict with those of other Shareholders.  Southern
Union presently does not compete with Atmos and will not, immedi-
ately upon consummation of the proposed Merger, compete with the
merged entity.  The Schedule 13D filed with the SEC on August 1,
1996, as amended by Amendment No 1. thereto filed with the SEC on
August 20, 1996 and Amendment No. 2 thereto filed with the SEC on
October 18, 1996 is referred to herein as the "Schedule 13D."

As disclosed in Amendment No. 2 to Southern Union's Schedule 13D,
on October 16, 1996, Southern Union filed with the Federal Trade
Commission and the Antitrust Division of the U.S. Department of
Justice its notification under the Hart-Scott-Rodino Antitrust
Improvements Act of its intention to acquire additional Common
Stock of United Cities in an amount less than 15% of the issued
and outstanding shares, subject to market conditions, applicable
legal and regulatory considerations, and other factors Southern
Union may from time to time deem appropriate.  Southern Union
requested early termination of the statutory waiting period be-
fore such acquisitions may commence which request was granted
effective November 1, 1996.  Such possible future purchases may
involve obtaining beneficial interests in shares of Common
Stock held by other Shareholders by, among other things,
Southern Union entering into contractual arrangements with such
Shareholders with respect to their voting AGAINST the Merger,
asserting their Dissenters' Rights and continuing to own their
shares of Common Stock; however, Southern Union has not entered
into any such arrangement, and presently cannot determine what


        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



the definitive terms of any such arrangement might be.  Southern
Union may also decide to sell some or all of its shares of Common
Stock in the future.  There is currently pending litigation
challenging the validity of Southern Union's ownership interest
in, and accordingly, its ability to vote its shares of, the
Common Stock.  See "Background and Reasons for the Opposition
Proxy Solicitation - Litigation."

As of the date of this Opposition Proxy Statement, United Cities
has not made any offer to Southern Union to purchase any shares
of Common Stock owned by Southern Union, and Southern Union has
not made any offers to sell to United Cities any shares of Common
Stock owned by Southern Union.

Perfection of Dissenters' Rights May Not Result in a Higher Con-
sideration But May Preclude the Merger
- -----------------------------------------------------------------

Under the Illinois Act, where, along with Virginia, United Cities
is incorporated, Atmos must pay Shareholders who properly assert
and perfect their Dissenters' Rights the "fair value" IN CASH of
their shares of Common Stock.  There can be no assurance that
such fair value will be greater than the value of the Merger con-
sideration offered by Atmos.  In addition, Shareholders effecting
their Dissenters' Rights may be assessed certain fees for adjudi-
cating such rights under certain circumstances and may experience
significant delays in receiving fair value in such a proceeding.
Southern Union urges Shareholders to assert their Dissenters'
Rights not because it believes that asserting such rights would
result in the receipt of consideration greater than that offered
in the Merger; rather, Southern Union believes that Shareholders
should assert their rights in order to potentially block the
Merger.  The Merger is subject to certain conditions (which may
be waived by Atmos), including that Shareholders owning less than
10% of the outstanding shares of United Cities Common Stock
assert their Dissenters' Rights and the receipt of the written
opinion of Atmos' independent accountants stating that they
concur in the accounting treatment of the Merger as a pooling
of interests.  Accordingly, in the event Shareholders owning
10% or more of the outstanding shares of Common Stock assert
such rights or such opinion is not received, the Merger may
not occur unless United Cities and Atmos waive the two condi-
tions described above and proceed with the Merger.  See also
"The Reorganization Agreement and the Merger - Accounting
Treatment" in the Board's Proxy Statement.  Shareholders
asserting their Dissenters' Rights may not succeed in blocking
the Merger and, if not able to withdraw their Dissenters'
Rights, may be forced to receive the "fair value" of their
shares in an appraisal proceeding and forfeit receipt of the
Merger consideration.

Based on Illinois case law, Southern Union believes that dis-
senting Shareholders may withdraw their request for Dissenters'
Rights for up to several months after the date of the Special
Meeting.  However, such right of withdrawal may not be settled as
a matter of Illinois law, so no, or a shorter, period may be
available for such withdrawal.  Southern Union has not requested
or received an opinion of counsel regarding withdrawal of
Dissenters' Rights.  In addition, the receipt of cash upon
perfecting Dissenters' Rights may subject such dissenting Share-
holders to tax liability on the difference between the cash
received and the Shareholder's basis in the Common Stock.
Accordingly, Shareholders should refer to "DISSENTERS' RIGHTS"
below for details as to how to assert and the uncertain effect
of perfecting or withdrawing their Dissenters' Rights, and obtain
their own legal counsel for further information regarding such
matters.

Payment of Termination Fee, Reasonable Expenses of Atmos and
Other Payments
- -----------------------------------------------------------------

As set forth in the Board's Proxy Statement and Section 5.4(b) of
the Merger Agreement, the Termination Fee must be paid in the
event the Merger Agreement is terminated (i) by United Cities in
the exercise of its Board of Directors of its fiduciary duties
with respect to a "Competing Transaction" (as defined below),
(ii) by Atmos if the Board of Directors of United Cities has
taken a position recommending a Competing Transaction, or if the
Board of Directors of United Cities fails to recommend the Merger
to the Shareholders of United Cities, or (iii) by Atmos because
the Shareholders of United Cities have approved a Competing
Transaction.  Termination of the Merger Agreement only in the
circumstances listed would necessitate the payment of the Termi-
nation Fee.  Any other prior termination for different reasons
permitted under Section 7.1 of the Merger Agreement should not
trigger payment of the Termination Fee.  Therefore, the Termina-
tion Fee would not be payable by United Cities solely as a result
of (a) Shareholders failing to approve the Merger, and/or (b)
Shareholders of 10% or more of the Common stock asserting their
Dissenters' Rights, as requested by Southern Union in this
Opposition Proxy Statement.  In the event the Merger Agreement is
not terminated by United Cities or Atmos promptly if the Merger
is not approved by Shareholders or Shareholders of 10% or more
of the Common Stock assert their Dissenters' Rights, such Termi-
nation Fee may still become payable under the circumstances
described.

In Section 8.1(h) of the Merger Agreement (see Exhibit A to the
Board's Proxy Statement), a "Competing Transaction" is defined to
include (i) any merger, consolidation, share exchange, business
combination or similar transaction involving United Cities, (ii)
any sale, lease, exchange or other

         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



disposition of 20% or more of the assets of United Cities and its
subsidiaries, (iii) any tender offer or exchange offer for 20% or
more of United Cities' stock, (iv) the acquisition of 20% or more
of United Cities' stock (or rights to acquire such stock) by any
person or group, or (v) any public announcement of any proposal or
plan or intention to do any of the foregoing or any agreement to
do any of the foregoing except as specifically provided in the
Merger Agreement for matters in the ordinary course of business.
As defined, Southern Union believes that a Competing Transaction
purportedly includes any future transaction involving United
Cities.  However, in Southern Union's opinion, with respect to
the circumstances under which the payment of the Termination Fee
would be triggered, a Competing Transaction would be limited to
those transactions occurring at the time the Merger Agreement is
still in full force and effect.  There can be no assurance, how-
ever, how United Cities and Atmos would interpret such provisions
of the Merger Agreement.

