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, 1997

                                          OR

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

  For the transition period from               to

  Commission       Registrant, State of Incorporation,        I.R.S. Employer
  File Number       Address, and Telephone Number           Identification No.

   1-11377                   CINERGY CORP.                     31-1385023
                       (A Delaware Corporation)
                        139 East Fourth Street
                        Cincinnati, Ohio 45202
                            (513) 381-2000

   1-1232         THE CINCINNATI GAS & ELECTRIC COMPANY        31-0240030
                        (An Ohio Corporation)
                        139 East Fourth Street
                        Cincinnati, Ohio 45202
                            (513) 381-2000

   1-3543                    PSI ENERGY, INC.                  35-0594457
                       (An Indiana Corporation)
                        1000 East Main Street
                      Plainfield, Indiana 46168
                            (317) 839-9611

   2-7793          THE UNION LIGHT, HEAT AND POWER COMPANY     31-0473080
                       (A Kentucky Corporation)
                        139 East Fourth Street
                        Cincinnati, Ohio 45202
                            (513) 381-2000

  Indicate  by check mark  whether  the  registrants  (1) have filed all reports
  required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of
  1934  during the  preceding  12 months (or for such  shorter  period  that the
  registrants were required to file such reports),  and (2) have been subject to
  such filing requirements for the past 90 days. Yes X No

  This combined Form 10-Q is separately  filed by Cinergy Corp.,  The Cincinnati
  Gas & Electric Company,  PSI Energy, Inc., and The Union Light, Heat and Power
  Company. Information contained herein relating to any individual registrant is
  filed  by  such  registrant  on its  own  behalf.  Each  registrant  makes  no
  representation as to information relating to the other registrants.

  The Union Light,  Heat and Power  Company  meets the  conditions  set forth in
  General  Instruction  H(1)(a) and (b) of Form 10-Q and is therefore filing its
  company specific information with the reduced disclosure format.

  As of October 31, 1997, shares of Common Stock outstanding for each registrant
  were as listed:

               Company                                              Shares
  Cinergy Corp., par value $.01 per share                        157,679,129
  The Cincinnati Gas & Electric Company, par value
   $8.50 per share                                                89,663,086
  PSI Energy, Inc., without par value, stated value
   $.01 per share                                                 53,913,701
  The Union Light, Heat and Power Company, par value
   $15.00 per share                                                  585,333
  <PAGE>
  TABLE OF CONTENTS


   Item                                                               Page
  Number                                                             Number

         Glossary of Terms . . . . . . . . . . . . . . . . . . .       3

                           PART I.  FINANCIAL INFORMATION

    1    Financial Statements
         Cinergy Corp.
           Consolidated Balance Sheets . . . . . . . . . . . . .       7
           Consolidated Statements of Income . . . . . . . . . .       9
           Consolidated Statements of Changes in Common
             Stock Equity. . . . . . . . . . . . . . . . . . . .      10
           Consolidated Statements of Cash Flows . . . . . . . .      11
           Results of Operations . . . . . . . . . . . . . . . .      12
         The Cincinnati Gas & Electric Company
           Consolidated Balance Sheets . . . . . . . . . . . . .      23
           Consolidated Statements of Income . . . . . . . . . .      25
           Consolidated Statements of Cash Flows . . . . . . . .      26
           Results of Operations . . . . . . . . . . . . . . . .      27
         PSI Energy, Inc.
           Consolidated Balance Sheets . . . . . . . . . . . . .      34
           Consolidated Statements of Income . . . . . . . . . .      36
           Consolidated Statements of Cash Flows . . . . . . . .      37
           Results of Operations . . . . . . . . . . . . . . . .      38
         The Union Light, Heat and Power Company
           Balance Sheets. . . . . . . . . . . . . . . . . . . .      44
           Statements of Income. . . . . . . . . . . . . . . . .      46
           Statements of Cash Flows. . . . . . . . . . . . . . .      47
           Results of Operations . . . . . . . . . . . . . . . .      48
         Notes to Financial Statements . . . . . . . . . . . . .      51
    2    Management's Discussion and Analysis of Financial
           Condition and Results of Operations . . . . . . . . .      57

