FORM 10-Q

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended.....................................June 30, 2005

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from.....................to...........................

Commission     Registrant, State of Incorporation             IRS Employer
File Number    Address and Telephone Number                   Identification No.
-----------    ----------------------------                   ------------------

0-30512        CH Energy Group, Inc.                          14-1804460
               (Incorporated in New York)
               284 South Avenue
               Poughkeepsie, New York 12601-4879
               (845) 452-2000

1-3268         Central Hudson Gas & Electric Corporation      14-0555980
               (Incorporated in New York)
               284 South Avenue
               Poughkeepsie, New York 12601-4879
               (845) 452-2000

      Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.

      Yes |X|    No |_|

<PAGE>

      Indicate by check mark whether CH Energy Group, Inc. is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act):

      Yes |X|    No |_|

      Indicate by check mark whether Central Hudson Gas & Electric Corporation
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

      Yes |_|    No |X|

      As of the close of business on August 1, 2005, (i) CH Energy Group, Inc.
had outstanding 15,762,000 shares of Common Stock ($0.10 per share par value)
and (ii) all of the outstanding 16,862,087 shares of Common Stock ($5 per share
par value) of Central Hudson Gas & Electric Corporation were held by CH Energy
Group, Inc.

      CENTRAL HUDSON GAS & ELECTRIC CORPORATION MEETS THE CONDITIONS SET FORTH
IN GENERAL INSTRUCTIONS (H)(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTIONS
(H)(2)(a), (b) AND (c).

<PAGE>

                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2005

                                      INDEX

  PART I - FINANCIAL INFORMATION                                           PAGE
                                                                           ----
Item 1 - Consolidated Financial Statements (Unaudited)

       CH ENERGY GROUP, INC.
       Consolidated Statement of Income -                                     1
        Three Months Ended June 30, 2005, and 2004

       Consolidated Statement of Income -                                     2
        Six Months Ended June 30, 2005, and 2004

       Consolidated Statement of Comprehensive Income -                       3
        Three Months Ended June 30, 2005, and 2004

       Consolidated Statement of Comprehensive Income -                       3
        Six Months Ended June 30, 2005, and 2004

       Consolidated Balance Sheet - June 30, 2005,                            4
        December 31, 2004, and June 30, 2004

       Consolidated Statement of Cash Flows -                                 6
        Six Months Ended June 30, 2005, and 2004

       CENTRAL HUDSON GAS & ELECTRIC CORPORATION
       Consolidated Statement of Income -                                     7
        Three Months Ended June 30, 2005, and 2004

       Consolidated Statement of Income -                                     8
        Six Months Ended June 30, 2005, and 2004

       Consolidated Statement of Comprehensive Income -                       9
        Three Months Ended June 30, 2005, and 2004

       Consolidated Statement of Comprehensive Income -                       9
        Six Months Ended June 30, 2005, and 2004

       Consolidated Balance Sheet - June 30, 2005,                          10
        December 31, 2004, and June 30, 2004

       Consolidated Statement of Cash Flows -                               12
        Six Months Ended June 30, 2005, and 2004

       Notes to Consolidated Financial Statements (Unaudited)               13

<PAGE>

                                      INDEX

      PART I - FINANCIAL INFORMATION                                       PAGE
                                                                           ----

Item 2 - Management's Discussion and Analysis of                            29
         Financial Condition and Results of Operations

Item 3 - Quantitative and Qualitative Disclosures                           48
         about Market Risk

Item 4 - Controls and Procedures                                            49

      PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                                  49

Item 4 - Submission of Matters to a Vote of Security Holders                49

Item 6 - Exhibits                                                           50

Signatures                                                                  51

Exhibit Index                                                               52

Certifications                                                              53

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

Filing Format

      This Quarterly Report on Form 10-Q is a combined quarterly report being
filed by two different registrants: CH Energy Group, Inc. ("Energy Group") and
Central Hudson Gas & Electric Corporation ("Central Hudson"), a wholly owned
subsidiary of Energy Group. Except where the content clearly indicates
otherwise, any reference in this report to Energy Group includes all
subsidiaries of Energy Group, including Central Hudson. Central Hudson makes no
representation as to the information contained in this report in relation to
Energy Group and its subsidiaries other than Central Hudson.

<PAGE>

                         PART I - FINANCIAL INFORMATION

                   Item I - Consolidated Financial Statements

                              CH ENERGY GROUP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                    For the 3 Months Ended June 30,
                                                                                                      2005                   2004
                                                                                                   ---------              ---------
                                                                                                        (Thousands of Dollars)
<S>                                                                                                <C>                    <C>
Operating Revenues
  Electric ...........................................................................             $ 106,620              $  97,441
  Natural gas ........................................................................                31,142                 26,091
  Competitive business subsidiaries ..................................................                51,808                 41,822
                                                                                                   ---------              ---------
      Total Operating Revenues .......................................................               189,570                165,354
                                                                                                   ---------              ---------

Operating Expenses
  Operation:
    Purchased electricity and fuel used in
       electric generation ...........................................................                64,283                 55,317
    Purchased natural gas ............................................................                20,773                 16,066
    Purchased petroleum ..............................................................                39,869                 29,956
    Other expenses of operation - regulated activities ...............................                24,129                 24,507
    Other expenses of operation - competitive business subsidiaries ..................                12,184                 12,453
  Depreciation and amortization ......................................................                 9,102                  8,613
  Taxes, other than income tax .......................................................                 8,850                  7,702
                                                                                                   ---------              ---------
      Total Operating Expense ........................................................               179,190                154,614
                                                                                                   ---------              ---------

Operating Income .....................................................................                10,380                 10,740
                                                                                                   ---------              ---------

Other Income
  Interest on regulatory assets and investment income ................................                 2,225                  2,913
  Other - net ........................................................................                  (250)                 1,547
                                                                                                   ---------              ---------
      Total Other Income .............................................................                 1,975                  4,460
                                                                                                   ---------              ---------

Interest Charges
  Interest on long-term debt .........................................................                 3,519                  2,909
  Interest on regulatory liabilities and other interest ..............................                   208                  2,090
                                                                                                   ---------              ---------
      Total Interest Charges .........................................................                 3,727                  4,999
                                                                                                   ---------              ---------

Income before income taxes and preferred dividends of subsidiary .....................                 8,628                 10,201

Income Taxes .........................................................................                 1,853                  4,463
                                                                                                   ---------              ---------

Income before preferred dividends of subsidiary ......................................                 6,775                  5,738
Cumulative preferred stock dividends of subsidiary ...................................                   242                    242
                                                                                                   ---------              ---------

Net Income ...........................................................................                 6,533                  5,496
Dividends Declared on Common Stock ...................................................                 8,511                  8,511
                                                                                                   ---------              ---------

Balance Retained in the Business .....................................................               ($1,978)               ($3,015)
                                                                                                   =========              =========

Common Stock:
    Average Shares Outstanding - Basic ...............................................                15,762                 15,762
                               - Diluted .............................................                15,769                 15,771

    Earnings Per Share - Basic .......................................................             $    0.41              $    0.35
                       - Diluted .....................................................             $    0.41              $    0.34

    Dividends Declared Per Share .....................................................             $    0.54              $    0.54
</TABLE>

                 See Notes to Consolidated Financial Statements

                                     - 1 -
<PAGE>

                              CH ENERGY GROUP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         For the 6 Months Ended June 30,
                                                                            2005                  2004
                                                                         ---------             ---------
                                                                              (Thousands of Dollars)
<S>                                                                      <C>                   <C>
Operating Revenues
  Electric ........................................................      $ 233,277             $ 216,710
  Natural gas .....................................................         94,571                84,795
  Competitive business subsidiaries ...............................        147,809               126,843
                                                                         ---------             ---------
      Total Operating Revenues ....................................        475,657               428,348
                                                                         ---------             ---------

Operating Expenses
  Operation:
    Purchased electricity and fuel used in
       electric generation ........................................        142,704               127,470
    Purchased natural gas .........................................         63,977                55,550
    Purchased petroleum ...........................................        111,263                87,796
    Other expenses of operation - regulated activities ............         48,859                47,761
    Other expenses of operation - competitive business subsidiaries         26,707                27,459
  Depreciation and amortization ...................................         18,189                17,214
  Taxes, other than income tax ....................................         16,765                14,891
                                                                         ---------             ---------
      Total Operating Expense .....................................        428,464               378,141
                                                                         ---------             ---------

Operating Income ..................................................         47,193                50,207
                                                                         ---------             ---------

Other Income
  Interest on regulatory assets and investment income .............          4,565                 5,837
  Other - net .....................................................           (773)                3,668
                                                                         ---------             ---------
      Total Other Income ..........................................          3,792                 9,505
                                                                         ---------             ---------

Interest Charges
  Interest on long-term debt ......................................          6,766                 5,740
  Interest on regulatory liabilities and other interest ...........          1,237                 4,266
                                                                         ---------             ---------
      Total Interest Charges ......................................          8,003                10,006
                                                                         ---------             ---------

Income before income taxes and preferred dividends of subsidiary ..         42,982                49,706

Income Taxes ......................................................         15,625                20,736
                                                                         ---------             ---------

Income before preferred dividends of subsidiary ...................         27,357                28,970
Cumulative preferred stock dividends of subsidiary ................            485                   485
                                                                         ---------             ---------

Net Income ........................................................         26,872                28,485
Dividends Declared on Common Stock ................................         17,023                17,023
                                                                         ---------             ---------

Balance Retained in the Business ..................................      $   9,849             $  11,462
                                                                         =========             =========

Common Stock:
    Average Shares Outstanding - Basic ............................         15,762                15,762
                               - Diluted ..........................         15,770                15,772

    Earnings Per Share - Basic ....................................      $    1.70             $    1.81
                       - Diluted ..................................      $    1.70             $    1.80

    Dividends Declared Per Share ..................................      $    1.08             $    1.08
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 2 -
<PAGE>

                              CH ENERGY GROUP, INC.
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 For the 3 Months Ended June 30,
                                                                                     2005               2004
                                                                                  ----------         ----------
                                                                                      (Thousands of Dollars)
<S>                                                                               <C>                <C>
Net Income ..................................................................     $    6,533         $    5,496

Other Comprehensive Income:

Net unrealized gains (losses) net of tax and net income realization:
      FAS 133 Designated Cash Flow Hedges - net of tax of $39 and $13 .......            (59)               (19)
      Investments - net of tax of $(53) and $67 .............................             80               (100)
                                                                                  ----------         ----------

Other comprehensive income (loss) ...........................................             21               (119)
                                                                                  ----------         ----------

Comprehensive Income ........................................................     $    6,554         $    5,377
                                                                                  ==========         ==========

<CAPTION>
                                                                                 For the 6 Months Ended June 30,
                                                                                     2005               2004
                                                                                  ----------         ----------
                                                                                       (Thousands of Dollars)
<S>                                                                               <C>                <C>
Net Income ..................................................................     $   26,872         $   28,485

Other Comprehensive Income:

Net unrealized gains (losses) net of tax and net income realization:
      FAS 133 Designated Cash Flow Hedges - net of tax of $0 and $58 ........             (1)               (88)
      Investments - net of tax of $(168) and $113 ...........................            252               (169)
                                                                                  ----------         ----------

Other comprehensive income (loss) ...........................................            251               (257)
                                                                                  ----------         ----------

Comprehensive Income ........................................................     $   27,123         $   28,228
                                                                                  ==========         ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 3 -
<PAGE>

                              CH ENERGY GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                   June 30,          December 31,          June 30,
                                    ASSETS                                           2005                2004                2004
                                                                                  ----------         ------------         ----------
                                                                                               (Thousands of Dollars)
<S>                                                                               <C>                 <C>                 <C>
Utility Plant
       Electric ........................................................          $  709,533          $  702,206          $  666,471
       Natural gas .....................................................             219,373             214,866             205,929
       Common ..........................................................             105,618             104,840             105,657
                                                                                  ----------          ----------          ----------
                                                                                   1,034,524           1,021,912             978,057

       Less: Accumulated depreciation ..................................             325,583             315,691             311,526
                                                                                  ----------          ----------          ----------
                                                                                     708,941             706,221             666,531

       Construction work in progress ...................................              51,704              38,846              66,254
                                                                                  ----------          ----------          ----------
               Net Utility Plant .......................................             760,645             745,067             732,785
                                                                                  ----------          ----------          ----------

Other Property and Plant - net .........................................              22,207              23,139              22,461
                                                                                  ----------          ----------          ----------

Current Assets
       Cash and cash equivalents .......................................             113,969             119,117             132,196
       Accounts receivable -
             net of allowance for doubtful accounts of
             $4.7 million, $4.8 million, and $4.3 million,
             respectively ..............................................              74,583              65,239              57,845
       Accrued unbilled utility revenues ...............................               5,432               9,130               4,949
       Other receivables ...............................................               4,716               4,548               3,708
       Fuel and materials and supplies - at average cost ...............              19,518              21,459              16,853
       Regulatory assets ...............................................              12,638              17,454               3,717
       Fair value of derivative instruments ............................               1,034                  --                  54
       Special deposits and prepayments ................................              14,619              20,767              13,061
       Accumulated deferred income tax .................................              12,570               9,454              10,940
                                                                                  ----------          ----------          ----------
                Total Current Assets ...................................             259,079             267,168             243,323
                                                                                  ----------          ----------          ----------

Deferred Charges and Other Assets
       Regulatory assets - pension plan ................................             101,389              88,633              92,816
       Intangible asset - pension plan .................................              22,291              22,291              24,447
       Goodwill ........................................................              50,873              50,462              50,462
       Other intangible assets - net ...................................              28,014              28,780              30,149
       Regulatory assets ...............................................              44,463              37,231              36,133
       Unamortized debt expense ........................................               3,866               4,041               3,860
       Other ...........................................................              23,656              20,995              20,018
                                                                                  ----------          ----------          ----------
                Total Deferred Charges and Other Assets ................             274,552             252,433             257,885
                                                                                  ----------          ----------          ----------

                          Total Assets .................................          $1,316,483          $1,287,807          $1,256,454
                                                                                  ==========          ==========          ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 4 -
<PAGE>

                              CH ENERGY GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,        June 30,
                    CAPITALIZATION AND LIABILITIES                                     2005               2004              2004
                                                                                    -----------       ------------      -----------
                                                                                                 (Thousands of Dollars)
<S>                                                                                 <C>               <C>               <C>
Capitalization
        Common Stock Equity:
             Common stock, 30,000,000 shares authorized:
               15,762,000 shares outstanding, 16,862,087 shares issued,
               $0.10 par value ...............................................      $     1,686       $     1,686       $     1,686
        Paid-in capital ......................................................          351,230           351,230           351,230
        Retained earnings ....................................................          197,622           187,772           190,857
        Treasury stock (1,100,087 shares) ....................................          (46,252)          (46,252)          (46,252)
        Accumulated comprehensive income (loss) ..............................             (392)             (643)             (564)
        Capital stock expense ................................................             (328)             (328)             (328)
                                                                                    -----------       -----------       -----------
                Total Common Stock Equity ....................................          503,566           493,465           496,629
                                                                                    -----------       -----------       -----------

        Cumulative Preferred Stock
             Not subject to mandatory redemption .............................           21,027            21,030            21,030

        Long-term debt - net of current portion ..............................          319,884           319,883           285,881
                                                                                    -----------       -----------       -----------
                Total Capitalization .........................................          844,477           834,378           803,540
                                                                                    -----------       -----------       -----------