As set forth in the Board's Proxy Statement and Section 5.4(a) of
the Merger Agreement, in the event the Merger Agreement is termi-
nated by Atmos due to, among other things (i) the failure of
Shareholders to approve the Merger, or (ii) Shareholders of 10%
or more of the Common stock asserting their Dissenters' Rights,
then Atmos could demand that United Cities reimburse it for its
reasonable expenses incurred in connection with the Reorganiza-
tion Agreement and the transactions contemplated thereby.  The
occurrence of either of the events in (i) and (ii) above gives
Atmos the right to terminate the Merger Agreement and demand
reimbursement of its expenses, but such termination would pre-
clude payment of the Termination Fee.  Therefore, if Southern
Union is successful in its Opposition Proxy Solicitation and
Atmos terminates the Merger Agreement as a result thereof, United
Cities could be obligated to pay such amount, which is not
accurately determinable by Southern Union at this time.  Such
amount, however, could include all reasonable fees incurred by
Atmos and its counsel, accountants and other advisors and agents
(including Merrill Lynch, Pierce, Fenner & Smith Incorporated,
"Merrill Lynch") and costs incurred in printing and mailing the
Board's Proxy Materials.  Such amount would not include those
fees to be paid only upon consummation of the Merger, such as the
$2,400,000 fee to be paid then by Atmos to Merrill Lynch.

In addition, United Cities may be obligated to pay SERP partici-
pants approximately $8.9 million in the event United Cities is
involved in a change of control transaction with a party other
than Atmos.  See "Background and Reasons for the Opposition Proxy
Solicitation - Effect of Management Perquisites."


  BACKGROUND AND REASONS FOR THE OPPOSITION PROXY SOLICITATION

Southern Union, as of the Record Date and presently, is the bene-
ficial owner of 854,300 shares of Common Stock, or 6.5% of the
outstanding shares of Common Stock.  There is currently pending
litigation challenging the validity of Southern Union's ownership
interest in, and accordingly, its ability to vote its shares of,
the Common Stock.  See "- Litigation."  In opposition to the
Merger, Southern Union is seeking to solicit the proxies of
Shareholders to be used:  (i) to vote AGAINST the Merger; and
(ii) to vote in its discretion on such other matters that may
properly come before the Special Meeting or any adjournments or
postponements thereof.

Southern Union has been a Shareholder of United Cities since
December 1995 and has invested in excess of $16.0 million in its
shares of Common Stock.  Like you, Southern Union wishes to maxi-
mize the value of its investment in the Common Stock, a commit-
ment that Southern Union believes should have been foremost in
the minds of United Cities' Board of Directors and senior manage-
ment.  Southern Union believes that the history of the exclusive
Merger negotiations between United Cities and Atmos, and there-
fore, United Cities' Board of Directors' entering into the Merger
Agreement, demonstrates that the Board and management did not
seek to maximize the value of United Cities.  Management did,
however, succeed in assuring themselves jobs and perquisites pay-
able in the event the Merger is consummated.

Southern Union's objections to the proposed Merger center around
the following key issues:

   -   United Cities' Board of Directors negotiated and entered
       into the Merger Agreement quickly (in less than three
       weeks) without soliciting competing bids for United Cities
       despite management's

           PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



       knowledge of Southern Union's interest in meeting with
       United Cities about a possible combination transaction.
       United Cities has denied such knowledge.

   -   The Termination Fee of $15,000,000 payable to Atmos in the
       event the Merger is not consummated under certain circum-
       stances discourages any competing offer for United Cities.

   -   Management benefits, including Supplemental Executive
       Retirement Plan ("SERP") benefits to certain executives
       (currently estimated to total to at least $5.1 million),
       employment contracts have increased the costs of consum-
       mating the Merger by the value of such benefits, and
       potential costs to United Cities of up to $8.9 million in
       payments to certain executives have the effect of further
       inhibiting any competing offer for United Cities.

   -   The United Cities Board did not obtain any "collar" to
       assure the value of the Merger consideration or obtain the
       right to terminate the Merger Agreement if the Atmos stock
       price drops below a certain level, despite the histori-
       cally fluctuating market price of Atmos' stock.

   -   The Fairness Opinion rendered by PaineWebber is inadequate
       and the $2,000,000 in total payments to be made to
       PaineWebber if the Merger is completed instead should have
       been used to retain PaineWebber to assist in pursuing com-
       peting proposals to maximize Shareholders' value.

United Cities' Board and Management Did Not Solicit Alternatives
Despite Management's Knowledge of Southern Union's Interest in
Pursuing a Combination
- -----------------------------------------------------------------

United Cities entered into the Merger Agreement on July 19, 1996
despite the fact that management was aware of Southern Union's
interest in pursuing a combination.  Immediately prior to United
Cities engaging in exclusive negotiations with Atmos, Southern
Union repeatedly expressed its interest in meeting with United
Cities officers in order to discuss a combination with United
Cities.  United Cities has denied knowledge of Southern Union's
expression of interest.

The Board's Proxy Statement focuses exclusively on Atmos' his-
toric expressions of interest and the negotiation of the Merger
Agreement with Atmos, implying that there were no third parties
interested in pursuing a transaction with United Cities.  This
simply was not the case.  In fact, United Cities refused to
entertain any proposal from Southern Union.

On May 6, 1996, Peter H. Kelley, President and Chief Operating
Officer of Southern Union, and Ronald J. Endres, Executive Vice
President and Chief Financial Officer of Southern Union,
approached James B. Ford, Senior Vice President and Treasurer of
United Cities, regarding Southern Union's interest in meeting
about a possible combination transaction.  This followed
Mr. Ford's comment earlier that day during his presentation at an
American Gas Association Financial Analysts Conference that, at
the right price, United Cities was a buyer or a seller.  Mr. Ford
told Messrs. Kelley and Endres that such a meeting could be
arranged.  Mr. Endres called Mr. Ford on several occasions in May
and June to schedule a meeting.  Mr. Ford offered trips to Europe
and the Olympic Games as reasons for delaying a meeting.  In
June, Mr. Ford eventually scheduled a meeting for August 7, 1996
at Southern Union's offices in Austin, Texas.  That meeting never
took place.  Mr. Ford has denied that any discussions ever took
place between him and Messrs. Kelley and Endres regarding
Southern Union's interest in United Cities.  Before that date,
United Cities instead negotiated exclusively with Atmos, and, on
July 19, 1996, both Boards approved and entered into the Merger
Agreement.

The Board's Proxy Statement states that, in August 1995,
Charles K. Vaughan, Chairman of the Board of Atmos, first
approached Gene C. Koonce, Chairman of the Board, President and
Chief Executive Officer of United Cities, to inquire about the
possibility of a merger between Atmos and United Cities.

        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



According to the Board's Proxy Statement, Mr. Koonce responded to
the initial inquiry and subsequent inquiries of Mr. Vaughan
regarding such a transaction by stating that "it was the policy
of United Cities to remain independent" or "the Company was not
interested" or "not for sale."  It was not until a February 1996
planning session that Mr. Koonce advised the Board of his con-
tacts with Atmos.  At that planning session the Board of Direc-
tors of United Cities heard presentations of outside consultants
and industry analysts regarding developments in the gas utilities
industry and a presentation of internal management regarding a
potential internal restructuring to simplify United Cities' man-
agement structure.

According to the Board's Proxy Statement, Mr. Koonce continued to
respond to subsequent inquiries of Atmos in a similar manner
until some time after May 3, 1996, APPROXIMATELY THE SAME TIME
Messrs. Kelley and Endres of Southern Union first approached
Mr. Ford regarding a possible combination of United Cities with
Southern Union.  Later in May -- soon after Messrs. Kelley and
Endres expressed Southern Union's interest in United Cities to
Mr. Ford -- Mr. Koonce indicated to Mr. Vaughan that United
Cities "might be willing to discuss the possibility of [a] merger
[with Atmos]."  See "Background of the Merger - History of the
Merger Negotiations" in the Board's Proxy Statement.

Southern Union considers it inappropriate that United Cities
would enter into exclusive merger discussions with Atmos without,
at the very least, inviting a proposal from Southern Union.
Instead, in the face of Southern Union's continuing requests to
meet with United Cities' representatives (which United Cities
denies), United Cities' management and Board rushed -- in less
than three weeks -- into an agreement with Atmos with special
terms benefitting the key executives advancing the Atmos
proposal.