  PART II.  OTHER INFORMATION

    1    Legal Proceedings . . . . . . . . . . . . . . . . . . .      61
    6    Exhibits and Reports on Form 8-K. . . . . . . . . . . .      61
         Signature . . . . . . . . . . . . . . . . . . . . . . .      62


  <PAGE>
  GLOSSARY OF TERMS

  The following abbreviations or acronyms used in the text of this combined Form
  10-Q are defined below:

      TERM                                   DEFINITION_________________________

  1996 Form         Combined 1996 Annual Report on Form 10-K filed separately by
    10-K              Cinergy, CG&E, PSI, and ULH&P

  August 1997       An IURC order issued in August 1997
    Order

  Avon Energy       Avon Energy Partners Holdings, an Unlimited Liability
                      Company and its wholly-owned subsidiary Avon Energy
                      Partners PLC, a Limited Liability Company

  Beckjord          CG&E's W. C. Beckjord Station

  Btu               British thermal unit

  CAC               Citizens Action Coalition of Indiana, Inc.

  Cadence\tab        Cadence Network LLC
   \tab
  Capital &         Cinergy Capital & Trading, Inc. (a subsidiary of
    Trading           Investments)

  CERCLA            Comprehensive Environmental Response, Compensation and
                      Liability Act

  CG&E              The Cincinnati Gas & Electric Company (a subsidiary of
                      Cinergy)

  Cinergy, CIN,     Cinergy Corp.
    or Company

  Cinergy UK        Cinergy UK, Inc. (a subsidiary of Investments)
                      which holds Cinergy's 50% investment in Avon Energy

  Clean Coal        A joint arrangement by PSI and Destec Energy, Inc. for a
    Project           262-megawatt clean coal power generating facility located
                      at Wabash River Generating Station

  D&P               Duff & Phelps Credit Rating Co.

  December 1996     A PUCO order issued in December 1996 on CG&E's gas rate
    Order             proceeding

  December 1996     An IURC order issued in December 1996 on PSI's DSM
    DSM Order         proceeding

  DSM               Demand-side management

  EPA               U.S. Environmental Protection Agency

  FASB              Financial Accounting Standards Board

  February 1995     An IURC order issued in February 1995
    Order


 <PAGE>
  GLOSSARY OF TERMS (Continued)

      TERM                                   DEFINITION_________________________

  Fitch             Fitch Investors Service, Inc.

  GEP               Greenwich Energy Partners L.P.

  Gibson            PSI's Gibson Generating Station

  IGC               Indiana Gas Company, Inc.

  Investments       Cinergy Investments, Inc. (a subsidiary of Cinergy)

  IURC              Indiana Utility Regulatory Commission

  KPSC              Kentucky Public Service Commission

  kwh               Kilowatt-hour

  LANCEs            Debentures in the form of Liquid Asset Notes with Coupon
                      Exchange

  LIBOR             London Interbank Offered Rate

  M&R Fund          Maintenance and Replacement Fund

  Mcf               Thousand cubic feet

  MGP               Manufactured Gas Plant

  Miami Fort        CG&E's Miami Fort Generating Station

  Midlands          Midlands Electricity plc

  Moody's           Moody's Investors Service

  NAAQS             National Ambient Air Quality Standards

  NIPSCO            Northern Indiana Public Service Company

  NOx               Nitrogen Oxide

  Opinion 15        Accounting Principles Board Opinion 15, Earnings Per Share

  PSI               PSI Energy, Inc. (a subsidiary of Cinergy)

  PUCO              Public Utilities Commission of Ohio

  PUHCA             Public Utility Holding Company Act of 1935

  S&P               Standard & Poor's

  SEC               Securities and Exchange Commission

  September 1996    An IURC order issued in September 1996 on PSI's retail rate
    Order             proceeding

  SIP               State Implementation Plan

  Statement 14      Statement of Financial Accounting Standards No. 14,
                      Financial Reporting for Segments of a Business Enterprise


  <PAGE>
  GLOSSARY OF TERMS (Continued)

      TERM                                   DEFINITION_________________________

  Statement 128     Statement of Financial Accounting Standards No. 128,
                      Earnings Per Share