Current Liabilities
        Current maturities of long-term debt .................................               --                --            15,000
        Notes payable ........................................................           13,000            12,000                --
        Accounts payable .....................................................           37,311            43,418            35,377
        Accrued interest .....................................................            5,096             4,629             4,667
        Dividends payable ....................................................            8,754             8,754             8,754
        Accrued vacation and payroll .........................................            5,760             5,833             6,455
        Customer deposits ....................................................            6,744             6,496             6,106
        Regulatory liabilities ...............................................            3,041                --             7,331
        Fair value of derivative instruments .................................               --               906             1,350
        Accrued taxes payable ................................................            3,437                --             4,293
        Deferred revenues ....................................................            5,538             8,931             6,449
        Other ................................................................           10,978            10,535            10,580
                                                                                    -----------       -----------       -----------
                Total Current Liabilities ....................................           99,659           101,502           106,362
                                                                                    -----------       -----------       -----------

Deferred Credits and Other Liabilities
        Regulatory liabilities ...............................................          151,534           156,339           153,267
        Operating reserves ...................................................            6,674             6,515             6,110
        Deferred gain - sale of major generating assets ......................               --                --             4,944
        Accrued environmental remediation costs ..............................           22,629            22,635            22,559
        Accrued other post-employment benefit costs ..........................           22,856            16,030            14,689
        Accrued pension costs ................................................           28,969            18,470            18,278
        Other ................................................................           11,542            11,163            17,000
                                                                                    -----------       -----------       -----------
                Total Deferred Credits and Other Liabilities .................          244,204           231,152           236,847
                                                                                    -----------       -----------       -----------

Accumulated Deferred Income Tax ..............................................          128,143           120,775           109,705
                                                                                    -----------       -----------       -----------

                          Total Capitalization and Liabilities ................     $ 1,316,483       $ 1,287,807       $ 1,256,454
                                                                                    ===========       ===========       ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 5 -
<PAGE>

                              CH ENERGY GROUP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              For the 6 Months Ended
                                                                                                      June 30,
                                                                                             2005                 2004
                                                                                          ---------            ---------
Operating Activities:                                                                         (Thousands of Dollars)
<S>                                                                                       <C>                  <C>
     Net Income .....................................................................     $  26,872            $  28,485

         Adjustments to reconcile net income to net
             cash provided by (used in) operating activities:
                Depreciation and amortization .......................................        18,189               17,214
                Deferred income taxes - net .........................................         4,648                9,623
                Provision for uncollectibles ........................................         1,572                2,010
                Accrued/deferred pension costs ......................................        (7,323)              (7,219)
                Amortization of fossil plant incentive ..............................            --               (4,944)

             Changes in operating assets and liabilities - net:
                Accounts receivable, unbilled revenues and other receivables ........        (7,386)              12,546
                Fuel, materials and supplies ........................................         1,985                2,994
                Special deposits and prepayments ....................................         6,148                3,951
                Accounts payable ....................................................        (6,107)              (5,225)
                Accrued taxes and interest ..........................................         3,904               11,051
                Deferred natural gas and electric costs .............................         5,471                8,109
                Customer benefit fund ...............................................        (2,852)             (15,642)
                Proceeds from sale of emissions allowances ..........................            --                6,780
                Other - net .........................................................           576               (2,384)
                                                                                          ---------            ---------

         Net Cash Provided By Operating Activities ..................................        45,697               67,349
                                                                                          ---------            ---------

Investing Activities:

         Additions to utility plant and other property and plant ....................       (28,718)             (33,064)
         Issuance of notes receivable ...............................................        (2,970)                  --
         Acquisitions made by competitive business subsidiaries .....................        (1,124)                  --
         Other - net ................................................................        (1,999)              (1,756)
                                                                                          ---------            ---------

         Net Cash Used in Investing Activities ......................................       (34,811)             (34,820)
                                                                                          ---------            ---------

Financing Activities:

         Proceeds from issuance of long-term debt ...................................            --                7,000
         Redemption of preferred stock ..............................................            (3)                  --
         Net borrowings (repayments) of short-term debt .............................         1,000              (16,000)
         Dividends paid on common stock .............................................       (17,023)             (17,023)
         Debt issuance costs ........................................................            (8)                (144)
                                                                                          ---------            ---------

         Net Cash Used in Financing Activities ......................................       (16,034)             (26,167)
                                                                                          ---------            ---------

Net Change in Cash and Cash Equivalents .............................................        (5,148)               6,362

Cash and Cash Equivalents - Beginning of Year .......................................       119,117              125,834
                                                                                          ---------            ---------

Cash and Cash Equivalents - End of Period ...........................................     $ 113,969            $ 132,196
                                                                                          =========            =========

Supplemental Disclosure of Cash Flow Information

         Interest paid ..............................................................     $   7,841            $   6,599

         Federal and State income tax paid ..........................................     $   8,843            $   4,906
</TABLE>

As authorized in the Order adopting the terms of the 2004 Joint Proposal dated
June 14, 2004, $3 millon and $75 million for the six months ended June 30, 2005,
and 2004, respectively, of deferred electric pension and OPEB costs, including
carrying charges, were offset against the Customer Benefit Fund with no impact
to cash flow.

                 See Notes to Consolidated Financial Statements


                                     - 6 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                For the 3 Months Ended June 30,
                                                                                    2005                2004
                                                                                -----------         -----------
                                                                                      (Thousands of Dollars)
<S>                                                                             <C>                 <C>
Operating Revenues
  Electric .............................................................        $   106,620         $    97,441
  Natural gas ..........................................................             31,142              26,091
                                                                                -----------         -----------
      Total Operating Revenues .........................................            137,762             123,532
                                                                                -----------         -----------

Operating Expenses
  Operation:
    Purchased electricity and fuel used in electric generation .........             64,283              55,317
    Purchased natural gas ..............................................             20,773              16,066
    Other expenses of operation ........................................             24,129              24,506
  Depreciation and amortization ........................................              7,502               7,064
  Taxes, other than income tax .........................................              8,768               7,652
                                                                                -----------         -----------
      Total Operating Expenses .........................................            125,455             110,605
                                                                                -----------         -----------

Operating Income .......................................................             12,307              12,927
                                                                                -----------         -----------

Other Income
  Interest on regulatory assets and other interest income ..............              1,534               2,651
  Other - net ..........................................................                (10)              1,815
                                                                                -----------         -----------
      Total Other Income ...............................................              1,524               4,466
                                                                                -----------         -----------

Interest Charges
  Interest on long-term debt ...........................................              3,519               2,909
  Interest on regulatory liabilities and other interest ................                262               2,115
                                                                                -----------         -----------
      Total Interest Charges ...........................................              3,781               5,024
                                                                                -----------         -----------

Income Before Income Taxes .............................................             10,050              12,369

Income Taxes ...........................................................              3,938               5,407
                                                                                -----------         -----------

Net Income .............................................................              6,112               6,962

Dividends Declared on Cumulative Preferred Stock .......................                242                 242
                                                                                -----------         -----------

Income Available for Common Stock ......................................        $     5,870         $     6,720
                                                                                ===========         ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 7 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 For the 6 Months Ended June 30,
                                                                                     2005                 2004
                                                                                 -----------         -----------
                                                                                      (Thousands of Dollars)
<S>                                                                              <C>                 <C>
Operating Revenues
  Electric ..............................................................        $   233,277         $   216,710
  Natural gas ...........................................................             94,571              84,795
                                                                                 -----------         -----------
      Total Operating Revenues ..........................................            327,848             301,505
                                                                                 -----------         -----------

Operating Expenses
  Operation:
    Purchased electricity and fuel used in electric generation ..........            142,704             127,470
    Purchased natural gas ...............................................             63,977              55,550
    Other expenses of operation .........................................             48,859              47,760
  Depreciation and amortization .........................................             15,004              14,128
  Taxes, other than income tax ..........................................             16,598              14,781
                                                                                 -----------         -----------
      Total Operating Expenses ..........................................            287,142             259,689
                                                                                 -----------         -----------

Operating Income ........................................................             40,706              41,816
                                                                                 -----------         -----------

Other Income
  Interest on regulatory assets and other interest income ...............              3,416               5,354
  Other - net ...........................................................               (668)              3,596
                                                                                 -----------         -----------
      Total Other Income ................................................              2,748               8,950
                                                                                 -----------         -----------

Interest Charges
  Interest on long-term debt ............................................              6,766               5,740
  Interest on regulatory liabilities and other interest .................              1,318               4,315
                                                                                 -----------         -----------
      Total Interest Charges ............................................              8,084              10,055
                                                                                 -----------         -----------

Income Before Income Taxes ..............................................             35,370              40,711

Income Taxes ............................................................             14,268              17,261
                                                                                 -----------         -----------

Net Income ..............................................................             21,102              23,450

Dividends Declared on Cumulative Preferred Stock ........................                485                 485
                                                                                 -----------         -----------

Income Available for Common Stock .......................................        $    20,617         $    22,965
                                                                                 ===========         ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 8 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           For the 3 Months Ended June 30,
                                                              2005                 2004
                                                          -----------           -----------
                                                               (Thousands of Dollars)
<S>                                                       <C>                   <C>
Net Income ..........................................     $     6,112           $     6,962

Other Comprehensive Income ..........................              --                    --
                                                          -----------           -----------

Comprehensive Income ................................     $     6,112           $     6,962
                                                          ===========           ===========

<CAPTION>
                                                           For the 6 Months Ended June 30,
                                                              2005                  2004
                                                          -----------           -----------
                                                               (Thousands of Dollars)
<S>                                                       <C>                   <C>
Net Income ..........................................     $    21,102           $    23,450

Other Comprehensive Income ..........................              --                    --
                                                          -----------           -----------

Comprehensive Income ................................     $    21,102           $    23,450
                                                          ===========           ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 9 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     June 30,         December 31,         June 30,
                                       ASSETS                                          2005               2004               2004
                                                                                    ----------        ------------        ----------
                                                                                                (Thousands of Dollars)
<S>                                                                                 <C>                <C>                <C>
Utility Plant
       Electric ...........................................................         $  709,533         $  702,206         $  666,471
       Natural gas ........................................................            219,373            214,866            205,929
       Common .............................................................            105,618            104,840            105,657
                                                                                    ----------         ----------         ----------
                                                                                     1,034,524          1,021,912            978,057

       Less:  Accumulated depreciation ....................................            325,583            315,691            311,526
                                                                                    ----------         ----------         ----------
                                                                                       708,941            706,221            666,531

       Construction work in progress ......................................             51,704             38,846             66,254
                                                                                    ----------         ----------         ----------
               Net Utility Plant ..........................................            760,645            745,067            732,785
                                                                                    ----------         ----------         ----------

Other Property and Plant - net ............................................                725                962                964
                                                                                    ----------         ----------         ----------

Current Assets
       Cash and cash equivalents ..........................................              3,417              8,227             12,887
       Accounts receivable -
             net of allowance for doubtful accounts of $3.5 million,
             $3.8 million, and $2.8 million, respectively .................             49,342             37,704             37,342
       Accrued unbilled utility revenues ..................................              5,432              9,130              4,949
       Other receivables ..................................................              2,448              2,048              2,001
       Fuel and materials and supplies - at average cost ..................             15,834             17,207             13,995
       Regulatory assets ..................................................             12,638             17,454              3,717
       Fair value of derivative instruments ...............................              1,034                 --                 54
       Special deposits and prepayments ...................................             11,839             20,354             10,209
       Accumulated deferred income tax ....................................             11,740              8,696             10,212
                                                                                    ----------         ----------         ----------
                Total Current Assets ......................................            113,724            120,820             95,366
                                                                                    ----------         ----------         ----------

Deferred Charges and Other Assets
       Regulatory assets - pension plan ...................................            101,389             88,633             92,816
       Intangible asset - pension plan ....................................             22,291             22,291             24,447
       Regulatory assets ..................................................             44,463             37,231             36,133
       Unamortized debt expense ...........................................              3,866              4,041              3,860
       Other ..............................................................              9,841             10,397              9,957
                                                                                    ----------         ----------         ----------
                Total Deferred Charges and Other Assets ...................            181,850            162,593            167,213
                                                                                    ----------         ----------         ----------

                          Total Assets ....................................         $1,056,944         $1,029,442         $  996,328
                                                                                    ==========         ==========         ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 10 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                June 30,          December 31,            June 30,
                           CAPITALIZATION AND LIABILITIES                         2005                2004                  2004
                                                                              -----------         ------------          -----------
                                                                                             (Thousands of Dollars)
<S>                                                                           <C>                  <C>                  <C>
Capitalization
        Common Stock Equity:
             Common stock, 30,000,000 shares authorized;
               16,862,087 shares issued ($5 par value) ..............         $    84,311          $    84,311          $    84,311
        Paid-in capital .............................................             174,980              174,980              174,980
        Retained earnings ...........................................              29,262               25,644               19,431
        Capital stock expense .......................................              (4,961)              (4,961)              (4,961)
                                                                              -----------          -----------          -----------
                Total Common Stock Equity ...........................             283,592              279,974              273,761
                                                                              -----------          -----------          -----------

        Cumulative Preferred Stock
             Not subject to mandatory redemption ....................              21,027               21,030               21,030

        Long-term Debt ..............................................             319,884              319,883              285,881
                                                                              -----------          -----------          -----------
                Total Capitalization ................................             624,503              620,887              580,672
                                                                              -----------          -----------          -----------

Current Liabilities

        Current maturities of long-term debt ........................                  --                   --               15,000
        Notes Payable ...............................................              13,000               12,000                   --
        Accounts payable ............................................              31,301               32,951               31,026
        Accrued interest ............................................               5,096                4,629                4,667
        Dividends payable - preferred stock .........................                 242                  242                  242
        Accrued vacation and payroll ................................               4,400                4,619                5,076
        Customer deposits ...........................................               6,603                6,359                5,971
        Regulatory liabilities ......................................               3,041                   --                7,331
        Fair value of derivative instruments ........................                  --                  907                1,350
        Accrued taxes payable .......................................               2,642                   --                  322
        Other .......................................................               6,209                5,869                6,443
                                                                              -----------          -----------          -----------
                Total Current Liabilities ...........................              72,534               67,576               77,428
                                                                              -----------          -----------          -----------

Deferred Credits and Other Liabilities
        Regulatory liabilities ......................................             151,534              156,339              153,267
        Operating reserves ..........................................               5,586                5,969                5,722
        Deferred gain - sale of major generating assets .............                  --                   --                4,944
        Accrued environmental remediation costs .....................              19,500               19,500               19,418
        Accrued other post-employment benefit costs .................              22,856               16,030               14,689
        Accrued pension costs .......................................              28,969               18,470               18,278
        Other .......................................................               9,350                8,971               14,623
                                                                              -----------          -----------          -----------
                Total Deferred Credits and Other Liabilities ........             237,795              225,279              230,941
                                                                              -----------          -----------          -----------

Accumulated Deferred Income Tax .....................................             122,112              115,700              107,287
                                                                              -----------          -----------          -----------

                Total Capitalization and Liabilities ................         $ 1,056,944          $ 1,029,442          $   996,328
                                                                              ===========          ===========          ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                     - 11 -
<PAGE>

                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                               For the 6 Months Ended
                                                                                                      June 30,
                                                                                               2005              2004
                                                                                            ----------        ----------
Operating Activities:                                                                          (Thousands of Dollars)
<S>                                                                                         <C>               <C>
  Net Income ........................................................................       $   21,102        $   23,450

        Adjustments to reconcile net income to net
          cash provided by (used in) operating activities:
             Depreciation and amortization ..........................................           15,004            14,128
             Deferred income taxes - net ............................................            3,764             9,788
             Provision for uncollectibles ...........................................            1,210             1,600
             Accrued/deferred pension costs .........................................           (7,323)           (7,219)
             Amortization of fossil plant incentive .................................               --            (4,944)

        Changes in operating assets and liabilities - net:
             Accounts receivable, unbilled revenues and other receivables ...........           (9,550)            8,779
             Fuel, materials and supplies ...........................................            1,373             2,163
             Special deposits and prepayments .......................................            8,515             4,109
             Accounts payable .......................................................           (1,650)           (2,058)
             Accrued taxes and interest .............................................            3,109             9,005
             Deferred natural gas and electric costs ................................            5,471             8,109
             Customer benefit fund ..................................................           (2,852)          (15,642)
             Proceeds from sales of emissions allowances ............................               --             6,780
             Other - net ............................................................            2,143              (403)
                                                                                            ----------        ----------

        Net Cash Provided by Operating Activities ...................................           40,316            57,645
                                                                                            ----------        ----------

Investing Activities:

        Additions to plant ..........................................................          (27,629)          (29,899)
        Other - net .................................................................           (1,001)             (950)
                                                                                            ----------        ----------

        Net Cash Used in Investing Activities .......................................          (28,630)          (30,849)
                                                                                            ----------        ----------

Financing Activities:

        Proceeds from issuance of long-term
        debt ........................................................................               --             7,000
        Redemption of preferred stock ...............................................               (3)               --
        Net borrowings (repayments) of short-term debt ..............................            1,000           (16,000)
        Dividends paid on cumulative preferred stock ................................             (485)             (485)
        Dividends paid to parent - Energy Group .....................................          (17,000)          (17,000)
        Debt issuance costs .........................................................               (8)             (144)
                                                                                            ----------        ----------

        Net Cash Used In Financing Activities .......................................          (16,496)          (26,629)
                                                                                            ----------        ----------

Net Change in Cash and Cash Equivalents .............................................           (4,810)              167

Cash and Cash Equivalents - Beginning of Year .......................................            8,227            12,720
                                                                                            ----------        ----------

Cash and Cash Equivalents - End of Period ...........................................       $    3,417        $   12,887
                                                                                            ==========        ==========

Supplemental Disclosure of Cash Flow Information

        Interest paid ...............................................................       $    6,325        $    5,432

        Federal and State income tax paid ...........................................       $    8,875        $    3,905
</TABLE>

As authorized in the Order adopting the terms of the 2004 Joint Proposal dated
June 14, 2004, $3 millon and $75 million for the six months ended June 30, 2005,
and 2004, respectively, of deferred electric pension and OPEB costs, including
carrying charges, were offset against the Customer Benefit Fund with no impact
to cash flow.