The United Cities' Board is continuing to inhibit Southern
Union's desire to propose an informed competitive offer without
the cost to Shareholders of the Termination Fee and management
perquisites under the Merger Agreement.  The Board has refused to
provide Southern Union access to the due diligence information
that they provided to Atmos (see "Background of the Merger - His-
tory of the Merger Negotiations" in the Board's Proxy Statement)
and is attempting to preclude Southern Union from having certain
benefits of its ownership of 6.5% of United Cities' outstanding
shares.  See "- Litigation."

In light of management's knowledge of Southern Union's interest
in pursuing a combination transaction with United Cities (which
United Cities denies), coupled with United Cities' retention of
a financial advisor, to be paid up to $2,000,000 upon consumma-
tion of the Merger and capable of assisting management with
such an endeavor, Southern Union believes that the solicitation
of competing offers would have been better aligned with
achieving the greatest value for Shareholders' investment in
United Cities.  The Board of Directors has not been and may not
be found to have failed in exercising its fiduciary duties to
the Shareholders in entering into the Merger Agreement or to
have been required to solicit competing offers for United
Cities.  These issues are not settled under the corporate laws
applicable to United Cities, but are the subject of current
litigation initiated by Southern Union (see "- Litigation").
Nevertheless, regardless of any legal standard to which the
Board of Directors presently is held or may be held in the
future, Southern Union believes that, under the circumstances,
Shareholders should have expected the Board of Directors of
United Cities to solicit competing offers prior to executing the
Merger Agreement. 

A VOTE AGAINST THE MERGER ON THE BLUE OPPOSITION PROXY CARD WILL
SEND A STRONG MESSAGE TO THE UNITED CITIES BOARD OF DIRECTORS
THAT YOU WANT THE BOARD TO CONSIDER ALTERNATIVES TO THE PROPOSED
MERGER.

Prohibitive Effect of the Termination Fee
- -----------------------------------------

Southern Union believes that the Termination Fee impedes the
ability of potential third-party strategic partners or bidders
from negotiating a merger 


       PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



or similar transaction with United Cities.  Even if such a propo-
sal were made and pursued, the Termination Fee could result in
additional transaction costs in the form of the $15,000,000.

In the event the Board of Directors determines that its fiduciary
duties require it to proceed with a Competing Transaction, the
payment of the $15,000,000 Termination Fee in such event would
effectively require the offeror to pay the equivalent of at least
a 4.7% premium, and as much as a 5.5% premium over the aggregate
value of the Merger consideration offered by Atmos (with the
aggregate value of the Merger consideration computed by multi-
plying the 13,174,794 shares of United Cities Common Stock out-
standing on the Record Date by the $24.125 per share highest, and
the $20.875 per share lowest, sale price of Atmos common stock on
the New York Stock Exchange since July 22, 1996, the day the pro-
posed Merger was announced).

Southern Union believes that the Board of Directors and senior
management of United Cities would have maximized the value to
Shareholders by investigating other potential strategic partners
or bidders.  That should have included Southern Union.  Instead,
while avoiding meeting with Southern Union, United Cities' man-
agement and Board negotiated with Atmos exclusively.  The Termi-
nation Fee, in the opinion of Southern Union, should not have
been agreed to until other potential avenues were investigated. 
Instead, Southern Union was led to believe that a meeting with
United Cities to discuss a possible business combination was
imminent while United Cities' Board pursued exclusive negotia-
tions with Atmos.  

The termination fee is payable only by United Cities in the event
United Cities is sold to a third party.  No such fee is payable
by Atmos even though United Cities is responsible for 45% of the
total value of the Merger.  In addition, Southern Union believes
that the $2,000,000 fee (including a $1,400,000 payment due if
the Merger closes) to PaineWebber would have been better earned
through the Board directing PaineWebber to assist in such inves-
tigations.  See "- No Price Protection Despite Uncertain Value of
Atmos Stock" and "- Limitations on PaineWebber Engagement and
Fairness Opinion."

IF THE MERGER AGREEMENT IS TERMINATED BY ATMOS FOR CERTAIN REA-
- ----------------------------------------------
SONS, INCLUDING EITHER BECAUSE THE APPROVAL OF THE REQUIRED
MAJORITY OF SHAREHOLDERS IS NOT OBTAINED OR BECAUSE SHAREHOLDERS
OWNING TEN PERCENT OR MORE OF THE OUTSTANDING SHARES ASSERT THEIR
DISSENTERS' RIGHTS, THE $15,000,000 TERMINATION FEE WOULD NOT BE
                    --------------------------------------------
PAYABLE.
- -------

Effect of Management Perquisites
- --------------------------------

The benefits that key United Cities executives negotiated for
themselves with Atmos should be carefully considered by Share-
holders.  As described below, the fees to be paid to United
Cities' management under the terms of the Merger Agreement by
either United Cities or the merged entity after the Merger,
necessarily will be provided from the cash flow of the entity
in which Shareholders have made, or have been asked by United
Cities to make, an investment.  If the Merger Agreement were
to be terminated for any reason, such payment provisions would
become unenforceable, thus preserving these funds as assets or
for other purposes.

Under the terms of the Merger Agreement, certain members of
United Cities' management and key employees who participate in
the SERP (other than Mr. Koonce) will receive cash payments, upon
termination of the SERP in connection with the consummation of
the Merger, in exchange for their waiver of certain rights and
benefits under the SERP.  Such amounts are reported to be up to
$5,100,000 in the aggregate.  Such officers will then become
eligible to participate in Atmos' Supplemental Executive Benefits
Plan (the "SEBP").  In addition to the payments made to other
officers, Mr. Koonce will be entitled to receive from the SERP a
benefit with a value that is currently undisclosed.  In the orig-
inal Merger Agreement, the amount was stated to be $2,247,434.


         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



Subsequent to the execution on July 19, 1996, of the Reorganiza-
tion Agreement, United Cities adopted amendments to the SERP
that, among other things, provide that if a participant becomes
subject to the federal excise tax on "excess parachute payments"
as a result of receiving any payments pursuant to the change of
control provisions of the SERP, United Cities is obligated to
make an additional cash payment to make him or her whole for such
excise tax, on an after-tax basis.  The maximum potential cost to
United Cities of this change is approximately $8.9 million.
Additionally, a provision was added which would render the change
of control provisions thereof inapplicable in the event that
United Cities undergoes a change of control involving an entity
other than Atmos if such other entity agrees to provide SERP
participants with compensation and employee benefits at least
equivalent to those agreed to by Atmos.  The change of control
provisions are inapplicable to the Merger because the waivers
referred to above have been obtained.  See "Interest of Certain
Persons in the Merger - United Cities Personnel -- Supplemental
Executive Retirement Plan" in the Board's Proxy Statement.
Accordingly, the change of control provisions and the payment by
United Cities of approximately $8.9 million would be triggered in
the event a change of control transaction with any third party
involving United Cities is consummated and either (i) the
acquiror does not provide SERP participants with compensation
and employee benefits at least equivalent to those agreed to by
Atmos or (ii) the SERP participants do not otherwise agree to
waive their rights under the SERP.