  Statement 130     Statement of Financial Accounting Standards No. 130,
                      Reporting Comprehensive Income

  Statement 131     Statement of Financial Accounting Standards No. 131,
                      Disclosures about Segments of an Enterprise and Related
                      Information

  UCC               The Indiana Office of the Utility Consumer Counselor

  ULH&P             The Union Light, Heat and Power Company (a wholly-owned
                      subsidiary of CG&E)

  UK                United Kingdom

  Zimmer            CG&E's William H. Zimmer Generating Station
  <PAGE>


  CINERGY CORP.
  AND SUBSIDIARY COMPANIES
  <PAGE>
  <PAGE>
  <TABLE>
  <CAPTION>
  CINERGY CORP.
  CONSOLIDATED BALANCE SHEETS
  (unaudited)


  ASSETS
                            September 30 December 31
                                    1997 1996
                             (dollars in thousands)
  <S>                                                     <C>          <C>
  Utility Plant - Original Cost
    In service
      Electric                                             $8,944,741   $8,809,786
      Gas                                                     737,681      713,829
      Common                                                  187,733      185,255
                                                            9,870,155    9,708,870
    Accumulated depreciation                                3,758,974    3,591,858
                                                            6,111,181    6,117,012
    Construction work in progress                             169,689      172,614
        Total utility plant                                 6,280,870    6,289,626

  Current Assets
    Cash and temporary cash investments                        58,234       19,327
    Restricted deposits                                         1,950        1,721
    Notes receivable                                              163          321
    Accounts receivable less accumulated provision
      for doubtful accounts of $11,401 at September 30,
      1997, and $10,618 at December 31, 1996                  378,164      199,040
    Materials, supplies, and fuel - at average cost
      Fuel for use in electric production                      57,771       71,730
      Gas stored for current use                               37,680       32,951
      Other materials and supplies                             79,651       80,292
    Property taxes applicable to subsequent year               30,895      123,580
    Prepayments and other                                      28,438       37,049
                                                              672,946      566,011

  Other Assets
    Regulatory assets
      Amounts due from customers - income taxes               368,338      377,194
      Post-in-service carrying costs and deferred
        operating expenses                                    180,477      186,396
      Coal contract buyout costs                              125,029      138,171
      Deferred merger costs                                    91,862       93,999
      Deferred demand-side management costs                   115,731      134,742
      Phase-in deferred return and depreciation                91,057       95,163
      Unamortized costs of reacquiring debt                    67,777       70,518
      Other                                                    57,120       72,483
    Investments in unconsolidated subsidiaries                469,420      592,660
    Other                                                     262,595      231,551
                                                            1,829,406    1,992,877

                                                           $8,783,222   $8,848,514
  <FN>
  The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>


  CINERGY CORP.


  CAPITALIZATION AND LIABILITIES
                                                            September 30    December 31
                                                                1997           1996
                                                              (dollars in thousands)
  <S>                                                       <C>            <C>
  Common Stock Equity
    Common stock - $.01 par value; authorized shares - 600,000,000;  outstanding
      shares - 157,679,129 at September 30, 1997, and
      December 31, 1996                                      $    1,577     $    1,577
    Paid-in capital                                           1,571,527      1,590,735
    Retained earnings                                           922,209        992,273
    Cumulative foreign currency translation adjustment           (1,234)          (131)
        Total common stock equity                             2,494,079      2,584,454

  Cumulative Preferred Stock of Subsidiaries
    Not subject to mandatory redemption                         178,116        194,232

  Long-term Debt                                              2,098,619      2,326,378
        Total capitalization                                  4,770,814      5,105,064

  Current Liabilities
    Long-term debt due within one year                           35,000        140,000
    Notes payable and other short-term obligations            1,245,345        922,217
    Accounts payable                                            480,585        305,420
    Accrued taxes                                               266,480        323,059
    Accrued interest                                             42,203         55,590
    Other                                                        65,465        114,653
                                                              2,135,078      1,860,939

