|                                                                                                                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED STATES
        SECURITIES AND EXCHANGE COMMISSION
        Washington, D. C. 20549
        FORM 10-Q
        (Mark One)
        x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                                                                                                                                                                                

|For the quarterly period ended......................................................September 30, 2007       
|-------------------------------------------------------------------------------------------------------------
|                                                                                                             
|OR                                                                                                           
|                                                                                                             
|o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                  
|                                                                                                             
|For the transition period from...............................to..............................................
|                                                                                                             

|**Commission 
      File Number** | **Registrant, State of Incorporation
      Address and Telephone Number**                                                                                      | **IRS Employer
      Identification No.**
|--------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------
|                                  |                                                                                                                                                                |                                          
|                                 
|0-30512                           | CH Energy Group, Inc.
      (Incorporated in New York)
      284 South Avenue
      Poughkeepsie, New York 12601-4879
      (845) 452-2000                     | 14-1804460                               
|                                  |                                                                                                                                                                |                                          
|1-3268                            | Central Hudson Gas & Electric Corporation
      (Incorporated in New York)
      284 South Avenue
      Poughkeepsie, New York 12601-4879
      (845) 452-2000 | 14-0555980                               

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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**o**
        Indicate by check mark whether CH Energy Group, Inc. is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check One):

|                             |                        |                           
|---------------------------- | ---------------------- | --------------------------
|Large Accelerated Filer**x** | Accelerated Filer**o** | Non-Accelerated Filer**o**

|
|



|Indicate
        by check mark whether Central Hudson Gas & Electric Corporation is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
    and large accelerated filer in Rule 12b-2 of the Exchange Act (Check One):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                     

|Large Accelerated Filer**o** | Accelerated Filer**o** | Non-Accelerated Filer**x**
|---------------------------- | ---------------------- | --------------------------
|                             |                        |                           

|Indicate by check mark whether CH Energy Group, Inc. is a shell company (as defined in Rule 12b-2 of the Exchange Act):
        Yes**o**No**x**
        Indicate by check mark whether Central Hudson Gas & Electric Corporation is a shell company (as defined in Rule 12b-2 of the Exchange Act):
        Yes**o**No**x**
        As of the close of business on November 1, 2007, (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).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



|FORM 10-Q FOR THE QUARTER ENDED September 30, 2007
        INDEX
|----------------------------------------------------------------
|                                                                

|                                                       |  | **PART I - FINANCIAL INFORMATION**                                                               | **PAGE** | 
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------ | -------- | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  |                                                                                                 
|Item 1  Consolidated Financial Statements (Unaudited) |  |                                                                                                 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | CH ENERGY GROUP, INC                                                                             |          | 
|                                                       |  | Consolidated Statement of Income Three Months Ended September 30, 2007, and 2006                | 1        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Income Nine Months Ended September 30, 2007, and 2006                 | 2        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Comprehensive Income Three Months Ended September 30, 2007, and 2006  | 3        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Comprehensive Income 
 Nine Months Ended September 30, 2007, and 2006 | 3        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Balance Sheet  September 30, 2007,December 31, 2006, and September 30, 2006        | 4        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Cash Flows Nine Months Ended September 30, 2007, and 2006             | 6        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | CENTRAL HUDSON GAS & ELECTRIC CORPORATION                                                        |          | 
|                                                       |  | Consolidated Statement of Income Three Months Ended September 30, 2007, and 2006                | 7        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Income Nine Months Ended September 30, 2007, and 2006                 | 8        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Comprehensive Income Three Months Ended September 30, 2007, and 2006  | 9        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Comprehensive Income 
 Nine Months Ended September 30, 2007, and 2006 | 9        | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Balance Sheet  September 30, 2007,December 31, 2006, and September 30, 2006        | 10       | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Consolidated Statement of Cash Flows Nine Months Ended September 30, 2007, and 2006             | 12       | 
|                                                       |  |                                                                                                  |          | 
|                                                       |  | Notes to Consolidated Financial Statements (Unaudited)                                           | 13       | 

|
|



|INDEX
|-----
|     

|                                                                                                    | **PAGE** | 
|--------------------------------------------------------------------------------------------------- | -------- | 
|                                                                                                    |          | 
|ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
    AND RESULTS OF OPERATIONS | 37       | 
|                                                                                                    |          | 
|ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 64       | 
|                                                                                                    |          | 
|ITEM 4 - CONTROLS AND PROCEDURES                                                                    | 64       | 
|                                                                                                    |          | 
|PART II  OTHER INFORMATION                                                                         | 65       | 
|                                                                                                    |          | 
|ITEM 1 - LEGAL PROCEEDINGS                                                                          | 65       | 
|                                                                                                    |          | 
|ITEM 1A - RISK FACTORS                                                                              | 65       | 
|                                                                                                    |          | 
|ITEM 6 - EXHIBITS                                                                                   | 67       | 
|                                                                                                    |          | 
|SIGNATURES                                                                                          | 68       | 
|                                                                                                    |          | 
|EXHIBIT INDEX                                                                                       | 69       | 
|                                                                                                    |          | 
|CERTIFICATIONS                                                                                      | 72       | 

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

|
|



|PART I - FINANCIAL INFORMATION                                       
|---------------------------------------------------------------------
|                                                                     
|Item I - Consolidated Financial Statements                           
|                                                                     
|CH ENERGY GROUP, INC.CONSOLIDATED STATEMENT OF INCOME
    (UNAUDITED)
|                                                                     

|                                                                  |  | **For the 3 Months Ended
      September 30,** |        
|----------------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                                  |  | **2007**                                       |        
|                                                                  |  |                                                |        
|                                                                  |  | **(Thousands of Dollars)**                     |        
|Operating Revenues                                                |  |                                                |        
|Electric                                                          |  | $                                              | 167,949
|Natural gas                                                       |  |                                                | 21,622 
|Competitive business subsidiaries                                 |  |                                                | 70,545 
|                                                                  |  |                                                |        
|Total Operating Revenues                                          |  |                                                | 260,116
|                                                                  |  |                                                |        
|                                                                 
|Operating Expenses                                                |  |                                                |        
|Operation:                                                        |  |                                                |        
|Purchased electricity and fuel used in
       electric generation |  |                                                | 107,706
|Purchased natural gas                                             |  |                                                | 13,579 
|Purchased petroleum                                               |  |                                                | 54,247 
|Other expenses of operation - regulated activities                |  |                                                | 38,589 
|Other expenses of operation - competitive business subsidiaries   |  |                                                | 17,409 
|Depreciation and amortization                                     |  |                                                | 8,956  
|Taxes, other than income tax                                      |  |                                                | 8,990  
|                                                                  |  |                                                |        
|Total Operating Expenses                                          |  |                                                | 249,476
|                                                                  |  |                                                |        
|                                                                 
|Operating Income                                                  |  |                                                | 10,640 
|                                                                  |  |                                                |        
|                                                                 
|Other Income and Deductions                                       |  |                                                |        
|Income from unconsolidated affiliates                             |  |                                                | 171    
|Interest on regulatory assets and investment income               |  |                                                | 1,685  
|                                                                  |  |                                               
|Other - net                                                       |  |                                                |       
|                                                                  |  |                                                |        
|Total Other Income                                                |  |                                                | 1,856  
|                                                                  |  |                                                |        
|                                                                 
|Interest Charges                                                  | 
|Interest on long-term debt                                        |  |                                                | 4,616  
|Interest on regulatory liabilities and other interest             |  |                                                | 1,340  
|                                                                  |  |                                                |        
|Total Interest Charges                                            |  |                                                | 5,956  
|                                                                  |  |                                                |        
|                                                                 
|Income Before Income Taxes and Preferred Dividends of Subsidiary  |  |                                                | 6,540  
|                                                                 
|Income Taxes                                                      |  |                                                | 1,885  
|Minority Interest                                                 |  |                                                | 84     
|                                                                  |  |                                                |        
|Income Before Preferred Dividends of Subsidiary                   |  |                                                | 4,571  
|Cumulative Peferred Stock Dividends of Subsidiary                 |  |                                                | 242    
|                                                                  |  |                                                |        
|Net Income                                                        |  |                                                | 4,329  
|                                                                  |  |                                               
|Dividends Declared on Common Stock (Note 1)                       |  |                                                |       
|                                                                  |  |                                                |        
|                                                                 
|Balance Retained in the Business                                  |  | $                                              | 4,329  
|                                                                  |  |                                                |        
|                                                                 
|Common Stock:                                                     | 
|Average Shares Outstanding - Basic                                |  |                                                | 15,762 
|- Diluted                                                         |  |                                                | 15,785 
|                                                                  |  |                                               
|                                                                 
|Earnings Per Share - Basic                                        |  | $                                              | 0.27   
|- Diluted                                                         |  | $                                              | 0.27   
|                                                                 
|Dividends Declared Per Share (Note 1)                             |  | $                                              | 0.00   

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|1                                             



|PART I - FINANCIAL INFORMATION                                         
|-----------------------------------------------------------------------
|                                                                       
|Item I - Consolidated Financial Statements                             
|                                                                       
|CH ENERGY GROUP, INC.CONSOLIDATED STATEMENT OF INCOME
      (UNAUDITED)
|                                                                       

|                                                                 |  | **For the 9 Months Ended
      September 30,** |        
|---------------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                                 |  | **2007**                                       |        
|                                                                 |  |                                                |        
|                                                                 |  | **(Thousands of Dollars)**                     |        
|Operating Revenues                                               |  |                                                |        
|Electric                                                         |  | $                                              | 470,069
|Natural gas                                                      |  |                                                | 126,055
|Competitive business subsidiaries                                |  |                                                | 278,354
|                                                                 |  |                                                |        
|Total Operating Revenues                                         |  |                                                | 874,478
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Operating Expenses                                               |  |                                                |        
|Operation:                                                       |  |                                                |        
|Purchased electricity and fuel used in electric generation       |  |                                                | 298,974
|Purchased natural gas                                            |  |                                                | 84,841 
|Purchased petroleum                                              |  |                                                | 209,625
|Other expenses of operation - regulated activities               |  |                                                | 115,747
|Other expenses of operation - competitive business subsidiaries  |  |                                                | 53,958 
|Depreciation and amortization                                    |  |                                                | 27,086 
|Taxes, other than income tax                                     |  |                                                | 26,137 
|                                                                 |  |                                                |        
|Total Operating Expenses                                         |  |                                                | 816,368
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Operating Income                                                 |  |                                                | 58,110 
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Other Income and Deductions                                      |  |                                                |        
|Income from unconsolidated affiliates                            |  |                                                | 1,715  
|Interest on regulatory assets and investment income              |  |                                                | 6,079  
|Other - net                                                      |  |                                                | (1,018 
|                                                                 |  |                                                |        
|Total Other Income                                               |  |                                                | 6,776  
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Interest Charges                                                 |  |                                                |        
|Interest on long-term debt                                       |  |                                                | 13,603 
|Interest on regulatory liabilities and other interest            |  |                                                | 3,212  
|                                                                 |  |                                                |        
|Total Interest Charges                                           |  |                                                | 16,815 
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Income Before Income Taxes and Preferred Dividends of Subsidiary |  |                                                | 48,071 
|                                                                 |  |                                               
|                                                                
|Income Taxes                                                     |  |                                                | 16,141 
|Minority Interest                                                |  |                                                | (13    
|                                                                 |  |                                                |        
|                                                                
|Income Before Preferred Dividends of Subsidiary                  |  |                                                | 31,943 
|Cumulative Preferred Stock Dividends of Subsidiary               |  |                                                | 727    
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Net Income                                                       |  |                                                | 31,216 
|Dividends Declared on Common Stock (Note 1)                      |  |                                                | 17,023 
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Balance Retained in the Business                                 |  | $                                              | 14,193 
|                                                                 |  |                                                |        
|                                                                 |  |                                               
|                                                                
|Common Stock:                                                    |  |                                                |        
|Average Shares Outstanding - Basic                               |  |                                                | 15,762 
|- Diluted                                                        |  |                                                | 15,786 
|                                                                
|Earnings Per Share - Basic                                       |  | $                                              | 1.98   
|- Diluted                                                        |  | $                                              | 1.97   
|                                                                
|Dividends Declared Per Share (Note 1)                            |  | $                                              | 1.08   

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|2                                             



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

|                                                                     |  | **For the 3 Months Ended
      September 30,** |      
|-------------------------------------------------------------------- |  | ---------------------------------------------- | -----
|                                                                     |  | **2007**                                       |      
|                                                                     |  |                                                |      
|                                                                     |  | **(Thousands of Dollars)**                     |      
|                                                                    
|Net Income                                                           |  | $                                              | 4,329
|                                                                    
|Other Comprehensive Income:                                          | 
|                                                                    
|Net unrealized gains (losses) net of tax and net income realization: |  |                                                |      
|FAS 133 Designated Cash Flow Hedges - net of tax of $(57) and $118   |  |                                                | 86   
|Investments - net of tax of $(4) and $(139)                          |  |                                                | 6    
|                                                                     |  |                                                |      
|                                                                    
|Other comprehensive income                                           |  |                                                | 92   
|                                                                     |  |                                                |      
|                                                                    
|Comprehensive Income                                                 |  | $                                              | 4,421
|                                                                     |  |                                                |      
|                                                                     |  |                                                |      

|                                                                     |  | **For the 9 Months Ended
      September 30,** |       
|-------------------------------------------------------------------- |  | ---------------------------------------------- | ------
|                                                                     |  | **2007**                                       |       
|                                                                     |  |                                                |       
|                                                                     |  | **(Thousands of Dollars)**                     |       
|                                                                    
|Net Income                                                           |  | $                                              | 31,216
|                                                                    
|Other Comprehensive Income:                                          | 
|                                                                    
|Net unrealized gains (losses) net of tax and net income realization: |  |                                                |       
|FAS 133 Designated Cash Flow Hedges - net of tax of $(302) and $107  |  |                                                | 453   
|Investments - net of tax of $(401) and $(223)                        |  |                                                | 601   
|                                                                     |  |                                                |       
|                                                                    
|Other comprehensive income                                           |  |                                                | 1,054 
|                                                                     |  |                                                |       
|                                                                    
|Comprehensive Income                                                 |  | $                                              | 32,270
|                                                                     |  |                                                |       

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|3                                             



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

|**ASSETS**                                                                                                                                                        |  | **September 30,
      2007** |           | **December 31,
      2006** |   | **September 30,
      2006** | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | --------------------------- | - | ---------------------------- | 
|                                                                                                                                                                  |  |                              |           |                             |   |                              | 
|                                                                                                                                                                  |  | **(Thousands of Dollars)**   |          
|                                                                                                                                                                 
|Utility Plant                                                                                                                                                     |  |                              |           |                             |   |                              | 
|Electric                                                                                                                                                          |  | $                            | 798,503   |                             | $ | 768,808                      | 
|Natural gas                                                                                                                                                       |  |                              | 244,166   |                             |   | 239,317                      | 
|Common                                                                                                                                                            |  |                              | 115,343   |                             |   | 112,426                      | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                  |  |                              | 1,158,012 |                             |   | 1,120,551                    | 
|                                                                                                                                                                 
|Less: Accumulated depreciation                                                                                                                                    |  |                              | 353,867   |                             |   | 344,540                      | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                  |  |                              | 804,145   |                             |   | 776,011                      | 
|                                                                                                                                                                 
|Construction work in progress                                                                                                                                     |  |                              | 60,868    |                             |   | 51,041                       | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|Net Utility Plant                                                                                                                                                 |  |                              | 865,013   |                             |   | 827,052                      | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                 
|Other Property and Plant - net                                                                                                                                    |  |                              | 30,131    |                             |   | 33,822                       | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                 
|Current Assets                                                                                                                                                    |  |                              |           |                             |   |                              | 
|Cash and cash equivalents                                                                                                                                         |  |                              | 27,603    |                             |   | 24,121                       | 
|Short-term investments - available-for-sale securities                                                                                                            |  |                              | 20,250    |                             |   | 42,611                       | 
|Accounts receivable -
             net of allowance for doubtful accounts of
             $4.5 million, $5.8 million, and $5.2 million,
             respectively |  |                              | 101,907   |                             |   | 80,862                       | 
|Accrued unbilled utility revenues                                                                                                                                 |  |                              | 7,826     |                             |   | 9,772                        | 
|Other receivables                                                                                                                                                 |  |                              | 4,785     |                             |   | 7,706                        | 
|Fuel, materials and supplies                                                                                                                                      |  |                              | 38,170    |                             |   | 27,930                       | 
|Regulatory assets                                                                                                                                                 |  |                              | 38,332    |                             |   | 31,332                       | 
|                                                                                                                                                                  |  |                              |          
|Prepaid income taxes                                                                                                                                              |  |                              | 4,443     |                             |   | 11,244                       | 
|                                                                                                                                                                  |  |                              |          
|Fair value of derivative instruments                                                                                                                              |  |                              | 143       |                             |   |                             | 
|Special deposits and prepayments                                                                                                                                  |  |                              | 28,422    |                             |   | 23,655                       | 
|Accumulated deferred income tax                                                                                                                                   |  |                              | 6,011     |                             |   | 5,875                        | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|Total Current Assets                                                                                                                                              |  |                              | 277,892   |                             |   | 265,108                      | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                 
|Deferred Charges and Other Assets                                                                                                                                 |  |                              |           |                             |   |                              | 
|Regulatory assets - related to pension plan costs                                                                                                                 |  |                              | 88,147    |                             |   | 99,281                       | 
|                                                                                                                                                                  |  |                              |          
|Regulatory assets - related to other
              post-employment benefit (OPEB) costs                                                                           |  |                              | 30,394    |                             |   | 36,392                       | 
|Regulatory assets                                                                                                                                                 |  |                              | 84,520    |                             |   | 83,102                       | 
|                                                                                                                                                                  |  |                              |          
|Intangible asset - pension plan                                                                                                                                   |  |                              |          |                             |   |                             | 
|Goodwill                                                                                                                                                          |  |                              | 58,450    |                             |   | 52,828                       | 
|Other intangible assets - net                                                                                                                                     |  |                              | 34,508    |                             |   | 27,550                       | 
|Unamortized debt expense                                                                                                                                          |  |                              | 4,370     |                             |   | 4,041                        | 
|Investments in unconsolidated affiliates                                                                                                                          |  |                              | 12,676    |                             |   | 12,651                       | 
|Other                                                                                                                                                             |  |                              | 24,575    |                             |   | 18,705                       | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|Total Deferred Charges and Other Assets                                                                                                                           |  |                              | 337,640   |                             |   | 334,550                      | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                 
|Total Assets                                                                                                                                                      |  | $                            | 1,510,676 |                             | $ | 1,460,532                    | 
|                                                                                                                                                                  |  |                              |           |                             |   |                             
|                                                                                                                                                                  |  |                              |          