                 See Notes to Consolidated Financial Statements


                                     - 12 -
<PAGE>

                              CH ENERGY GROUP, INC.
                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
             Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - GENERAL

Basis of Presentation

      This Quarterly Report on Form 10-Q is a combined report of CH Energy
Group, Inc. ("Energy Group") and its regulated electric and natural gas
subsidiary, Central Hudson Gas & Electric Corporation ("Central Hudson"). The
Notes to the Consolidated Financial Statements apply to both Energy Group and
Central Hudson. Energy Group's Consolidated Financial Statements include the
accounts of Energy Group and its wholly owned subsidiaries, which include
Central Hudson and Energy Group's non-utility subsidiary, Central Hudson
Enterprises Corporation ("CHEC" and, together with its subsidiaries, the
"competitive business subsidiaries").

Unaudited Consolidated Financial Statements

      The accompanying Consolidated Financial Statements of Energy Group and
Central Hudson are unaudited but, in the opinion of Management, reflect
adjustments (which include normal recurring adjustments) necessary for a fair
statement of the results for the interim periods presented. These condensed,
unaudited, quarterly Consolidated Financial Statements do not contain the detail
or footnote disclosures concerning accounting policies and other matters which
would be included in annual Consolidated Financial Statements and, accordingly,
should be read in conjunction with the audited Consolidated Financial Statements
(including the Notes thereto) included in the combined Energy Group/Central
Hudson Annual Report on Form 10-K for the year ended December 31, 2004 (the
"Corporations' 10-K Annual Report").

      Energy Group's and Central Hudson's balance sheets as of June 30, 2004,
are not required to be included in this Quarterly Report on Form 10-Q; however,
these balance sheets are included for supplemental analysis purposes.

      Central Hudson's and CHEC's operations are seasonal in nature and weather-
sensitive and, as a result, financial results for interim periods are not
necessarily indicative of trends for a twelve-month period.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

      For purposes of the Consolidated Statement of Cash Flows, Energy Group and
Central Hudson consider temporary cash investments with a maturity, when
purchased, of three months or less to be cash equivalents.


                                       13
<PAGE>

Accounting for Derivative Instruments and Hedging Activities

      Reference is made to the caption "Accounting for Derivative Instruments
and Hedging Activities" of Note 1 - "Summary of Significant Accounting Policies"
to the Consolidated Financial Statements of the Corporations' 10-K Annual
Report. At June 30, 2005, the total fair value of open Central Hudson
derivatives, which hedge electric and natural gas commodity purchases, was $1.0
million (net unrealized gain). This compares to a fair value at December 31,
2004, of ($907,000) and a fair value of ($1.3 million) at June 30, 2004, both
reflecting net unrealized losses. The June 30, 2004, balance is largely
comprised of the fair value of put and call options hedging sulfur dioxide
emission allowances retained when Central Hudson sold its interests in its major
generating assets in January 2001. All of these allowances were sold by August
2004. At June 30, 2005, Central Hudson had open derivative contracts hedging
approximately 15.2% of its projected electricity requirements for the period
July 2005 through October 2005 and 2.4% of its projected natural gas
requirements for the period August 2005 through March 2006. Central Hudson
recorded actual net gains of $433,000 on such derivatives for the quarter ended
June 30, 2005, as compared to a net gain of $323,000 for the same period in
2004. Comparative amounts for the six months ended June 30, 2005, and 2004, were
a net loss of $287,000 and a net gain of $167,000, respectively.

      Realized gains and losses, in addition to unrealized gains and losses,
serve to either decrease or increase actual energy costs, and are deferred for
recovery from customers under Central Hudson's electric and natural gas energy
cost adjustment clauses as authorized by the New York State Public Service
Commission ("PSC") and in accordance with the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 71, entitled Accounting for the
Effects of Certain Types of Regulation ("SFAS 71"). Central Hudson also entered
into weather derivative contracts for the three months of the heating seasons
ended March 31, 2005, and 2004, and for the three months of the cooling seasons
ended August 31, 2005, and 2004, to hedge the effect of weather on sales of
electricity and natural gas. Payments made to counter-parties for the 2005 and
2004 heating seasons were not material. An estimated liability of $1.2 million
was accrued for the month of June 2005 due to weather that was hotter than the
strike point of one such contract. The amount recorded in June 2004 was not
material.

      CHEC had no open derivative positions at June 30, 2005, and 2004, and the
fair value of derivative instruments at December 31, 2004, was not material.
Actual net gains recorded during the quarters and years-to-date ended June 30,
2005, and 2004, were also not material. CHEC also entered into weather
derivative contracts during the three months of the heating season ended March
31, 2005, and 2004, which resulted in no settlement payments to or from
counter-parties due to near normal weather conditions.


                                       14
<PAGE>

Goodwill and Other Intangible Assets

      Reference is made to Note 5 - "Goodwill and Other Intangible Assets" to
the Consolidated Financial Statements of the Corporations' 10-K Annual Report.

      Intangible assets include separate, identifiable, intangible assets such
as customer lists and covenants not to compete. Intangible assets with finite
lives are amortized over their useful lives. The estimated useful life for
customer lists is 15 years, which is believed to be appropriate in view of
average historical customer turnover. However, if customer turnover were to
substantially increase, a shorter amortization period would be used, resulting
in an increase in amortization expense. For example, if a ten-year amortization
period were used, annual amortization expense would increase by approximately
$1.3 million. The useful life of a covenant not to compete is based on the
expiration date of the covenant. Intangible assets with indefinite useful lives
and goodwill are no longer amortized, but instead are periodically reviewed for
impairment. Goodwill balances are retested for impairment periodically
throughout the year.

      The components of amortizable intangible assets of Energy Group are
summarized as follows (thousands of dollars):

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                      June 30, 2005                    December 31, 2004                    June 30, 2004
---------------------------------------------------------------------------------------------------------------------------------
                                Gross                              Gross                              Gross
                              Carrying        Accumulated        Carrying         Accumulated        Carrying       Accumulated
                               Amount         Amortization        Amount         Amortization         Amount        Amortization
---------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>               <C>               <C>               <C>              <C>
Customer Lists                 $38,902          $11,453           $38,371           $10,170           $38,371          $ 8,890
---------------------------------------------------------------------------------------------------------------------------------
Covenants Not to Compete         1,489              924             1,439               860             1,439              771
---------------------------------------------------------------------------------------------------------------------------------
Total Amortizable
Intangibles                    $40,391          $12,377           $39,810           $11,030           $39,810          $ 9,661
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      Amortization expense was $0.7 million for each of the three months ended
June 30, 2005, and 2004, respectively, and $1.3 million and $1.4 million for the
six months ended June 30, 2005, and 2004, respectively. The estimated annual
amortization expense for each of the next five years is approximately $2.7
million.

      The carrying amount for goodwill not subject to amortization was $50.9
million as of June 30, 2005, and $50.5 million as of both June 30, 2004, and
December 31, 2004.

Depreciation and Amortization

      Reference is made to the caption "Depreciation and Amortization" of Note 1
- "Summary of Significant Accounting Policies" to the Consolidated Financial
Statements of the Corporations' 10-K Annual Report. For financial statement
purposes, Central Hudson's depreciation provisions are computed on the
straight-line method using rates based on studies of the estimated useful lives
and estimated net salvage value of properties. The anticipated costs of removing
assets upon retirement are provided for


                                       15
<PAGE>

over the life of those assets as a component of depreciation expense. This
depreciation method is consistent with industry practice and the applicable
depreciation rates have been approved by the PSC.

      Financial Accounting Standards Board ("FASB") SFAS No. 143, entitled
Accounting for Asset Retirement Obligations ("SFAS 143"), precludes the
recognition of expected future retirement obligations as a component of
depreciation expense or accumulated depreciation. Central Hudson, however, is
required to use depreciation methods and rates approved by the PSC under
regulatory accounting. In accordance with SFAS 71, Central Hudson continues to
accrue for the future cost of removal for its rate-regulated natural gas and
electric utility assets. In connection with the adoption of SFAS 143, Central
Hudson has classified $90.7 million, $88.2 million, and $88.6 million of net
cost of removal as regulatory liabilities as of June 30, 2005, December 31,
2004, and June 30, 2004, respectively.

      For financial statement purposes, the competitive business subsidiaries'
depreciation provisions are computed on the straight-line method using
depreciation rates based on the estimated useful lives of depreciable property
and equipment. Expenditures for major renewals and betterments, which extend the
useful lives of property and equipment, are capitalized. Expenditures for
maintenance and repairs are charged to expense when incurred. Retirements,
sales, and disposals of assets are recorded by removing the cost and accumulated
depreciation from the asset and accumulated depreciation accounts with any
resulting gain or loss reflected in earnings.

      Accumulated depreciation for the competitive business subsidiaries was
$13.4 million, $11.7 million, and $10.2 million as of June 30, 2005, December
31, 2004, and June 30, 2004, respectively.

      Amortization of intangibles (other than goodwill) is computed on the
straight-line method over an asset's expected useful life. See the caption
"Goodwill and Other Intangible Assets" of this Note 2 for further discussion.

Earnings Per Share

      In the calculation of earnings per share (basic and diluted), earnings for
Energy Group reflect the inclusion of preferred stock dividends of Central
Hudson. The average dilutive effect of Energy Group's stock options and
performance shares was 7,078 shares and 8,945 shares for the quarters ended June
30, 2005, and 2004, and 7,697 shares and 9,672 shares for the six months ended
June 30, 2005, and 2004, respectively. Certain stock options are excluded from
the calculation of diluted earnings per share because the exercise prices of
those options were greater than the average market price per share of Common
Stock for each of the periods presented. The number of shares of Common Stock
represented by the options excluded from the above calculation was 36,900 shares
for each of the three months and six months ended June 30, 2005, and 2004,
respectively. For additional information regarding stock options and performance
shares, see Note 6 - "Equity-Based Compensation Incentive Plans."


                                       16
<PAGE>

Equity-Based Compensation

      Effective January 1, 2003, Energy Group adopted the fair value recognition
provisions of SFAS No. 123 ("SFAS 123"), utilizing the modified prospective
methods under the provisions of SFAS No. 148, entitled Accounting for
Stock-Based Compensation - Transition and Disclosure. Compensation costs
recorded in the second quarters of 2005 and of 2004 and the six months ended
June 30, 2005, and 2004, were not material. At June 30, 2005, Energy Group had
an equity-based employee compensation plan described more fully in Note 6 -
"Equity-Based Compensation Incentive Plans."

Income Tax

      In 2000, New York State law changed such that Central Hudson and other New
York State utilities became subject to a state income tax. The tax law repealed
the three-quarter percent, or 0.75%, tax on gross earnings and the excess
dividends tax under Section 186 of the New York State Tax Law and replaced them
with an income-based tax under Article 9-A of the New York State Tax Law.
Therefore, Energy Group filed a combined Article 9-A tax return which included
all of its subsidiaries. The completion of the audit, concluded in the second
quarter of 2005, of the combined filing of the Article 9-A tax resulted in a
favorable adjustment of $2.3 million of New York State income tax, including the
Metropolitan Transit Authority tax. Management does not expect adjustments
relating to any similar audits of subsequent years to be of this magnitude.

FIN 46R - Consolidation of Variable Interest Entities

      Reference is made to the subcaption "FIN 46 - Consolidation of Variable
Interest Entities" under the caption "New Accounting Standards and Other FASB
Projects - Standards Implemented" of Note 1 - "Summary of Significant Accounting
Policies" to the Consolidated Financial Statements of the Corporations' 10-K
Annual Report. Energy Group and its subsidiaries do not have any interests in
special purpose entities and are not affiliated with any variable interest
entities that currently require consolidation under the provisions of FIN 46R.

Reclassification

      Certain amounts in the 2004 Consolidated Financial Statements have been
reclassified to conform to the 2005 presentation.

NOTE 3 - ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

      Reference is made to Note 4 - "Acquisition, Divestitures and Discontinued
Operations" to the Consolidated Financial Statements of the Corporations' 10-K
Annual Report.


                                       17
<PAGE>

      In the second quarter of 2005, Griffith Energy Services, Inc.
("Griffith"), a subsidiary of CHEC, made minor acquisitions of certain assets of
three companies for a total of $1.1 million. The amount charged to intangible
assets (including goodwill) was $1.0 million, of which $0.4 million was charged
to goodwill. These acquisitions were accounted for using the purchase method of
accounting. The principal tangible assets acquired were vehicles, petroleum
products, and spare parts.

NOTE 4 - SEGMENTS AND RELATED INFORMATION

      Reference is made to Note 12 - "Segments and Related Information" to the
Consolidated Financial Statements of the Corporations' 10-K Annual Report.

      Energy Group's reportable operating segments are the regulated electric
and natural gas operations of Central Hudson and the unregulated fuel oil
distribution activities of CHEC. The fuel oil distribution segment currently
operates in the Northeast and Mid-Atlantic regions of the United States. The
"Unregulated - Other" segment is comprised of the investment and business
development activities of Energy Group and the energy efficiency and investment
activities of CHEC.

      Certain additional information regarding these segments is set forth in
the following tables. General corporate expenses, property common to both
electric and natural gas segments, and the depreciation of common property have
been allocated to those segments in accordance with practices established for
regulatory purposes.

      Central Hudson's and CHEC's operations are seasonal in nature and
weather-sensitive and, as a result, financial results for interim periods are
not necessarily indicative of trends for a twelve-month period.