  Other Liabilities
    Deferred income taxes                                     1,147,148      1,146,263
    Unamortized investment tax credits                          168,694        175,935
    Accrued pension and other postretirement
      benefit costs                                             287,353        263,319
    Other                                                       274,135        296,994
                                                              1,877,330      1,882,511

                                                             $8,783,222     $8,848,514
  </TABLE>
  <PAGE>

  <TABLE>
  <CAPTION>
  CINERGY CORP.
  CONSOLIDATED STATEMENTS OF INCOME
  (unaudited)


                                                Quarter Ended                 Year to Date              Twelve Months Ended
                                                 September 30                 September 30                  September 30
                                             1997           1996          1997           1996           1997           1996
                                                               (in thousands, except per share amounts)
  <S>                                    <C>              <C>          <C>            <C>
  Operating Revenues
    Electric                              $1,315,165       $724,917     $2,923,655     $2,060,471     $3,631,890     $2,699,657
    Gas                                       39,941         40,787        326,964        306,062        494,936        451,137
                                           1,355,106        765,704      3,250,619      2,366,533      4,126,826      3,150,794

  Operating Expenses
    Fuel used in electric production         197,116        184,093        507,464        539,350        681,364        710,556
    Gas purchased                             15,622         17,133        175,416        150,313        274,219        226,328
    Purchased and exchanged power            607,281         37,020        963,237         95,443      1,026,632        110,083
    Other operation                          157,089        129,009        478,989        423,769        653,654        572,376
    Maintenance                               42,498         45,903        139,553        137,709        195,752        192,055
    Depreciation                              72,385         70,811        216,112        211,603        287,272        281,011
    Amortization of phase-in deferrals         3,371          3,399         10,112         10,198         13,512         13,607
    Amortization of post-in-service
      deferred operating expenses              1,091           (930)         3,272         (2,637)         4,400         (2,997)
    Income taxes                              52,172         65,456        156,028        172,459        201,838        220,718
    Taxes other than income taxes             67,002         63,549        203,215        196,095        264,935        259,562
                                           1,215,627        615,443      2,853,398      1,934,302      3,603,578      2,583,299

  Operating Income                           139,479        150,261        397,221        432,231        523,248        567,495

  Other Income and Expenses - Net
    Allowance for equity funds used
      during construction                       (182)           358            189          1,206            208          2,444
    Post-in-service carrying costs              -               391           -             1,228             (5)         1,231
    Phase-in deferred return                   2,002          2,093          6,006          6,279          8,099          8,413
    Equity in earnings of
      unconsolidated subsidiary                3,782          8,014         42,462         10,447         57,445         10,447
    Income taxes                               3,211          3,538          7,655          9,085         18,106         10,493
    Other - net                               (4,172)        (4,758)       (14,879)       (18,384)       (36,959)       (19,211)
                                               4,641          9,636         41,433          9,861         46,894         13,817

  Income Before Interest and Other
    Charges                                  144,120        159,897        438,654        442,092        570,142        581,312

  Interest and Other Charges
    Interest on long-term debt                43,525         46,522        137,777        143,678        184,716        196,935
    Other interest                            16,542         10,305         43,839         18,497         56,511         22,803
    Allowance for borrowed funds used
      during construction                     (1,623)        (1,455)        (4,719)        (4,235)        (6,667)        (5,976)
    Preferred dividend requirements
      of subsidiaries                          3,142          6,495          9,617         19,941         12,856         26,710
                                              61,586         61,867        186,514        177,881        247,416        240,472

  Net Income Before Extraordinary Item    $   82,534       $ 98,030     $  252,140     $  264,211     $  322,726     $  340,840
  Extraordinary Item - Equity Share of
    Windfall Profits Tax (less applicable
    income taxes of $0) (Note 5)            (109,400)          -          (109,400)          -          (109,400)          -
  Net Income (Loss)                       $  (26,866)      $ 98,030     $  142,740     $  264,211     $  213,326     $  340,840
  Costs of Reacquisition of Preferred
    Stock of Subsidiary                         -           (18,175)          -           (18,175)          (216)       (18,175)
  Net Income (Loss) Applicable to
    Common Stock                          $  (26,866)      $ 79,855     $  142,740     $  246,036     $  213,110     $  322,665