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|4                                             



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

|**CAPITALIZATION AND LIABILITIES**                                                                                                                 |  | **September 30,
    2007** |           | **December 31,
      2006** |   | **September 30,
      2006** |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------------------------- | -
|                                                                                                                                                   |  |                            |           |                             |   |                              |  
|                                                                                                                                                   |  | **(Thousands of Dollars)** |          
|                                                                                                                                                  
|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                        |  
|Paid-in capital                                                                                                                                    |  |                            | 351,230   |                             |   | 351,230                      |  
|Retained earnings                                                                                                                                  |  |                            | 221,248   |                             |   | 207,055                      |  
|Treasury stock (1,100,087 shares)                                                                                                                  |  |                            | (46,252   | )                           |   | (46,252                      | )
|Accumulated comprehensive income (loss)                                                                                                            |  |                            | 525       |                             |   | (529                         | )
|Capital stock expense                                                                                                                              |  |                            | (328      | )                           |   | (328                         | )
|                                                                                                                                                   |  |                            |           |                             |   |                             
|Total Common Shareholders Equity                                                                                                                  |  |                            | 528,109   |                             |   | 512,862                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                  
|Cumulative Preferred Stock                                                                                                                         |  |                            |           |                             |   |                              |  
|Not subject to mandatory redemption                                                                                                                |  |                            | 21,027    |                             |   | 21,027                       |  
|                                                                                                                                                  
|Long-term debt                                                                                                                                     |  |                            | 403,891   |                             |   | 337,889                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|Total Capitalization                                                                                                                               |  |                            | 953,027   |                             |   | 871,778                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                   |  |                            |          
|                                                                                                                                                  
|Current Liabilities                                                                                                                                |  |                            |           |                             |   |                              |  
|Current maturities of long-term debt                                                                                                               |  |                            |          |                             |   | 33,000                       |  
|Notes payable                                                                                                                                      |  |                            | 36,000    |                             |   | 13,000                       |  
|Accounts payable                                                                                                                                   |  |                            | 38,480    |                             |   | 41,840                       |  
|Accrued interest                                                                                                                                   |  |                            | 3,432     |                             |   | 5,645                        |  
|Dividends payable                                                                                                                                  |  |                            | 242       |                             |   | 8,754                        |  
|Accrued vacation and payroll                                                                                                                       |  |                            | 6,586     |                             |   | 5,963                        |  
|Customer advances                                                                                                                                  |  |                            | 22,785    |                             |   | 25,732                       |  
|Customer deposits                                                                                                                                  |  |                            | 8,065     |                             |   | 7,954                        |  
|                                                                                                                                                   |  |                            |          
|Regulatory liabilities                                                                                                                             |  |                            | 12,226    |                             |   | 21,651                       |  
|Fair value of derivative instruments                                                                                                               |  |                            | 7,284     |                             |   | 3,582                        |  
|                                                                                                                                                   |  |                            |          
|Accrued environmental remediation costs                                                                                                            |  |                            | 2,562     |                             |   | 3,400                        |  
|                                                                                                                                                   |  |                            |          
|Accrued income taxes                                                                                                                               |  |                            |          |                             |   |                             |  
|Deferred revenues                                                                                                                                  |  |                            | 5,724     |                             |   | 5,455                        |  
|Other                                                                                                                                              |  |                            | 15,052    |                             |   | 14,112                       |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|Total Current Liabilities                                                                                                                          |  |                            | 158,438   |                             |   | 190,088                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                  
|Deferred Credits and Other Liabilities                                                                                                             |  |                            |           |                             |   |                              |  
|Regulatory liabilities                                                                                                                             |  |                            | 105,382   |                             |   | 107,796                      |  
|Operating reserves                                                                                                                                 |  |                            | 5,219     |                             |   | 4,906                        |  
|Accrued environmental remediation costs                                                                                                            |  |                            | 15,542    |                             |   | 17,354                       |  
|Accrued OPEB costs                                                                                                                                 |  |                            | 70,217    |                             |   | 68,818                       |  
|Accrued pension costs                                                                                                                              |  |                            | 43,823    |                             |   | 47,299                       |  
|Other                                                                                                                                              |  |                            | 13,808    |                             |   | 12,566                       |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|Total Deferred Credits and Other Liabilities                                                                                                       |  |                            | 253,991   |                             |   | 258,739                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                  
|Minority Interest                                                                                                                                  |  |                            | 1,454     |                             |   | 1,481                        |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                  
|Accumulated Deferred Income Tax                                                                                                                    |  |                            | 143,766   |                             |   | 138,446                      |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|Commitments and Contingencies (Note 11)                                                                                                           
|                                                                                                                                                  
|**Total Capitalization and Liabilities**                                                                                                           |  | $                          | 1,510,676 |                             | $ | 1,460,532                    |  
|                                                                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                                                                   |  |                            |          

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|5                                             



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

|                                                                                                     |  | **For the 9 Months Ended
      September 30,** |        
|---------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                                                                     |  | **2007**                                       |        
|                                                                                                     |  |                                                |        
|**Operating Activities:**                                                                            |  | **(Thousands of Dollars)**                     |        
|                                                                                                    
|Net Income                                                                                           |  | $                                              | 31,216 
|                                                                                                    
|Adjustments to reconcile net income to net cash
                  provided by operating activities:  |  |                                                |        
|Depreciation and amortization                                                                        |  |                                                | 27,085 
|Deferred income taxes - net                                                                          |  |                                                | 5,369  
|Provision for uncollectibles                                                                         |  |                                                | 3,989  
|Undistributed equity in earnings of unconsolidated affiliates                                        |  |                                                | (225   
|Pension expense                                                                                      |  |                                                | 9,760  
|OPEB expense                                                                                         |  |                                                | 7,761  
|Regulatory liability - rate moderation                                                               |  |                                                | (15,426
|Minority interest                                                                                    |  |                                                | (13    
|Gain on sale of property and plant                                                                   |  |                                                | (627   
|                                                                                                     |  |                                               
|                                                                                                    
|Changes in operating assets and liabilities - net of business
                         acquisitions: |  |                                                |        
|Accounts receivable, unbilled revenues and other receivables                                         |  |                                                | (20,167
|Fuel, materials and supplies                                                                         |  |                                                | (8,809 
|Special deposits and prepayments                                                                     |  |                                                | (4,767 
|Prepaid income taxes                                                                                 |  |                                                | 6,801  
|Pension plan contribution                                                                            |  |                                                | (5,800 
|OPEB contribution                                                                                    |  |                                                | (4,747 
|Accounts payable                                                                                     |  |                                                | (1,749 
|Accrued taxes and interest                                                                           |  |                                                | (2,213 
|Customer advances                                                                                    |  |                                                | (2,947 
|Regulatory liability - MGP site remediations                                                         |  |                                                | (4,805 
|Deferred natural gas and electric costs                                                              |  |                                                | (598   
|Customer benefit fund                                                                                |  |                                                |       
|Other - net                                                                                          |  |                                                | 11,668 
|                                                                                                     |  |                                                |        
|                                                                                                     |  |                                               
|                                                                                                    
|**Net Cash Provided by Operating Activities**                                                        |  |                                                | 30,756 
|                                                                                                     |  |                                                |        
|                                                                                                    
|**Investing Activities:**                                                                            | 
|                                                                                                    
|Purchase of short-term investments                                                                   |  |                                                | (54,451
|Proceeds from sale of short-term investments                                                         |  |                                                | 76,812 
|Proceeds from sale of property and plant                                                             |  |                                                | 4,574  
|Additions to utility plant and other property and plant                                              |  |                                                | (61,599
|Issuance of notes receivable                                                                         |  |                                                | (3,993 
|Proceeds from repayment of notes receivable                                                          |  |                                                |       
|Acquisitions made by competitive business subsidiaries                                               |  |                                                | (17,705
|Other - net                                                                                          |  |                                                | (779   
|                                                                                                     |  |                                                |        
|                                                                                                    
|**Net Cash Used in Investing Activities**                                                            |  |                                                | (57,141
|                                                                                                     |  |                                                |        
|                                                                                                    
|**Financing Activities:**                                                                            |  |                                                |        
|                                                                                                    
|Redemption of long-term debt                                                                         |  |                                                | (33,000
|Proceeds from issuance of long-term debt                                                             |  |                                                | 66,000 
|Net borrowings of short-term debt                                                                    |  |                                                | 23,000 
|Dividends paid on common stock                                                                       |  |                                                | (25,535
|Debt issuance costs                                                                                  |  |                                                | (598   
|                                                                                                     |  |                                                |        
|                                                                                                    
|**Net Cash Provided by (Used in) Financing Activities**                                              |  |                                                | 29,867 
|                                                                                                     |  |                                                |        
|                                                                                                     |  |                                               
|**Net Change in Cash and Cash Equivalents**                                                          |  |                                                | 3,482  
|                                                                                                    
|**Cash and Cash Equivalents - Beginning of Year**                                                    |  |                                                | 24,121 
|                                                                                                     |  |                                                |        
|                                                                                                    
|**Cash and Cash Equivalents - End of Period**                                                        |  | $                                              | 27,603 
|                                                                                                     |  |                                                |        
|                                                                                                    
|Supplemental Disclosure of Cash Flow Information and Non-Cash 
    Investing Activities              |  |                                                |        
|                                                                                                    
|Interest paid                                                                                        |  | $                                              | 17,442 
|                                                                                                    
|Federal and state income tax paid                                                                    |  | $                                              | 24,818 
|                                                                                                    
|Additions to plant included in accounts payable                                                      |  | $                                              | 2,599  

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|6                                             



|CENTRAL HUDSON GAS & ELECTRIC CORPORATIONCONSOLIDATED STATEMENT OF INCOME
    (UNAUDITED)
|-----------------------------------------------------------------------------------------
|                                                                                         

|                                                           |  | **For the 3 Months Ended
      September 30,** |        
|---------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                           |  | **2007**                                       |        
|                                                           |  |                                                |        
|                                                           |  | **(Thousands of Dollars)**                     |        
|Operating Revenues                                         |  |                                                |        
|Electric                                                   |  | $                                              | 167,949
|Natural gas                                                |  |                                                | 21,622 
|                                                           |  |                                                |        
|Total Operating Revenues                                   |  |                                                | 189,571
|                                                           |  |                                                |        
|                                                          
|Operating Expenses                                         |  |                                                |        
|Operation:                                                 |  |                                                |        
|Purchased electricity and fuel used in electric generation |  |                                                | 106,255
|Purchased natural gas                                      |  |                                                | 13,579 
|Other expenses of operation                                |  |                                                | 38,589 
|Depreciation and amortization                              |  |                                                | 7,083  
|Taxes, other than income tax                               |  |                                                | 8,864  
|                                                           |  |                                                |        
|Total Operating Expenses                                   |  |                                                | 174,370
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Operating Income                                           |  |                                                | 15,201 
|                                                           |  |                                                |        
|                                                           |  |                                               
|Other Income and Deductions                                | 
|Interest on regulatory assets and other interest income    |  |                                                | 1,002  
|Other - net                                                |  |                                                | 18     
|                                                           |  |                                                |        
|Total Other Income                                         |  |                                                | 1,020  
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Interest Charges                                           | 
|Interest on long-term debt                                 |  |                                                | 4,616  
|Interest on regulatory liabilities and other interest      |  |                                                | 1,339  
|                                                           |  |                                                |        
|Total Interest Charges                                     |  |                                                | 5,955  
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Income Before Income Taxes                                 |  |                                                | 10,266 
|                                                           |  |                                               
|                                                          
|Income Taxes                                               |  |                                                | 4,161  
|                                                           |  |                                                |        
|                                                           |  |                                               
|Net Income                                                 |  |                                                | 6,105  
|                                                           |  |                                               
|                                                          
|Dividends Declared on Cumulative Preferred Stock           |  |                                                | 242    
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Income Available for Common Stock                          |  | $                                              | 5,863  
|                                                           |  |                                                |        

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|7                                             



|CENTRAL HUDSON GAS & ELECTRIC CORPORATIONCONSOLIDATED STATEMENT OF INCOME
    (UNAUDITED)
|-----------------------------------------------------------------------------------------
|                                                                                         

|                                                           |  | **For the 9 Months Ended
      September 30,** |        
|---------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                           |  | **2007**                                       |        
|                                                           |  |                                                |        
|                                                           |  | **(Thousands of Dollars)**                     |        
|Operating Revenues                                         |  |                                                |        
|Electric                                                   |  | $                                              | 470,069
|Natural gas                                                |  |                                                | 126,055
|                                                           |  |                                                |        
|Total Operating Revenues                                   |  |                                                | 596,124
|                                                           |  |                                                |        
|                                                          
|Operating Expenses                                         |  |                                                |        
|Operation:                                                 |  |                                                |        
|Purchased electricity and fuel used in electric generation |  |                                                | 295,268
|Purchased natural gas                                      |  |                                                | 84,841 
|Other expenses of operation                                |  |                                                | 115,747
|Depreciation and amortization                              |  |                                                | 21,513 
|Taxes, other than income tax                               |  |                                                | 25,720 
|                                                           |  |                                                |        
|Total Operating Expenses                                   |  |                                                | 543,089
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Operating Income                                           |  |                                                | 53,035 
|                                                           |  |                                                |        
|                                                          
|Other Income and Deductions                                | 
|Interest on regulatory assets and other interest income    |  |                                                | 4,090  
|Other - net                                                |  |                                                | (541   
|                                                           |  |                                                |        
|Total Other Income                                         |  |                                                | 3,549  
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Interest Charges                                           |  |                                                |        
|Interest on long-term debt                                 |  |                                                | 13,603 
|Interest on regulatory liabilities and other interest      |  |                                                | 3,211  
|                                                           |  |                                                |        
|Total Interest Charges                                     |  |                                                | 16,814 
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Income Before Income Taxes                                 |  |                                                | 39,770 
|                                                           |  |                                               
|                                                          
|Income Taxes                                               |  |                                                | 15,032 
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Net Income                                                 |  |                                                | 24,738 
|                                                           |  |                                               
|                                                          
|Dividends Declared on Cumulative Preferred Stock           |  |                                                | 727    
|                                                           |  |                                                |        
|                                                           |  |                                               
|                                                          
|Income Available for Common Stock                          |  | $                                              | 24,011 
|                                                           |  |                                                |        
|                                                           |  |                                               

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|8                                             



|CENTRAL HUDSON GAS & ELECTRIC CORPORATIONCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    (UNAUDITED)
|-------------------------------------------------------------------------------------------------------
|                                                                                                       

|                           |  | **For the 3 Months Ended
      September 30,** |      
|-------------------------- |  | ---------------------------------------------- | -----
|                           |  | **2007**                                       |      
|                           |  |                                                |      
|                           |  | **(Thousands of Dollars)**                     |      
|                          
|Net Income                 |  | $                                              | 6,105
|                          
|Other Comprehensive Income |  |                                                |     
|                           |  |                                                |      
|Comprehensive Income       |  | $                                              | 6,105
|                           |  |                                                |      
|                           |  |                                                |      

|                           |  | **For the 9 Months Ended
      September 30,** |       
|-------------------------- |  | ---------------------------------------------- | ------
|                           |  | **2007**                                       |       
|                           |  |                                                |       
|                           |  | **(Thousands of Dollars)**                     |       
|
|Net Income                 |  | $                                              | 24,738
|                          
|Other Comprehensive Income |  |                                                |      
|                           |  |                                                |       
|Comprehensive Income       |  | $                                              | 24,738
|                           |  |                                                |       

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|9                                             



|CENTRAL HUDSON GAS & ELECTRIC CORPORATIONCONSOLIDATED BALANCE SHEET
    (UNAUDITED)
|-----------------------------------------------------------------------------------
|                                                                                   

|**ASSETS**                                                                                                                                           |  | **September 30,
    2007** |           | **December 31,
      2006** |   | **September 30,
      2006** | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------------------------- | 
|                                                                                                                                                     |  |                            |           |                             |   |                              | 
|                                                                                                                                                     |  | **(Thousands of Dollars)** |          
|                                                                                                                                                    
|Utility Plant                                                                                                                                        |  |                            |           |                             |   |                              | 
|Electric                                                                                                                                             |  | $                          | 798,503   |                             | $ | 768,808                      | 
|Natural gas                                                                                                                                          |  |                            | 244,166   |                             |   | 239,317                      | 
|Common                                                                                                                                               |  |                            | 115,343   |                             |   | 112,426                      | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                     |  |                            | 1,158,012 |                             |   | 1,120,551                    | 
|                                                                                                                                                    
|Less: Accumulated depreciation                                                                                                                       |  |                            | 353,867   |                             |   | 344,540                      | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                     |  |                            | 804,145   |                             |   | 776,011                      | 
|                                                                                                                                                    
|Construction work in progress                                                                                                                        |  |                            | 60,868    |                             |   | 51,041                       | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|Net Utility Plant                                                                                                                                    |  |                            | 865,013   |                             |   | 827,052                      | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                    
|Other Property and Plant - net                                                                                                                       |  |                            | 416       |                             |   | 434                          | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                    
|Current Assets                                                                                                                                       |  |                            |           |                             |   |                              | 
|Cash and cash equivalents                                                                                                                            |  |                            | 2,497     |                             |   | 1,710                        | 
|Accounts receivable -
             net of allowance for doubtful accounts of $2.7 million,
             $3.8 million, and $3.8 million, respectively |  |                            | 70,438    |                             |   | 48,611                       | 
|Accrued unbilled utility revenues                                                                                                                    |  |                            | 7,826     |                             |   | 9,772                        | 
|Other receivables                                                                                                                                    |  |                            | 1,654     |                             |   | 3,034                        | 
|Fuel, materials and supplies - at average cost                                                                                                       |  |                            | 31,173    |                             |   | 22,804                       | 
|Regulatory assets                                                                                                                                    |  |                            | 38,332    |                             |   | 31,332                       | 
|                                                                                                                                                     |  |                            |          
|Prepaid income taxes                                                                                                                                 |  |                            | 3,508     |                             |   | 10,477                       | 
|Special deposits and prepayments                                                                                                                     |  |                            | 22,365    |                             |   | 21,009                       | 
|Accumulated deferred income tax                                                                                                                      |  |                            | 5,064     |                             |   | 4,600                        | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|Total Current Assets                                                                                                                                 |  |                            | 182,857   |                             |   | 153,349                      | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                    
|Deferred Charges and Other Assets                                                                                                                    | 
|Regulatory assets - related to pension plan costs                                                                                                    |  |                            | 88,147    |                             |   | 99,281                       | 
|                                                                                                                                                     |  |                            |          
|Regulatory assets - related to OPEB costs                                                                                                            |  |                            | 30,394    |                             |   | 36,392                       | 
|Regulatory assets                                                                                                                                    |  |                            | 84,520    |                             |   | 83,102                       | 
|                                                                                                                                                     |  |                            |          
|Intangible asset - pension plan                                                                                                                      |  |                            |          |                             |   |                             | 
|Unamortized debt expense                                                                                                                             |  |                            | 4,370     |                             |   | 4,041                        | 
|Other                                                                                                                                                |  |                            | 12,465    |                             |   | 12,172                       | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|Total Deferred Charges and Other Assets                                                                                                              |  |                            | 219,896   |                             |   | 234,988                      | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                    
|**Total Assets**                                                                                                                                     |  | $                          | 1,268,182 |                             | $ | 1,215,823                    | 
|                                                                                                                                                     |  |                            |           |                             |   |                             
|                                                                                                                                                     |  |                            |          