Pursuant to the Merger Agreement, Atmos has agreed to enter into
Employment Agreements with Messrs. Gene C. Koonce, James B. Ford
and Thomas R. Blose, Jr., in the event the Merger is consummated.
Mr. Koonce will become an officer of Atmos and serve as Vice
Chairman of the Atmos Board of Directors (provided he is elected
to the Board by Atmos shareholders by virtue of their approval of
the Merger) for a period of six months after the Merger.
Mr. Ford will be employed as Senior Vice President--Finance of
Atmos.  Mr. Blose will be employed as the President of the United
Cities operating division of Atmos and Vice President of Atmos.
Both Mr. Ford and Mr. Blose will be guaranteed employment for a
period of three years after the Merger.  Such Employment Agree-
ments provide that the employees will receive:  an annual base
salary; coverage under Atmos' Mini-Med Plan; participation in
Atmos' Restricted Stock Grant Plan; participation in Atmos' SEBP;
and participation in Atmos' pension, employee stock ownership,
welfare benefit and other similar plans and benefits on the same
basis as other executives of Atmos, including a company car (or
car allowance) and country club membership.

The initial base salaries for Messrs. Koonce, Ford and Blose
under the Employment Agreements are $370,875, $193,775 and
$191,475, respectively.  The Employment Agreements also provide
for a retention payment of $60,000 to each of them if after 6
months following consummation of the Merger, the employee (i) is
an employee of Atmos, or (ii) is not an employee of Atmos due to
termination other than for "cause," his resignation for "good
reason" or his having taken normal retirement at age 65.  The
Employment Agreements also include a severance payment provision
whereby, if the employee is terminated other than for "cause"
during the term of the agreement, the employee will be entitled
to receive all salary, benefits and contributions to plans and
programs through the remainder of the agreement's term.

As set forth in United Cities' proxy statement for the Annual
Meeting of Shareholders held on May 3, 1996, the base salary of
Messrs. Koonce, Ford and Blose during the year ended December 31,
1995 was $303,077, $158,538 and $156,539, respectively.
Mr. Koonce's base salary was increased to $310,000 in April 1996. 
In the event the Merger is consummated and the Employment Agree-
ments with such officers are executed, Messrs. Koonce, Ford and
Blose will receive salaries that are 19.6%, 22.2% and 22.3%
higher, respectively, than they received in 1995.  Although the
potential benefits to shareholders resulting from the Merger is
uncertain, the personal benefits to these officers is assured.


        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



In addition, Atmos has agreed to severance agreements for
Glenn B. Rogers, Senior Vice President--Gas Supply and Marketing
of United Cities, and Shirley M. Hawkins, Senior Vice President
and Secretary of United Cities.  These agreements provide that in
the event of their termination of employment for any reason after
the one-year period following consummation of the Merger, Atmos
will provide them with a severance payment equal to 200% of their
then annual compensation.

It is not possible for Southern Union to accurately compare the
compensation and severance packages for United Cities' executive
officers prior to and upon consummation of the Merger utilizing
existing public information.  Therefore, such overall packages
may be comparable.  Nevertheless, as set forth in United Cities'
proxy statement for the Annual Meeting of Shareholders held on
May 3, 1996, none of Messrs. Koonce, Ford, Blose or Rogers or
Ms. Hawkins has an employment agreement with United Cities.  Such
agreements are to become effective upon consummation of the
Merger, as described above, and, as such, provide these executive
officers with greater job security than they might have other-
wise.

Management perquisites payable in the event the Merger is consum-
consummated represent the allocation of funds from United Cities'
(or the merged entity's) operations that could otherwise be
retained by United Cities (or the merged entity) or used to in-
crease the company's value, and therefore, the value of the
Shareholders' current or future investment.  Although such
perquisites alone may not discourage a negotiated, alternative
transaction to the Merger, Southern Union believes that such
perquisites further impede the ability of potential third-party
strategic partners from negotiating a merger or similar transac-
tion with United Cities unless they match or exceed these
management benefits.  

For further information on management perquisites related to the
Merger, see "The Reorganization Agreement and the Merger -
Interest of Certain Person in the Merger -- United Cities
Personnel" and "United Cities Stock Plan."

No Price Protection Despite Uncertain Value of Atmos Stock
- ----------------------------------------------------------

The Merger Exchange Ratio has no "collar."  Shareholders will
receive one share of Atmos stock for each share of United Cities
stock regardless of the market price of Atmos' common stock.
Therefore, any decrease in the market price of Atmos stock will
decrease the value of the Merger consideration; likewise, any
increase in the market price of Atmos stock will increase the
value of the Merger consideration.  The market price for Atmos
stock historically has been subject to fluctuations, and, in the
opinion of Southern Union, can be expected to continue to be sub-
ject to such fluctuations in the future.

During 1995, Atmos stock had high and low sales prices of $20.625
and $15.875, respectively, representing a 30% price swing during
that year.  In 1996, prior to the announcement of executing the
Merger Agreement on July 22, Atmos stock traded between $21.00
and $31.00 per share, representing a 48% price swing during that
period.  On July 22, 1996, the day the proposed Merger was
announced, Atmos stock closed at $22.625, down more than 12% from
its close of $25.875 on the previous trading day, July 19, 1996.
During the period from July 22 to July 31, 1996 (the day prior to
the filing by Southern Union of its Schedule 13D reporting its
ownership of 6.5% of United Cities' Common Stock), Atmos stock
traded between $20.875 and $25.875, representing a 24% spread.
From August 1 through October 16, 1996, Atmos stock traded
between $21.25 and $24.125, representing a 14% price range.


          PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



Limitations on PaineWebber Engagement and Fairness Opinion
- ----------------------------------------------------------

PaineWebber was not requested or authorized to solicit, and did
not solicit, potential purchasers of United Cities.  PaineWebber
was not asked and did not make an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise)
of United Cities, nor was PaineWebber furnished with any such
evaluations or appraisals.  Neither United Cities, nor
PaineWebber in its Fairness Opinion (attached as Exhibit C to the
Board's Proxy Statement), discuss the market value of United
Cities in terms of the physical assets of United Cities, and what
that may mean to the Shareholders.  Furthermore, PaineWebber's
analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses may
actually be sold.  Rather, PaineWebber's Fairness Opinion focused
on, among other things, the financial position, operating results
and market value of the stock of United Cities and Atmos, as well
as other publicly available  information.  This is despite United
Cities' selection of PaineWebber as financial advisor in connec-
tion with the Merger based upon, among other factors,
PaineWebber's "experience in the valuation of businesses."  See
"Background of the Merger - Opinion of United Cities' Financial
Advisor" in the Board's Proxy Statement.

Southern Union believes that the fair market value of United
Cities' assets is important to the Shareholders in making their
decision as to where they may realize the greatest value for
their shares.  Although the Fairness Opinion may be comparable
to those delivered in similar negotiated transactions, Southern
Union does not believe that PaineWebber has performed a bene-
ficial analysis of the fairness of the Merger consideration in
the absence of the Board having solicited competing offers,
without having made geographical and demographical determinations
as to markets which would find portions of the assets attractive
and without appraisals of the properties.  As described under the
caption "United Cities' Board and Management Did Not Solicit
Alternatives Despite Management's Knowledge of Southern Union's
Interest in Pursuing a Combination" above, Southern Union's dis-
satisfaction with the Fairness Opinion and the tasks performed by
PaineWebber involve their limited scope, as PaineWebber was not
retained to seek other offers for United Cities, which Southern
Union believes would have been beneficial to Shareholders in max-
imizing the value of their investment in United Cities.

PaineWebber's Fairness Opinion states:

      "Our opinion is directed to the Board of Directors of
   [United Cities] and does not constitute a recommendation to
   any shareholder of [United Cities] as to how any such share-
   holder should vote on the Merger.  This opinion does not
   address the relative merits of the Merger and other transac-
   tions or business strategies discussed by the Board of Direc-
   tors of [United Cities] as alternatives to the Merger or the
   decision of the Board of Directors of [United Cities] to pro-
   ceed with the Merger.  PaineWebber Incorporated was not
   requested or authorized to solicit, and did not solicit,
   potential purchasers of [United Cities]."