  Average Common Shares Outstanding          157,679        157,679        157,679        157,678        157,679        157,633

  Earnings Per Common Share
    Net income before extraordinary item  $     0.53       $   0.63     $     1.60     $     1.68     $     2.04     $     2.17
    Extraordinary item                         (0.69)           -            (0.69)           -            (0.69)           -
    Net income (loss)                     $    (0.16)      $   0.63     $     0.91     $     1.68     $     1.35     $     2.17
    Costs of reacquisition of preferred
      stock of subsidiary                        -            (0.12)           -            (0.12)           -            (0.12)
    Net income (loss) applicable to
      common stock                        $    (0.16)      $   0.51     $     0.91     $     1.56     $     1.35     $     2.05

  Dividends Declared Per Common Share     $     0.45       $   0.43     $     1.35     $     1.29     $     1.80     $     1.72
  <FN>
  The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
  </FN>
</TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  CINERGY CORP.
  CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
  (unaudited)

                                                                                       Cumulative
                                                                                        Foreign
                                                                                        Currency
                                         Common         Paid-in         Retained       Translation    Total Common
                                         Stock          Capital         Earnings       Adjustment     Stock Equity
                                                                  (dollars in thousands)
  <S>                                   <C>          <C>              <C>              <C>            <C>

  Quarter Ended September 30, 1997

  Balance July 1, 1997                   $1,577       $1,570,533       $1,019,957       $  (720)       $2,591,347
  Net loss                                                                (26,866)                        (26,866)
  Dividends on common stock (See page
    9 for per share amounts)                                              (71,000)                        (71,000)
  Translation adjustments                                                                  (514)             (514)
  Other                                                      994              118                           1,112

  Balance September 30, 1997             $1,577       $1,571,527       $  922,209       $(1,234)       $2,494,079

  Quarter Ended September 30, 1996

  Balance July 1, 1996                   $1,577       $1,594,920       $  981,003       $  (567)       $2,576,933
  Net income                                                               98,030                          98,030
  Dividends on common stock (See page
    9 for per share amounts)                                              (67,802)                        (67,802)
  Translation adjustments                                                                   (17)              (17)
  Costs of reacquisition of preferred
    stock of subsidiary                                                   (18,175)                        (18,175)
  Other                                                   (2,527)             (17)                         (2,544)

  Balance September 30, 1996             $1,577       $1,592,393       $  993,039       $  (584)       $2,586,425

  Nine Months Ended September 30, 1997

  Balance January 1, 1997                $1,577       $1,590,735       $  992,273       $  (131)       $2,584,454
  Net income                                                              142,740                         142,740
  Dividends on common stock (See page
    9 for per share amounts)                                             (212,910)                       (212,910)
  Translation adjustments                                                                (1,103)           (1,103)
  Other                                                  (19,208)             106                         (19,102)

  Balance September 30, 1997             $1,577       $1,571,527       $  922,209       $(1,234)       $2,494,079

  Nine Months Ended September 30, 1996

  Balance January 1, 1996                $1,577       $1,597,050       $  950,216       $   -          $2,548,843
  Net income                                                              264,211                         264,211
  Issuance of 8,988 shares of common
    stock - net                                              311                                              311
  Dividends on common stock (See page
    9 for per share amounts)                                             (203,402)                       (203,402)
  Translation adjustments                                                                  (584)             (584)
  Costs of reacquisition of preferred
    stock of subsidiary                                                   (18,175)                        (18,175)
  Other                                                   (4,968)             189                          (4,779)

  Balance September 30, 1996             $1,577       $1,592,393       $  993,039       $  (584)       $2,586,425

  Twelve Months Ended September 30, 1997

  Balance October 1, 1996                $1,577       $1,592,393       $  993,039       $  (584)       $2,586,425
  Net income                                                              213,326                         213,326
  Dividends on common stock (See page
    9 for per share amounts)                                             (283,866)                       (283,866)
  Translation adjustments                                                                  (650)             (650)
  Costs of reacquisition of preferred
    stock of subsidiary                                                      (216)                           (216)
  Other                                                  (20,866)             (74)                        (20,940)