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|10                                            



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

|**CAPITALIZATION AND LIABILITIES**                                                                 |  | **September 30,
    2007** |           | **December 31,
      2006** |   | **September 30,
      2006** |  
|-------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------------------------- | -
|                                                                                                   |  |                            |           |                             |   |                              |  
|                                                                                                   |  | **(Thousands of Dollars)** |          
|Capitalization                                                                                     |  |                            |           |                             |   |                              |  
|Common Stock Equity:                                                                               | 
|Common stock, 30,000,000 shares authorized;
               16,862,087 shares issued ($5 par value) |  | $                          | 84,311    |                             | $ | 84,311                       |  
|Paid-in capital                                                                                    |  |                            | 174,980   |                             |   | 174,980                      |  
|Retained earnings                                                                                  |  |                            | 84,221    |                             |   | 68,710                       |  
|Capital stock expense                                                                              |  |                            | (4,961    | )                           |   | (4,961                       | )
|                                                                                                   |  |                            |           |                             |   |                             
|Total Common Shareholders Equity                                                                  |  |                            | 338,551   |                             |   | 323,040                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                  
|Cumulative Preferred Stock
                 Not subject to mandatory redemption                    |  |                            | 21,027    |                             |   | 21,027                       |  
|                                                                                                  
|Long-term debt                                                                                     |  |                            | 403,891   |                             |   | 337,889                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|Total Capitalization                                                                               |  |                            | 763,469   |                             |   | 681,956                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                  
|Current Liabilities                                                                                |  |                            |           |                             |   |                              |  
|                                                                                                   |  |                            |          
|Current maturities of long-term debt                                                               |  |                            |          |                             |   | 33,000                       |  
|Notes payable                                                                                      |  |                            | 36,000    |                             |   | 13,000                       |  
|Accounts payable                                                                                   |  |                            | 27,936    |                             |   | 32,418                       |  
|Accrued interest                                                                                   |  |                            | 3,432     |                             |   | 5,645                        |  
|Dividends payable - preferred stock                                                                |  |                            | 242       |                             |   | 242                          |  
|Accrued vacation and payroll                                                                       |  |                            | 5,005     |                             |   | 4,682                        |  
|Customer advances                                                                                  |  |                            | 8,684     |                             |   | 15,907                       |  
|Customer deposits                                                                                  |  |                            | 7,943     |                             |   | 7,811                        |  
|Regulatory liabilities                                                                             |  |                            | 12,226    |                             |   | 21,651                       |  
|Fair value of derivative instruments                                                               |  |                            | 7,284     |                             |   | 2,971                        |  
|                                                                                                   |  |                            |          
|Accrued income taxes                                                                               |  |                            |          |                             |   |                             |  
|Accrued environmental remediation costs                                                            |  |                            | 2,304     |                             |   | 3,400                        |  
|Other                                                                                              |  |                            | 9,639     |                             |   | 8,884                        |  
|                                                                                                   |  |                            |           |                             |   |                             
|Total Current Liabilities                                                                          |  |                            | 120,695   |                             |   | 149,611                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                  
|Deferred Credits and Other Liabilities                                                             |  |                            |           |                             |   |                              |  
|Regulatory liabilities                                                                             |  |                            | 105,382   |                             |   | 107,796                      |  
|Operating reserves                                                                                 |  |                            | 4,171     |                             |   | 3,936                        |  
|Accrued environmental remediation costs                                                            |  |                            | 14,161    |                             |   | 15,457                       |  
|Accrued OPEB costs                                                                                 |  |                            | 70,217    |                             |   | 68,818                       |  
|Accrued pension costs                                                                              |  |                            | 43,823    |                             |   | 47,299                       |  
|Other                                                                                              |  |                            | 13,139    |                             |   | 11,802                       |  
|                                                                                                   |  |                            |           |                             |   |                             
|Total Deferred Credits and Other Liabilities                                                       |  |                            | 250,893   |                             |   | 255,108                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                  
|Accumulated Deferred Income Tax                                                                    |  |                            | 133,125   |                             |   | 129,148                      |  
|                                                                                                   |  |                            |           |                             |   |                             
|                                                                                                  
|Commitments and Contingencies (Note 11)                                                            |  |                            |           |                             |   |                              |  
|                                                                                                  
|**Total Capitalization and Liabilities**                                                           |  | $                          | 1,268,182 |                             | $ | 1,215,823                    |  
|                                                                                                   |  |                            |           |                             |   |                             

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|11                                            



|CENTRAL HUDSON GAS & ELECTRIC CORPORATIONCONSOLIDATED STATEMENT OF CASH FLOWS
    (UNAUDITED)
|---------------------------------------------------------------------------------------------
|                                                                                             

|                                                                                                    |  | **For the 9 Months Ended
      September 30,** |        
|--------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | -------
|                                                                                                    |  | **2007**                                       |        
|                                                                                                    |  |                                                |        
|**Operating Activities:**                                                                           |  | **(Thousands of Dollars)**                     |        
|                                                                                                   
|Net Income                                                                                          |  | $                                              | 24,738 
|Adjustments to reconcile net income to net cash
                  provided by operating activities: |  |                                                |        
|Depreciation and amortization                                                                       |  |                                                | 21,513 
|Deferred income taxes - net                                                                         |  |                                                | 4,401  
|Provision for uncollectibles                                                                        |  |                                                | 3,316  
|Pension expense                                                                                     |  |                                                | 9,760  
|OPEB expense                                                                                        |  |                                                | 7,761  
|Regulatory liability - rate moderation                                                              |  |                                                | (15,426
|Gain on sale of property and plant                                                                  |  |                                                | (468   
|                                                                                                    |  |                                               
|                                                                                                   
|Changes in operating assets and liabilities - net:                                                  |  |                                                |        
|Accounts receivable, unbilled revenues and other receivables                                        |  |                                                | (21,817
|Fuel, materials and supplies                                                                        |  |                                                | (8,369 
|Special deposits and prepayments                                                                    |  |                                                | (1,356 
|Prepaid income tax                                                                                  |  |                                                | 6,969  
|Pension plan contribution                                                                           |  |                                                | (5,800 
|OPEB contribution                                                                                   |  |                                                | (4,747 
|Accounts payable                                                                                    |  |                                                | (2,871 
|Accrued taxes and interest                                                                          |  |                                                | (2,213 
|Customer advances                                                                                   |  |                                                | (7,223 
|Regulatory liability - MGP site remediations                                                        |  |                                                | (4,805 
|Deferred natural gas and electric costs                                                             |  |                                                | (598   
|Customer benefit fund                                                                               |  |                                                |       
|Other - net                                                                                         |  |                                                | 11,353 
|                                                                                                    |  |                                                |        
|                                                                                                    |  |                                               
|                                                                                                   
|**Net Cash Provided by Operating Activities**                                                       |  |                                                | 14,118 
|                                                                                                    |  |                                                |        
|                                                                                                    |  |                                               
|                                                                                                   
|**Investing Activities:**                                                                           |  |                                                |        
|                                                                                                   
|Proceeds from sale of property and plant                                                            |  |                                                | 862    
|Additions to utility plant                                                                          |  |                                                | (59,827
|Other - net                                                                                         |  |                                                | (541   
|                                                                                                    |  |                                                |        
|                                                                                                    |  |                                               
|                                                                                                   
|**Net Cash Used in Investing Activities**                                                           |  |                                                | (59,506
|                                                                                                    |  |                                                |        
|                                                                                                   
|**Financing Activities:**                                                                           |  |                                                |        
|                                                                                                   
|Redemption of long-term debt                                                                        |  |                                                | (33,000
|Proceeds from issuance of long-term debt                                                            |  |                                                | 66,000 
|Net borrowings of short-term debt                                                                   |  |                                                | 23,000 
|Dividends paid on cumulative preferred stock                                                        |  |                                                | (727   
|Dividends paid to parent - CH Energy Group                                                          |  |                                                | (8,500 
|Debt issuance costs                                                                                 |  |                                                | (598   
|                                                                                                    |  |                                                |        
|                                                                                                    |  |                                               
|                                                                                                   
|**Net Cash Provided by (Used In) Financing Activities**                                             |  |                                                | 46,175 
|                                                                                                    |  |                                                |        
|                                                                                                   
|**Net Change in Cash and Cash Equivalents**                                                         |  |                                                | 787    
|                                                                                                   
|**Cash and Cash Equivalents - Beginning of Year**                                                   |  |                                                | 1,710  
|                                                                                                    |  |                                                |        
|                                                                                                   
|**Cash and Cash Equivalents - End of Period**                                                       |  | $                                              | 2,497  
|                                                                                                    |  |                                                |        
|                                                                                                   
|Supplemental Disclosure of Cash Flow Information and Non-Cash Investing Activities                  |  |                                                |        
|Interest paid                                                                                       |  | $                                              | 17,442 
|                                                                                                    |  |                                               
|Federal and state income tax paid                                                                   |  | $                                              | 12,322 
|                                                                                                    |  |                                               
|Additions to plant included in accounts payable                                                     |  | $                                              | 2,599  
|                                                                                                    |  |                                               

|                                              
|----------------------------------------------
|See Notes to Consolidated Financial Statements
|12                                            



|CH ENERGY GROUP, INC.
        CENTRAL HUDSON GAS & ELECTRIC CORPORATIONNotes to Consolidated Financial Statements (Unaudited)
        NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        Basis of Presentation
        This Quarterly Report on Form 10-Q is a combined report of CH Energy Group, Inc. (CH 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 CH Energy Group and Central Hudson. CH Energy Groups Consolidated Financial Statements include the accounts of CH Energy Group and its wholly owned subsidiaries, which include Central Hudson and CH Energy Groups non-utility subsidiary,
Central Hudson Enterprises Corporation (CHEC). Operating results of CHECs wholly owned subsidiary Griffith Energy Services, Inc. (Griffith) and CHECs Lyonsdale Biomass, LLC (Lyonsdale) subsidiary are consolidated in the financial statements of CH Energy Group.
The minority interest shown on CH Energy Groups Consolidated Financial Statements represents the minority owners proportionate share of the income and equity of Lyonsdale.
        Unaudited Consolidated Financial Statements
        The accompanying Consolidated Financial Statements of CH 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 CH Energy Group/Central Hudson Annual Report on
Form 10-K for the year ended December 31, 2006 (the Corporations 10-K Annual Report).
        CH Energy Groups and Central Hudsons balance sheets as of September 30, 2006,
are not required to be included in this Quarterly Report on Form 10-Q; however, these balance sheets are included for supplemental analysis purposes.
        Cash and Cash Equivalents
        For purposes of the Consolidated Statement of Cash Flows, CH Energy Group and Central Hudson
consider temporary cash investments with a maturity (when purchased) of three months or less, to be cash equivalents.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13
|--



|Accounting for Derivative Instruments and Hedging Activities
        Central Hudson
        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 September 30, 2007, the total fair value of open Central Hudson derivatives, which hedge electric and natural gas commodity purchases,
was an unrealized loss of ($7.3) million. This compares to a fair value at December 31, 2006, of ($3.0) million, and a fair value of ($6.4) million at September 30, 2006, both net unrealized losses. At September 30, 2007, Central Hudson had open derivative contracts hedging approximately 32.8%
of its projected electricity requirements for the period October 2007 through December 2007 and 38.0% of its projected natural gas requirements for the period November 2007 through March 2008. Central Hudson recorded actual net losses of ($7.0) million on such hedging activities for the quarter ended
September 30, 2007, as compared to a net loss of ($1.3) million for the same period in 2006. Comparative amounts for the nine months ended September 30, 2007, and 2006, were net losses of ($11.7) million and ($7.0) million, 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 return to or 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, titled Accounting for the Effects of Certain Types of Regulation(SFAS 71).
Central Hudson also entered into weather derivative contracts to hedge the effect of weather on sales of electricity and natural gas. The periods covered were the months of February and March of the heating season ended March 31, 2007, the three
months of the heating season ended March 31, 2006, the three months of the cooling season ended August 31, 2007, and the months of July and August 2006. Central Hudson made no settlement payments to or received payments from counter-parties
during the nine months ended September 30, 2007. Settlement payments to counter-parties during the nine months ended September 30, 2006 were $0.5 million.Griffith
        The fair value of Griffiths
open derivative positions at September 30, 2007, and 2006, was not material. The fair value of derivative instruments at December 31, 2006, was a net unrealized loss of ($0.6) million. Derivatives outstanding at September 30, 2007,
include call options designated as cash flow hedges for fuel oil purchases from October 2007 through June 2008, which hedge approximately 5.8% of Griffiths total projected fuel oil requirements for this period. The call options are
used only for those customers who seek capped prices. Settlement amounts recorded for the quarter ended September 30, 2007 were not material. Settlement amounts for the quarter ended September 30, 2006 were ($0.6) million. A total actual net loss including
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14
|--



|premium expense was recorded during the nine months ended September 30, 2007, in the amount of ($0.7) million. A net loss of ($0.6) million was recorded during the same period in 2006.
        Griffith entered into weather derivative contracts for
selected months of the heating season ended March 31, 2007, and due to weather that was colder than the contractual ceiling price paid $0.9 million to the related counter-party. The settlement amount for the weather-hedging contract covering the three-month period ended March 31, 2006, was not material.
        Parental Guarantees
        CH Energy Group and CHEC 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. Reference is made to Note 1  Summary of Significant
Accounting Policies to the Consolidated Financial Statements of the Corporations 10-K Annual Report under the captions Parental Guarantees and Product Warranties.
        The guarantees described above have been issued
to counter-parties to assure the payment, when due, of certain obligations incurred by CH Energy Group subsidiaries in physical and financial transactions related to heating oil, propane, other petroleum products, and weather and commodity hedges.
At September 30, 2007, the aggregate amount of subsidiary obligations covered by these guarantees was $7.3 million. Where liabilities exist under the commodity-related contracts subject to these guarantees, these liabilities are included in CH Energy Groups Consolidated Balance Sheet.
        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 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, titled 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
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15
|--



|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 accordance with SFAS 143, Central Hudson has classified $47.2 million, $44.6 million, and $44.1 million of net cost of removal as regulatory liabilities as of September 30, 2007, December 31, 2006, and September 30, 2006, respectively. For further information,
see Note 1  Summary of Significant Accounting Policies under the caption Depreciation and Amortization to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
        For financial statement purposes, both Griffith and Lyonsdale
have depreciation provisions that 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 Griffith was $19.7 million,
$17.3 million, and $16.7 million as of September 30, 2007, December 31, 2006, and September 30, 2006, respectively. Accumulated depreciation for Lyonsdale was $1.1 million, $0.6 million and $0.4 million as of September 30, 2007, and December 31, 2006,
and September 30, 2006, respectively.
        Amortization of intangibles (other than goodwill)
is computed on the straight-line method over an assets expected useful life. See Note 5  Goodwill and Other Intangible Assets for further discussion.
        Earnings Per Share
        Reference is made to Note 1  Summary
of Significant Accounting Policies to the Consolidated Financial Statements of the Corporations 10-K Annual Report under the caption Earnings Per Share.
        In the calculation of earnings per share
(basic and diluted) of CH Energy Groups common stock (Common Stock), earnings for CH Energy Group are reduced by the preferred stock dividends of Central Hudson. The average dilutive effect of CH Energy Groups stock options
and performance shares was 23,097 shares and 15,473 shares for the quarters ended September 30, 2007, and 2006, and 23,473 shares and 14,455 shares for the nine months ended September 30, 2007, and 2006, 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 some of the periods presented. Excluded from the
calculation were options for 18,420 shares for the three-month and nine-month periods ended September 30, 2007, and 35,700 shares for the three-month and nine-month periods ended September 30, 2006. For additional information regarding
stock options and performance shares, see Note 10  Equity-Based Compensation Incentive Plans.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--