When Shareholders review the Fairness Opinion, this cautionary
language should be kept in mind.

Southern Union believes that the interests of Shareholders in
receiving maximum value for their shares would have been better
served if the Board had conducted, or retained a third party such
as PaineWebber to conduct, such investigations and appraisals.
The $600,000 payments to date, plus an additional $1,400,000 fee
payable if the Merger is consummated, would bring PaineWebber's
total bill to $2,000,000.  Southern Union believes this payment
should have been used to explore opportunities beneficial to the
Shareholders, not simply to justify an exclusively and quickly
negotiated sale of their company.

        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



The Possibility of Other Bidders
- --------------------------------

Southern Union's approaches to United Cities regarding a possible
business combination (described above under "- United Cities'
Board and Management Did Not Consider Alternatives Despite Man-
agement's Knowledge of Southern Union's Interest in Pursuing a
Combination") demonstrates that there was, and United Cities was
aware of, one other interested party--Southern Union.  United
Cities denies such knowledge.  The existence of an alternative
proposal with terms more favorable to the Shareholders is specu-
lative; however, Southern Union believes that only through
soliciting and exploring alternatives to the Merger can any such
alternative reasonably be expected to surface.  In addition, by
conducting an "auction" or other request for bids for United
Cities stock or its assets, Southern Union believes Shareholders
would benefit from the competitive environment such a procedure
would facilitate and possibly result in a greater value for
Shareholders.

A VOTE AGAINST THE MERGER ON THE BLUE OPPOSITION PROXY CARD WILL
SEND A STRONG MESSAGE TO THE UNITED CITIES BOARD OF DIRECTORS
THAT YOU WANT THE BOARD TO INVITE ALTERNATIVES THAT MAY PROVE TO
BE FINANCIALLY SUPERIOR TO THE PROPOSED MERGER WITHOUT UNITED
CITIES -- AND SO, ITS SHAREHOLDERS -- BEARING THE COST OF THE
TERMINATION FEE AND SPECIAL PERQUISITES FOR MANAGEMENT.

Shareholders should note that they are being asked to vote
AGAINST the Merger on the BLUE PROXY CARD -- THEY ARE NOT BEING
ASKED TO VOTE ON ANY ALTERNATIVE TO THE MERGER.  The existence or
implementation of any such alternative plan is speculative.  See
"Risks Associated with Accepting the Opposition Proxy."  However,
United Cities' Board is entrusted with considering the interests
and expectations of Shareholders and, therefore, the United
Cities Board may consider alternatives to the Merger in the event
Shareholders reject the proposed Merger by voting AGAINST the
Merger on the BLUE PROXY CARD.

Litigation
- ----------

Southern Union has initiated certain suits against United Cities
and its directors and certain executives, as well as against
Atmos, and is presently defending against an administrative pro-
ceeding filed by United Cities and Atmos, and a declaratory
judgment action filed by United Cities.  Each of these actions is
summarized below.

On August 20, 1996, Southern Union filed a complaint against
United Cities, its Board members and other executives in the
United States District Court for the Middle District of Tennessee
(Nashville Division) (the "Tennessee Complaint"), alleging that
United Cities' Board of Directors failed to exercise their
fiduciary duties properly in approving the proposed Merger into
Atmos.  The Tennessee Complaint seeks preliminary and permanent
injunctive relief against United Cities (1) to prevent its taking
any further action to consummate the proposed Merger until such
time as United Cities' Board has properly exercised its fiduciary
duties and (2) directing United Cities to provide Southern Union
with confidential information in order to provide Southern Union
with the option of making an informed offer for United Cities, in
the event it determines to do so.  On October 30, 1996, Southern
Union amended the Tennessee Complaint to seek preliminary and
permanent injunctive relief against United Cities to prevent it
from holding the Special Meeting for the additional reason of
its delay (as described further below) in providing Southern
Union with a list of Shareholders as of the Record Date.  The
amended complaint, which includes a motion for leave to amend,
will be deemed filed when such motion is granted.  On
October 31, 1996, the Court issued an order scheduling a
hearing for November 4, 1996 at which it will address Southern
Union's motion for preliminary injunctive relief.

On October 18, 1996, Southern Union filed a complaint against
Atmos based on Texas law in the District Court of Dallas, Texas
(the "Texas Complaint"), alleging that Atmos knowingly partici-
pated in breaches of fiduciary duties by Untied Cities, similar
to those described above in the Tennessee Complaint, in connec-
tion with the proposed Merger.  The Texas Complaint seeks pre-
liminary and permanent injunctive relief against Atmos to bar its
taking any further action to consummate the Merger and otherwise
enforcing its rights under the Merger Agreement, including, but
not limited to, those provisions (i) restricting the conduct of
United Cities' business 


          PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



pending the Merger, (ii) limiting United Cities' ability to
solicit or facilitate competing transactions or proposals, (iii)
providing for termination of the SERP and (iv) providing for
payment of the $15,000,000 Termination Fee.  The Texas Complaint
also seeks actual and exemplary damages.

On August 6, 1996, United Cities and Atmos filed a joint com-
plaint (the "MPSC Complaint") against Southern Union with the
Public Service Commission of the State of Missouri (the "MPSC").
The MPSC Complaint alleges, among other things, that Southern
Union purchased Common Stock without the prior approval of the
MPSC in violation of Missouri law.  The MPSC Complaint seeks,
among other things, (i) a declaration by the MPSC that the pur-
chases of Common Stock by Southern Union are in violation of
Missouri law and are void and of no effect, (ii) an order by the
MPSC requiring Southern Union to submit a plan of divestiture of
the Common Stock for approval of the MPSC, (iii) an order by the
MPSC requiring that Southern Union cease and desist any further
purchases of the Common Stock, (iv) an order by the MPSC
requiring Southern Union to refrain from exercising any incidents
of ownership in the Common Stock, and (v) maximum penalties in
the amount of two thousand dollars ($2,000) for each separate and
distinct offense of Missouri law by Southern Union.  A hearing
before the MPSC has been scheduled for November 12, 1996 to argue
Southern Union's motion to dismiss or stay the MPSC Complaint.
To date, the MPSC has denied motions by United Cities and Atmos
to compel document production by Southern Union and to expedite
the proceeding.  United Cities and Atmos subsequently filed a
motion for partial summary judgment (and request for a hearing on
such motion on November 12, 1996) on the issue of whether the
Missouri law cited by United Cities and Atmos is applicable to
Southern Union's purchases of Common Stock.  By Notice dated
October 17, 1996, the MPSC ordered responses to United Cities and
Atmos' motion for partial summary judgment be filed no later than
October 30, 1996 and set the motion for oral argument before the
MPSC on November 12, 1996.  Southern Union has denied the
applicability of the Missouri law and the availability of the
remedies that United Cities and Atmos seek, intends to oppose the
motion for partial summary judgment, and has defended and intends
to continue to defend vigorously against the MPSC Complaint.  It
is not possible to predict with any certainty what action may be
taken by the MPSC on the scheduled hearing date or thereafter.

On August 19, 1996, Southern Union filed a complaint in the
United States District Court for the Eastern District of Missouri
(Southeastern Division) (the "Missouri Complaint") seeking a
declaratory judgment that Southern Union is entitled to all the
usual and customary rights and privileges of ownership of its
shares of Common Stock because the Missouri statute that is the
basis of the MPSC Complaint is not applicable to Southern Union's
purchases of the Common Stock or otherwise is unconstitutional
under the federal and Missouri constitutions.  On October 29,
1996, the Court determined that it would abstain from hearing
the action in light of the pending state proceeding and,
accordingly, dismissed the Missouri Complaint without prejudice.