  Balance September 30, 1997             $1,577       $1,571,527       $  922,209       $(1,234)       $2,494,079

  Twelve Months Ended September 30, 1996

  Balance October 1, 1995                $1,572       $1,585,470       $  941,652       $  -           $2,528,694
  Net income                                                              340,840                         340,840
  Issuance of 539,343 shares of common
    stock - net                               5           11,920                                           11,925
  Common stock issuance expenses                             (38)                                             (38)
  Dividends on common stock (See page
    9 for per share amounts)                                             (271,002)                       (271,002)
  Translation adjustments                                                                  (584)             (584)
  Costs of reacquisition of preferred
    stock of subsidiary                                                   (18,175)                        (18,175)
  Other                                                   (4,959)            (276)                         (5,235)

  Balance September 30, 1996             $1,577       $1,592,393       $  993,039       $  (584)       $2,586,425

  <FN>
  The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  CINERGY CORP.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (unaudited)

                                                            Year to Date          Twelve Months Ended
                                                            September 30              September 30
                                                          1997         1996         1997         1996
                                                                        (in thousands)
  <S>                                                 <C>         <C>           <C>          <C>
  Operating Activities
    Net income                                         $ 142,740   $ 264,211     $ 213,326    $ 340,840
    Items providing (using) cash currently:
      Depreciation                                       216,112     211,603       287,272      281,011
      Deferred income taxes and investment tax
        credits - net                                      4,698      34,061        18,549       34,636
      Equity in unconsolidated subsidiary                (17,309)    (10,447)      (32,292)     (10,447)
      Extraordinary item - equity share of windfall
        profits tax                                      109,400        -          109,400         -
      Allowance for equity funds used during
        construction                                        (189)     (1,206)         (208)      (2,444)
      Regulatory assets - net                             57,316        (450)       97,048        9,845
      Changes in current assets and current
        liabilities
          Restricted deposits                               (229)       (357)         (230)      (1,400)
          Accounts and notes receivable, net of
            reserves on receivables sold                (180,916)    227,237      (275,404)     123,562
          Materials, supplies, and fuel                    9,871      23,525        30,351       48,522
          Accounts payable                               175,165      (5,959)      218,405       89,126
          Litigation settlement                             -           -          (80,000)        -
          Accrued taxes and interest                      22,719      (8,734)       36,922       19,678
      Other items - net                                  (25,845)    (32,556)       44,557       (4,889)
            Net cash provided by operating
              activities                                 513,533     700,928       667,696      928,040

  Financing Activities
    Issuance of common stock                                -            311          -          11,887
    Issuance of long-term debt                              -           -          150,217         -
    Funds on deposit from issuance of long-term debt        -            973          -          86,276
    Retirement of preferred stock of subsidiaries        (16,182)   (209,559)      (19,110)    (209,567)
    Redemption of long-term debt                        (336,312)   (207,583)     (365,912)    (307,863)
    Change in short-term debt                            323,128     651,654       243,891      533,454
    Dividends on common stock                           (212,910)   (203,402)     (283,866)    (271,002)
            Net cash provided by (used in)
              financing activities                      (242,276)     32,394      (274,780)    (156,815)

  Investing Activities
    Construction expenditures (less allowance
      for equity funds used during construction)        (215,389)   (203,977)     (334,425)    (296,939)
    Deferred demand-side management costs                (16,961)    (32,426)      (28,879)     (49,557)
    Investment in unconsolidated subsidiary                 -       (503,349)         -        (503,349)
    Sale of investment in Argentine utility                 -           -             -          19,799
            Net cash used in investing activities       (232,350)   (739,752)     (363,304)    (830,046)

  Net increase (decrease) in cash and
    temporary cash investments                            38,907      (6,430)       29,612      (58,821)

  Cash and temporary cash investments at
    beginning of period                                   19,327      35,052        28,622       87,443

  Cash and temporary cash investments at
    end of period                                      $  58,234   $  28,622     $  58,234    $  28,622
  <FN>
  The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  CINERGY CORP.