|Equity-Based Compensation
        CH Energy Group has an equity-based employee compensation plan that is
described in Note 10  Equity-Based Compensation Incentive Plans.
        FASB Interpretation Number (FIN) 46R  Consolidation of Variable Interest Entities
        Reference is made to the caption FIN 46  Consolidation of Variable Interest Entities of Note 1  Summary of Significant Accounting
Policies to the Consolidated Financial Statements of the Corporations 10-K Annual Report. CH 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.
        Income Tax
        On April 9, 2007, New York State enacted its 2007  2008 budget, which included amendments to the state income tax. Those amendments included a reduction in the
Corporate Net Income Tax Rate to 7.1% from 7.5%, as well as the adoption of a single sales factor for apportioning taxable income to New York State. Both amendments are effective January 1, 2007, and are not material to CH Energy Group and Central Hudson.
        Reclassification
        Certain amounts in the 2006 Consolidated Financial Statements have been reclassified to conform to the 2007 presentation.
        Common Stock Dividends
        On March 30, 2007, the Board of Directors of CH Energy Group declared a quarterly dividend of $0.54 per share, payable May 1, 2007, to shareholders of record as of April 10, 2007. On May 24, 2007, the Board
of Directors of CH Energy Group declared a quarterly dividend of $0.54 per share, payable August 1, 2007, to shareholders of record as of July 10, 2007. On October 2, 2007, the Board of Directors of CH Energy Group declared a quarterly dividend of $0.54 per share, payable November 1, 2007, to shareholders of record as of October 12, 2007. Although this dividend was
declared at the beginning of the fourth quarter, it represents the third quarter 2007 dividend declaration.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--



|NOTE 2  REGULATORY MATTERS
        Reference is made to Note 2  Regulatory Matters under captions Expiring Rate Proceedings  Electric and Natural Gas
and New Rate Proceedings  Electric and Natural Gas to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
        Utility Land Sales
        Central Hudson
        On April 23, 2007, the PSC issued an Order approving the proposed transfer of Central Hudsons ownership interest in its 900 kW Groveville Mills Hydroelectric
facility and the deferral of any gain realized upon the transfer for the benefit of customers.
        During the nine months ended September 30, 2007, Central Hudson sold utility property, including the Groveville Mills Hydroelectric facility, for $0.3 million in
excess of book value plus transaction costs. The excess was recorded as a regulatory liability.
        Non-Utility Land Sales
        Central Hudson
        During the nine months ended September 30, 2007, Central Hudson sold four parcels of non-utility real property for $0.5 million in excess of book value plus transaction costs, which is recorded as a reduction to
Other Expenses of Operation.
        NOTE 3  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 Financial Statements of the Corporations 10-K Annual Report.
        New accounting standards are summarized below, and explanations of the underlying information for all standards (except those not currently applicable to
        CH Energy Group and its subsidiaries) follow the chart.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|18
|--



|           
|-----------
|**Impact***
|           
|1          
|           
|1          
|           
|1          
|           
|2          
|           
|2          
|           
|2          
|           
|3          
|           
|3          
|           
|3          
|           
|3          
|           

|                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------
|*Impact Key:                                                                                                                                
|                                                                                                                                            
|1 - No significant impact on the financial condition, results of operations and cash flows of CH Energy Group and its subsidiaries expected.
|                                                                                                                                            
|2 - Following the chart, the impacts are separately disclosed as of standard effective dates.                                               
|                                                                                                                                            
|3 - No current impact on the financial condition, results of operations and cash flows of CH Energy Group and its subsidiaries.             

|19
|--



|Standards Under Assessment
        SFAS 159 permits entities to choose to elect, at specified election dates, to measure eligible financial instruments at fair value. The election is made on an
instrument-by-instrument basis, and once made is irrevocable. Eligible instruments include written loan commitments, rights and obligations under insurance contracts and warranties that are not financial instruments, and firm commitments that would otherwise not be recognized at inception and that involve only financial instruments. The statement requires that entities report
in earnings unrealized gains and losses on items for which the fair value option has been elected, and recognize upfront costs and fees related to those items in earnings as incurred.
        SFAS 157 will change the definition of fair value, establish a framework for measuring it in accordance with General Accepted Accounting Principles, and expand
disclosures about the fair value measurements.
        FSP No. FIN 39-1 permits a reporting entity to offset fair value amounts recognized for the rights to reclaim cash collateral (a receivable) or the obligation to
return cash collateral (a payable) against fair value amounts recognized for derivative agreements if the receivable or payable arises from the same master netting arrangement as the derivative instrument. This FSP also replaces the terms conditional contracts and exchange contracts with the term derivative contracts (as defined by Statement 133).
        Standards Implemented
        SFAS 158 requires an employer that sponsors a defined benefit pension or other post-retirement plans to report the current economic status (i.e., the overfunded or
underfunded status) of each such plan in its statement of financial position by measuring plan assets and benefit obligations on the same date as the employers assets and liabilities. SFAS 158 became effective for fiscal years ending after December 15, 2006, with an exception for the provision to change the measurement date, which is effective and will be implemented for
fiscal years ending after December 15, 2008. The impact of the measurement date change on CH Energy Groups financial condition, results of operations,
and cash flows cannot be determined at this time. Reference is made to Note 1  Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Corporations 10-K Annual Report under the caption Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.
        FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS 109, Accounting for
Income Taxes. FIN 48 also prescribes a recognition threshold and measurement methodology for tax positions taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, and disclosure and transition issues. Only tax positions that are more likely than not to be successful may be
recognized. No adjustment to the opening balance of retained
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20
|--



|earnings was recorded upon CH Energy Groups adoption of FIN 48 in January 2007. Due to no uncertain tax positions, no interest or penalties have been recorded in the financial statements. If CH Energy Group and its subsidiaries incur any interest or penalties on underpayment of income taxes, the amounts would
be included on the line Other liabilities on the Consolidated Balance Sheet and on the line Other  net on the Consolidated Statement of Income. CH Energy Group and its subsidiaries file a consolidated Federal and New York State income tax return, which represents the major tax jurisdictions of CH Energy Group. The statute of limitations for federal
tax years 2004 through 2006 are still open for audit. The New York State income tax return is currently open for audit for tax years 2002 through 2006, and tax years 2002 through 2004 are currently under audit.
        FIN 48-1 clarifies the rules regarding settled tax positions. Under the approach prescribed by FIN 48-1, an enterprise must evaluate all of the following conditions
when determining effective settlement: whether a tax authority has examined the tax year; whether or not the enterprise intends to appeal or litigate any aspects of the tax position; and, based on a taxing authoritys widely understood policy, whether the enterprise considers it remote that the taxing authority would subsequently examine or reexamine any of the
positions once the examination process is completed. CH Energy Groups determination of settled positions is consistent with these rules.
        NOTE 4  ACQUISITIONS AND INVESTMENTS
        Reference is made to Note 4 - Acquisitions and Investments to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
        Acquisitions
        During the nine months ended September 30, 2007, Griffith acquired fuel distribution companies as follows (in Millions):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                               | 
|------------------------------ | 
|**3
      Month Period Ended** | 
|                               | 
|March
      31, 2007           | 
|June 30,
      2007            | 
|September
      30, 2007       | 
|Total                          | 

|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(1) | Including goodwill.                                                                                                     
|    |                                                                                                                         
|(2) | Total tangible assets include $1.5 million in liquid petroleum and spare parts inventory, and $1.2 million in vehicles. 
|    |                                                                                                                         
|(3) | The amount of purchase price assigned to goodwill is based upon preliminary assessment and may be subject to adjustment.

|21
|--



|NOTE 5  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 $1.8 million. The useful life of a covenant not to compete is based on the expiration date of the covenant, generally between two and ten years. Intangible assets with indefinite useful lives and goodwill are no longer amortized, but instead are periodically reviewed for impairment. Griffith tests the goodwill and intangible assets remaining on the balance sheet for impairment
annually in the fourth quarter, and retests between annual tests if an event should occur or circumstances arise that would more likely than not reduce the fair value below its carrying amount.
        The components of amortizable intangible assets of CH Energy Group are summarized as follows (in Thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                          |                               
|----------------------------------------- | ------------------------------
|September
      30, 2007                 
|
|Gross
      Carrying
      Amount         | Accumulated
      Amortization
|                                          |                               
|Customer
      Lists                      | $                             
|Covenants Not to Compete                  |                               
|Total
      Amortizable
      Intangibles | $                             

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Amortization expense was $2.5 million and $2.2 million for each of the nine-month periods ended September 30, 2007, and 2006, respectively.
The estimated annual amortization expense for each of the next five years, assuming no new acquisitions, is approximately $3.6 million. The carrying amount for goodwill was $58.4 million as of September 30, 2007, $52.8 million as of December 31, 2006, and $52.7 million as of September 30, 2006.
        NOTE 6  SHORT-TERM INVESTMENTS
        CH Energy Groups short-term investments consist of Auction Rate Securities (ARS) and Variable Rate Demand Notes (VRDN), which have been
classified as current available-for-sale securities pursuant to the provisions of SFAS 115, titled Accounting for Certain Investments in Debt and Equity Securities. ARS and VRDN are debt instruments with a long-term nominal maturity and a mechanism that resets the

|22
|--



|interest rate at regular intervals. CH Energy Groups investments include tax-exempt ARS and VRDN with interest rates that are reset anywhere from 7 to 35 days. These investments are available to fund current operations or to provide funding in accordance with CH Energy Groups strategy to redeploy equity
into its subsidiaries. Due to the nature of these securities with regard to their interest rate reset periods, the aggregate carrying value approximates their fair value; as such, it does not impact shareholders equity with regard to unrealized gains and losses. The aggregate fair value of these short-term investments was $20.3 million at September 30, 2007, $42.6 million at
        December 31, 2006, and $40.3 million at September 30, 2006. Cash flows from the purchases and liquidation of these investments are reported separately as investing activities in CH Energy Groups Consolidated Statement of Cash Flows.
        NOTE 7  FUEL, MATERIALS AND SUPPLIES
        Fuel, materials, and supplies for CH Energy Group are valued using the following accounting methods:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | **Company**    | **Valuation Method**  | 
| | -------------- | --------------------- | 
| |                |                       | 
| | Central Hudson | Average cost          | 
| | Griffith       | FIFO                  | 
| | Lyonsdale      | Weighted average cost | 

|                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The following is a summary of CH Energy Groups and Central Hudsons fuel, materials and supplies at September 30, 2007, December 31, 2006, and
September 30, 2006 (In Thousands):
|                                                                                                                                                                                  

|                                       |                        
|-------------------------------------- | -----------------------
|CH Energy Group                       
|
|September
      30,
      2007         | December 31,
      2006
|                                       |                        
|Natural
      gas                      | $                      
|Petroleum products and
      propane   |                        
|Fuel
      used in electric generation |                        
|Materials and supplies                 |                        
|                                      
|Total                                  | $                      
|                                       |                        

|                                       |                        
|-------------------------------------- | -----------------------
|Central Hudson                        
|
|September
      30,
      2007         | December 31,
      2006
|                                       |                        
|Natural
      gas                      | $                      
|Petroleum products and
      propane   |                        
|Fuel
      used in electric generation |                        
|Materials and supplies                 |                        
|                                      
|Total                                  | $                      

|23
|--



|NOTE 8  LONG-TERM DEBT
        Reference is made to Note 8  Capitalization  Long-term Debt to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
        On March 23, 2007, Central Hudson issued $33 million of 30-year, 5.80% Series F notes. The proceeds were used to redeem at maturity $33 million of 5-year, 5.87%
Series D Notes, on March 28, 2007. On September 14, 2007, Central Hudson issued an additional $33 million of 10-year 6.028% Series F Notes. The proceeds will be used to finance ongoing investments in capital improvements.
        NOTE 9  POST-EMPLOYMENT BENEFITS
        The following are the components of Central Hudsons net periodic benefit costs for its pension and other postretirement benefits (OPEB) plans
for the quarters and nine months ended September 30, 2007, and 2006. The OPEB amounts for both years reflect the effect of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 under the provisions of Financial Staff Position (FSP) 106-2, titled Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                |               
|------------------------------- | --------------
|Pension Benefits                | OPEB          
|
|2007                            | 2006          
|(In Thousands)                  | (In Thousands)
|
|Service cost                    | $             
|                               
|Interest cost                   |               
|                               
|Expected return on plan assets  |               
|Amortization of:                |               
|Prior service cost              |               
|Transitional obligation (asset) |               
|                               
|Recognized actuarial loss       |               
|                                |               
|                               
|Net periodic benefit cost       | $             
|                                |               

|24
|--



|                                |               
|------------------------------- | --------------
|Pension Benefits                | OPEB          
|
|2007                            | 2006          
|(In Thousands)                  | (In Thousands)
|
|Service cost                    | $             
|                               
|Interest cost                   |               
|                               
|Expected return on plan assets  |               
|Amortization of:                |               
|Prior service cost              |               
|Transitional obligation (asset) |               
|                               
|Recognized actuarial loss       |               
|                                |               
|                               
|Net periodic benefit cost       | $             
|                                |               

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Decisions to fund Central Hudsons pension plan (the Retirement Plan) are based on several factors, including the value of plan assets
relative to plan liabilities, legislative requirements, and available corporate resources. The liabilities are affected by the discount rate used to determine benefit obligations and the accruing of additional benefits. Central Hudson is currently reviewing the provisions of the Pension Protection Act of 2006 to determine funding requirements for the near-term and future periods.
Central Hudson contributed $5.8 million to the Retirement Plan in September 2007.
        Employer contributions for OPEB totaled $4.7 million and $3.3 million during the nine months ended September 30, 2007, and 2006, respectively. The total contribution
for the 2006 plan year was $4.9 million including a $1.7 million contribution funded in April of 2007. The determination of future funding depends on a number of factors, including the discount rate, expected return on plan assets, medical claims assumptions used, and corporate resources. Annual funding for the 2007 plan year is expected to approximate $6.7 million.
This includes $1.9 million to be funded in the first quarter of 2008.
        For additional information related to pensions and OPEB, reference is made to Note 9  Post-Employment Benefits to the Consolidated Financial
Statements of the Corporations 10-K Annual Report.
        NOTE 10  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,
to the description of CH Energy Groups Long-Term Performance-Based Incentive Plan (the 2000 Plan), and to the description of CH Energy Groups Long-Term Equity Incentive Plan (the 2006 Plan) described therein.

|25
|--



|A summary of the status of performance shares granted to executives under the 2000 Plan and 2006 Plan as of September 30, 2007 is as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                             

|               
|---------------
|Plan           
|               
|2000
      Plan
|2006 Plan      
|2006
      Plan

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The ultimate number of shares earned under the awards is based on metrics established by the Compensation Committee at the beginning of the award cycle.
Compensation expense is recorded as performance shares are earned over the relevant three-year life of the performance share grant prior to its award. Due to the retirement of one of CH Energy Groups executive officers on January 1, 2007, a pro-rated number of shares under the 2005 and 2006 grants were paid out in April 2007. Additionally, outstanding performance shares
for all grants were reduced in the second quarter of 2007 for forfeitures.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                                         | Quarter
      Ended September 30, |         | Nine
      Months Ended September 30, |  
|-------------------------------------------------------- | --------------------------------- | ------- | ------------------------------------- | -
|                                                         |                                   |         |                                       |  
|Description                                              | 2007                              |         | 2006                                  |  
|                                                         |                                  
|Performance
      shares 
      compensation expense    | $                                 | 339,000 |                                       | $
|Stock options                                           |                                   |         |                                       |  
|Compensation
      expense                               | Not
      material                |         | Not
      material                    |  
|Balance
      accrued on 
           outstanding options | $                                 | 127,000 |                                       | $
|Intrinsic
      value of outstanding
           options  | Not
      material                |         | Not
      material                    |  

|                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A summary of the status of stock options awarded to executives and non-employee Directors of CH Energy Group and its subsidiaries under the 2000 Plan as of September 30, 2007, is as follows:
|                                                                                                                                                                                              

|                         |  |            |   |   |      
|------------------------ |  | ---------- | - | - | -----
|                         |  |            |   |   |      
|Outstanding at 12/31/06  |  | 45,260     |   | $ | 45.87
|Granted                  |  |           |   |   |     
|Exercised                |  | (4,780     | ) |   | 44.23
|Expired/Forfeited        |  | (180       | ) |   | 48.62
|                         |  |            |   |   |      
|Outstanding at 9/30/07   |  | 40,300     |   | $ | 46.05
|                         |  |            |   |   |      
|                        
|Total Shares Outstanding |  | 15,762,000 |   |   |      
|Potential Dilution       |  | 0.3        | % |   |      

|                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A total of 4,780 non-qualified stock options with exercise prices of $44.06 and $48.62 were exercised during the nine months ended September 30, 2007. The total intrinsic value of options exercised was not material.

|26
|--



|The following table summarizes information concerning outstanding and exercisable stock options at September 30, 2007, by exercise price:
|-----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                         

|Exercise Price |  | Number of
      Options
      Outstanding |  | Weighted Average
      Remaining
      Life in Years |  | Number of
      Options
      Exercisable |  | Number of
      Options
      Remaining to Vest | 
|-------------- |  | ----------------------------------------- |  | ---------------------------------------------------- |  | ----------------------------------------- |  | ----------------------------------------------- | 
|               |  |                                           |  |                                                      |  |                                           |  |                                                 | 
|$31.94         |  | 320                                       |  | 2.25                                                 |  | 320                                       |  |                                                | 
|$44.06         |  | 21,560                                    |  | 3.25                                                 |  | 21,560                                    |  |                                                | 
|$48.62         |  | 18,420                                    |  | 5.25                                                 |  | 17,430                                    |  | 990                                             | 
|               |  |                                           |  |                                                      |  |                                           |  |                                                 | 
|               |  | 40,300                                    |  | 4.16                                                 |  | 39,310                                    |  | 990                                             | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 11  COMMITMENTS AND CONTINGENCIES
        Electricity Purchase Commitments
        Reference is made to Note 11  Commitments and Contingencies to the Consolidated Financial Statements of the Corporations 10-K Annual Report,
to the caption Electric Purchase Commitments.
        On November 12, 2002,Central Hudson entered into an agreement with Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear lndian Point 3, LLC to purchase
electricity (but not capacity) on a unit-contingent basis at defined prices from January 1, 2005 to and including December 31, 2007. On March 6, 2007,  Central Hudson entered into new agreements with Entergy Nuclear Power Marketing, LLC to purchase electricity (but not capacity) on a unit-contingent basis at defined prices from January 1, 2008 through
December 31, 2010. On an annual basis, the electricity purchased through the Entergy contracts represents approximately 19% of Central Hudsons full-service customer requirements, or 832,250 MWh.
        Contingencies
        CH 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.
        City of Poughkeepsie
        On January 1, 2001, a fire destroyed a multi-family residence on Taylor Avenue in the City of Poughkeepsie, New York resulting in several deaths and damage to nearby residences. Eight separate lawsuits arising out of this
incident have been commenced against Central Hudson and other defendants. The basis for the claimed liability of Central Hudson in these actions is that it was allegedly negligent in the supply of natural gas. The suits seek an aggregate of $528 million in compensatory damages. Central Hudson has notified its insurance carrier, has denied liability, and is defending the lawsuits.
Based on information known to Central Hudson at this time, including information from ongoing discovery proceedings in the lawsuits, Central Hudson believes that the likelihood it will have a liability in these lawsuits is remote.