Southern Union originally issued a request to United Cities on
October 8, 1996 for a list of Shareholders as of the Record Date
so that Southern Union could communicate with them about the pro-
posed Merger with Atmos in advance of the Special Meeting.
United Cities originally promised to advise Southern Union of its
position with respect to Southern Union's request by October 11,
1996.  Contrary to this representation, however, United Cities
did not respond to Southern Union's request until October 14,
1996, when it informed Southern Union that, on October 11, 1996,
it had filed a lawsuit against Southern Union in Cook County,
Illinois, seeking a declaratory judgment that it is not obligated
to disclose its Shareholder list to Southern Union until the MPSC
Complaint has been resolved and that it is not subject to
penalties for refusing Southern Union's request.


        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



Southern Union filed a Notice of Removal removing the case to the
United States District Court for the Northern District of
Illinois.

On October 18, 1996, Southern Union again requested, in this
instance specifically referencing 17 C.F.R. Section 240.14a-7
("SEC Rule 14a-7"), that United Cities: (a) provide Southern
Union with the Shareholder information required pursuant to SEC
Rule 14a-7(a)(2)(ii) or advise Southern Union that United Cities
has elected to mail Southern Union's proxy solicitation materials
for Southern Union pursuant to SEC Rule 14a-7(a)(2)(i); and (b)
provide Southern Union with certain other information required by
SEC Rule 14a-7(a)(1).  The purpose of SEC Rule 14a-7 is to give
Shareholders, such as Southern Union, the same opportunity that
United Cities' Board enjoys in communicating with, and soliciting
proxies from, Shareholders.  On October 25, 1996, United Cities
advised Southern Union that it would comply with such request.
Southern Union believes that the purpose of these tactics was to
impede timely communications by Southern Union with other Share-
holders.  As discussed above, a hearing is scheduled to be held
on November 4, 1996, before the Court hearing the Tennessee Com-
plaint with respect to Southern Union's motion for a preliminary
injunction of the Special Meeting as a result of United Cities'
delay in providing Southern Union any Shareholder information
until the night of October 25, 1996.


                       DISSENTERS' RIGHTS

Any Shareholder of record as of the Record Date has the right to
dissent to the approval of the Merger Agreement and the proposed
Merger pursuant to Section 11.65 of the Illinois Act and the
right to receive the "fair value" of their shares of Common Stock
IN CASH after the closing of the Merger, if the Merger is com-
pleted, by complying with the procedures set forth in Section
11.70 of the Illinois Act.  See also "Risks Associated with
Accepting the Opposition Proxy - Perfection of Dissenters' Rights
May Not Result in a Higher Consideration But May Preclude the
Merger."

How to Assert Your Dissenters' Rights
- -------------------------------------

Shareholders of record of United Cities Common Stock who desire
to assert their Dissenters' Rights must satisfy all of the condi-
tions contained in Sections 11.65 and 11.70 of the Illinois Act.
A written demand for payment for shares of Common Stock must be
- ---------------------------------------------------------------
delivered to United Cities by a Shareholder seeking payment
- -----------------------------------------------------------
before the taking of the vote on the Merger Agreement.  This
- -----------------------------------------------------
written demand must be separate from any proxy or vote abstaining
from voting or voting against approval of the Merger Agreement.


         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



Voting against approval of the Merger Agreement, abstaining from
voting or failing to vote with respect to approval of the Merger
Agreement is required in order to perfect Dissenters' Rights.
Such actions, alone, will not constitute a demand for payment
- -------------------------------------------------------------
within the meaning of Sections 11.65 and 11.70 of the Illinois
- --------------------------------------------------------------
Act.
- ---

SHAREHOLDERS ELECTING TO EXERCISE THEIR DISSENTERS' RIGHTS UNDER
SECTIONS 11.65 AND 11.70 MUST NOT VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.  A VOTE BY A SHAREHOLDER AGAINST APPROVAL OF
THE MERGER AGREEMENT IS NOT REQUIRED IN ORDER FOR THAT SHARE-
HOLDER TO EXERCISE DISSENTERS' RIGHTS.  HOWEVER, IF A SHAREHOLDER
RETURNS THE BOARD'S PROXY CARD BUT DOES NOT SPECIFY A VOTE
AGAINST APPROVAL OF THE MERGER AGREEMENT OR A DIRECTION TO
ABSTAIN, THE PROXY, IF NOT REVOKED, WILL BE VOTED FOR APPROVAL OF
THE MERGER AGREEMENT, WHICH WILL HAVE THE EFFECT OF WAIVING THAT
SHAREHOLDER'S DISSENTERS' RIGHTS.

IF A SHAREHOLDER RETURNS A SIGNED BLUE OPPOSITION PROXY CARD BUT
DOES NOT SPECIFY A VOTE FOR APPROVAL OF THE MERGER AGREEMENT OR A
DIRECTION TO ABSTAIN, THE PROXY, IF NOT REVOKED, WILL BE VOTED
"AGAINST" APPROVAL OF THE MERGER AGREEMENT, WHICH WILL PRESERVE,
BUT NOT ITSELF CONSTITUTE ASSERTION OF, THAT SHAREHOLDER'S
DISSENTERS' RIGHTS.

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN ASSERTING YOUR
DISSENTERS' RIGHTS, YOU ARE INVITED TO CALL GEORGESON & COMPANY
INC. TOLL-FREE AT (800)           .  BANKS AND BROKERS CALL (212)
                        ----------
               (COLLECT).
- --------------

A demand for appraisal should be sufficient if it reasonably
informs United Cities of the identity of the Shareholder
(including the name and address of the Shareholder and the number
of shares held of record as such information appears on a proxy
card for the Special Meeting) and that such Shareholder intends
thereby to demand payment in cash for his or her shares.  If the
Common Stock is owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, such demand must be executed
by the fiduciary.  If the Common Stock is owned of record by more
than one person, as in a joint tenancy or tenancy in common, such
demand must be executed by all joint owners.  An authorized
agent, including an agent for two or more joint owners, may
exercise the demand for appraisal for a Shareholder of record;
however, the agent must identify the record owner or owners and
expressly disclose the fact that, in exercising the demand, he or
she is acting as agent for the record owner or owners.

A record owner, such as a broker, who holds Common Stock as a
nominee for others, may exercise Dissenters' Rights with respect
to the shares held for all or less than all beneficial owners of
shares as to which he or she is the record owner.  In such case,
the written demand must set forth the number of shares covered by
such demand and the name and address of each such beneficial
owner.  Where the number of shares is not expressly stated, the
demand will be presumed to cover all shares of Common Stock out-
standing in the name of such record owner.  A beneficial owner of
shares who is not the record owner may assert Dissenters' Rights
as to shares held on such person's behalf only if the beneficial
owner submits to United Cities the record owner's written consent
to the dissent before or at the time the beneficial owner asserts
Dissenters' Rights.

If the Merger Agreement is approved and the Merger is consum-
mated, the surviving corporation, Atmos, must within 10 days of
such consummation or 30 days after the delivery of the Share-
holder's demand for payment in cash, whichever is later, send to
the dissenting Shareholder a written opinion as to its estimated
fair value of the shares and a commitment that it will pay the
estimated fair value of the shares in cash upon delivery of the
stock certificates by such Shareholder to Atmos.  Atmos must also
include with the estimate and commitment, its consolidated
balance sheet as of the end of the most recent fiscal year, its
consolidated statement of income for such year and its latest
available unaudited condensed consolidated interim financial
statements.