CH Energy Group, Inc. Segment Disclosure

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Quarter Ended June 30, 2005
    (In Thousands, Except            -----------------------------------------------------------------------------------------------
     Earnings Per Share)                     Regulated                      Unregulated                 Eliminations         Total
------------------------------------------------------------------------------------------------------------------------------------
                                                       Natural        Fuel Oil
                                      Electric           Gas        Distribution        Other
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>             <C>              <C>                <C>              <C>
Revenues from
external customers                   $  106,620      $   31,142      $   51,598       $      210         $       --       $  189,570
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                         3              34                                                 (37)
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                    $  106,623      $   31,176      $   51,598       $      210         $      (37)      $  189,570
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income
taxes                                $    7,857      $    1,950      $   (2,486)      $    1,065         $       --       $    8,386
------------------------------------------------------------------------------------------------------------------------------------
Net income                           $    4,854      $    1,016      $   (1,492)      $    2,155         $       --       $    6,533
------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share -
Diluted                              $     0.31      $     0.06      $    (0.10)      $     0.14(1)      $       --       $     0.41
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at
June 30, 2005                        $  789,379      $  267,565      $  136,065       $  124,704         $   (1,230)      $1,316,483
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount attributable to CHEC's other business activities was $0.01; the
      balance of $0.13 resulted primarily from the recording of New York State
      income tax benefits of $0.09 related to the completion of the Energy Group
      tax audit and investment and business development activities.


                                       18
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Six Months Ended June 30, 2005
                                     -----------------------------------------------------------------------------------------------
    (In Thousands, Except
     Earnings Per Share)                      Regulated                       Unregulated                Eliminations        Total
------------------------------------------------------------------------------------------------------------------------------------
                                                       Natural         Fuel Oil
                                       Electric          Gas         Distribution        Other
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>              <C>             <C>                <C>              <C>
Revenues from
external customers                   $  233,277      $   94,571       $  147,354      $      455         $       --       $  475,657
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                         6             201                                                (207)
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                    $  233,283      $   94,772       $  147,354      $      455         $     (207)      $  475,657
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income
taxes                                $   20,696      $   14,189       $    5,284      $    2,328         $       --       $   42,497
------------------------------------------------------------------------------------------------------------------------------------
Net income                           $   12,347      $    8,270       $    3,171      $    3,084         $       --       $   26,872
------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share -
Diluted                              $     0.78      $     0.52       $     0.20      $      .20(1)      $       --       $     1.70
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at
June 30, 2005                        $  789,379      $  267,565       $  136,065      $  124,704         $   (1,230)      $1,316,483
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount attributable to CHEC's other business activities was $0.02; the
      balance of $0.18 resulted primarily from the recording of New York State
      income tax benefits of $0.09 related to the completion of the Energy Group
      tax audit and investment and business development activities.

CH Energy Group, Inc. Segment Disclosure

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                    Quarter Ended June 30, 2004
                                     -----------------------------------------------------------------------------------------------
    (In Thousands, Except
     Earnings Per Share)                     Regulated                       Unregulated                Eliminations        Total
------------------------------------------------------------------------------------------------------------------------------------
                                                      Natural         Fuel Oil
                                      Electric          Gas         Distribution         Other
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>             <C>              <C>                <C>              <C>
Revenues from
external customers                   $   97,441      $   26,091      $   41,555       $      267         $       --       $  165,354
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                         3              42              --               --                (45)              --
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                    $   97,444      $   26,133      $   41,555       $      267         $      (45)      $  165,354
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income
taxes                                $    9,948      $    2,179      $   (2,754)      $      586         $       --       $    9,959
------------------------------------------------------------------------------------------------------------------------------------
Net income                           $    5,721      $      999      $   (1,653)      $      429         $       --       $    5,496
------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share -
Diluted                              $     0.36      $     0.06      $    (0.11)      $     0.03(1)      $       --       $     0.34
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at
June 30, 2004                        $  768,766      $  227,562      $  133,135       $  128,247         $   (1,256)      $1,256,454
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount attributable to CHEC's other business activities was $0.02; the
      balance of $0.01 was primarily related to Energy Group's investment and
      business development activities.


                                       19
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 Six Months Ended June 30, 2004
                                      ----------------------------------------------------------------------------------------------
    (In Thousands, Except
     Earnings Per Share)                       Regulated                     Unregulated                Eliminations         Total
------------------------------------------------------------------------------------------------------------------------------------
                                                        Natural        Fuel Oil
                                       Electric           Gas        Distribution       Other
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>             <C>             <C>                <C>              <C>
Revenues from
external customers                    $  216,710      $   84,795      $  126,337      $      506         $       --       $  428,348
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                          6             192              --              --               (198)              --
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                     $  216,716      $   84,987      $  126,337      $      506         $     (198)      $  428,348
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income
taxes                                 $   26,078      $   14,148      $    7,362      $    1,633         $       --       $   49,221
------------------------------------------------------------------------------------------------------------------------------------
Net income                            $   15,084      $    7,881      $    4,417      $    1,103         $       --       $   28,485
------------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share -
Diluted                               $     0.95      $     0.50      $     0.28      $     0.07(1)      $       --       $     1.80
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets
at June 30, 2004                      $  768,766      $  227,562      $  133,135      $  128,247         $   (1,256)      $1,256,454
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount attributable to CHEC's other business activities was $0.03; the
      balance of $0.04 was primarily related to Energy Group's investment and
      business development activities.

Central Hudson Gas & Electric Corporation Segment Disclosure

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
          (In Thousands)                                                               Quarter Ended June 30, 2005
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Natural
                                                                       Electric           Gas          Eliminations          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>               <C>
Revenues from external customers                                      $  106,620       $   31,142       $       --        $  137,762
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                                                          3               34              (37)               --
------------------------------------------------------------------------------------------------------------------------------------
   Total Revenues                                                     $  106,623       $   31,176       $      (37)       $  137,762
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                          $    8,040       $    2,010       $       --        $   10,050
------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                            $    5,035       $    1,077       $       --        $    6,112
------------------------------------------------------------------------------------------------------------------------------------
Income Available for Common Stock                                     $    4,854       $    1,016       $       --        $    5,870
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at June 30, 2005                                       $  789,379       $  267,565       $       --        $1,056,944
------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
          (In Thousands)                                                             Six Months Ended June 30, 2005
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Natural
                                                                       Electric           Gas          Eliminations          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>               <C>
Revenues from external customers                                      $  233,277       $   94,571       $       --        $  327,848
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                                                          6              201             (207)               --
------------------------------------------------------------------------------------------------------------------------------------
   Total Revenues                                                     $  233,283       $   94,772       $     (207)       $  327,848
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                          $   21,061       $   14,309       $       --        $   35,370
------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                            $   12,711       $    8,391       $       --        $   21,102
------------------------------------------------------------------------------------------------------------------------------------
Income Available for Common Stock                                     $   12,347       $    8,270       $       --        $   20,617
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at June 30, 2005                                       $  789,379       $  267,565       $       --        $1,056,944
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       20
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
         (In Thousands)                                                               Quarter Ended June 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Natural
                                                                       Electric           Gas          Eliminations          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>               <C>
Revenues from external customers                                      $   97,441       $   26,091       $       --        $  123,532
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                                                          3               42              (45)               --
------------------------------------------------------------------------------------------------------------------------------------
   Total Revenues                                                     $   97,444       $   26,133       $      (45)       $  123,532
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                          $   10,130       $    2,239       $       --        $   12,369
------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                            $    5,903       $    1,059       $       --        $    6,962
------------------------------------------------------------------------------------------------------------------------------------
Income Available for Common Stock                                     $    5,721       $      999       $       --        $    6,720
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at June 30, 2004                                       $  768,766       $  227,562       $       --        $  996,328
------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
         (In Thousands)                                                             Six Months Ended June 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Natural
                                                                       Electric           Gas          Eliminations          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>               <C>
Revenues from external customers                                      $  216,710       $   84,795       $       --        $  301,505
------------------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                                                          6              192             (198)               --
------------------------------------------------------------------------------------------------------------------------------------
   Total Revenues                                                     $  216,716       $   84,987       $     (198)       $  301,505
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                          $   26,443       $   14,268       $       --        $   40,711
------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                            $   15,449       $    8,001       $       --        $   23,450
------------------------------------------------------------------------------------------------------------------------------------
Income Available for Common Stock                                     $   15,084       $    7,881       $       --        $   22,965
------------------------------------------------------------------------------------------------------------------------------------
Segment Assets at June 30, 2004                                       $  768,766       $  227,562       $       --        $  996,328
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 5 - NEW ACCOUNTING STANDARDS AND OTHER FASB PROJECTS

      Reference is made to the captions "New Accounting Standards and Other FASB
Projects - Standards Implemented" and "New Accounting Standards and Other FASB
Projects - Standards to be Implemented" of Note 1 - "Summary of Significant
Accounting Policies" to the Consolidated Financial Statements of the
Corporations' 10-K Annual Report.

FIN 47 - Accounting for Conditional Asset Retirement Obligations

      In March 2005, the FASB issued Interpretation No. 47, entitled Accounting
for Conditional Asset Retirement Obligations ("FIN 47"), which clarifies that
the term "conditional asset retirement obligation" as used in SFAS 143 refers to
a legal obligation to perform an asset retirement activity when the timing
and/or method of settlement are conditional on a future event that may or may
not be in the control of the entity. This legal obligation is absolute, despite
the uncertainty regarding the timing and/or method of settlement. In addition,
the fair value of a liability for the conditional asset retirement obligation
should be recognized when incurred: generally upon acquisition, construction, or
development and/or through normal operation of the asset. FIN 47 also clarifies
when an entity would have sufficient information to reasonably estimate the fair
value of an asset retirement obligation. FIN 47 is effective for years ending
after December 31, 2005. The implementation of FIN 47 is not expected to have
any


                                       21
<PAGE>

material impact on the financial condition, results of operations, or cash flows
of Energy Group or its subsidiaries.

Equity-Based Compensation

      In March 2005, the Securities and Exchange Commission ("SEC") approved a
new rule that amended the compliance dates for public companies implementing
FASB Statement No. 123(R), entitled Accounting for Stock-Based Compensation
("SFAS 123(R)"). For public companies, the new ruling makes the effective date
beginning the first annual, rather than interim, period beginning after June 15,
2005, giving most companies (including Energy Group) an additional six months to
develop an implementation plan. In addition, the delayed effective date will
alleviate the potential problem of comparability between quarterly reports that
may have arisen. Until the time of the new effective date for SFAS 123(R), the
provisions of SFAS 123 will remain in effect. For Energy Group, the effective
date for the new accounting and disclosure requirements under SFAS 123(R) is
January 1, 2006.

      The SEC also released Staff Accounting Bulletin No. 107, which provides
guidance related to share-based payment transactions with non-employees, the
transition from non-public to public entity status, valuation methods, the
accounting for certain redeemable financial instruments issued under share-based
payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first-time adoption of SFAS 123(R) in an interim period,
capitalization of compensation cost related to share-based payment arrangements,
the accounting for income tax effects of share-based payment arrangements upon
adoption of SFAS 123(R), and disclosures in Management's Discussion and Analysis
of Financial Condition and Results of Operations subsequent to adoption of SFAS
123(R).

      Energy Group adopted the fair value method of accounting for equity-based
compensation under the provisions of SFAS 123 in the first quarter of 2003. It
is not anticipated that the adoption of SFAS 123(R) will significantly impact
the financial condition, results of operations, or cash flows of Energy Group or
its subsidiaries.

Accounting Changes and Error Corrections

      On June 1, 2005, the FASB issued Statement No. 154, entitled Accounting
Changes and Error Corrections ("SFAS 154"), a replacement of Accounting
Principles Board ("APB") Opinion No. 20, entitled Accounting Changes, and FASB
Statement No. 3, entitled Reporting Accounting Changes in Interim Financial
Statements. SFAS 154 applies to all voluntary changes in accounting principles
and changes the requirements when accounting for and reporting a change in an
accounting principle. SFAS 154 also applies to changes required by an accounting
pronouncement in the unusual circumstance when the pronouncement does not
include specific transition provisions.

      SFAS 154 requires retrospective application, limited to the direct effects
of the voluntary change in accounting principle, to prior periods' financial
statements unless it is impracticable. SFAS 154 also requires that a change in
depreciation, amortization, or


                                       22
<PAGE>

depletion method for long-lived, non-financial assets should be accounted for as
a change in accounting estimate effected by a change in an accounting principle.

      SFAS 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005, although early
application is permitted. It is not anticipated that the adoption of SFAS 154
will significantly impact the financial condition, results of operations, or
cash flows of Energy Group or its subsidiaries.

NOTE 6 - EQUITY-BASED COMPENSATION INCENTIVE PLANS

      Reference is made to Note 10 - "Equity-Based Compensation Incentive Plans"
to the Consolidated Financial Statements of the Corporations' 10-K Annual Report
and to the description of Energy Group's Long-Term Performance-Based Incentive
Plan ("Plan") described therein.

      Performance shares were granted, in aggregate, to executives covered under
the Plan in the amount of 14,800 shares, 29,300 shares, and 23,000 shares on
January 1, 2003, January 1, 2004, and January 1, 2005, respectively. As of June
30, 2005, the number of these performance shares that remain outstanding are as
follows: 9,700 from the January 1, 2003, grant; 19,800 from the January 1, 2004,
grant; and 23,000 from the January 1, 2005, grant. The ultimate number of shares
awarded is based on metrics established by Energy Group's Board of Directors at
the beginning of the award cycle. Compensation expense is recorded as
performance shares are earned over the three-year life of the relevant
performance share grant prior to its award. The amounts recorded for the
quarter-ended June 30, 2005, or the quarter ended June 30, 2004, were not
material.

      A summary of the status of stock options awarded to executives and
non-employee Directors of Energy Group and its subsidiaries under the Plan as of
June 30, 2005, is as follows:

                                                     Weighted     Weighted
                                                      Average      Average
                                                     Exercise     Remaining
                                        Shares         Price    Contract Life
                                        -------------------------------------
Outstanding at 12/31/04                  91,400       $45.15      6.75
             Granted                         --           --        --
             Exercised                  (13,380)       41.89
             Forfeited                       --           --
                                     ----------       ------      ----
Outstanding at 6/30/05                   78,020       $45.71      6.40 years
                                     ==========       ======      ====

Total Shares Outstanding             15,762,000
Potential Dilution                          0.5%

      A total of 4,160 non-qualified stock options were exercised during the
quarter ended June 30, 2005, and 13,380 were exercised during the six months
ended June 30, 2005. These options had exercise prices of $31.94 and $44.06.


                                       23
<PAGE>

      In addition, effective January 1, 2003, Energy Group adopted the fair
value method of recording stock-based compensation utilizing the "modified
prospective" approach, whereby existing options are expensed prospectively over
their respective vesting periods. Under the fair value method, employee stock
option grants and other stock-based compensation are expensed over their
respective vesting periods based on the fair value at the date the stock-based
compensation is granted. Compensation expense recorded for the quarters ended
and six months ended June 30, 2005, and 2004, resulting from the implementation
of fair value accounting for stock options was not material.

      The following table summarizes information concerning outstanding and
exercisable stock options at June 30, 2005, by exercise price:

                                            Weighted Average
                                                Remaining
                         Number of Options     Contractual     Number of Options
       Exercise Price        Outstanding      Life in Years       Exercisable
       --------------    -----------------  ----------------   -----------------
            $31.94               3,240              4.50             3,240
            $44.06              37,880              5.50            36,296
            $48.62              36,900              7.50            24,480
                                ------              ----            ------
                                78,020              6.40            64,016

NOTE 7 - INVENTORY

Inventory for Central Hudson is valued at average cost. Inventory for CHEC is
valued using the "first-in, first-out" (or "FIFO") inventory method.