  Below is  information  concerning the  consolidated  results of operations for
  Cinergy for the quarter,  nine months,  and twelve months ended  September 30,
  1997.  For  information  concerning  the results of operations for each of the
  other  registrants  for the  same  quarter  and  nine  months  ended,  see the
  discussion  under the heading  RESULTS OF  OPERATIONS  following the financial
  statements of each company.

  RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales increased  165.9% for the quarter ended September 30, 1997, from the
  comparable period of last year,  primarily  reflecting  increased  activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power sales for resale.  Also contributing to the higher kwh sales levels were
  increased industrial and commercial sales,  primarily reflecting growth in the
  primary  metals sector and an increase in the number of commercial  customers,
  respectively.  These increases were partially offset by decreased  residential
  sales for the quarter ended September 30, 1997, as compared to the same period
  last year, as a result of mild weather.

  Mcf Sales and Transportation

  Mcf gas sales for the quarter ended  September 30, 1997,  decreased 1.5% while
  Mcf  transportation  volumes increased 12.6%, when compared to the same period
  in 1996. Industrial sales declined and gas transportation volumes increased as
  customers continued the trend of purchasing gas directly from suppliers, using
  transportation services provided by Cinergy.

  Operating Revenues

  Electric Operating Revenues

  Electric  operating  revenues  for  the  quarter  ended  September  30,  1997,
  increased  $590  million  (81%),  as  compared  to the same  period last year,
  primarily as a result of the increased kwh sales as previously discussed. Also
  contributing  to the increase  were the effects of the December 1996 DSM Order
  and the September 1996 Order (as amended by the August 1997 Order).

  An analysis of electric operating revenues is shown below:

                                     Quarter
                               Ended September 30
                                  (in millions)

  Electric operating revenues - September 30, 1996             $  725
  Increase (Decrease) due to change in:
    Price per kwh
      Retail                                                       16
      Sales for resale
        Firm power obligations                                     (3)
        Non-firm power transactions                                 5
    Total change in price per kwh                                  18

    Kwh sales
      Retail                                                        9
      Sales for resale
        Firm power obligations                                      7
        Non-firm power transactions                               556
    Total change in kwh sales                                     572

  Electric operating revenues - September 30, 1997             $1 315

  Gas Operating Revenues

  The  increasing  trend of industrial  customers  purchasing  gas directly from
  producers and utilizing  Cinergy  facilities to transport the gas continues to
  put downward pressure on gas operating  revenues.  When Cinergy sells gas, the
  sales price  reflects the cost of gas purchased by Cinergy to support the sale
  plus the costs to deliver the gas. When gas is  transported,  Cinergy does not
  incur any purchased gas costs but delivers gas the customer has purchased from
  other sources.  Since providing  transportation  services does not necessitate
  recovery of gas purchased  costs, the revenue per Mcf transported is less than
  the  revenue  per Mcf  sold.  As a  result,  a higher  relative  volume of gas
  transported to gas sold translates into lower gas operating revenues.

  Operating Expenses

  Fuel Used in Electric Production

  Electric fuel costs increased $13 million (7%), as compared to the same period
  last year.

  An analysis of these fuel costs is shown below:

                                                   Quarter
                                             Ended September 30
                                                (in millions)

  Fuel expense - September 30, 1996 $184 Increase (Decrease) due to change in:
    Price of fuel                                      6
    Deferred fuel cost                                (1)
    Kwh generation                                     8

  Fuel expense - September 30, 1997                 $197

  Gas Purchased

  Gas purchased for the quarter ended  September 30, 1997,  decreased $2 million
  (9%), when compared to the same period last year, reflecting decreased volumes
  purchased  which were partially  offset by an increase in the average cost per
  Mcf of gas purchased.