        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD




If the dissenting Shareholder does not agree with the opinion of
Atmos as to Atmos' estimated fair value of his or her shares (or
the amount of interest due), such Shareholder, within 30 days
from the delivery of Atmos' statement of value, shall notify
Atmos of his or her estimated fair value of the shares and shall
demand payment for the difference between such estimated fair
value (and interest due) and the amount that Atmos has agreed to
pay to the Shareholder.  If within 60 days of the delivery of the
Shareholder's estimate of fair value of the shares (and interest
due) to Atmos, Atmos and the dissenting Shareholder have not
agreed in writing upon the fair value of the shares (and interest
due), Atmos must either:  (i) pay the difference between the
Shareholder's estimated fair value of the shares (with interest)
and any amount previously paid by Atmos; or (ii) file a petition
in the Circuit Court of the appropriate county in Illinois
requesting that the court determine the fair value of the shares
(and interest due).  All dissenting Shareholders whose claims
remain unsettled at the time of the filing of the action must be
joined as parties thereto and be bound by the judgment of the
Court.  The Court may appoint one or more persons to serve as
appraisers to hear evidence and determine the fair value of the
shares.

Each dissenting Shareholder who is a party to the action will be
entitled to the payment of the fair value of the shares as deter-
mined by the Court, plus interest at a rate deemed fair and rea-
sonable by the Court, from the date of consummation of the Merger
until the date of payment, less any amount therefor previously
paid by Atmos.  The Court may also assess court costs, other than
attorneys' and experts' fees of the parties, against Atmos if the
fair value, as determined by the Court, materially exceeds the
amount which Atmos initially agreed to pay for the shares.  The
Court may assess such costs and fees against a dissenting Share-
holder if the fair value of the shares, as estimated by such
Shareholder, materially exceeds the fair value as determined by
the Court.  The Court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
Court finds equitable.

The provisions of Sections 11.65 and 11.70 are technical in
nature and complex.  The preceding summary is qualified in its
entirety by reference to Sections 11.65 and 11.70, the complete
text of which is attached as Exhibit D to the Board's Proxy
Statement.  Shareholders desiring to exercise Dissenters' Rights
and obtain payment of the fair value of their Common Stock should
consult counsel, as failure to comply strictly with the provi-
sions of Sections 11.65 and 11.70 may defeat their Dissenters'
Rights.

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN ASSERTING YOUR
DISSENTERS' RIGHTS, YOU ARE INVITED TO CALL GEORGESON & COMPANY
INC. TOLL-FREE AT (800)           .  BANKS AND BROKERS CALL (212)
                        ----------
              (COLLECT).
- -------------

Withdrawal of Dissenters' Rights
- ---------------------------------

Southern Union believes that Shareholders retain the ability to
abandon their Dissenters' Rights and receive the Merger con-
sideration until at least the earlier of (i) the date immediately
prior to the date Atmos files its petition with the circuit court
and (ii) the date Atmos pays the dissenting Shareholder the dif-
ference between the Shareholder's and Atmos' estimated fair value
of the shares.  Illinois case law supports this conclusion, but
it is not a settled matter of Illinois law and such period for
withdrawal may be shorter.  See Bauman v. Advance Aluminum
                                --------------------------
Castings Corp., 27 Ill. App. 2d 178; 169 N.E. 2d 382 (Ill. App.
- -------------
1960).  As neither of these dates can occur prior to the consum-
mation of the Merger, which is currently expected to occur no
sooner than March 1997, SHAREHOLDERS MAY BE ABLE TO WITHDRAW
THEIR DISSENTERS' RIGHTS AND BE ELIGIBLE TO RECEIVE THE MERGER
CONSIDERATION FOR SEVERAL MONTHS AFTER THE SPECIAL MEETING
SCHEDULED FOR NOVEMBER 12, 1996.

See also "Risks Associated with Accepting the Opposition Proxy -
Perfection of Dissenters' Rights May Not Result in a Higher Con-
sideration But May Preclude the Merger."

         PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



                    ADDITIONAL INFORMATION

Reference is made to the Board's Proxy Statement for information
concerning, among other matters, the Merger, the Merger Agree-
ment, Selected Historical and Pro Forma Financial Information,
Opinions of Financial Advisors, Certain Federal Income Tax
Consequences, Accounting Treatment, the Common Stock, beneficial
ownership of Common Stock by and other information concerning
United Cities's management, United Cities' independent public
accountants, the principal holders of Common Stock, the vote
required to approve the Merger and procedures for submitting
proposals for consideration at the next annual meeting of United
Cities.


                   EXPENSES OF SOLICITATION

The entire expense of preparing and mailing this Opposition Proxy
Statement and any other soliciting materials and the total
expenditures relating to the solicitation of Opposition Proxies
will be borne by Southern Union.  In addition to the use of the
mails, Opposition Proxies may be solicited by Southern Union's
affiliates, directors, executive officers and other officers,
employees and agents by telephone, telegram and personal
solicitation.  No additional compensation will be paid to those
persons engaged in such solicitation.  Southern Union's affili-
ates, directors, executive officers and other officers, employees
and agents will be indemnified by Southern Union for losses,
claims and liabilities arising out of their activities relating
to the solicitation of Opposition Proxies.

Southern Union has entered into an agreement with Georgeson &
Company Inc. ("Georgeson") pursuant to which Georgeson has agreed
to assist Southern Union with its solicitation of Opposition
Proxies, strategy, press and investor relations in connection
with the Special Meeting.  The agreement with Georgeson provides
for the payment of fees to Georgeson in the amount of $         .
                                                       ---------
Georgeson will receive reimbursement from Southern Union for its
expenses incurred in its engagement and will be indemnified by
Southern Union against liabilities arising out of such engage-
ment.

Georgeson expects to engage approximately      persons in connec-
                                          ----
tion with its efforts on behalf of Southern Union.  Such persons
will, among other activities, solicit proxies from Shareholders
by telephone, telegram and personal solicitation.  In addition,
banks, brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward proxy solicitation
materials to the beneficial owners of the Common Stock that such
institutions hold of record, and Southern Union will reimburse
such institutions for their reasonable out-of-pocket expenses.

Southern Union estimates that its total expenditures relating to
the solicitation of Opposition Proxies will be approximately
$             , plus the fees payable to Georgeson and additional
 -------------
expenditures if there is litigation.  There have been $        in
                                                       -------
cash expenditures to date relating to the solicitation of Opposi-
tion Proxies.  Southern Union presently intends to seek reim-
bursement from United Cities for reasonable expenses in
connection with the solicitation of Opposition Proxies.


           CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS

To the knowledge of Southern Union, no director or executive
officer of Southern Union is, or was within the past year, a
party to any contract, arrangements or understandings with any
person with respect to any securities of United Cities.  To the
knowledge of Southern Union, no such director or executive
officer or any associate of such persons has any arrangement or
understanding with respect to any future employment by United
Cities or its affiliates, and no such person has any arrangement
or understanding with respect to any future transactions to which
United Cities or any of its affiliates will or may be a party.



        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



All transactions in securities of United Cities engaged in by
Southern Union during the past two years are listed in Appendix B
hereto.

Except as described herein or in Appendix B attached hereto,
neither Southern Union nor its directors or executive officers or
any associates of such persons (i) has engaged in or has a direct
or indirect interest in any transaction or series of transactions
since the beginning of United Cities' last fiscal year, or in any
current proposed transaction, to which United Cities or any of
its subsidiaries was a party, (ii) owns beneficially any
securities of United Cities, (iii) borrowed any funds for the
purpose of acquiring or holding any securities of United Cities
(except, as disclosed in the Schedule 13D, with respect to
Southern Union's revolving credit agreement, funds from which are
included in the working capital used to purchase Southern Union's
investment in the Common Stock), or is presently, or has been
within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of
United Cities, (iv) is the beneficial or record owner of any
securities of United Cities or any parent or subsidiary thereof,
or (v) has, during the past ten years, been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors).