|27
|--



|Environmental Matters
        Central Hudson:
        Air
        In October 1999, Central Hudson was informed by the New York State Attorney General (Attorney General) that the Danskammer Point Steam Electric Generating Station (Danskammer Plant) was included in an investigation by the Attorney
Generals Office into the compliance of eight older New York State coal-fired power plants with federal and state air emissions rules. Specifically, the Attorney General alleged that Central Hudson may have constructed, and continues to operate, major modifications to the Danskammer Plant without obtaining certain requisite preconstruction permits. In March 2000, the
Environmental Protection Agency (EPA) assumed responsibility for the investigation. Central Hudson has completed its production of documents requested by the Attorney General, the New York State Department of Environmental Conservation (DEC), and the EPA, and believes any permits required for these projects were obtained in a timely manner. Notwithstanding Central Hudsons
sale of the Danskammer Plant on January 30, 2001, Central Hudson could retain liability depending on the type of remedy, if any, imposed in connection with this matter. Central Hudson presently has insufficient information with which to predict the outcome of this matter.
        Former Manufactured Gas Plant Facilities
        Like most late 19th and early 20th century utilities in the northeastern United States, Central Hudson and its predecessors owned and operated
manufactured gas plants (MGPs) to serve their customers heating and lighting needs. MGPs manufactured gas from coal and oil. This process produced certain by-products that may pose risks to human health and the environment.
        The DEC, which regulates the timing and extent of remediation of MGP sites, has notified Central Hudson that it believes Central Hudson or its predecessors at one
time owned and/or operated MGPs at eight sites in Central Hudsons franchise territory. The DEC has further requested that Central Hudson investigate and, if necessary, remediate these sites under a Consent Order, Voluntary Cleanup Agreement, or Brownfield Cleanup Agreement. The DEC has placed five of these sites on the New York State Environmental Site Remediation Database.
A number of the eight sites are now owned by third parties and have been redeveloped for other uses.
        Central Hudson spent approximately $5.2 million during the nine months ended September 30, 2007, related to site investigation and remediation.
Based on the 2006 PSC Rate Order (i.e. the 2006 Order), on July 1, 2007, Central Hudson started the recovery of a rate allowance for MGP Site Investigation & Remediation Costs which totaled $0.4 million as of September 30, 2007. In addition, Central Hudson has developed estimates of the potential remediation costs for four of the eight identified MGP sites indicating that the total costs could exceed $125 million over the next 30
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|28
|--



|years.  These estimates were based on DEC-approved remediation plans for two sites, and conceptual plans for the other two sites. The cost estimates involve assumptions relating to investigation expenses, remediation costs, potential future liabilities, and post-remedial monitoring costs, and are based on a
variety of factors including projections regarding the amount and extent of contamination, the location, size and use of the sites, proximity to sensitive resources, status of regulatory investigations, and information regarding remediation activities at other MGP sites in New York State. These cost estimates also assume that proposed or anticipated remediation techniques are
technically feasible and that proposed remediation plans receive DEC approval.
        Prior to 2007, Central Hudson recorded a $19.5 million estimated liability regarding two of the four sites for which it has estimated future costs.
This amount represented the low end of the range of cost estimates for these two sites since no amount within the range was considered to be most likely. Based on the actual expenditures from the remediation completed to date and the latest cost projections, Central Hudson has increased its estimated liability by $1.7 million. As of September 30, 2007, $16.5 million of the estimated
liability has not been spent; $2.3 million of the estimated liability is expected to be spent over the next twelve months.
        Nothing has been accrued in connection with the other two sites for which Central Hudson has estimated future costs developed from conceptual plans because, absent
DEC-approved remediation plans, management cannot estimate what cost, if any, will be incurred.
        With regard to the remaining four sites not discussed above, Central Hudson now believes that it has no liability for two of these sites. For one of these sites,
records show that Central Hudson did not own or operate the site. Central Hudson has submitted its findings to the DEC and is awaiting the DECs response. Testing performed at the second site has not revealed any data to indicate remediation is required. Central Hudson has submitted its findings to the DEC and the DEC has agreed that no further investigation or remedial
action is required at that site.
        For one of the remaining four MGP sites, Central Hudson has reached agreement with the DEC on the scope of remediation work and completed the remediation work during
the third quarter of 2007. The expenditures for this remediation work were $0.7 million.
        For the last of the remaining four MGP sites, Central Hudson estimates that it will be at least 2-3 years before sufficient data has been obtained to estimate the
 potential remediation costs. Testing at this site started in September 2007.
        Central Hudson has become aware of information contained in a DEC Internet website indicating that, in addition to the eight sites referenced above, Central Hudson is
 attributed with responsibility for three additional MGP sites. Central Hudson does not believe that it ever owned one of these three additional sites, and it believes that another of the identified locations was never an MGP site. Central Hudson has provided the DEC with this information about the two sites but it has not yet received a
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|29
|--



|formal response.  With respect to the third site, Central Hudson has provided the DEC with information that it believes demonstrates Central Hudson has no responsibility for the site, and Central Hudson is awaiting the DECs response.
        Central Hudson has obtained a copy of a publication developed by the DEC entitled New York States Approach to the Remediation of Former Manufactured Gas Plant Sites. The DEC has indicated that this publication will be distributed to municipal and elected officials throughout the state. Within the publication, Central Hudson is listed as having seven MGP sites currently identified, with six under clean-up agreements. Central Hudson does not know what implications, if any; this publication poses regarding MGP clean-up agreements and remediation schedules.
        Future remediation activities and costs may vary significantly from the assumptions used in Central Hudsons current cost estimates, and these costs could have a material adverse effect (the extent of which cannot be reasonably determined) on the financial condition, results of operations and cash flows of CH Energy Group and Central Hudson if Central Hudson were unable to recover all or a substantial portion of these costs through insurance and/or customers via collection in rates.
        Central Hudson has put its insurers on notice and intends to seek reimbursement from its insurers for the costs of any liabilities. Certain of these insurers have denied coverage. Furthermore, pursuant to the 2006 Order, Central Hudson is permitted to defer for future recovery the differences between actual costs for MGP site investigation and remediation and the associated rate allowances, with carrying charges to be accrued on the deferred balances at the authorized pre-tax rate of return.
        Little Britain Road
        In December 1977, Central Hudson purchased property at 610 Little Britain Road, New Windsor, New York. In 1992, the DEC informed Central Hudson that the DEC was preparing to conduct a Preliminary Site Assessment (PSA) of the site and in 1995, the DEC issued an Order of Consent in which
Central Hudson agreed to conduct the PSA. In 2000, following completion of the PSA, Central Hudson and the DEC entered into a Voluntary Cleanup Agreement (VCA) whereby Central Hudson removed approximately 3,100 tons of soil and has conducted a routine groundwater sampling program since that time. Groundwater sampling results show the presence of certain contaminants at levels exceeding DEC criteria. Deep groundwater wells were installed in 2005 and 2006, which also show contaminants exceeding
DEC criteria. The DEC responded with a request for a plan to address the situation. Negotiations between DEC and Central Hudson regarding additional site work and closure of the VCA are ongoing. Central Hudson has submitted a proposal to DEC for limited additional site work, and closure of the VCA. Although at this time Central Hudson does not have sufficient information to estimate potential remediation costs, Central Hudson has put its insurers on notice regarding this matter and intends
to seek reimbursement from its insurers for amounts, if any, for which it may become liable. Neither CH Energy Group nor Central Hudson can predict the outcome of this matter.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|30
|--



|Newburgh Consolidated Iron Works
        By letter from the EPA dated November 28, 2001, Central Hudson, among others, was served with a Request For Information pursuant to the Comprehensive Environmental Response, Compensation and Liability Act regarding any shipments of scrap or waste materials that Central Hudson may have made to Consolidated Iron and Metal Co., Inc. (Consolidated Iron), a Superfund site located in Newburgh, New York. Sampling by the EPA indicated that lead and polychlorinated biphenyls (or PCBs) are present at the site, and the EPA subsequently commenced a remedial investigation and feasibility study at the site.
No records were found which indicate that the material sold by Central Hudson to Consolidated Iron contained or was a hazardous substance. Central Hudson has put its insurers on notice regarding this matter and intends to seek reimbursement from its insurers for amounts, if any, for which it may become liable. Neither CH Energy Group nor Central Hudson can predict the outcome of this investigation at the present time.
        Asbestos Litigation
        As of October 15, 2007, of the 3,310 asbestos cases brought against Central Hudson, 1,183 remain pending. Of the cases no longer pending against Central Hudson, 1,976 have been dismissed or discontinued without payment by Central Hudson, and Central Hudson has settled 151 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 costs which may be incurred in connection with the remaining lawsuits will not have a material adverse effect on either of CH Energy Groups or Central Hudsons financial position, results of operations, or cash flows.
        CHEC:
        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. The State of West Virginia has indicated that some additional remediation will be required, and Griffith has received an estimate of $300,000 for the environmental remediation. During the nine months ended September 30, 2007, $177,000 was spent on site remediation efforts. In addition, Griffith spent $81,000 on remediation efforts in Maryland, Virginia, and Connecticut in 2007. Griffith is to be reimbursed $275,000 from the State of Connecticut under an environmental agreement and has recorded this amount as a receivable.
        Griffith has a reserve for environmental remediation which is $1.6 million as of September 30, 2007, of which approximately $258,000 is expected to be spent in the next twelve months.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31
|--



|Other Matters
        Central Hudson
        Central Hudson is involved in various other legal and administrative proceedings incidental to its business which are in various stages. While these matters collectively could involve substantial amounts, it is the opinion of management that their ultimate resolution will not have a material adverse effect on either of CH Energy Groups or Central Hudsons financial positions, results of operations, or cash flows.
        NOTE 12  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.
        CH Energy Groups reportable operating segments are the regulated electric utility business and regulated natural gas utility business of Central Hudson and the unregulated fuel distribution business of Griffith. The investments and business development activities of CH Energy Group and the renewable energy and investment activities of CHEC, including its ownership interests in ethanol, wind, and biomass energy projects, are reported under the heading Other Businesses and Investments.
        Certain additional information regarding these segments is set forth in the following tables. General corporate expenses, Central Hudson property common to both electric and natural gas segments, and the depreciation of Central Hudsons common property have been allocated in accordance with practices established for regulatory purposes.
        Central Hudsons and Griffith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. Demand for electricity typically peaks during the summer, while demand for natural gas and heating oil typically peaks during the winter.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32
|--



|CH Energy Group, Inc. Segment Disclosure
|----------------------------------------
|                                        

|                                                 |         
|------------------------------------------------ | --------
|
|
|                                                 | Electric
|                                                 |         
|Revenues
      from 
      external customers    | $       
|Intersegment revenues                            |         
|Total
      Revenues                             |         
|Income before income taxes                       |         
|Net income                                       |         
|Earnings per share 
      diluted               |         
|Segment
      assets at
      September 30, 2007 | $       

| |     |                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The amount of EPS attributable to CHECs other businesses and investments was $0.04 per share, with the balance of $0.07 per share resulting primarily from interest income.
| |     |                                                                                                                                                                             
| | (2) | Includes minority owners interest of $1,454 related to Lyonsdale and elimination of affiliates accounts receivable of ($1,925).                                           

|                                        
|----------------------------------------
|CH Energy Group, Inc. Segment Disclosure
|                                        

|                                                 |         
|------------------------------------------------ | --------
|
|
|                                                 | Electric
|                                                 |         
|Revenues
      from 
      external customers    | $       
|Intersegment revenues                            |         
|Total
      Revenues                             |         
|Income before income taxes                       |         
|Net income                                       |         
|Earnings per share 
      diluted               |         
|Segment
      assets at
      September 30, 2006 | $       

|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amount of EPS attributable to CHECs other businesses and investments was $0.12 per share, with the balance of $0.06 per share resulting primarily from interest income.
|    |                                                                                                                                                                             
|(2) | Includes minority owners interest of $1,501 related to Lyonsdale and elimination of affiliates accounts receivable of ($1,818).                                           

|33
|--



|CH Energy Group, Inc. Segment Disclosure
|----------------------------------------
|                                        

|                                                 |         
|------------------------------------------------ | --------
|
|
|                                                 | Electric
|                                                 |         
|Revenues
      from 
      external customers    | $       
|Intersegment revenues                            |         
|Total
      Revenues                             |         
|Income before income taxes                       |         
|Net income                                       |         
|Earnings per share 
      diluted               |         
|Segment
      assets at
      September 30, 2007 | $       

|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amount of EPS attributable to CHECs other businesses and investments was $0.14 per share, with the balance of $0.21 per share resulting primarily from interest income.
|    |                                                                                                                                                                             
|(2) | Includes minority owners interest of $1,454 related to Lyonsdale and elimination of affiliates accounts receivable of ($1,925).                                           

|                                        
|----------------------------------------
|CH Energy Group, Inc. Segment Disclosure
|                                        

|                                                  |  
|------------------------------------------------- | -
|
|
|                                                  |  
|                                                  |  
|Revenues
      from 
      external customers     | $
|Intersegment revenues                             |  
|Total
      Revenues                              |  
|Income before income taxes                        |  
|Net income                                        |  
|Earnings per share 
      diluted                |  
|Segment
      assets at 
      September 30, 2006 | $

|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amount of EPS attributable to CHECs other businesses and investments was $0.18 per share, with the balance of $0.21 per share resulting primarily from interest income.
|    |                                                                                                                                                                             
|(2) | Includes minority owners interest of $1,501 related to Lyonsdale and elimination of affiliates accountsreceivable of ($1,818).                                            

|34
|--



|Central Hudson Gas & Electric Corporation Segment Disclosure
|------------------------------------------------------------
|                                                            

|                                          
|------------------------------------------
|(In
      Thousands)                      
|
|Electric                                  
|                                          
|Revenues
      from external customers    
|Intersegment revenues                     
|Total
      Revenues                      
|Income before income taxes                
|Income
      available for common stock   
|Segment assets at September
      30, 2007

|                                                            
|------------------------------------------------------------
|Central Hudson Gas & Electric Corporation Segment Disclosure
|                                                            

|                                          
|------------------------------------------
|(In
      Thousands)                      
|
|Electric                                  
|                                          
|Revenues
      from external customers    
|Intersegment revenues                     
|Total
      Revenues                      
|Income before income taxes                
|Income
      available for common stock   
|Segment assets at September
      30, 2006

|                                                            
|------------------------------------------------------------
|Central Hudson Gas & Electric Corporation Segment Disclosure
|                                                            

|                                          
|------------------------------------------
|(In
      Thousands)                      
|
|Electric                                  
|                                          
|Revenues
      from external customers    
|Intersegment revenues                     
|Total
      Revenues                      
|Income before income taxes                
|Income
      available for common stock   
|Segment assets at September
      30, 2007

|                                                            
|------------------------------------------------------------
|Central Hudson Gas & Electric Corporation Segment Disclosure
|                                                            

|                                          
|------------------------------------------
|(In
      Thousands)                      
|
|Electric                                  
|                                          
|Revenues
      from external customers    
|Intersegment revenues                     
|Total
      Revenues                      
|Income before income taxes                
|Income
      available for common stock   
|Segment assets at September
      30, 2006

|35
|--



|NOTE 13  CAPITALIZATION  COMMON AND PREFERRED STOCK
        Reference is made to the caption Repurchase Program of Note 7  Capitalization  Common and Preferred Stock to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
        On July 27, 2007, the Board of Directors of CH Energy Group extended and amended the Common Stock Repurchase Program (the Program) of the Company, which was originally authorized on July 25, 2002. As amended, the Program authorizes the repurchase of up to 2,000,000 shares (excluding shares purchased before July 31, 2007) or approximately 13% of the Companys outstanding common stock, from time to time, during the next five years, i.e., through July 31, 2012. The extended and amended Program is effective as of July 31, 2007.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|36
|--



|ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        EXECUTIVE SUMMARY
        Business Overview
        CH Energy Group is a holding company with four business segments:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                            

| | (1)  Central Hudsons regulated electric utility business;                                                                                                                                                                                                    
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                               
| | (2)  Central Hudsons regulated natural gas utility business;                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                               
| | (3)  Griffiths fuel distribution business; and                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                               
| | (4)  CHECs investments in renewable energy supply, energy efficiency, an energy sector venture capital fund, and other investments of CH Energy Group, consisting primarily of investments in liquid short-term securities and inter-company interest income.