--------------------------------------------------------------------------------
                                                      Energy Group
--------------------------------------------------------------------------------
                                         June 30,      December 31,     June 30,
                                           2005            2004           2004
--------------------------------------------------------------------------------
(In Thousands)
--------------------------------------------------------------------------------

Natural Gas                               $ 9,074        $10,856        $ 7,813
--------------------------------------------------------------------------------

Petroleum Products and Propane              2,692          3,389          1,853
--------------------------------------------------------------------------------

Materials and Supplies                      7,752          7,214          7,187
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Total                                     $19,518        $21,459        $16,853
--------------------------------------------------------------------------------


                                       24
<PAGE>

--------------------------------------------------------------------------------
                                                        Central Hudson
--------------------------------------------------------------------------------
                                              June 30,   December 31,   June 30,
                                                2005         2004         2004
--------------------------------------------------------------------------------
(In Thousands)
--------------------------------------------------------------------------------

Natural Gas                                    $ 9,074      $10,856      $ 7,813
--------------------------------------------------------------------------------

Petroleum Products and Propane                     628          613          454
--------------------------------------------------------------------------------

Materials and Supplies                           6,132        5,738        5,728
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Total                                          $15,834      $17,207      $13,995
--------------------------------------------------------------------------------

NOTE 8 - POST-EMPLOYMENT BENEFITS

      The following are the components of Central Hudson's net periodic benefits
costs for its Pension and Other Post-Employment Benefits (the latter, "OPEB")
plans for the quarters and six months ended June 30, 2005, and 2004. The OPEB
amounts for both years reflect the effect of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 under the provisions of FSP 106-2,
entitled Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003.

<TABLE>
<CAPTION>
                                                          Quarter Ended June 30,
                                                Pension Benefits                 OPEB
                                             ---------------------       ---------------------
                                              2005          2004          2005           2004
                                                 (In Thousands)             (In Thousands)
                                             ---------------------       ---------------------
<S>                                          <C>           <C>           <C>           <C>
Service cost                                 $ 1,837       $ 1,739       $   968       $   829

Interest cost                                  5,489         5,378         2,395         2,252

Expected return on plan assets                (5,808)       (5,510)       (1,279)       (1,296)

Amortization of:
     Prior service cost                          535           538           (37)          (37)
     Transitional (asset) or obligation           --            --           642           641

Recognized actuarial (gain) or loss            3,331         2,209         1,669           734
                                             -------       -------       -------       -------

Net periodic benefit cost                    $ 5,384       $ 4,354       $ 4,358       $ 3,123
                                             =======       =======       =======       =======
</TABLE>


                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                            Six Months Ended June 30,
                                                 Pension Benefits                   OPEB
                                             -----------------------       -----------------------
                                               2005           2004           2005           2004
                                                  (In Thousands)                (In Thousands)
                                             -----------------------       -----------------------
<S>                                          <C>            <C>            <C>            <C>
Service cost                                 $  3,674       $  3,478       $  1,935       $  1,657

Interest cost                                  10,977         10,756          4,791          4,505

Expected return on plan assets                (11,616)       (11,020)        (2,557)        (2,592)

Amortization of:
     Prior service cost                         1,070          1,076            (74)           (74)
     Transitional (asset) or obligation            --             --          1,283          1,283

Recognized actuarial (gain) or loss             6,663          4,418          3,339          1,467
                                             --------       --------       --------       --------

Net periodic benefit cost                    $ 10,768       $  8,708       $  8,717       $  6,246
                                             ========       ========       ========       ========
</TABLE>

      Decisions to fund the pension plan are made annually based on the value of
plan assets relative to plan liabilities. The liabilities are primarily affected
by the discount rate used to determine benefit obligations. Contributions would
most likely be made to eliminate any Pension Benefit Guaranty Corporation
variable rate premiums or to maintain a 90% gateway current liability funded
level. Central Hudson does not presently anticipate a contribution to the
pension plan in 2005.

      Employer contributions for OPEB totaled $953,000 during the quarter ended
June 30, 2005, and $1.9 million for the six months ended June 30, 2005. The
total contribution expected to be made in 2005 will be determined based on the
maximum tax-deductible contribution, which is expected to be approximately $6.0
million.

      For additional information related to pensions and OPEB, please see Note 9
- "Post-Employment Benefits" to the Consolidated Financial Statements of the
Corporations' 10-K Annual Report.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

      Energy Group and Central Hudson face a number of contingencies which arise
during the normal course of business and which have been discussed in Note 11 -
"Commitments and Contingencies" to the Consolidated Financial Statements of the
Corporations' 10-K Annual Report and to which reference is made.


                                       26
<PAGE>

Asbestos Litigation

      For a discussion of lawsuits against Central Hudson involving asbestos,
see Note 11 - "Commitments and Contingencies" under the caption "Asbestos
Litigation" in the Consolidated Financial Statements of the Corporations' 10-K
Annual Report.

      As of July 15, 2005, of the 3,233 cases brought against Central Hudson,
1,539 remain pending. Of the 1,694 cases no longer pending against Central
Hudson, 1,550 have been dismissed or discontinued without payment by Central
Hudson, and Central Hudson has settled 144 cases. Central Hudson is presently
unable to assess the validity of the remaining asbestos lawsuits; accordingly,
it cannot determine the ultimate liability relating to these cases. Based on
information known to Central Hudson at this time, including Central Hudson's
experience in settling asbestos cases and in obtaining dismissals of asbestos
cases, Central Hudson believes that the cost which may be incurred in connection
with the remaining lawsuits will not have a material adverse effect on either of
Energy Group's or Central Hudson's financial position or results of operations.

Environmental Matters

      For a discussion of Central Hudson's environmental matters see Note 11 -
"Commitments and Contingencies" to the Consolidated Financial Statements under
the caption "Environmental Matters" of the Corporations' 10-K Annual Report.

Central Hudson:

      Former Manufactured Gas Plant Facilities

      City of Newburgh: Reference is made to the discussion under the subcaption
"Central Hudson - Former Manufactured Gas Plant Facilities - City of Newburgh"
in Note 11 to the Consolidated Financial Statements of the Corporations' 10-K
Annual Report. On February 24, 2005, the New York State Department of
Environmental Conservation ("DEC") issued a Proposed Remedial Action Plan
("PRAP") for public review and comment. The PRAP proposes a $22.9 million
remediation plan, which is similar in scope to one previously submitted by
Central Hudson, although it also includes a contingency fund and a projected
expense for continued maintenance and monitoring at the site. The PRAP was the
subject of a public hearing in the City of Newburgh on March 17, 2005. A public
comment period remained open until April 30, 2005. The DEC is expected to issue
a Record of Decision ("ROD") in the third quarter of 2005 that will specify a
remediation plan for Central Hudson's implementation. Neither Energy Group nor
Central Hudson can make any prediction as to the full financial effect of this
matter on either Energy Group or Central Hudson, including the extent, if any,
of insurance reimbursement and including implementation of environmental cleanup
under the Order on Consent. However, Central Hudson has put its insurers on
notice of this matter and intends to seek reimbursement from its insurers for
the cost of any liability. Certain of the insurers have denied coverage. Subject
to


                                       27
<PAGE>

the provisions of a PSC Order issued on June 3, 1997, the costs of remediation
are being deferred in anticipation of future rate recovery.

      Other MGP Sites: Reference is made to the discussion under the subcaption
"Central Hudson - Former Manufactured Gas Plant Facilities - Other MGP Sites" in
Note 11 to the Consolidated Financial Statements of the Corporations' 10-K
Annual Report. Central Hudson had requested that the Voluntary Cleanup Agreement
covering the North Water Street site be converted into a Brownfield Cleanup
Agreement under New York State's new Brownfield Cleanup Program. The Brownfield
Cleanup Agreement with the DEC was signed and effective May 12, 2005. Central
Hudson believes the Brownfield Cleanup Agreement is unlikely to significantly
change the amount or cost of any potential remediation of the North Water Street
site, but may permit the recovery by Central Hudson of some of the remediation
costs through tax credits.

      Orange County Landfill

      Reference is made to the discussion under the subcaption "Orange County
Landfill" in Note 11 to the Consolidated Financial Statements of the
Corporations' 10-K Annual Report. The Tolling Agreement dated September 7, 2001,
whereby Central Hudson agreed to toll the applicable statute of limitations by
certain state agencies against Central Hudson for certain alleged causes of
action, has through a series of sequential agreements been extended to November
30, 2005. Neither Energy Group nor Central Hudson can predict the outcome of
this investigation at this time.

CHEC:

      Reference is made to the discussion under the caption "CHEC" in Note 11 to
the Consolidated Financial Statements of the Corporations' 10-K Annual Report.
Griffith has a voluntary environmental program in connection with the West
Virginia Division of Environmental Protection regarding Griffith's Kable Oil
Bulk Plant, located in West Virginia. Griffith anticipates that less than
$50,000 will be expended in 2005 on oil site remediation efforts.

Other CHEC Matter

      Reference is made to the discussion under subcaption "Other CHEC Matter"
in Note 11 - "Commitments and Contingencies" to the Consolidated Financial
Statements of the Corporations' 10-K Annual Report. In September 2004, the State
of Maryland issued a Notice of Assessment for Motor Fuel Tax to Griffith in the
amount of $2.5 million for the period from 2001 to 2003. As of December 2004,
Griffith had reserved $500,000 for this assessment. Griffith has since paid
$528,000 to the State of Maryland and settled the claim in full.


                                       28
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

EXECUTIVE SUMMARY

      Earnings per share (basic) for the second quarter of 2005 for Energy Group
were $0.41 per share, versus the $0.35 per share earned during the second
quarter of 2004, a 17% increase. The primary drivers of the increase were a
one-time, $0.09 per share tax benefit; a $0.03 change related to a re-pricing
adjustment made by the New York State Independent System Operator ("NYISO");
higher returns on temporary investments; a reduction in expenses; and a modest
improvement in operating performance from Energy Group's oil distribution
subsidiaries. The quarter's earnings were negatively impacted by the expiration
of regulatory items that had previously contributed $0.12 per share.
Year-to-date, Energy Group reports earnings of $1.70 per share, a decrease of
$0.11 per share as compared to the first half of 2004.

      The quarterly results were somewhat dampened by the impact of a hedging
contract designed to lessen the effect that variable weather can have upon
revenues. Though it had a $0.05 per share negative impact in the second quarter
of this year, it is expected that higher revenues related to warm June weather
will offset this impact in the third quarter.

      Energy Group believes it will still achieve its full-year earnings
projections. Results in both Central Hudson and Energy Group are projected to be
strong enough to maintain consolidated earnings within the target range, even
though Energy Group is adjusting its guidance for the fuel-oil segment to
$0.10-$0.15 per share from $0.20-$0.25 per share.

Regulated Electric and Natural Gas

      Central Hudson's contribution to second quarter earnings was $0.37 per
share, a decrease of $0.06 per share from the $0.43 per share posted during the
same period of 2004. The decline resulted from the expiration of a $0.09 per
share incentive associated with the sale of Central Hudson's interest in its
major generating assets and $0.03 per share of previously deferred revenues.
Electric and natural gas revenues increased by $14.2 million, or 11.5%, between
the second quarters of 2004 and 2005, due largely to an increase in the amount
Central Hudson collected to recover the cost of energy purchased on behalf of
its customers.

      On July 29, 2005, Central Hudson filed an electric and natural gas case
with the PSC for an increase in its delivery rates.

Unregulated Fuel Oil Distribution

      The fuel oil distribution businesses of CHEC had a loss - which is typical
for the second quarter - of $0.10 per share for the period, $0.01 per share
better than the $0.11 per share loss posted in the second quarter of 2004. The
improvement in


                                       29
<PAGE>

earnings resulted largely from an increase in service profitability and a
reduction in operating expenses.

Unregulated - Other

      Energy Group, the holding company, and CHEC partnership investments
contributed $0.14 per share to earnings during the second quarter, which was
$0.11 per share above the same period of 2004. A $0.09 per share favorable New
York State income tax benefit and increased earnings on temporary investments
were partially offset by a decrease in earnings from CHEC partnership
investments during the quarter.

2005 Earnings Projections

      Energy Group believes it will still achieve its earlier projection that
2005 consolidated annual earnings will total between $2.55 and $2.75 per share,
comprised of the following segments: Central Hudson's regulated electric and
natural gas businesses, unchanged at $2.15-$2.25 per share; CHEC's unregulated
fuel oil distribution businesses, $0.10-$0.15 per share, reduced from
$0.20-$0.25 per share due to lower residential sales volumes during the heating
season attributable to customer conservation and attrition, as well as lower
commercial sales volumes due to fuel switching in reaction to higher prices in
the oil industry; and unregulated other businesses (including Energy Group, the
holding company), $0.30-$0.35 per share, increased from $0.20-$0.25 per share
due to a $0.09 per share New York State income tax benefit for which notice was
received in June 2005.

REGULATORY MATTERS

Rate Proceedings - Electric and Natural Gas

      On July 29, 2005, Central Hudson filed an electric and natural gas case
with the PSC. Central Hudson is seeking to increase electric and natural gas
delivery rates, which have been in effect since November 1, 2001, and have not
been increased since 1993 and 1991, respectively.

      Central Hudson has proposed a one-year increase of $52.8 million and $18.1
million of electric and natural gas delivery rates, respectively. The filing is
being made in order to align electric and natural gas delivery rates with
current expenses, including employee benefits, resulting from inflationary
pressures, regulatory mandates, and electric and natural gas system
infrastructure improvements. In addition, Central Hudson is seeking to recover
the build-up of regulatory assets, consisting primarily of deferred pension and
OPEB undercollections, which can no longer be completely offset by the
regulatory liability, the Customer Benefit Fund. The filing includes suggested
uses for the remaining balance of the Customer Benefit Fund and proposes a
number of ratemaking treatments for the rate base credit established in prior
PSC Orders, as well as anticipated MGP site remediation expenditures. The filing
also seeks to recover current expenditures associated with stray voltage testing
of Central Hudson owned


                                       30
<PAGE>

and municipally owned electric facilities, as well as distribution line tree
trimming and enhanced electric transmission right of way management practices.

      Central Hudson has requested a common equity ratio of 47% and a base
return on equity ("ROE") of 10.75%. The current common equity ratio cap for
Central Hudson is 45% with a base ROE of 10.3%.

      It is anticipated the PSC will suspend the filing and requested delivery
rate increases and initiate a full review of the filing. A PSC Order
establishing rates is not expected until the second quarter of 2006. No
prediction can be made as to the final outcome of the rate filing.

Other PSC Proceedings

      Commencing April 26, 2005, Central Hudson filed Notices of Intent with the
PSC to sell fifteen parcels of non-utility real property. On July 22, 2005, the
PSC issued an Order stating that the filings shall be reviewed further under
Public Service Law Section 70 to determine the disposition of and the accounting
for the potential gains.

CAPITAL RESOURCES AND LIQUIDITY

      The growth of Energy Group's retained earnings in the first six months of
2005 contributed to the increase in the book value per share of its Common Stock
from $31.31 at December 31, 2004, to $31.95 at June 30, 2005; the common equity
ratio increased from 58.3% at December 31, 2004, to 58.7% at June 30, 2005. Book
value per share at June 30, 2004, was $31.51 and the common equity ratio was
60.7%.

      Both Energy Group's and Central Hudson's liquidity reflect cash flows from
operating, investing, and financing activities, as shown on their respective
Consolidated Statements of Cash Flows and as discussed below.

      The principal factors affecting Energy Group's liquidity are the dividends
it pays to its shareholders and, as it relates to both Central Hudson and CHEC,
cash flows generated from operations and capital expenditures. Central Hudson's
liquidity is affected by its debt obligations and by dividends paid to Energy
Group.