             SECURITY OWNERSHIP OF UNITED CITIES

To the knowledge of Southern Union, as of the Record Date,
Southern Union was the only Shareholder who beneficially owned
more than five percent of any class of voting securities of
United Cities.  As of the Record Date, Southern Union bene-
ficially owned 854,300 shares of Common Stock, or 6.5% of the
Common Stock outstanding on the Record Date.  There is cur-
rently pending litigation challenging the validity of Southern
Union's ownership interest in, and accordingly, its ability to
vote its shares of, the Common Stock.  See "Background and
Reasons for the Opposition Proxy Solicitation - Litigation."


      SHARES REPRESENTED BY THIS OPPOSITION PROXY STATEMENT

All of the 854,300 shares of the Common Stock beneficially owned
by Southern Union are represented in this Opposition Proxy State-
ment.



        PLEASE COMPLETE AND RETURN THE BLUE PROXY CARD



                         APPENDIX A
                         ----------

Each of the persons who may participate in soliciting Opposition
Proxies (other than employees of Georgeson) are identified below.


Name                     Position(s) Held with Southern Union
- ----------------------   ------------------------------------

George L. Lindemann      Chairman of the Board and Chief
                           Executive Officer

John E. Brennan          Vice Chairman of the Board

Peter H. Kelley          President and Chief Operating Officer

Frank W. Denius          Director

Aaron I. Fleischman      Director

Kurt A. Gitter, M.D.     Director

Adam M. Lindemann        Director

George Rountree, III     Director

Roger J. Pearson         Director

Dan K. Wassong           Director

Ronald J. Endres         Executive Vice President and Chief
                           Financial Officer

David J. Kvapil          Vice President - Controller

Dennis K. Morgan         Vice President - Legal and Secretary

George Yankowski         Treasurer and Director of Investor
                           Relations

Nancy Capezzuti          Senior Vice President - Human Resources

Stephen A. Bouchard      Partner, Fleischman and Walsh, L.L.P.,
                           Legal Counsel to Southern Union





                          APPENDIX B
                          ----------

Set forth below are descriptions of transactions in the Common
Stock by Southern Union effected during the past two years, all
of which represent open market purchases, net of brokerage com-
missions:

                         Number of Shares of
Date of Transaction         Common Stock          Price Per Share
- -------------------      -------------------      ---------------

 December 6, 1995               5,000                 $16.7500
 December 6, 1995               1,500                  16.6250
 December 7, 1995               2,500                  16.7500
 December 7, 1995               2,500                  16.7500
 December 7, 1995               3,500                  16.7500
 December 8, 1995               1,500                  16.7500
 December 8, 1995               7,500                  17.2500
 December 11, 1995             30,000                  17.2500
 December 12, 1995              2,000                  17.2500
 December 12, 1995              5,000                  17.5000
 December 14, 1995              1,500                  17.2500
 December 20, 1995              2,500                  16.7500
 December 20, 1995              2,500                  17.0000
 December 21, 1995              7,500                  17.0000
 December 22, 1995             10,000                  17.1250
 January 2, 1996              500,000                  18.5500
 July 23, 1996                 43,000                  20.0000
 July 23, 1996                 19,000                  19.8750
 July 23, 1996                  5,000                  19.6250
 July 23, 1996                 20,000                  19.7500
 July 24, 1996                 25,000                  19.7500
 July 24, 1996                 10,000                  19.6250
 July 24, 1996                  7,000                  19.8750
 July 24, 1996                 21,000                  20.0000
 July 25, 1996                 22,500                  19.8750
 July 25, 1996                  3,000                  19.7500
 July 26, 1996                  6,000                  19.8750
 July 26, 1996                  1,000                  19.6250
 July 26, 1996                 20,600                  19.7500
 July 29, 1996                 18,400                  19.7500
 July 29, 1996                 11,000                  19.6250
 July 30, 1996                 21,400                  19.7500
 July 31, 1996                  5,000                  19.8125
 July 31, 1996                 10,400                  19.7500




         [TO BE DELIVERED TO UNITED CITIES' SHAREHOLDERS
              WITH DEFINITIVE PROXY STATEMENT ONLY]

                     OPPOSITION PROXY CARD
                   United Cities Gas Company
 Special Meeting of Stockholders -- To Be Held November 12, 1996
       THIS PROXY IS SOLICITED BY SOUTHERN UNION COMPANY
    

The undersigned shareholder of United Cities Gas Company, an
Illinois and Virginia corporation ("United Cities"), hereby
appoints Peter H. Kelley and Ronald J. Endres, and each of them,
proxies and attorneys-in-fact of the undersigned, each with full
power of substitution, to attend and act for the undersigned at
the Special Meeting of Shareholders to be held on November 12,
1996 at 10:30 a.m., Central Time at the Fifth Floor Auditorium of
the First American Center, 326 Union Street, Nashville, Tennessee
and at any adjournment or postponement thereof (the "Special
Meeting"), and in connection therewith to represent and vote all
the shares of Common Stock of United Cities which the undersigned
would be entitled to vote.

Said proxies and attorneys, and each of them, shall have all the
powers which the undersigned would have if acting in person.  The
undersigned hereby revokes any other proxy to vote at such
Special Meeting and hereby ratifies and confirms all that said
proxies and attorneys, and each of them, may lawfully do by
virtue hereof.  Said proxies, without hereby limiting their
general authority, are authorized to vote in accordance with
their best judgment with respect to all matters incident to the
conduct of the Special Meeting and all matters presented at the
Special Meeting but which are not known to Southern Union Company
at the time of the solicitation of this proxy.

Proposal to ratify and approve an Agreement and Plan of Reorgani-
zation dated July 19, 1996 as amended by Amendment No. 1 to
Agreement and Plan of Reorganization dated October 3, 1996, by
and between United Cities and Atmos Energy Corporation, a Texas
corporation ("Atmos"), and approve the Plan of Merger and the
Merger of United Cities with and into Atmos, with Atmos as the
surviving corporation (the "Merger").
    
      [  ]  FOR         [  ]  AGAINST         [  ]  ABSTAIN

   
SOUTHERN UNION COMPANY RECOMMENDS A VOTE AGAINST RATIFICATION AND
                                         -------
APPROVAL OF THE MERGER.
   

   IMPORTANT:  PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN
               PROMPTLY IN THE POSTPAID ENVELOPE PROVIDED.  NO
               POSTAGE IS NECESSARY IF MAILED IN THE UNITED
               STATES.




Each of the above-named proxies at said Special Meeting, either
in person or by substitute, shall have and exercise all the
powers of said proxies hereunder.  This proxy will be voted in
accordance with the choices specified by the undersigned on this
proxy.  In their discretion, each of the above-named proxies is
authorized to vote upon such other business incident to the
conduct of the Special Meeting as may properly come before the
Special Meeting or any postponements or adjournments thereof.  If
no instructions are indicated herein, this Proxy will be treated
as a grant of authority to vote AGAINST the proposal and in the
discretion of the above-named proxies on any other matters to be
voted upon at the Special Meeting.

                         THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF
                         COPIES OF THE OPPOSITION PROXY STATEMENT
                         AND THE BOARD'S PROXY STATEMENT


                         Date -----------------------, 1996

 

                         -----------------------------------
                         (Signature of shareholder)


                         -----------------------------------
                         (Signature of shareholder)

                         Please sign your name exactly as it
                         appears hereon and return this proxy
                         promptly in the enclosed envelope. Where
                         there is more than one owner, each
                         should sign.  When signing in a
                         fiduciary capacity, please add your
                         title as such.  If executed by a
                         corporation, the proxy should be signed
                         by a duly authorized officer.

      PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD

        SOUTHERN UNION COMPANY RECOMMENDS A VOTE AGAINST
                                                 -------

            RATIFICATION AND APPROVAL OF THE MERGER