|                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------
|A breakdown of CH Energy Groups operating revenues and net income by segment for the three and the nine months ended September 30, 2007, is below.
|                                                                                                                                                   
|                                                                                                                                                   

|37
|--



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The change in composition of net income for the three months ended September 30, 2007, versus nine months ended September 30, 2007 is due to the seasonal nature of Central Hudsons natural gas business and Griffiths fuel distribution business. The highest concentration of net income for these two businesses is during the heating season months of January through March and November through December.
        Central Hudson
        Central Hudson delivers electricity and natural gas to approximately 371,000 customers in a defined service territory in the Mid-Hudson Valley region of New York State. Consistently ranking among the lowest cost electric utilities in New York State, Central Hudsons earnings are derived primarily from customer delivery charges. In addition to delivering electricity and natural gas, Central Hudson procures supplies of electricity and natural gas for a majority of its customers. With authorization from the PSC, Central Hudson recovers these supply costs from customers without deriving profits from these activities.
        Central Hudsons rates are regulated by the PSC, which is responsible for setting rates at a level that will recover the cost to provide safe and reliable service and provide a fair and reasonable return on the capital invested by shareholders.
        In addition to providing safe and reliable service, managements attention is focused on managing costs and customer rate stabilization, and thus maintaining above average levels of customer satisfaction. This approach promotes high customer

|38
|--



|satisfaction and positive regulatory relations, which should translate into opportunities for shareholders.
        Lower sales than reflected in the 2006 Rate Order may occur as a result of changes in usage patterns due to factors external to Central Hudson, such as weather, the price of energy, economic conditions, the loss of major customers or additions of fewer new customers. With increasing energy prices and heightened consumer awareness of the need to conserve energy, Central Hudson is at risk of having sales volumes that are lower than those upon which the 2006 Rate Order was based. Such lower volumes will, absent other factors such as expense reductions, reduce the Companys earnings and cash flow.
Implementation of a revenue decoupling mechanism (RDM) would reduce this risk. On September 25, 2007, Central Hudson filed a proposed energy efficiency program with the PSC, which includes an RDM.
        Griffith
        Griffith serves approximately 102,000 customers in a market area comprised primarily of parts of Connecticut, Delaware, Washington, D.C., Maryland, Pennsylvania, Rhode Island, Virginia, and West Virginia. Griffiths revenues, cash flows, and earnings are derived from the sale and delivery of heating oil, gasoline, diesel fuel, kerosene, and propane and from the installation and maintenance of heating, ventilating, and air conditioning equipment. Griffiths gross profit by petroleum product and service and installations for the three and nine months ended September 30, 2007, is illustrated below.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                      
|During the first nine months of 2007, Griffiths acquisitions strategy contributed favorably to earnings. In addition to the nine companies acquired in 2006, Griffith acquired eight companies during the nine months ended September 30, 2007, which

|39
|--



|increased the companys customer base, providing additional sales during the heating season. Griffiths earnings were also favorably impacted by higher petroleum margins.
        Griffiths strong brand and marketing programs, effective cost management practices, strong customer service capabilities, and access to capital for a continuing acquisition program should be competitive advantages in the fuel distribution market and are expected to drive improvements in Griffiths financial performance over time.
        Other Businesses and Investments
        In addition to Griffith, CHEC derives earnings through investments in the competitive energy markets. CHECs investment objectives are to increase earnings and cash flow while limiting earnings volatility to a level that management believes is acceptable. CHEC faces strong competition for investment opportunities in the energy industry. The existence of this competition may make it difficult to make investments that offer appropriate risk-adjusted returns or may slow the rate at which such investments can be made. Increasing government support for certain investments (e.g., those related to renewable energy sources) has made such investments more attractive but has also resulted in increased competition for available opportunities.
        Overview of Third Quarter and Year-to-Date Results
        CH Energy Groups earnings during the third quarter of 2007 totaled $0.27 per share versus the $0.70 per share earnings during the third quarter of 2006. It is expected that the energy holding company will attain its year-end projected consolidated earnings of between $2.55 and $2.80 per share. Year-to-date earnings per share stand at $1.98, in comparison to $2.12 for the first three quarters of 2006.
        Changes in regulatory provisions and a number of significant, favorable, unusual items had contributed $0.31 per share to the third-quarter results of the prior year, when earnings per share totaled $0.70. The 2007 third-quarter results were more typical of prior third-quarter results.
        CH Energy Groups business plan anticipated this quarterly outcome, recognizing both the unique circumstances that had shaped third-quarter results last year and the seasonality of its business units; however, most importantly, CH Energy Group remains on target to reach its 2007 earnings projections.
        The following summarizes quarterly results by business unit:
        Central Hudson Gas & Electric Corporation
        The utility earned $0.37 per share during the third quarter, as compared to the $0.67 per share it posted during the same period of the prior year. Of the $.30 per share variation, $0.21 are attributable to those unusual items that occurred in the third quarter of last year; the remaining $0.09 per share were due to increased expenses  largely the additional costs incurred to accelerate Central Hudsons tree trimming program
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|40
|--



|(which includes vegetation management) in order to improve the reliability of service for its electric
customers.
It
is projected that Central Hudson will contribute between $1.90 and $2.00 to annual earnings per share.
Earnings per share year to date total $1.52.
Griffith Energy Services, Inc.
The
fuel distribution subsidiary posted a loss of $0.21 per share, as compared to the $0.15 per share
loss it incurred during the same quarter of 2006. The seasonal nature of Griffiths operations
typically produces a loss during the third quarter, but this year several significant acquisitions
were made, which also impacted the results. While creating a drag on the third quarter, the new acquisitions
are expected to be accretive to earnings beginning in the fourth quarter of 2007 and on an annualized
basis.
Griffith
invested $16 million in eight acquisitions during the first three quarters of 2007, acquiring 15,300
additional customers and moving into a new geographic market. The fuel distribution subsidiary now
serves approximately 102,000 customers, an 18-percent increase over the same period of last year.
Griffiths
year-to-date earnings per share were $0.11, as compared to the break-even level posted during the
same three quarters of 2006. $0.02 of the $0.11 per share resulted from acquisitions completed during
2007, with the remainder due largely to improved margins on petroleum sales and services, as well
as $0.06 per share due to colder weather. CH Energy Group projects annual earnings per share from
the subsidiary to total between $0.25 and $0.30 per share.
Other Businesses & Investments
Quarterly
earnings per share for other businesses and investments, including the Companys renewable energy
portfolio, totaled $0.11 per share during the quarter, down from $0.18 during the third quarter of
last year. The absence of a significant and unusual item in this years third quarter was the
primary reason for the quarter-over-quarter difference. Earnings per share for the first three quarters
of 2007 from these investments totaled $0.35 per share, $0.04 lower than the same period of 2006.
Annual
earnings per share for CH Energy Groups other businesses are projected to total between $0.40
and $0.50 per share for 2007, and it is projected that CH Energy Groups consolidated earnings
per share for all business units will total between $2.55 and $2.80 per share.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|41
|--



|PSC PROCEEDINGS
Non-Utility Land Sales
For further information regarding non-utility land sales, see Note 2  Regulatory Matters.
Other PSC Proceedings and Administration Initiatives
On October 19, 2007, the PSC issued an Order in Case 07-E-0437  New York Solar Energy Industries
Association and Sustainable Hudson Valley  Joint Petition to Expand the Ceiling on the Photovoltaic
Net Metering Load for Central Hudson Gas and Electric Corporation from 1.2 MW to 3.0 MW. Under Public
Service Law (PSL) § 66-j, electric utilities are required to provide net metering to residential
Photovoltaic (PV) generation systems sized at 10 kW or less. PSL § 66-j also allows the PSC
to set a ceiling on the amount of PV capacity a utility must net meter. This Order raised the PV
net metering ceiling for Central Hudson from 1.8 MW, the level set in a June 21, 2007 Order issued
by the PSC in this proceeding, to 10 MW. This Order also authorizes Central Hudson to defer delivery
revenue losses attributable to PV penetration in excess of the 0.8 MW level assumed in its existing
Rate Plan for the period July 1, 2007 through June 30, 2009.
On
September 25, 2007, Central Hudson filed a petition with the PSC seeking expedited consideration
and approval of interim electric, gas and low-income energy efficiency programs, electric and gas
revenue decoupling mechanisms, and deferral accounting authorizations. The petition was accompanied
by a filing providing detailed descriptions of Central Hudsons proposed energy efficiency programs,
including analyses demonstrating cost effectiveness. The programs are targeted at residential, small
commercial and industrial, and low-income customer segments, and consist of a range of incentives
for high efficiency measures including lighting, appliances, heating and cooling equipment, energy
audits, and weatherization. In addition, the programs include a comprehensive customer outreach and
education effort. The company has proposed implementing the proposed programs within three months
following approval. Neither CH Energy Group nor Central Hudson can predict the final outcome of the
petitions energy efficiency initiative or revenue decoupling mechanisms.
On April 24, 2007, the PSC issued an Order in Case 07-M-0458 - Proceeding on Motion of the Commission
to Review Policies and Practices Intended to Foster the Development of Competitive Retail Energy
Markets. This Order encouraged interested parties to examine and submit comments on existing programs
and practices of New York State (NYS) utilities that promote retail market development
focusing on whether programs are still necessary; if market participants are improperly subsidized;
if risks and expenses are properly allocated among ratepayers, utilities and market participants;
and, also, the need to continue programs or practices to prevent the re-building of barriers to entry
in the competitive markets. The Order also calls for the
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|42
|--



|review and evaluation of utility specific programs, practices and policies in ongoing and future electric
and gas rate proceedings.
On April 20, 2007, the PSC issued an Order in Cases 03-E-0640 and 06-G-0746 - Proceeding on Motion
of the Commission to Investigate Potential Electric and Gas Delivery Rate Disincentives Against the
Promotion of Energy Efficiency, Renewable Technologies and Distributed Generation. The Order directed
Central Hudson and other NYS utilities to develop proposals for delivery service revenue decoupling
mechanisms for consideration in a next rate case filing. Consistent with the Orders direction,
Central Hudson proposed mechanisms to true up forecast and actual delivery service revenues in its
September 25, 2007 filing discussed above.
On April 19, 2007, the PSC issued an Order in Case 06-M-1017 - Proceeding on Motion of the Commission
as to Polices, Practices and Procedures for Utility Commodity Supply Service to Residential and Small
Commercial Customers. The Order provided guidance on commodity supply and hedging practices and directed
Central Hudson and other NYS utilities, through a collaborative or administrative process, to develop
standards and goals for measuring and constraining the supply price volatility on certain classes
of customers. In addition, utilities will be required to report to the PSC Staff on their strategies,
aggregate supply portfolio, and the extent to which goals for measuring and constraining energy price
volatility have been met. This case continues with collaborative meetings among the utilities, PSC
Staff, and interested Parties, and a Phase II to address long-term contracting, supply resource planning,
and other public policy issues.
On April 19, 2007, Governor Eliot Spitzer delivered a speech announcing a comprehensive energy strategy
for NYS, consisting of demand side and supply side components to reduce energy costs and achieve
economic and environmental benefits. The strategy includes goals of reducing electricity demand 15%
by 2015 through new energy efficiency programs, new appliance efficiency standards, and energy building
codes. The plan also proposes a new power plant siting law, and continued support for renewable energy
resources, as well as other proposed energy policies. On May 16, 2007, the PSC issued an Order Instituting
Proceeding in Case 07-M-0548 - Proceeding on Motion of the Commission on an Energy Efficiency Portfolio
Standard. In response to those initiatives, Central Hudson developed the energy efficiency programs
included in its September 25, 2007 filing discussed above.
CH Energy Group and Central Hudson continue to review the above released Orders and proceedings. Neither
CH Energy Group nor Central Hudson can predict the final outcome of the above PSC proceedings or
the administrations new energy policies at this time.
CAPITAL RESOURCES AND LIQUIDITY
The growth of CH Energy Groups retained earnings in the nine months ended September 30, 2007,
contributed to the increase in the book value per share of its Common Stock from $32.54 at December 31,
2006, to $33.51 at September 30, 2007.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|43
|--



|Book value per share at September 30, 2006 was $32.47 and the common equity ratio was 56.4%. Common
equity comprised 53.4% of total capital (including short-term debt) at September 30, 2007, a decrease
from 55.9% at December 31, 2006. CH Energy Groups book value per share and common equity at
September 30, 2007, do not include the impact of the third quarter 2007 dividend declared in the
fourth quarter.
Both CH 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 CH Energy Groups liquidity are the net cash flows resulting from
the operations of its subsidiaries, subsidiary capital expenditures and investments, the external
financing of its subsidiaries, and the dividends CH Energy Group pays to its shareholders.
Central Hudsons cash flows from operating activities reflect principally its energy deliveries
and costs of operations. Variations in the volume of energy deliveries are primarily driven by factors
external to Central Hudson, such as weather and economic conditions, including the price of energy
and the resulting changes in customer behavior. 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 and natural gas may affect the timing of cash flows but not
overall net income, as these costs are fully recoverable through Central Hudsons electric and
natural gas cost adjustment mechanisms.
Central Hudsons cash flows are also affected by capital expenditures, long-term financing for
its growing asset base, fluctuations in working capital primarily caused by weather and energy prices,
and other regulatory deferral mechanisms that may result in cash being expended in one period and
recovered from customers in a subsequent period.
CH Energy Group  Cash Flow Summary
Changes in CH Energy Groups cash and cash equivalents resulting from operating, investing, and
financing activities for the nine months ended September 30, 2007, are summarized in the following
chart:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | CH Energy
      Group                 | Nine
      Months
      Ended
      September
      2007 |         |  
| | ------------------------------------- | -------------------------------------------------------- | ------- | -
| |                                       |                                                         
| | Net Cash
      Provided By (Used In): |                                                          |         |  
| | Operating Activities                  | $                                                        | 30,756  |  
| | Investing
      Activities            |                                                          | (57,141 | )
| | Financing Activities                  |                                                          | 29,867  |  
| | Net change
      for the period       |                                                          | 3,482   |  
| | Balance at beginning of
      period  |                                                          | 24,121  |  
| | Balance
      at end of period        | $                                                        | 27,603  |  

|44
|--



|CH
Energy Groups cash increased by $3.5 million for the first nine months of 2007. Capital expenditures,
acquisitions and dividends were funded by a combination of cash from operations, long-term debt and
proceeds from the sale of short-term investments. Short-term debt was issued primarily to finance
additional working capital needs.
Net cash provided by operations was $30.8 million for the first nine months of 2007. Cash provided
by sales exceeded the periods net increase in working capital. Other significant items that
impacted cash from operations included an $8.7 million federal income tax refund from taxes overpaid
at December 31, 2006, a $5.8 million contribution to Central Hudsons pension plan in September
2007, and $4.8 million spent on MGP site remediation in the first nine months of 2007.
Net cash used in investing activities was $57.1 million in the first nine months of 2007. $61.6 million
of this total was for capital expenditures, $17.7 million was used for Griffiths acquisitions
and $4.0 million was issued in notes receivable to unconsolidated affiliates. These uses of cash
for investing were partially offset by net proceeds of $22.4 million from the sale of short-term
investments (used primarily to fund Griffiths acquisitions and pay dividends). Additionally,
proceeds from the sale of property and plant included the sale of a Griffith property for $3.6 million.
Net cash provided by financing activities was $29.9 million in the first nine months of 2007. $25.5
million was used to pay dividends. Net borrowings of $23.0 million in short-term debt and $33.0 million
in long-term debt were primarily used to fund Central Hudsons increased working capital and
capital expenditures and pay dividends.
Central Hudson  Cash Flow Summary
Changes in Central Hudsons cash and cash equivalents resulting from operating, investing, and
financing activities for the nine months ended September 30, 2007, are summarized in the following
chart:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Central Hudson                        | Nine
      Months
      Ended
      September
      2007 |         |  
| | ------------------------------------- | -------------------------------------------------------- | ------- | -
| |                                       |                                                         
| | Net Cash
      Provided By (Used In): |                                                          |         |  
| | Operating Activities                  | $                                                        | 14,119  |  
| | Investing
      Activities            |                                                          | (59,506 | )
| | Financing Activities                  |                                                          | 46,174  |  
| | Net change
      for the period       |                                                          | 787     |  
| | Balance at beginning of
      period  |                                                          | 1,710   |  
| | Balance
      at end of period        | $                                                        | 2,497   |  

|                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Central Hudsons cash increased by $0.8 million for the first nine months of 2007. Capital expenditures
and dividends were funded by a combination of cash from

|45
|--



|operations and long-term debt. Short-term debt was issued primarily to finance additional working capital
needs.
Net cash provided by operations was $14.1 million for the first nine months of 2007. Cash provided
by sales exceeded the periods net increase in working capital. Other significant items that
impacted cash from operations included an $8.7 million federal income tax refund from taxes overpaid
at December 31, 2006, a $5.8 million contribution to the pension plan in September 2007 and $4.8
million spent on MGP site remediation in the first nine months of 2007.
Net
cash used in investing activities of $59.5 million in the first nine months of 2007 was primarily
for capital expenditures.
Net cash provided by financing activities was $46.2 million in the first nine months of 2007. $9.2
million was used to pay dividends to CH Energy Group. Net borrowings of $23 million in short-term
debt and $33.0 million in long-term debt were primarily used to fund increased working capital and
capital expenditures.
Capitalization  Common Stock Repurchase Program
On July 27, 2007, the Board of Directors of CH Energy Group extended and amended the Common Stock Repurchase
Program of the Company, which was originally authorized on July 25, 2002 and further disclosed in
the caption Repurchase Program of Note 7  Capitalization  Common and
Preferred Stock to the Consolidated Financial Statements of the Corporations 10-K Annual
Report.
As amended, the Program authorizes the repurchase of up to 2,000,000 shares (excluding shares purchased
before July 31, 2007) or approximately 13% of the Companys outstanding common stock, from time
to time, during the next five years, i.e., through July 31, 2012. The extended and amended Program
is effective as of July 31, 2007.
Contractual Obligations
A review of capital resources and liquidity should also consider other contractual obligations and
commitments, which are further disclosed in Note 11  Commitments and Contingencies
to the Consolidated Financial Statements of the Corporations 10-K Annual Report and Note 11
 Commitments and Contingencies of the Quarterly Report on Form 10-Q under the caption
Electric Purchase Commitments.
Central Hudson employer contributions for OPEB totaled $4.7 million during the nine months ended September
30, 2007. Of the $4.7 million, $1.7 million was contributed for the 2006 plan year and $3.0 million
was contributed for the 2007 plan year. The total contribution for the 2006 plan year was $4.9 million,
including the $1.7
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|46
|--