      Central Hudson's cash flows from operating activities reflect principally
its energy sales and deliveries and costs of operations. The volume of energy
sales and deliveries is dependent primarily on factors external to Central
Hudson, such as weather and economic conditions. Prices at which Central Hudson
delivers energy to its customers are determined in accordance with rate plans
approved by the PSC. In general, changes in the cost of purchased electricity,
fuel, and natural gas may affect the timing of cash flows but not net income
because these costs are fully recovered through its electric and natural gas
cost adjustment mechanisms.


                                       31
<PAGE>

      Central Hudson's cash flows are also affected by other regulatory deferral
mechanisms whereby cash may be expended in one period and recovery of the cash
from customers may not occur until a subsequent period.

Energy Group - Cash Flow Summary

      Changes in Energy Group's cash and temporary cash investments resulting
from operating, investing, and financing activities for the six months ended
June 30, 2005, and June 30, 2004, are summarized in the following chart.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                      Six Months       Six Months        Variance
Energy Group                                          Ended 2005       Ended 2004      2005 vs. 2004
------------------------------------------------------------------------------------------------------
                                                                 (Millions of Dollars)
------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>
Operating Activities                                  $     45.7       $     67.3       $    (21.6)
------------------------------------------------------------------------------------------------------
Investing Activities                                       (34.8)           (34.8)              --
------------------------------------------------------------------------------------------------------
Financing Activities                                       (16.0)           (26.1)            10.1
------------------------------------------------------------------------------------------------------
Net change for the period                                   (5.1)             6.4            (11.5)
------------------------------------------------------------------------------------------------------
Balance at beginning of period                             119.1            125.8             (6.7)
------------------------------------------------------------------------------------------------------
Balance at end of period                              $    114.0       $    132.2       $    (18.2)
------------------------------------------------------------------------------------------------------
</TABLE>

      Energy Group's net cash flows provided by operating activities during the
first six months ended June 30, 2005, were $21.6 million lower as compared to
the first six months ended June 30, 2004. Cash flow decreased primarily because
of a substantial increase in customer accounts receivable for Central Hudson and
CHEC, the absence of proceeds from Central Hudson's sale of emission allowances
in 2004, increased estimated tax payments based on current year taxable income,
and lower fuel oil sales volumes at CHEC related to customer attrition and
price-induced customer conservation. The substantial increase in customer
accounts receivable is related to a favorable re-pricing adjustment in
electricity sales for resale made by the NYISO and a reflection of increased
customer costs for purchased electricity, natural gas, and petroleum products,
due largely to an increase in the wholesale price of each as compared to the
same period in 2004. Increased sales for Central Hudson also contributed to this
increase in accounts receivable, reflecting customer growth for residential and
commercial customer classes. Cash flow from operations was also lower in 2005
due to the absence of the 2001 amended Utility Service Tax refund that Central
Hudson received in 2004. Slightly offsetting these decreases in cash flow was a
reduction in costs related to various programs funded by Central Hudson's
Customer Benefit Fund, including customer refunds for electric customers.

      As authorized in the 2004 Joint Proposal approved by the PSC, deferred
electric pension and OPEB costs, including carrying charges, were offset against
the Customer Benefit Fund with no impact to cash flow for the first six months
of 2005. The total amount offset for the first six months of 2005 was $3.0
million. Central Hudson will continue to use the Customer Benefit Fund to offset
the cost of various programs as well as under collected pension and OPEB costs
subject to certain limitations. For further details see Note 2 - "Regulatory
Matters" under the caption "Rate Proceedings -


                                       32
<PAGE>

Electric and Natural Gas" in the Consolidated Financial Statements of the
Corporations' 10-K Annual Report.

      Net cash flows related to investing activities were virtually the same in
the first six months of 2005 as compared to the first six months of 2004.
Decreased expenditures in 2005 related to property, plant, and equipment were
offset by issuances of notes receivable to certain of the competitive business
subsidiaries and minor acquisitions made by CHEC.

      Net cash flows related to financing activities were $10.1 million higher
in the first six months of 2005 as compared to the first six months of 2004. The
resulting increase in cash flows was primarily driven by lower net repayments of
short-term debt by Central Hudson in the first six months of 2005 as compared to
the same period in 2004. There were no issuances of medium-term notes in the
first six months of 2005 by Central Hudson and in the first six months of 2004
there were issuances of $7.0 million.

Central Hudson - Cash Flow Summary

      Changes in Central Hudson's cash and temporary cash investments resulting
from operating, investing, and financing activities for the six months ended
June 30, 2005, and June 30, 2004, are summarized in the following chart.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                         Six Months        Six Months         Variance
Central Hudson                                           Ended 2005        Ended 2004      2005 vs. 2004
--------------------------------------------------------------------------------------------------------------
                                                                     (Millions of Dollars)
--------------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>               <C>
Operating Activities                                    $      40.3       $      57.6       $     (17.3)
--------------------------------------------------------------------------------------------------------------
Investing Activities                                          (28.6)            (30.8)              2.2
--------------------------------------------------------------------------------------------------------------
Financing Activities                                          (16.5)            (26.6)             10.1
--------------------------------------------------------------------------------------------------------------
Net change for the period                                      (4.8)              0.2              (5.0)
--------------------------------------------------------------------------------------------------------------
Balance at beginning of period                                  8.2              12.7              (4.5)
--------------------------------------------------------------------------------------------------------------
Balance at end of period                                $       3.4       $      12.9       $      (9.5)
--------------------------------------------------------------------------------------------------------------
</TABLE>

      Central Hudson's net cash flows provided by operating activities in the
six months ended June 30, 2005, were $17.3 million lower as compared to the six
months ended June 30, 2004, for the reasons indicated in the discussion of
Energy Group's net cash flows provided by operating activities.

      Net cash flows related to investing activities were $2.2 million higher in
the first six months of 2005 as compared to the first six months of 2004 as a
result of decreased expenditures related to property, plant, and equipment.

      Net cash flows related to financing activities were $10.1 million higher
in the first six months of 2005 as compared to the first six months of 2004. The
resulting increase in cash flows was primarily driven by lower net repayments of
short-term debt in 2005 as compared to the same period in 2004. There were no
issuances of medium-term notes in the first six months of 2005 and in the first
six months of 2004 there were issuances of $7.0 million.


                                       33
<PAGE>

Credit Facilities and Debt

      At June 30, 2005, Energy Group, consolidated, had no current maturities of
long-term debt and $13.0 million of short-term debt outstanding. Cash and cash
equivalents for Energy Group, consolidated, were $114.0 million at June 30,
2005.

      Energy Group, the holding company, has a $75.0 million revolving credit
agreement with several commercial banks which currently has no outstanding
balance.

      As of June 30, 2005, Central Hudson had short-term debt outstanding of
$13.0 million and cash and cash equivalents of $3.4 million. The short-term debt
outstanding is from the use of uncommitted credit lines. Central Hudson has a
$75.0 million revolving credit agreement with a group of commercial banks which
currently has no outstanding balance. Central Hudson also has committed
short-term credit facilities totaling $1.0 million with a regional bank and
certain uncommitted lines of credit with various banks. These agreements give
Central Hudson competitive options to minimize the cost of its short-term
borrowing. Existing PSC authorization limits the amount of short-term borrowing
Central Hudson may have outstanding at any time to $77.0 million in aggregate.

      Central Hudson's current senior unsecured debt ratings/outlook is
A2/stable by Moody's Investors Service and A/stable by both Standard and Poor's
Corporation and by Fitch Ratings.

      Each of Energy Group and Central Hudson believes that it will be able to
meet its reasonably likely short-term and long-term cash requirements, assuming
that Central Hudson's current and future rate plans reflect the costs of
service, including a reasonable return on invested capital.

      CHEC has a $15.0 million line of credit with a commercial bank and, as of
June 30, 2005, there was no outstanding balance.

Parental Guarantees

      Energy Group and certain of the competitive business subsidiaries have
issued guarantees in conjunction with certain commodity and derivative contracts
that provide financial or performance assurance to third parties on behalf of a
subsidiary. The guarantees are entered into primarily to support or enhance the
creditworthiness otherwise attributed to a subsidiary on a stand-alone basis,
thereby facilitating the extension of sufficient credit to accomplish the
relevant subsidiary's intended commercial purposes. In addition, Energy Group
agreed to guarantee the post-closing obligations of former subsidiary Central
Hudson Energy Services, Inc. under the agreement related to the sale of former
subsidiary CH Resources, Inc. ("CH Resources"), which guarantee now applies to
CHEC. Reference is made to Note 1 - "Summary of Significant Accounting Policies"
under the captions "Parental Guarantees" and "Product Warranties" and to Note 11
- "Commitments and Contingencies" under


                                       34
<PAGE>

the caption "CHEC" to the Consolidated Financial Statements of the Corporations'
10-K Annual Report.

      The guarantees described have been issued to counter-parties to assure the
payment, when due, of certain obligations incurred by the Energy Group
subsidiaries in physical and financial transactions related to heating oil,
propane, other petroleum products, weather and commodity hedges, and certain
obligations related to the sale of CH Resources. At June 30, 2005, the aggregate
amount of subsidiary obligations (excluding obligations related to CH Resources)
covered by these guarantees was $3.7 million. Where liabilities exist under the
commodity-related contracts subject to these guarantees, these liabilities are
included in the Energy Group's Consolidated Balance Sheet. Energy Group's
approximate aggregate potential liability for product warranties at June 30,
2005, has not changed from that reported at December 31, 2004, which was
$504,000.

Financing Program of Energy Group and Its Subsidiaries

      On July 25, 2002, the Board of Directors of Energy Group authorized a
Common Stock Repurchase Program ("Repurchase Program") to repurchase up to 4.0
million shares, or approximately 25%, of its outstanding Common Stock over the
five years beginning August 1, 2002. Between August 1, 2002, and December 31,
2003, the number of shares repurchased under the Repurchase Program was 600,087
at a cost of $27.5 million. No shares were repurchased during the six months
ended June 30, 2005, or during the twelve months ended December 31, 2004. Energy
Group intends to set repurchase targets, if any, each year based on
circumstances then prevailing. Repurchases have been suspended while Energy
Group assesses opportunities to redeploy its cash reserves in regulated and
competitive energy-related businesses. Energy Group reserves the right to
modify, suspend, or terminate the Repurchase Program at any time without notice.

EARNINGS PER SHARE

      Energy Group's consolidated earnings per share (basic) for the second
quarter of 2005 were $0.41 as compared to $0.35 for the second quarter of 2004,
an increase of $0.06 per share. Details of the change in earnings are as follows
for each of the operating segments which include Central Hudson (described under
the subcaption "Regulated Electric and Natural Gas"), CHEC (described under the
subcaption "Unregulated Fuel Oil Distribution"), and Energy Group (the holding
company) and CHEC's interests in partnerships and interests other than fuel oil
distribution operations (both described under the subcaption "Unregulated -
Other").


                                       35
<PAGE>

Three Months Ended June 30, 2005

Regulated Electric and Natural Gas

      Earnings for Central Hudson's electric and natural gas operations
decreased $0.06 per share due to the following:

      o     $0.09 per share due to the completion of the amortization of Central
            Hudson's share of the gain from the 2001 sale of its interests in
            its major generating assets. This gain was recorded as deferred
            income beginning July 1, 2001, and its amortization was completed in
            December 2004.

      o     $0.04 per share due to a decrease in electric net operating
            revenues, net of the cost of purchased electricity, fuel, and
            revenue taxes. The reduction in electric net revenues is due to the
            recording of an estimated amount payable of $0.05 per share for the
            month of June, pursuant to a summer weather-hedging contract that
            runs from June to August. The $0.05 per share impact of the
            weather-hedging contract was partially offset by an increase in
            revenues from electric delivery sales, primarily to residential
            customers.

      o     $0.04 per share due to an increase in property taxes and
            depreciation and amortization of utility plant assets.

      o     $0.03 per share due to the absence of the amortization of previously
            deferred electric revenues that ended June 30, 2004, pursuant to the
            current regulatory agreement.

      o     $0.03 per share from an increase in storm restoration costs.

      Partially offsetting the decreases were the following:

      o     An increase of $0.05 per share due to a reduction in operating
            expenses primarily related to uncollectible accounts, workers
            compensation, and injuries and damages.

      o     An increase of $0.04 per share from electric and natural gas
            regulatory mechanisms. The increase was due to lower shared earnings
            for electric and natural gas operations. Both electric and natural
            gas shared earnings decreased largely due to lower ratemaking
            operating income and a change in the sharing arrangements effective
            July 1, 2004.

      o     An increase of $0.03 per share due to a favorable NYISO re-pricing
            adjustment related to electricity sales for resale.

      o     $0.02 per share due to an increase in natural gas net operating
            revenues from delivery sales, net of the cost of natural gas and
            revenue taxes. Sales to residential and commercial customers,
            largely space heating sales, increased due to increased usage and
            customer growth, which was partially offset by a reduction in usage
            by existing industrial customers.

      o     An increase of $0.03 per share due to the net effect of various
            other items including a reduction in income taxes and a reduction in
            regulatory carrying charges due to customers. These reductions were
            partially offset by an increase in interest charges resulting from
            the issuance of long-term debt in


                                       36
<PAGE>

            November of 2004. The reduction in carrying charges primarily
            reflects the substantial use of the principal balance of the
            Customer Benefit Fund by December 31, 2004, for customer refunds and
            other authorized programs.

Unregulated Fuel Oil Distribution

      Earnings for CHEC's fuel oil distribution subsidiaries increased $0.01 per
share due to an increase in net revenues (net of fuel and other related
expenses). The increase is due to an increase in service profitability and a
reduction in operating expenses resulting from lower volumes sold due to
customer attrition and price-induced customer conservation.

Unregulated - Other

      Earnings for Energy Group, the holding company, and CHEC's non-fuel oil
interests increased $0.11 per share. The increase is due primarily to the
recording of favorable New York State income tax benefits related to the
completion of an Energy Group tax audit. An increase in investment income from
temporary investments held by Energy Group, the holding company, also enhanced
earnings. The increase in investment income reflects higher returns due to
higher interest rates. The overall increase was partially offset by a decrease
in income from CHEC's partnership and other investment interests.

Six Months Ended June 30, 2005

      Energy Group's consolidated earnings per share (basic) for the six months
ended June 30, 2005, and 2004, reflect earnings per share (basic) of $1.70 and
$1.81, respectively, a decrease in earnings of $0.11 per share. Details of the
six-month change in earnings are as follows:

Regulated Electric and Natural Gas

      Earnings for Central Hudson's electric and natural gas operations
decreased $0.15 per share due to the following:

      o     $0.19 per share due to the completion of the amortization of Central
            Hudson's share of the gain from the 2001 sale of its interests in
            its major generating assets. This gain was recorded as deferred
            income beginning July 1, 2001, and its amortization was completed in
            December 2004.

      o     $0.08 per share due to an increase in property taxes and
            depreciation and amortization of utility plant assets.

      o     $0.06 per share due to the absence of the amortization of previously
            deferred electric revenues that ended June 30, 2004, pursuant to the
            current regulatory agreement.

      o     $0.06 per share from an increase in storm restoration costs.


                                       37
<PAGE>

      Partially offsetting the decreases were the following:

      o     $0.10 per share from electric and natural gas regulatory mechanisms.
            The increase was due to lower shared earnings for electric and
            natural gas operations. Both electric and natural gas shared
            earnings decreased largely due to lower rate-making operating income
            and a change in the sharing arrangements effective July 1, 2004.

      o     An increase of $0.04 per share due to a reduction in other operating
            expenses primarily related to uncollectible accounts and injuries
            and damages.

      o     An increase of $0.03 per share due to a favorable NYISO re-pricing
            adjustment related to electricity sales for resale.

      o     $0.03 per share due to an increase in natural gas net operating
            revenues from delivery sales, net of the cost of natural gas and
            revenue taxes. Sales to residential and commercial customers,
            largely space heating sales, increased due to customer growth and
            increased usage, which was partially offset by a reduction in usage
            by existing industrial customers.

      o     An increase of $0.04 per share due to the net effect of various
            other items, including a reduction in income taxes and a reduction
            in regulatory carrying charges due to customers. These reductions
            were partially offset by an increase in interest charges resulting
            from the issuance of long-term debt in November of 2004. The
            reduction in carrying charges primarily reflects the substantial use
            of the principal balance of the Customer Benefit Fund by December
            31, 2004, for customer refunds and other authorized programs.

Unregulated Fuel Oil Distribution

      Earnings for CHEC's fuel oil distribution subsidiaries decreased $0.08 per
share due to a decrease in gross margins (revenues net of fuel and other related
expenses) due to reduced residential volumes related to customer attrition and
price-induced customer conservation. This shortfall was partially offset by
higher margins in the first quarter of 2005 as compared to 2004. In addition,
commercial dual-fuel customers used less oil and used more natural gas provided
from other suppliers, due to the price advantage of natural gas on a price per
unit of heating value basis.

Unregulated - Other

      Earnings for Energy Group, the holding company, and CHEC's non-fuel oil
interests increased $0.12 per share. The increase was due primarily to the
recording of favorable New York State income tax benefits related to the
completion of the Energy Group tax audit. An increase in investment income from
temporary investments held by Energy Group, the holding company, also enhanced
earnings. The increase in investment income reflects higher returns due to
higher interest rates. The overall increase was partially offset by a decrease
in income from CHEC's partnership and other investment interests.


                                       38
<PAGE>

RESULTS OF OPERATIONS

      The following discussion and analyses include explanations of significant
changes in revenues and expenses between the three and six-month periods ended
June 30, 2005, and the three and six-month periods ended June 30, 2004, for
Energy Group's operating segments.

OPERATING REVENUES

      Energy Group's consolidated operating revenues increased $24.2 million, or
14.6%, for the second quarter of 2005 as compared to the same period in 2004.
Revenues increased $47.3 million, or 11.0%, for the comparative six-month
periods. Details of these revenue changes are presented in the following charts
and related discussions concerning these variances.

      Details of these revenue changes by electric, natural gas, and unregulated
subsidiaries are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                          2005/2004 INCREASE (DECREASE)
(Thousands of Dollars)                                   THREE MONTHS ENDED JUNE 30, 2005
-------------------------------------------------------------------------------------------------------------------
                                                                             Unregulated
                                                                      --------------------------
                                                     Natural           Fuel Oil
                                Electric               Gas            Distribution       Other           Total
-------------------------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>                 <C>             <C>              <C>
Customer Sales                $      305(a)       $      751(b)       $   10,044      $      (58)      $   11,042
-------------------------------------------------------------------------------------------------------------------
Sales to Other Utilities             941                   6                  --              --              947
-------------------------------------------------------------------------------------------------------------------
Energy Cost Adjustment             9,414               4,112                  --              --           13,526
-------------------------------------------------------------------------------------------------------------------
Deferred Revenues(c)                 348                  24                  --              --              372
-------------------------------------------------------------------------------------------------------------------
Miscellaneous                     (1,829)                158                  --              --           (1,671)
-------------------------------------------------------------------------------------------------------------------
       Total                  $    9,179          $    5,051          $   10,044      $      (58)      $   24,216
-------------------------------------------------------------------------------------------------------------------

<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                          2005/2004 INCREASE (DECREASE)
(Thousands of Dollars)                                   SIX MONTHS ENDED JUNE 30, 2005
-------------------------------------------------------------------------------------------------------------------
                                                                             Unregulated
                                                                      --------------------------
                                                     Natural           Fuel Oil
                                Electric               Gas            Distribution       Other           Total
-------------------------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>                 <C>             <C>              <C>
Customer Sales                $    1,409(a)       $    1,964(b)       $   21,017      $      (51)      $   24,339
-------------------------------------------------------------------------------------------------------------------
Sales to Other Utilities           1,130                  61                  --              --            1,191
-------------------------------------------------------------------------------------------------------------------
Energy Cost Adjustment            15,661               7,237                  --              --           22,898
-------------------------------------------------------------------------------------------------------------------
Deferred Revenues(c)                 477                 675                  --              --            1,152
-------------------------------------------------------------------------------------------------------------------
Miscellaneous                     (2,110)               (161)                 --              --           (2,271)
-------------------------------------------------------------------------------------------------------------------
       Total                  $   16,567          $    9,776          $   21,017      $      (51)      $   47,309
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)   Includes an offsetting restoration of amounts from Central Hudson's
      Customer Benefit Fund (described under the captions "Summary of Regulatory
      Assets and Liabilities" and "Rate Proceedings - Electric and Natural Gas"
      in Note 2 - "Regulatory Matters" to the Consolidated Financial Statements
      of the Corporations' 10-K Annual Report) for customer refunds to all
      customers and back-out credits for retail access customers.

(b)   Includes both firm and interruptible customers.

(c)   Includes the restoration of other revenues from Central Hudson's Customer
      Benefit Fund for other authorized programs and the restoration of
      previously deferred delivery revenues, and the deferral of electric and
      natural gas shared earnings in accordance with the provisions of Central
      Hudson's current rate agreement with the PSC (described in Note 2 -
      "Regulatory Matters" of the Corporations' 10-K Annual Report).


                                       39
<PAGE>

Regulated Electric and Natural Gas

      Utility electric and natural gas operating revenues increased $14.2
million, or 11.5%, from $123.5 million in 2004 to $137.7 million in 2005 for the
quarter ended June 30. Electric revenues increased $9.2 million, or 9.4%, and
natural gas revenues increased $5.0 million, or 19.4%, largely due to an
increase in amounts collected through Central Hudson's energy cost adjustment
mechanisms to recover its cost of purchased electricity and natural gas.
Electric revenues also reflect increases due to an increase in delivery sales
and revenues from sales for resale due to a NYISO re-pricing adjustment. Natural
gas revenues also reflect an increase in delivery revenues. The increase in
electric revenues was partially offset by a reduction in revenues related to
weather hedging contracts.

      For the six months ended June 30, 2005, utility electric and natural gas
operating revenues increased $26.3 million, or 8.7%, from $301.5 million in 2004
to $327.8 million in 2005 with electric revenues increasing $16.5 million, or
7.6%, and natural gas revenues increasing by $9.8 million, or 11.5%. As with the
quarter ended June 30, 2005, most of the change is related to an increase in
amounts collected through Central Hudson's cost adjustment mechanisms for the
recovery of energy costs. Electric and natural gas revenues also reflect the
impact of increased delivery sales with the electric increase partially offset
by the effect of weather hedging contracts. Electric revenues additionally
increased due to NYISO re-pricing adjustments related to sales for resale.

Unregulated Fuel Oil Distribution

      Revenues for CHEC's fuel oil distribution operations increased $10.0
million, or 24%, from $41.6 million for the quarter ended June 30, 2004, to
$51.6 million for the quarter ended June 30, 2005. The increase in revenues
primarily reflects an increase in the average selling price of petroleum in 2005
in comparison to 2004 due to an increase in wholesale costs. The increase is
partially offset by a reduction in petroleum volumes due to customer attrition,
price-induced customer conservation, and fuel switching.

      For the six months ended June 30, 2005, fuel oil distribution operating
revenues increased $21.0 million, or 16.6%, from $126.3 million in 2004 to
$147.3 million in 2005. The increase in revenues results for the reasons
indicated above.

SALES VOLUMES

      Sales volumes for both Central Hudson and CHEC's fuel oil distribution
companies vary in response to weather conditions. Electric deliveries peak in
the


                                       40
<PAGE>

summer, and natural gas and petroleum products consumed for heating purposes
peak in the winter.

Regulated Electric and Natural Gas

      The following chart reflects the change in the level of electric and
natural gas sales for the quarter and six-months ended June 30, 2005, as
compared to the same periods for 2004.

<TABLE>
<CAPTION>
                                                     INCREASE (DECREASE) FROM 2004
                                     --------------------------------------------------------------
                                        3 MONTHS ENDED JUNE 30            6 MONTHS ENDED JUNE 30
                                     ---------------------------        ---------------------------
                                     Electric        Natural Gas        Electric        Natural Gas
                                     --------        -----------        --------        -----------
<S>                                    <C>               <C>            <C>                 <C>
Residential ..............               2%               4%                2%               2%
Commercial ...............               0%               4%                1%               4%
Industrial ...............               2%              (9)%               2%              (1)%
Interruptible ............             N/A                2%              N/A                7%
</TABLE>

      Utility deliveries of electricity within Central Hudson's service
territory increased 1% in the second quarter of 2005 as compared to the same
quarter in 2004. Sales to residential and industrial customers each increased
2%, while sales to commercial customers remained relatively flat. Sales to
residential customers increased due to customer growth and increased usage.
Customer growth also served to offset a reduction in usage by commercial
customers. The increase in usage results from the cooler weather experienced in
the months of April and May 2005 as evidenced by a 19% increase in electric
billing heating degree-days over the prior year.

      Utility deliveries of natural gas to firm Central Hudson customers
increased 3% in 2005 as compared to last year. Sales to residential and
commercial customers each increased 4% due to increased usage and customer
growth. Industrial sales, which were 4% and 5% of total firm sales in the
quarters ended June 30, 2005, and 2004, respectively, decreased 9%, while
interruptible sales increased 2%. Billing heating degree-days, although at
normal levels for 2005, were 14% higher than last year.

      For the six months ended June 30, 2005, as compared to the same period in
2004, electric delivery sales increased 2%. Sales to residential customers
increased 2% and sales to commercial customers increased 1% both due to customer
growth and, for residential customers, also increased usage. Sales to industrial
customers increased 2%. Electric billing heating degree-days increased 3% over
last year.

      Deliveries of natural gas increased 2% in 2005 as compared to the prior
year. Residential sales increased 2% and commercial sales increased 4%,
primarily due to customer growth. Industrial sales, which represent less than 5%
of total firm sales, decreased 1%. Interruptible sales increased 7% due to a
greater availability of natural gas. Billing heating degree-days increased 2%
for the six months ended June 30, 2005, as compared to last year.


                                       41
<PAGE>

Unregulated Fuel Oil Distribution

      Sales of petroleum products by CHEC's fuel oil distribution companies
decreased 2.4 million gallons, or 9%, from 28.0 million gallons in the second
quarter of 2004 to 25.6 million gallons in the second quarter of 2005. Half of
the variation was the result of reduced sales to lower margin commercial
customers with dual-fuel capabilities. The primary alternative fuel, natural
gas, had a price advantage in the fuel oil distribution companies' markets due
to high oil prices during the quarter. The remaining variation was attributed
primarily to residential customers and delivered motor fuels. The variation in
residential customer gallons was driven by price-induced conservation efforts
and customer attrition. Also, fewer new customers were acquired due to the
discontinuance of certain new customer discounts. Temperatures were colder in
the second quarter of 2005 as compared to last year, as evidenced by a 13%
increase in heating degree-days.

      For the six months ended June 30, 2005, sales of petroleum products
decreased 11.0 million gallons, or 13%, from 87.1 million gallons in the first
six months of 2004 to 76.1 million gallons in the first six months of 2005. The
reduction in sales volume was due to essentially the same reasons as discussed
for the second quarter change in sales volume. For the six months ended June 30,
2005, heating degree-days increased 2% due to colder weather in the second
quarter, as discussed above.

OPERATING EXPENSES

Regulated Electric and Natural Gas

      Total utility operating expenses and income taxes increased $13.4 million,
or 11.5%, from $116.0 million in the second quarter of 2004 to $129.4 million in
the second quarter of 2005. The increase in operating expenses resulted from an
increase in purchased electricity and natural gas expense, which increased $9.0
million and $4.7 million, respectively. Both reflect an increase in wholesale
costs, an increase in volumes purchased due to an increase in sales to full
service customers, and a change in amounts recorded related to the recovery of
these costs through Central Hudson's cost adjustment mechanisms for purchased
electricity and natural gas costs. Other operating expenses and income taxes
decreased $0.3 million due to a decrease in income taxes of $1.5 million, which
resulted largely from a reduction in taxable income. Partially offsetting the
decrease in income taxes was an increase in depreciation and amortization of
utility plant and taxes other than income taxes.

      For the six months ended June 30, 2005, as compared to the six months
ended June 30, 2004, operating expenses and income taxes increased $24.5
million, or 8.8%, from $276.9 million in 2004 to $301.4 million in 2005. As with
the quarter ended June 30, 2005, the increase is reflective of an increase in
the cost of purchased electricity, which increased $15.2 million, and an
increase in the cost of purchased natural gas of $8.4 million. The increases for
both are due to an increase in wholesale costs, an increase in volumes purchased
due to an increase in full service sales, and a change in the amounts recorded
for the recovery of these energy costs through Central


                                       42
<PAGE>

Hudson's energy cost adjustment mechanisms. Other operating expenses and income
taxes increased $0.9 million, reflecting increases in storm restoration costs,
depreciation, amortization of utility plant, and taxes other than income taxes.
The increase was partially offset by a reduction in income taxes resulting
largely from a reduction in taxable income.

Unregulated Fuel Oil Distribution

      For the second quarter, operating expenses and income taxes increased $9.8
million, or 23.1%, from $42.7 million in 2004 to $52.5 million in 2005 due to an
increase in purchased petroleum expense. The cost of petroleum increased $9.9
million due primarily to an increase in the wholesale price of petroleum in 2005
as compared to 2004. This increase was partially offset by a reduction in other
expenses of operation due to a decrease in distribution costs related to lower
volumes sold.

      For the six months ended June 30, 2005, these expenses increased $22.0
million, or 18.2%, from $121.0 million in 2004 to $143.0 million in 2005 due to
an increase in purchased petroleum expense. The cost of petroleum increased
$23.5 million due primarily to an increase in the wholesale price of petroleum
in 2005 as compared to 2004. This increase was partially offset by a reduction
in other expenses of operation of $0.7 million partially due to a reduction of
distribution costs related to lower volumes sold. Income taxes were lower by
$0.8 million resulting from lower taxable income for fuel oil distribution
operations.

OTHER INCOME

Regulated Electric and Natural Gas

      Other income for Central Hudson decreased $2.9 million, or 65.9%, for the
quarter ended June 30, 2005, as compared to the quarter ended June 30, 2004. The
decrease was due to the completion of the amortization in December 2004 of
Central Hudson's share of the gain from the 2001 sale of its interests in its
major generating assets and a reduction in carrying charges due from customers
related to pension costs. In its June 2004 Rate Order adopting the terms of
Central Hudson's Joint Proposal for Rate Plan Modification, the PSC authorized
the use of the Customer Benefit Fund to offset pension under-collection
balances, which reduced the balance upon which carrying charges for pension
costs are determined. This reduction in carrying charges was offset by a
reduction in carrying charges related to the Customer Benefit Fund as discussed
below under "Interest Charges".

      For the six months ended June 30, 2005, other income decreased $6.2
million due to the reasons noted above for the quarter ended June 30, 2005.

Unregulated Other

      Other income and related income taxes for Energy Group, the holding
company, and CHEC's partnership investments and energy efficiency services
increased $1.6


                                       43
<PAGE>

million for the quarter ended June 30, 2005, as compared to the quarter ended
June 30, 2004. The increase is primarily due to the recording of favorable New
York State income tax benefits related to the completion of a tax audit. The
increase also reflects an increase in investment income from temporary
investments held by Energy Group due to higher interest rates, which was
partially offset by a decrease in income from CHEC's partnership and other
investment interests.