|million contribution funded in April of 2007. The determination of future funding depends on a number
of factors, including the discount rate, expected return on plan assets, medical claims assumptions
used, and corporate resources. Annual funding for the 2007 plan year is expected to approximate $6.7
million. This includes $1.9 million to be funded in the first quarter of 2008.
Financing Program
At September 30, 2007, CH Energy Group, on a consolidated basis, had $36 million of short-term debt
outstanding, cash and cash equivalents of $27.6 million, and short-term investments of $20.3 million.
CH Energy Group, the holding company, has a $75 million revolving credit agreement with several commercial
banks, which as of September 30, 2007, had no outstanding balance.
As of September 30, 2007, Central Hudson had short-term debt outstanding of $36 million, and cash and
cash equivalents of $2.5 million. The short-term debt outstanding is from the use of uncommitted
credit lines. Central Hudson has a $125 million revolving credit agreement with a group of commercial
banks, which as of September 30, 2007, had no outstanding balance. Central Hudson also has uncommitted
lines of credit with various banks. These agreements give Central Hudson competitive options to minimize
the cost of its short-term borrowing.
On March 23, 2007, Central Hudson issued $33 million of 30-year 5.80% Series F notes. The proceeds
were used to redeem maturing debt of $33 million, 5-year 5.87% Series D Notes, on March 28, 2007.
On September 14, 2007, Central Hudson issued an additional $33 million of 10-year 6.028% Series F
Notes. The proceeds will be used to finance ongoing investments in capital improvements.
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 Fitch Ratings.
CH Energy Group and Central Hudson believe they will be able to meet their 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, which as of September 30, 2007, had
no outstanding balance.
For additional information related to CH Energy Groups and Central Hudsons financing program,
please see Note 6  Short-term Borrowing Arrangements, Note 7  Capitalization
 Common and Preferred Stock, and Note 8  Capitalization  Long-Term
Debt to the Consolidated Financial Statements of the Corporations 10-K Annual Report.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|47
|--



|EARNINGS PER SHARE
CH Energy Group Consolidated
Earnings per Share (Basic)
|--------------------------------------------------------------------------
|                                                                          

|                                 |     
|-------------------------------- | ----
|
|
|2007                             | 2006
|
|Central Hudson  Electric        | $   
|Central Hudson  Natural Gas     |     
|Griffith                         |     
|Other Businesses and Investments |     
|                                 |     
|                                 | $   
|                                 |     

|                                 |     
|-------------------------------- | ----
|
|
|2007                             | 2006
|
|Central Hudson  Electric        | $   
|Central Hudson  Natural Gas     |     
|Griffith                         |     
|Other Businesses and Investments |     
|                                 |     
|                                 | $   
|                                 |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The decrease in CH Energy Groups consolidated earnings in the third quarter of 2007 largely results
from a number of regulatory mechanisms and unusual items that contributed $0.31 per share in 2006.
The remaining $0.12 per share variation was caused primarily by higher operating expenses, including
an increase in tree trimming activities in 2007 in order to improve electric reliability.
Regulatory mechanisms and unusual items had an even larger unfavorable impact on the year-to-date comparison,
causing a decrease in earnings of $(0.60) per share. This decrease was partially offset by a $0.46
per share increase in the first nine months of 2007, resulting primarily from the sale of petroleum
products and services by Griffith, and deliveries of electricity by Central Hudson, both of which
were impacted by favorable weather conditions. Central Hudsons earnings were also favorably
impacted by the recording of higher revenues pursuant to the 2006 Order, and lower storm-related
service restoration costs.

|48
|--



|Central Hudson
|--------------
|              

|           
|-----------
|
|
|2007       
|
|Electric   
|Natural Gas
|           
|Total      
|           
|           

|                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------
|Central Hudsons earnings decreased $(0.30) per share in the third quarter compared to the same
period in 2006, due to the following:
|                                                                                                                                     

|Regulatory Mechanisms and Unusual Events:  |   |       |  
|------------------------------------------ | - | ----- | -
|Release of Reserves in 2006                | $ | (0.11 | )
|Gain on Non-Utility Property Sales         |   | (0.07 | )
|Reversal of Reliability Assessment in 2006 |   | (0.03 | )
|Shared Earnings recorded in 2007           |   | 0.01  |  
|                                           |   |       |  
|Weather Impact on Sales                    |   | (0.03 | )
|Weather-Normalized Sales Growth            |   | 0.03  |  
|Tax Adjustments in 2006                    |   | (0.01 | )
|Higher Tree Trimming Expense in 2007       |   | (0.03 | )
|Lower Storm Restoration Expense in 2007    |   | 0.02  |  
|Interest Expense and Carrying Charges      |   | (0.03 | )
|Property and Use Taxes                     |   | (0.02 | )
|Other                                      |   | (0.03 | )
|                                           |   |      
|                                           | $ | (0.30 | )
|                                           |   |      

|           
|-----------
|
|
|2007       
|
|Electric   
|Natural Gas
|           
|Total      
|           
|           

|                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------
|Central Hudsons earnings year-to-date decreased $(0.21) per share in 2007 compared to the same
period in 2006, due to the following:
|                                                                                                                                     

|Regulatory Mechanisms and Unusual Events:          |   |       |  
|-------------------------------------------------- | - | ----- | -
|Release of Reserves in 2006                        | $ | (0.14 | )
|Revenues recorded in 2006 per prior Rate Agreement |   | (0.14 | )
|Reversal of Shared Earnings in 2006                |   | (0.08 | )
|Gain on Non-Utility Property Sales in 2006         |   | (0.07 | )
|Reversal of Reliability Assessment in 2006         |   | (0.03 | )
|Shared Earnings Recorded in 2007                   |   | (0.04 | )
|Gain on Non-Utility Property Sales in 2007         |   | 0.02  |  
|                                                   |   |       |  
|Weather-Normalized Sales Growth                    |   | 0.14  |  
|Rate Increases                                     |   | 0.13  |  
|Weather Impact on Sales                            |   | 0.03  |  
|Tax Adjustments in 2006                            |   | (0.01 | )
|Higher Tree Trimming Expense in 2007               |   | (0.08 | )
|Lower Storm Restoration Expense in 2007            |   | 0.12  |  
|Interest Expense and Carrying Charges              |   | (0.10 | )
|Property and Use Taxes                             |   | (0.02 | )
|Other                                              |   | 0.06  |  
|                                                   |   |      
|                                                   | $ | (0.21 | )
|                                                   |   |      

|49
|--



|Central Hudson experienced lower earnings resulting from regulatory mechanisms and unusual items, most
of which had favorably impacted 2006. These items caused a $(0.21) per share and $(0.46) per share
unfavorable variation in the third quarter of 2007 and nine months ended September 30, 2007, respectively.
The release of certain operating and tax reserves in 2006 and the recording of revenues in 2006 to
restore earnings towards the allowed rate of return lowered earnings compared to last year. The latter
mechanism was in accordance with the terms of the then-applicable rate plan and is no longer available
under the provisions of the 2006 Order. However, earnings for the nine month period ended September
30, 2007, were favorably impacted by the recording of higher revenues pursuant to the 2006 Order,
which provides greater revenue support for the cost of providing service to customers and recovery
for previously deferred costs. Higher weather-normalized sales growth and lower storm restoration
expenses as compared to last year also favorably affected year-to-date earnings.
Griffith
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|    
|----
|
|
|2007
|
|    
|    

|                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------
|Griffiths earnings decreased $(0.06) per share in the third quarter of 2007 compared to 2006, due to the following:
|                                                                                                                    

|Acquisitions(1)                                        | $ | (0.04 | )
|------------------------------------------------------ | - | ----- | -
|Reduction in Environmental Remediation Reserve in 2006 |   | (0.03 | )
|Margin on Petroleum Sales and Services                 |   | 0.01  |  
|                                                       |   |      
|                                                       | $ | (0.06 | )
|                                                       |   |      

|50
|--



|    
|----
|
|
|2007
|
|    
|    

|                                                                                             
|---------------------------------------------------------------------------------------------
|Griffiths earnings increased $0.11 per share in 2007 compared to 2006, due to the following:
|                                                                                             

|Margin on Petroleum Sales and Services                 | $ | 0.15  |  
|------------------------------------------------------ | - | ----- | -
|Weather Impact on Sales                                |   | 0.06  |  
|Acquisitions(1)                                        |   | 0.02  |  
|Operating Expenses                                     |   | (0.08 | )
|Reduction in Environmental Remediation Reserve in 2006 |   | (0.04 | )
|                                                       |   |      
|                                                       | $ | 0.11  |  
|                                                       |   |      

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) For the purposes of the above charts, Acquisitions represents the incremental effect
of acquisitions made by Griffith in 2007 and 2006.
Earnings for the quarter and year-to-date were impacted by the reduction of an environmental
reserve in 2006, which favorably impacted prior year earnings. Aside from this unusual item, year-to-date
earnings improved due to higher margins in 2007. These higher margins were partially offset by higher
operating expenses resulting from increased sales volumes.
Other Businesses and Investments
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|    
|----
|
|
|2007
|
|    
|    

|                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Earnings from CH Energy Group (the holding company) and CHECs partnership and other investment interests decreased $(0.07) per share in the third quarter of 2007 compared to 2006, due to the following:
|                                                                                                                                                                                                          

|Release of Reserves of a Former Subsidiary in 2006 | $ | (0.07 | )
|-------------------------------------------------- | - | ----- | -
|Cornhusker Energy Lexington Investment             |   | (0.02 | )
|Lyonsdale Investment                               |   | 0.01  |  
|Tax Adjustments                                    |   | 0.01  |  
|                                                   |   |      
|                                                   | $ | (0.07 | )
|                                                   |   |      

|51
|--



|Earnings per Share (Basic) | Nine Months Ended September 30, |     
|-------------------------- | ------------------------------- | ----
|
|
|
|
|                           | $                               | 0.35
|                           |                                

|                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Earnings year-to-date from CH Energy Group (the holding company) and CHECs partnership and other investment interests decreased $(0.04) per share in 2007 as compared to the same period in 2006, due to the following:
|                                                                                                                                                                                                                        

|Release of Reserves of a Former Subsidiary in 2006 | $ | (0.07 | )
|-------------------------------------------------- | - | ----- | -
|Gain on Sale of Non-Strategic Property in 2006     |   | (0.03 | )
|Cornhusker Energy Lexington Investment             |   | (0.01 | )
|Lyonsdale Investment                               |   | 0.03  |  
|CH-Community Wind Energy Investment                |   | 0.01  |  
|Tax Adjustments                                    |   | 0.03  |  
|                                                   |   |      
|                                                   | $ | (0.04 | )
|                                                   |   |      

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Earnings per share from CH Energy Groups other unregulated businesses for the third quarter and
nine months ended September 30, 2007 decreased $(0.07) and $(0.04), respectively, largely due to
extinguishments in 2006 of certain operating and tax contingent liabilities related to CH Resources,
Inc., a former CH Energy Group subsidiary, which was sold in May 2002.
RESULTS OF OPERATIONS
The following discussions and analyses include explanations of significant changes in revenues and
expenses between the three and nine months ended September 30, 2007, and the three and nine months
ended September 30, 2006, for Central Hudsons regulated electric and natural gas businesses.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|Central Hudson
      Income Statement Variances | Three months ended 
      September 30,
      2007 over/(under) 2006 |        | Nine months ended 
      September 30,
      2007 over/(under) 2006 | 
|----------------------------------------------- | -------------------------------------------------------------------- | ------ | ------------------------------------------------------------------- | 
|
|
|                                               
|Operating
      Revenues                        | $                                                                    | 16,464 |                                                                     | 
|                                               
|Operating Expenses                              |                                                                      |        |                                                                     | 
|Purchased
      electric, fuel and natural gas  |                                                                      | 14,779 |                                                                     | 
|                                               
|Depreciation and Amortization                   |                                                                      | 13     |                                                                     | 
|                                               
|Other
      operating expenses                  |                                                                      | 6,878  |                                                                     | 
|Total operating expenses                        | $                                                                    | 21,670 |                                                                     | 
|                                               
|Operating
      Income                          |                                                                      | (5,206 | )                                                                   | 
|                                               
|Other income, net                               |                                                                      | (142   | )                                                                   | 
|                                               
|Interest
      Charges                          |                                                                      | 693    |                                                                     | 
|                                               
|Income before income tax                        |                                                                      | (6,041 | )                                                                   | 
|                                               
|Income
      Taxes                              |                                                                      | (1,373 | )                                                                   | 
|                                               
|Net (loss)/income                               | $                                                                    | (4,668 | )                                                                   | 

|52
|--



|Central Hudson
Delivery and Sales Volumes
Delivery and sales volumes for Central Hudson vary in response to weather conditions and customer behavior.
Electric deliveries typically peak in the summer and deliveries of natural gas used for heating purposes
typically peak in the winter. Sales also vary as customers respond to the price of the particular
energy product and changes in local economic conditions.
The following chart reflects the change in the level of electric and natural gas deliveries for
Central Hudson for the three and nine months ended September 30, 2007, as compared to the same period
for 2006. Deliveries of electricity and natural gas to residential and commercial customers contribute
the most to Central Hudsons earnings. Industrial sales and interruptible sales have a negligible
impact on earnings.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                         | Increase (Decrease) from 2006
      Three Months Ended
      September 30, 2007 |    | Increase (Decrease) from 2006
      Nine Months Ended
      September 30, 2007 |    
|------------------------ | ------------------------------------------------------------------------------- | -- | ------------------------------------------------------------------------------ | ---
|
|                        
|
|
|                        
|Residential              | (4                                                                              | )% |                                                                                | 13%
|                        
|Commercial               | (1                                                                              | )% |                                                                                | 0% 
|                        
|Industrial and Other (a) | (1                                                                              | )% |                                                                                | 19%
|                         |                                                                                 |    |                                                                                |    
|                        
|Total Deliveries         | (3                                                                              | )% |                                                                                | 11%
|                         |                                                                                 |    |                                                                                |    

|                                                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)  Includes interruptible natural gas deliveries.
In the third quarter of 2007, electric deliveries to residential and commercial customers decreased
due primarily to cooler weather as compared to last year. This

|53
|--



|was partially offset by an increase in non-weather related usage per customer and modest customer growth.
Residential cooling degree-days, although near normal levels for this period, decreased 15% over
the prior year with most of the decrease occurring in the months of August and September.
Natural
gas deliveries to residential customers increased due to an increase in usage and modest customer
growth. Natural gas sales to firm customers in the third quarter, which is a non-heating season,
represent approximately 8% of annual natural gas sales. The increase in industrial and other sales
is due to a 20% increase in sales to interruptible customers, largely for use in electric generation.
Electric
deliveries to residential and commercial customers were higher during the nine months ended September
30, 2007, due to colder weather in the months of April and May, an increase in non-weather related
usage per customer and modest customer growth. This increase was partially offset by the impact of
weather that was cooler than last year, primarily during the months of August and September. Residential
electric heating degree-days increased 4% as compared to last year and residential cooling degree-days
decreased 10%.
Deliveries of natural gas for the nine months ended September 30, 2007, also increased due to higher
usage per customer, primarily from the effect of colder weather in the earlier part of the year,
and some customer growth. Residential natural gas heating degree-days increased 4% in this period
as compared to last year.
Revenues
Central Hudsons revenues consist of two major categories: those which offset specific expenses
in the current period (matching revenues), and those that impact earnings. Matching revenues recover
Central Hudsons actual costs for particular expenses. Any difference between these revenues
and the actual expenses incurred is deferred for future recovery from or refund to customers and
therefore does not impact earnings.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|Increase (Decrease) from 2006  $16.5 million increase
    (In Thousands)
    Three Months Ended September 30, 2007
|-------------------------------------------------------------------------------------------------------------------
|                                                                                                                   

|                                                 
|-------------------------------------------------
|
|
|                                                 
|Revenues
      with Matching Offsets: (a)        
|Energy
      cost adjustment                     
|Sales
      to other utilities                   
|Pension,
      OPEB and other
           revenues
|Subtotal                                         
|                                                 
|Revenues Impacting Earnings:                     
|Customer
      sales (b)                         
|Other
      regulatory mechanisms                
|Sales
      to other utilities                   
|Weather-hedging
      contracts                  
|Other
      revenues                             
|Subtotal                                         
|Total                                            
|
|                                                 

|54
|--



|Increase (Decrease) from 2006  $71.8 million increase
    (In Thousands)
    Nine Months Ended September 30, 2007
|------------------------------------------------------------------------------------------------------------------
|                                                                                                                  

|                                                 
|-------------------------------------------------
|
|
|                                                 
|Revenues
      with Matching Offsets: (a)        
|Energy
      cost adjustment                     
|Sales
      to other utilities                   
|Pension,
      OPEB and other
           revenues
|Subtotal                                         
|                                                 
|Revenues Impacting Earnings:                     
|Customer
      sales (b)                         
|Other
      regulatory mechanisms                
|Sales
      to other utilities                   
|Weather-hedging
      contracts                  
|Other
      revenues                             
|Subtotal                                         
|Total                                            
|

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Revenues with matching offsets do not affect earnings since they offset related costs, the most significant
being energy cost adjustment revenues, which provide for the recovery of purchased electricity and
natural gas costs. Other related costs are pensions, OPEB, and the cost of special programs authorized
by the PSC, which are funded with certain available credits. Changes in revenues from electric sales
to other utilities also do not affect earnings since any related profits or losses are returned or
charged, respectively, to customers. For natural gas sales to other utilities, 85% of such profits
are returned to customers.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | Includes an offsetting recovery of amounts related to back-out credits for retail access customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Electric
revenues increased for the three and nine months ended September 30, 2007, as compared to the same
periods in 2006 due to higher revenues with matching expense offsets. The increase reflects an increase
in energy cost adjustment revenues as well as an increase in revenues for pension and OPEB costs
resulting from the 2006 Order, which offset related costs and do not impact earnings. For both periods,
energy

|55
|--



|cost revenues increased due to higher delivery volumes resulting from the migration of a large industrial
customer from retail access to full service status. The increase for the nine months ended also reflects
higher wholesale costs.
Natural
gas revenues increased for the three months ended September 30, 2007, due to higher revenues with
matching expense offsets, primarily sales to other utilities and, as noted above, revenues for pension
and OPEB costs. For the nine months ended September, natural gas revenues increased by less than
1%. Increases in pension and OPEB revenues and revenues from customer sales were largely offset by
a decrease in revenues from sales to other utilities and energy cost adjustment revenues, the latter
due primarily to lower wholesale costs.
Operating Expenses
The most significant elements of Central Hudsons operating expenses are purchased electricity
and purchased natural gas; however, changes in these costs do not affect earnings since they are
offset by changes in related revenues recovered through Central Hudsons energy cost adjustment
mechanisms. Additionally, there are other costs that are matched to revenues largely from customer
billings, notably the cost of pensions and OPEBs.
Total utility operating expenses for the three months ended September 30, 2007, increased 14%. For
the nine months ended September 30, 2007, total utility operating expenses increased 16%. For both
periods, the primary reasons for the increase were higher energy, pension and OPEB costs, which as
discussed above, do not affect earnings. The following summarizes the change in operating expenses.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                            | Increase (Decrease) from 2006 |       
|------------------------------------------- | ----------------------------- | ------
|
|
|Expenses Currently Matched to Revenues (1): |                               |       
|Purchased electricity                       | $                             | 11,863
|Purchased natural gas                       |                               | 2,385 
|Pensions                                    |                               | 1,242 
|OPEBs                                       |                               | 335   
|New York State energy programs              |                               | 559   
|Stray voltage testing program               |                               | 12    
|Other matched expenses                      |                               | 833   
|                                            |                               |       
|Subtotal                                    | $                             | 17,229
|                                            |                               |       
|                                            |                               |       
|Other Expense Variations:                   |                               |       
|Tree trimming                               |                               | 911   
|Disposition of property                     |                               | 1,811 
|Injuries & damages reserve                  |                               | 1,294 
|Purchased natural gas                       |                               | 531   
|Increase in other expenses                  |                               | 361   
|Storm restoration expenses                  |                               | (467  
|                                            |                               |       
|Subtotal                                    | $                             | 4,441 
|                                            |                               |       
|                                           
|Total Increase in Operating Expenses        | $                             | 21,670
|                                            |                               |       

|                                                                                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  Includes expenses that, in accordance with the 2006 Order, are adjusted in the current period to equal the revenues earned for the applicable expenses.

|56
|--



|In addition to the required adjustment to match revenues collected from customers, the increase in
purchased electricity expense and natural gas expense for the quarter ended is also due to higher
volumes purchased. Purchased electricity costs year-to-date increased due to higher wholesale costs
and increased delivery volumes resulting from an increase in usage and customer growth. Natural gas
costs year-to-date, decreased due to lower wholesale costs, largely offset by an increase in volumes
purchased due to increased deliveries and customer growth. The increase in other revenue-matched
expenses, primarily pensions and OPEBs, is due to an increase in the level of expense recorded due
to a corresponding increase in revenues resulting from the 2006 Order.
The
increase in tree trimming expenses reflects Central Hudsons continuing efforts to improve system
reliability. These costs are included in the higher revenues resulting from the 2006 Order. The lower
storm restoration costs year-to-date resulted from fewer and less severe storms in 2007 as compared
to the same reliability period in 2006. Management also believes that the increased tree trimming
costs have contributed to the improved system reliability during storms.
Other Income
Other income and deductions for Central Hudson for the nine months ended September 30,
2007, as compared to the same period in 2006, decreased due to a decrease in pension-related regulatory
carrying charges due from customers. The decrease resulted from lower reserve balances upon which
these carrying charges are calculated. These balances were significantly reduced due to the recovery,
in accordance with the 2006 Order, of accumulated pension costs that were in excess of the revenues
earned for those costs.
The
change for the three months ended September 30, 2007, was not material.
Interest Charges
Central Hudsons interest charges increased for the three and nine months ended September 30,
2007, compared to 2006 largely due to an increase in long-term debt resulting from the issuance of
$27.0 million of medium-term notes in November
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|57
|--



|2006 and an increase in regulatory charges due to customers related to other postretirement benefits.
The latter results from an increase in the reserve balances upon which these carrying charges are
calculated.
Income Taxes
Income taxes for Central Hudson decreased in the third quarter of 2007 compared to 2006. The decrease
in income taxes was primarily due to a decrease in pre-tax book earnings and favorable impacts from
the tax benefits of the Medicare Part D prescription drug program. These favorable items were partially
offset by an unfavorable impact of flow-through items related to reserves.
Income taxes for Central Hudson decreased in the nine months ended September 30, 2007 compared to 2006.
The decrease in income taxes was primarily due to the favorable impact of items related to utility
plant at Central Hudson and favorable impacts from the tax benefits of the Medicare Part D prescription
drug program. These favorable items were partially offset by an unfavorable impact of flow-through
items related to reserves.
CH Energy Group
In addition to the impacts of Central Hudson discussed above, CH Energy Groups sales volumes,
revenues and operating expenses, income taxes and other income were impacted by Griffith and the
other businesses described below.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|58
|--



|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|
|
|
|                                                                                                          
|Operating
      Revenues                                                                                  
|                                                                                                          
|Operating Expenses                                                                                        
|                                                                                                          
|Purchased
      electric, fuel natural gas                                                                
|                                                                                                          
|Depreciation and Amortization                                                                             
|                                                                                                          
|Other
      operating expenses                                                                            
|                                                                                                          
|Total operating expenses                                                                                  
|                                                                                                          
|Operating
      Income                                                                                    
|                                                                                                          
|Other income, net                                                                                         
|                                                                                                          
|Interest
      Charges                                                                                    
|                                                                                                          
|Income before income taxes,
      
      preferred dividends of subsidiaries, 
      and minority interest
|                                                                                                          
|Income
      Taxes                                                                                        
|                                                                                                          
|Net (loss)/income                                                                                         
|                                                                                                          

|59
|--



|Griffith
      Sales Volumes
      Delivery and sales volumes for Griffith vary in response to weather conditions and customer behavior. Deliveries of petroleum products used for heating purposes typically peak in the winter. Sales also vary as customers respond to the price of the particular energy product and changes in local economic conditions.
    Changes in sales volumes of petroleum products, including the impact of acquisitions, are set forth below.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                        | Griffith Sales Volumes |  
|----------------------- | ---------------------- | -
|
|                       
|
|
|
|
|Heating Oil             |                        |  
|Base Company Volume     | -9                     | %
|Acquisitions Volume     | 14                     | %
|
|Total Heating Oil       | 5                      | %
|
|                        |                        |  
|Motor Fuels             |                        |  
|Base Company Volume     | -11                    | %
|Acquisitions Volume     | 6                      | %
|
|Total Motor Fuels       | 5                      | %
|
|                        |                        |  
|Propane and Other       |                        |  
|Base Company Volume     | 40                     | %
|Acquisitions Volume     | 1                      | %
|
|Total Propane and Other | 41                     | %
|
|                        |                        |  
|Total                   |                        |  
|Base Company Volume     | -10                    | %
|Acquisitions Volume     | 8                      | %
|
|Total                   | -2                     | %
|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1  For the purposes of this chart, Base Company means Griffith as constituted at January

1, 2006 (i.e., without any impact from acquisitions made by Griffith in 2007 and 2006).
2  For the purposes of this chart, Acquisition represents the incremental effect of
acquisitions made by Griffith in 2007 and 2006.
Sales of petroleum products decreased 2% in the third quarter of 2007 compared to the third quarter
of 2006. This was primarily a result of a decrease in sales of motor fuels, partially offset by an
increase in the sale of heating oil. The increase in heating oil

|60
|--



|is attributable primarily to acquisitions made in 2007. Sales of propane increased due primarily to
the addition of a large commercial account in 2007.
Sales of petroleum products increased 9% in the nine months ended September 30, 2007 compared to the
nine months ended September 30, 2006. This was primarily a result of an increase in sales of heating
oil, largely attributable to acquisitions made in 2007 and colder weather in 2007 as compared to
2006, partially offset by a decrease in motor fuel sales. Sales of propane increased due primarily
to colder weather in 2007 as compared to 2006 and the addition of a large commercial account in 2007.
There was a 12% increase in heating degree-days in 2007 as compared to 2006. Degree-day variation
is adjusted for the delay between the time actual weather occurs and the time of product delivery.
Revenues
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Griffith RevenuesIncrease (Decrease) from 2006(In Thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                          | Three Months Ended
      September 30, 2007 |        | Nine Months
      Ended
      September 30, 2007 |  
|------------------------- | ------------------------------------------- | ------ | ------------------------------------------------ | -
|
|Heating Oil               |                                             |        |                                                  |  
|Base Company 1            | $                                           | (921   | )                                                | $
|Acquisitions 2            |                                             | 1,923  |                                                  |  
|
|Total Heating Oil         | $                                           | 1,002  |                                                  | $
|
|Motor Fuels               |                                             |        |                                                  |  
|Base Company 3            | $                                           | (2,357 | )                                                | $
|Acquisitions              |                                             | 3,072  |                                                  |  
|
|Total Motor Fuels         | $                                           | 715    |                                                  | $
|
|Service Revenues          |                                             |        |                                                  |  
|Base Company              | $                                           | 175    |                                                  | $
|Acquisitions              |                                             | 1,168  |                                                  |  
|
|Total Service Revenues    |                                             | 1,343  |                                                  | $
|
|Other                     |                                             |        |                                                  |  
|Propane                   | $                                           | 262    |                                                  | $
|Weather-Hedging Contracts |                                             |       |                                                  |  
|Other                     |                                             | 138    |                                                  |  
|
|Total Other               | $                                           | 400    |                                                  | $
|
|                          |                                             |        |                                                  |  
|Total Revenues            | $                                           | 3,460  |                                                  | $
|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1  For the purposes of this chart, Base Company means Griffith as constituted at January

1, 2006 (i.e., without any impact from acquisitions made by Griffith in 2007 and 2006).
2  For the purposes of this chart, Acquisitions represents the incremental effect of
acquisitions made by Griffith in 2007 and 2006.
3 Although year-to-date base company motor fuels
  revenues decreased, the decrease was more than offset by a corresponding decrease in operating expenses
  related to those revenues.

|61
|--



|Revenues, net of the effect of weather hedging contracts, increased in the three and nine months ended
September 30, 2007 compared to the three and nine months ended September 30, 2006 due largely to
an increase in revenues from petroleum products resulting from an increase in heating oil volumes,
and revenues from acquisitions made in 2006 and 2007. These increases were partially offset by a
decline in revenues from the sale of motor fuels due to a decrease in sales volumes.
Operating Expenses
For the three months ended September 30, 2007, operating expenses increased $4.1 million, or 6%, from
$68.4 million in 2006 to $72.5 million in 2007. The cost of petroleum products increased $1.6 million,
or 3%, due to an increase in sales volume resulting primarily from acquisitions.
Other operating expenses increased $2.5 million in 2007 due primarily to an increase in expenses
associated with the increased sales volumes noted above.
For the nine months ended September 30, 2007, operating expenses increased $24.8 million, or 10.3%,
from $241.4 million in 2006 to $266.2 million in 2007. The cost of petroleum products increased $16.6
million, or 8.6%, due to an increase in sales volume primarily due to the impact of acquisitions
and colder weather in 2007 as compared to 2006. Other operating expenses increased $8.2 million in
2007 due primarily to an increase in expenses associated with the increased sales volumes noted above.
Other Businesses and Investments
Revenues and Operating Expenses
On April 12, 2006, CHEC purchased a 75% interest in Lyonsdale from Catalyst Renewables Corporation.
The operating results of Lyonsdale have been consolidated in the Financial Statements of CH Energy
Group since the date of purchase. Results for the three months ended September 30, 2007, reflect
operating revenues of $2.8 million, total operating expenses of $2.5 million, and net favorable tax
benefits of $0.3 million, including production tax credits of $0.4 million. Results for the nine
months ended September 30, 2007, reflect operating revenues of $6.8 million, total operating expenses
of $6.9 million, and favorable tax benefits of $1.2 million, including production tax credits of
$0.9 million.
Other Income
Other income and deductions for the balance of CH Energy Group, primarily the holding company and CHECs
investments in partnerships and other investments (other than Griffith), decreased $0.7 million for
the nine months ended September 30, 2007. The decrease is primarily attributable to the sale of non-strategic
property in 2006, and
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|62
|--



|decreases in investment income related to the redeployment of capital to CH Energy Groups subsidiaries
and renewable energy investments. Specifically, results of CH Energy Groups investment in Cornhusker
Energy Lexington, LLC declined due to increasing corn costs and declining ethanol prices, representing
the primary raw material and output, respectively. This decrease was partially offset by an increase
in income from CHECs investments in renewable energy and energy efficiency projects.
The change for the three months ended September 30, 2007, was not material.
Income Taxes
Income taxes for CH Energy Group decreased $2.5 million in the third quarter of 2007 compared to 2006.
The decrease in income taxes was primarily due to lower taxes at Central Hudson and a decrease in
pre-tax book earnings at Griffith and CH Energy Groups other businesses and investments. These
favorable items were partially offset by an unfavorable impact of flow-through items related to reserves.
Income taxes for CH Energy Group decreased $3.2 million in the nine months ended September 30,
2007, 2007, compared to the same period in 2006, primarily due to lower taxes at Central Hudson and
the favorable impact of production tax credits at CHEC from its renewable energy portfolio. These
favorable items were partially offset by an unfavorable impact of flow-through items related to reserves.
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 CH Energy Groups dividend
payments. On March 30, 2007, the Board of Directors of CH Energy Group declared a quarterly
dividend of $0.54 per share, payable May 1, 2007, to shareholders of record as of April 10,
2007. On May 24, 2007, the Board of Directors of CH Energy Group declared a quarterly dividend of
$0.54 per share, payable August 1, 2007, to shareholders of record as of July 10, 2007.
On October 2, 2007, the Board of Directors of CH Energy Group declared a quarterly dividend of $0.54
per share, payable November 1, 2007, to shareholders of record as of October 12, 2007. Although this
dividend was declared at the beginning of the fourth quarter, it represents the third quarter 2007
dividend declaration.
OTHER MATTERS
Changes in Accounting Standards:  See Note 1  Summary of Significant Accounting Policies and Note 3  New
Accounting Standards and Other FASB Projects for discussion of relevant changes, which discussion
is incorporated by reference herein.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|63
|--



|FORWARD-LOOKING STATEMENTS
Statements included in this Quarterly Report on Form 10-Q and any 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 Exchange Act.
Forward-looking statements may be identified by words including anticipates, intends,
estimates, believes, projects, expects, plans,
assumes, seeks, and similar expressions. Forward-looking statements including,
without limitation, those relating to 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; fuel prices; corn and ethanol
prices; plant capacity factors; energy supply and demand; 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.
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 CH 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 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 CH Energy Group and Central Hudson evaluated
the effectiveness of the disclosure controls and procedures
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|64
|--



|(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 Corporations
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.
There were no changes to the Corporations internal control over financial reporting that occurred
during the Corporations last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Corporations internal control over financial reporting.
PART II  OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information about developments regarding certain legal proceedings, see Item 3 (Legal Proceedings)
of the Corporations 10-K Annual Report, and Note 11  Commitments and Contingencies
of that 10-K and/or Note 11  Commitments and Contingencies of this 10-Q.
Central Hudson:
Former Manufactured Gas Plant FacilitiesLittle Britain RoadOrange County LandfillAsbestos Litigation
CHEC:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|Griffiths remediation efforts at its Kable Oil bulk plant.
|-----------------------------------------------------------

|                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM 1A. RISK FACTORS
Central Hudsons Rate Plans Limit Its Ability to Recover Its Costs from Its Customers; If Central
Hudsons Sales Are Below Rate Plan Levels or Its Rate Plans Are Modified by State Regulatory
Authorities, Central Hudsons Revenues And Earnings May Be Lower Than Expected
|                                                                                                                                                                                                                                                                                                   

| | Description and Sources of Risk: Central Hudsons retail rates are regulated by the PSC. Rate plans generally may not be
changed during their respective terms. Therefore, rates cannot be modified for lower sales volumes
and/or higher expenses
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|65
|--



| | than those assumed in the Rate plan, absent circumstances such as an increase in expenses that meet
the PSCs requirements for filing for approval of deferral accounting.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                           
| | Any of the following could unfavorably impact Central Hudsons financial results.                                                                                         
| |                                                                                                                                                                           

| |  | Lower sales than reflected in the current rate agreement. Lower sales can occur due to changes in usage
patterns due to product prices or economic conditions or due to loss of major customers or addition
of fewer new customers than projected.        
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                           
| |  | Higher expenses, including carrying costs on capital invested, than reflected in current rates. Higher
expenses could result from storm activity or inflation above the projected rate for major expense
components such as labor or health care benefits.
| |   |                                                                                                                                                                                                                                                           

| | Potential Impacts: Central Hudson could have lower earnings and/or reduced cash flows if cost management and/or
other factors are not sufficient to alleviate the impact of the actions above.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------
|Commodity Price Changes May Adversely Impact the Profitability of CHECs Investment in Cornhusker
Energy Lexington Holdings, LLC
|                                                                                                                                

| | Description and Sources of Risk:  CHECs management believes that increases of wholesale corn prices and/or decreases in
ethanol prices are caused by a variety of factors, including, but not limited to the following:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                         

| |  | Actions by the federal government that reduce the demand for, or increase the supply of, ethanol. Such
actions could include, but are not limited to, a reduction in the required level of ethanol blending,
decreases in tax credits to refiners and/or reductions in tariffs on imported ethanol.                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                    
| |  | Demand for corn in excess of supply. This could be caused by, among other things (1) drought or other
acts of nature, (2) increased construction of new ethanol production facilities, or (3) governmental
actions that discourage raising corn for use in ethanol production (such as providing tax credits
for corn grown for human consumption).
| |   |                                                                                                                                                                                                                                                                                                                                                    
| |  | Volatility in domestic and/or foreign markets may result in increased corn prices and/or lower ethanol
prices                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                    

| | Potential Impacts: Prolonged increases in corn prices and/or decreases in ethanol prices could have a material
adverse impact on earnings that could, in turn, lead to an impairment of CHECs investment in
Cornhusker Energy Lexington Holdings, LLC.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|66
|--



|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**                                                                                                                                    
|------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                         |  |                                                                                                                                                            
|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.                                                                                                                  

|67
|--



|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 thereunto 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               

|                       
|-----------------------
|Dated: November 2, 2007

|68
|--



|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**                                                                                                                                    
|------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                         |  |                                                                                                                                                            
|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.                                                                                                                  

|69
|--