      For the six months ended June 30, 2005, other income and related income
taxes increased $1.7 million due to the reasons noted above for the quarter
ended June 30, 2005.

INTEREST CHARGES

Regulated Electric and Natural Gas

      Interest charges for Central Hudson decreased $1.2 million, or 24.7%, for
the quarter ended June 30, 2005, as compared to the same period in the prior
year. The decrease was due primarily to a reduction of regulatory carrying
charges resulting from the substantial use, by December 31, 2004, of the
principal balance of the Customer Benefit Fund for customer refunds and other
authorized programs. In accordance with Central Hudson's current settlement
agreement, carrying charges were accrued on the unused balance for the future
benefit of customers. This reduction in carrying charges was partially offset by
an increase in interest charges on long-term debt due to the issuance of
medium-term notes in November 2004.

      For the six months ended June 30, 2005, interest charges decreased $2.0
million due to the reasons noted above. The increase in interest charges for the
six months was also affected by the issuance of long-term debt in February 2004.

COMMON STOCK DIVIDENDS

      Reference is made to the caption "Common Stock Dividends and Price Ranges"
of Part II, Item 7 of the Corporations' 10-K Annual Report for a discussion of
Energy Group's dividend payments. On March 24, 2005, the Board of Directors of
Energy Group declared a quarterly dividend of $0.54 per share, payable May 2,
2005, to shareholders of record as of April 11, 2005. On June 21, 2005, the
Board of Directors of Energy Group declared a quarterly dividend of $0.54 per
share, payable August 1, 2005, to shareholders of record as of July 11, 2005.

OTHER MATTERS

      Changes in Accounting Standards: See Note 2 - "Summary of Significant
Accounting Policies" and Note 5 - "New Accounting Standards and Other FASB
Projects" for discussion of relevant changes.

      On July 20, 2005, Central Hudson received a payment from the NYISO for
adjustments to energy sales transactions that had occurred in May 2000, when
Central


                                       44
<PAGE>

Hudson owned the Danskammer Plant and a share of the Roseton Plant. The
adjustments resulted from a decision of the United State Court of Appeals for
the District of Columbia Circuit and a subsequent Order of the Federal Energy
Regulatory Commission that directed the NYISO to increase the real-time pricing
on those transactions. Since the payment related to unresolved billing issues
that existed at June 30, 2005, its impact has been recorded in the financial
results for that quarter. The payment resulted in an increase to net income of
$574,000, or $0.03 per share. Additionally, as a result of PSC regulatory
mechanisms in place in 2000, customers will received $2.7 million of the NYISO
payments which will be returned through Central Hudson's energy cost adjustment
mechanism.

FORWARD-LOOKING STATEMENTS

      Statements included in this Quarterly Report on Form 10-Q and the
documents incorporated by reference which are not historical in nature, are
intended to be, and are hereby identified as, "forward-looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended ("Exchange Act"). Forward-looking statements may be
identified by words including "anticipates," "believes," "projects," "intends,"
"estimates," "expects," "plans," "assumes," "seeks," and similar expressions.
Forward-looking statements including, without limitation, those relating to
Energy Group's and Central Hudson's ("Registrants") future business prospects,
revenues, proceeds, working capital, liquidity, income and margins, are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements, due to
several important factors including those identified from time to time in the
forward-looking statements. Those factors include, but are not limited to:
weather; energy supply and demand; fuel prices; interest rates; potential future
acquisitions; developments in the legislative, regulatory and competitive
environment; market risks; electric and natural gas industry restructuring and
cost recovery; the ability to obtain adequate and timely rate relief; changes in
fuel supply or costs including future market prices for energy, capacity, and
ancillary services; the success of strategies to satisfy electricity, natural
gas, fuel oil, and propane requirements; the outcome of pending litigation and
certain environmental matters, particularly the status of inactive hazardous
waste disposal sites and waste site remediation requirements; and certain
presently unknown or unforeseen factors, including, but not limited to, acts of
terrorism. Registrants undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.

      Given these uncertainties, undue reliance should not be placed on the
forward-looking statements.

RISK FACTORS

      Redeployment of Capital

      Energy Group is seeking to invest approximately $90 million in
energy-related assets and/or utility assets. These funds were generated from the
sales of Central


                                       45
<PAGE>

Hudson's interests in its major generating assets and Energy Group's sale of CH
Resources and are currently held in low risk and low return money market
instruments and short-term securities. Investments in new business ventures may
provide returns that are not commensurate with their risk profile, including
potential losses or write offs, and they may cause Energy Group's earnings to be
more volatile.

      Energy Group may not be successful in finding suitable new investments
and, therefore, Energy Group may not achieve the earnings accretion such
investments could produce.

      No projected income from such future investments in energy-related assets
has been included in any earnings guidance issued to date by Energy Group for
2005.

      Storms and Other Events Beyond Central Hudson's Control May Interfere with
      the Operation of its Transmission and Distribution Facilities in the
      Mid-Hudson Valley Region

      Central Hudson's revenues are generated by the delivery of electricity
over transmission and distribution lines and by the delivery of natural gas
through pipelines. These facilities, which are owned and operated by Central
Hudson or by third party entities, are at risk of damage from storms, natural
disasters, wars, terrorist acts, and other catastrophic events. If Central
Hudson is unable to repair its facilities in a timely manner, or if the third
parties that own and operate the interconnected facilities are unable to repair
their facilities in a timely manner, Central Hudson's customers may experience a
service disruption and Central Hudson may experience lower revenues or increased
expenses, or both, that Central Hudson may not be able to recover fully through
rates, insurance, sales margins, or other means in a timely manner, or at all.

      Storms and Other Events Beyond the Control of CHEC's Subsidiaries May
      Interfere with the Operation of their Fuel Oil Delivery Businesses in the
      Mid-Atlantic and in the Northeast Region

      CHEC's revenues from its fuel oil delivery businesses are generated by the
delivery of various petroleum products within their areas of operation. In order
to conduct these businesses, CHEC's subsidiaries need access to petroleum
supplies from storage facilities in their service territories. Some of these
storage facilities are owned or leased by CHEC's subsidiaries, and some are
owned and operated by third party entities. These facilities are at risk of
damage from storms, natural disasters, wars, terrorist acts, and other
catastrophic events and supply of petroleum products to these facilities could
be delayed, curtailed, or lost due to developments in the world oil markets. If
such damage or disruption were to occur, and if the affected CHEC subsidiary
were unable to procure petroleum from alternative sources of supply in a timely
manner, the customers of such subsidiary could experience a service disruption
and the subsidiary could experience lower revenues, or increased expenses, or
both, that the subsidiary might not be able to recover fully through insurance,
sales margins, or other means in a timely manner, or at all.


                                       46
<PAGE>

      Unusual Temperatures in Central Hudson and CHEC's Service Territories
      Could Adversely Impact Earnings

      Central Hudson's service territory is the mid-Hudson Valley region. CHEC's
subsidiaries serve the mid-Atlantic region and northeast U.S. These areas
typically experience seasonal fluctuations in temperature. If, however, the
regions were to experience unusually mild winters and/or cooler summers, Central
Hudson's and CHEC's earnings could be adversely impacted. A considerable portion
of Central Hudson's total electric deliveries is directly or indirectly related
to weather-sensitive end uses such as air conditioning and space heating. Much
of the fuel oil delivered by CHEC's subsidiaries is used for space heating, as
is the majority of the natural gas delivered by Central Hudson. As a result,
sales fluctuate and vary from normal expected levels based on variations in
weather from normal seasonal levels. Such variations in sales volumes could
affect results of operations significantly. Central Hudson and CHEC's
subsidiaries have programs in place to constrain the potential variability in
results of operations through the use of derivative instruments. However, no
assurance can be given that suitable risk management instruments will remain
available.

      Central Hudson's Rate Plans Limit its Ability to Pass Through Increased
      Costs to its Customers; If Central Hudson's Rate Plans Are Modified by
      State Regulatory Authorities, Central Hudson Revenues May Be Lower Than
      Expected

      As a transmission and distribution company delivering electricity and
natural gas within New York State, Central Hudson is regulated by the PSC, which
regulates retail rates, terms and conditions of service, various business
practices and transactions, financings, and transactions between Central Hudson
and Energy Group or Energy Group's competitive business subsidiaries. The PSC's
Order Establishing Rates in Central Hudson's rate proceeding, which was issued
on October 25, 2001, and became effective November 1, 2001, and the PSC's Joint
Proposal Order issued on June 14, 2004, and effective July 1, 2004, (together
the "Rate Plans") cover the rates Central Hudson can charge customers and
contain a number of related provisions. Rates charged to customers generally may
not be changed during the respective limited terms of the Rate Plans, other than
for the recovery of energy costs and limited other exceptions. As a result, the
Rate Plans may not reflect all of the increased construction and other costs
that may be experienced after the date the Rate Plans became effective. The
approval of new rate plans or changes to existing Rate Plans (including the
modification or elimination of Central Hudson's energy cost adjustment clauses)
could have a significant effect on Central Hudson's financial condition, results
of operations, or cash flows. The current Rate Plans and material matters
relating to potential rate changes are described in Note 2 - "Regulatory
Matters" to the Consolidated Financial Statements of the Corporations' 10-K
Annual Report. The current Rate Plans permit Central Hudson to file for changes
in rates at any time, but rates are generally not changed by the PSC until
eleven months after the filing of proposed rate changes. On July 29, 2005,
Central Hudson filed an electric and natural gas case for an increase in its
delivery rates. Central Hudson cannot predict the rates


                                       47
<PAGE>

that will be established by the PSC, or whether its business may be adversely
affected by the rates determined, in such proceeding.

      Central Hudson Is Subject to Risks Relating to Asbestos Litigation and
      Manufactured Gas Plant Facilities

      Litigations have been commenced against Central Hudson arising from the
use of asbestos at its previously owned major generating assets, and Central
Hudson is involved in a number of matters arising from contamination at former
manufactured gas plant sites. Reference is made to Note 11 - "Commitments and
Contingencies" to the Consolidated Financial Statements of the Corporations'
10-K Annual Report and in particular to the subcaptions in Note 11 regarding
"Asbestos Litigation" and "Former Manufactured Gas Plant Facilities."

      High Wholesale Fuel Oil Prices May Adversely Affect the Ability of CHEC's
      Subsidiaries to Attract New Customers, Retain Existing Customers and
      Maintain Sales Volumes

      For the six months ended June 30, 2005, the average wholesale price of
fuel oil, as measured by the closing price on the New York Mercantile Exchange,
increased 52% to $1.459 per gallon, from $0.958 per gallon for the same six
months ended June 30, 2004. CHEC's management believes the significant rise in
the wholesale price of fuel oil has adversely impacted the ability of CHEC's
fuel oil delivery businesses to attract new full service residential customers
and, to a lesser extent, retain existing full service residential customers.
CHEC's management believes some customer attrition is due to former and
prospective full service customers deciding, because of high fuel oil prices, to
purchase fuel from discount distributors, which - unlike CHEC's fuel oil
delivery businesses - do not offer other services such as repair and
maintenance. In addition, CHEC's management believes that some customers are
conserving their use of fuel oil by accepting lower temperatures in their homes
and by implementing home improvements (e.g., more insulation; better windows).
If high fuel prices were to continue indefinitely, or such prices were to
increase significantly, CHEC's subsidiaries could experience further customer
attrition and further reductions in sales volume due to customer conservation.
If one or both of these were to occur and be material, the consequence could be
a material reduction in profitability that could, in turn, lead to an impairment
of the goodwill included in the intangible assets on CHEC's and Energy Group's
balance sheets. Additionally, if customer attrition were to accelerate
significantly the remaining value of the customer list could be impaired.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Reference is made to Part II, Item 7A of the Corporations' 10-K Annual
Report for a discussion of market risk. There has been no material change in
either the market risks or the practices employed by Energy Group and Central
Hudson to mitigate these risks discussed in the Corporations' 10-K Annual
Report. For related discussion on this activity, see, in the Consolidated
Financial Statements of the Corporations' 10-K Annual


                                       48
<PAGE>

Report, Note 1 - "Summary of Significant Accounting Policies" under the caption
"Accounting for Derivative Instruments and Hedging Activities" and Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under subcaption "Capital Resources and Liquidity."

ITEM 4 - CONTROLS AND PROCEDURES

      The Chief Executive Officer and Chief Financial Officer of Energy Group
and Central Hudson evaluated the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934, as amended) as of the end of the period covered by this Quarterly Report
on Form 10-Q and based on that evaluation, concluded that, as of the end of the
period covered by this Quarterly Report on Form 10-Q, the Registrants' controls
and procedures are effective for recording, processing, summarizing, and
reporting information required to be disclosed in their reports under the
Securities Exchange Act of 1934, as amended, within the time periods specified
in the SEC's rules and forms.

      A significant deficiency in general computer controls at one of Energy
Group's fuel oil distribution subsidiaries was described in Item 9A of the
Corporations' 10-K Annual Report. Remediation of this deficiency is nearly
complete. Access to programs and data by the software vendor is now restricted
and controlled by the subsidiary. Employee access to programs and data has been
limited to meet the needs of job classifications. Internal testing of the
remediation to confirm that it is operating as intended is expected to be
completed by the end of the third quarter.

      Other than noted above, there were no changes to the Registrants' internal
control over financial reporting that occurred during the Registrants' last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Registrants' internal control over financial reporting.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      For a discussion of certain legal proceedings and certain administrative
matters involving Central Hudson and the competitive business subsidiaries, see
Note 9 - "Commitments and Contingencies," which discussion is incorporated
herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

      The Annual Meeting of Shareholders of Energy Group was held on April 26,
2005. For a description of the matters voted on and the election outcome, see
Part II, Item 4 of Registrants' Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005.


                                       49
<PAGE>

Item 6. Exhibits

      (a) The following exhibits are furnished in accordance with the provisions
of Item 601 of Regulation S-K.

  Exhibit No.
Regulation S-K
   Item 601
  Designation                 Exhibit Description

10(iii)(34)       Form of Performance Shares Agreement

12                Statements Showing Computation of the Ratio of Earnings to
                  Fixed Charges and the Ratio of Earnings to Combined Fixed
                  Charges and Preferred Stock Dividends.

31.1              Rule 13a-14(a)/15d-14(a) Certification by Mr. Lant.

31.2              Rule 13a-14(a)/15d-14(a) Certification by Mr. Capone.

32.1              Section 1350 Certification by Mr. Lant.

32.2              Section 1350 Certification by Mr. Capone.


                                       50
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunder duly authorized.

                                    CH ENERGY GROUP, INC.
                                         (Registrant)

                                    By:       /s/ Donna S. Doyle
                                    --------------------------------------------
                                                Donna S. Doyle
                                    Vice President - Accounting and Controller


                                    CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                                         (Co-Registrant)

                                    By:       /s/ Donna S. Doyle
                                    --------------------------------------------
                                                Donna S. Doyle
                                    Vice President - Accounting and Controller

Dated: August 5, 2005


                                       51
<PAGE>

                                  EXHIBIT INDEX

      Following is the list of Exhibits, as required by Item 601 of Regulation
S-K, filed as part of this Quarterly Report on Form 10-Q:

  Exhibit No.
Regulation S-K
   Item 601
  Designation               Exhibit Description

10(iii)(34)       Form of Performance Shares Agreement

12                Statements Showing Computation of the Ratio of Earnings to
                  Fixed Charges and the Ratio of Earnings to Combined Fixed
                  Charges and Preferred Stock Dividends.

31.1              Rule 13a-14(a)/15d-14(a) Certification by Mr. Lant.

31.2              Rule 13a-14(a)/15d-14(a) Certification by Mr. Capone.

32.1              Section 1350 Certification by Mr. Lant.

32.2              Section 1350 Certification by Mr. Capone.


                                       52