  Purchased and Exchanged Power

  Purchased and  exchanged  power  increased  $570 million for the quarter ended
  September  30,  1997,  when  compared to the same period last year,  primarily
  reflecting  increased  purchases  of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Other Operation

  Other operation  expenses for the quarter ended September 30, 1997,  increased
  $28 million  (22%),  as compared to the same period of 1996.  This increase is
  due, in part, to higher other operation expenses of PSI, primarily  associated
  with the Clean Coal  Project,  amortization  of  deferred  DSM  expenses,  and
  amortization of deferred expenses associated with the Clean Coal Project,  all
  of which are being recovered in revenues pursuant to either the September 1996
  Order or the December 1996 DSM Order. The effect of PSI discontinuing deferral
  of certain  DSM-related  costs in accordance  with  provisions of the December
  1996  DSM  Order  also  added to the  increase.  Further  contributing  to the
  increase is the effect of CG&E curtailing certain  deferrals,  associated with
  its DSM  programs,  for new  participants  after  December 31, 1996,  due to a
  December  1996 order  issued by the PUCO that changed the  benefit/cost  tests
  that DSM programs must surpass in Ohio in order for certain  DSM-related costs
  to be eligible for deferral.

  Maintenance

  For the quarter ended September 30, 1997,  maintenance  expenses  decreased $3
  million  (7%),  when compared to the quarter  ended  September 30, 1996.  This
  decrease is due, in part, to reduced outage related  charges  associated  with
  PSI's electric production  facilities and reduced maintenance  associated with
  CG&E's electric production facilities.  Partially offsetting this decrease was
  an  increase  in  maintenance   expenses   associated   with  CG&E's  electric
  distribution facilities.

  Amortization of Post-in-service Deferred Operating Expenses

  Amortization  of  post-in-service  deferred  operating  expenses  reflects the
  amortization   and  related   recovery  in  rates  of  various   deferrals  of
  depreciation,  operation and maintenance  expenses  (exclusive of fuel costs),
  and property  taxes on certain  generating  units and other utility plant from
  the in-service date until the related plant was reflected in retail rates.

  Taxes Other Than Income Taxes

  The $3 million (5%)  increase in taxes other than income taxes for the quarter
  ended  September  30,  1997,  as compared  to the same  period  last year,  is
  primarily due to an increase in the Ohio Gross Receipts Tax.

  Other Income and Expenses - Net

  Equity in Earnings of Unconsolidated Subsidiary

  The decrease in equity in earnings of unconsolidated  subsidiary of $4 million
  (53%) for the quarter ended September 30, 1997, as compared to the same period
  in 1996,  primarily resulted from the successful closing, in the third quarter
  of 1996, of a power development project by Midlands' international development
  business.

  Interest and Other Charges

  Interest on Long-term Debt

  Interest on long-term  debt  decreased  $3 million (6%) for the quarter  ended
  September  30,  1997,  as compared  to the same  period  last year,  primarily
  reflecting the net redemption of approximately  $200 million of long-term debt
  by CG&E and PSI during the period from August 1996 through September 1997.

  Other Interest

  Other interest  increased $6 million (61%) for the quarter ended September 30,
  1997, as compared to the same period last year,  primarily reflecting interest
  expense on increased  short-term  borrowings used to fund CG&E's redemption of
  first  mortgage  bonds and Cinergy's  investment in  non-regulated  companies,
  including Avon Energy.

  Preferred Dividend Requirements of Subsidiaries

  Preferred dividend requirements of subsidiaries decreased $3 million (52%) for
  the quarter ended  September 30, 1997, as compared to the same period of 1996.
  This decrease is primarily  attributable to the reacquisition of approximately
  90% of the outstanding  preferred stock of CG&E,  pursuant to Cinergy's tender
  offer in September 1996.

  Extraordinary Item - Equity Share of Windfall Profits Tax

  Extraordinary item - equity share of windfall profits tax
  represents the one-time charge for the windfall profits
  tax levied against Midlands and recorded in the third
  quarter of 1997.  (See Note 5 of the "Notes to Financial
  Statements" in "Part I.  Financial Information.")

  Costs of Reacquisition of Preferred Stock of Subsidiary

  Costs of  reacquisition  of  preferred  stock  of  subsidiary  represents  the
  difference  between the par value of preferred stock of CG&E tendered pursuant
  to  Cinergy's  tender  offer in  September  1996 and the  purchase  price paid
  (including tender fees paid to dealer managers) by Cinergy for these shares.

  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales  increased  90.1% for the nine months ended September 30, 1997, from
  the comparable period of last year, primarily reflecting increased activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power sales for resale.  Also contributing to the higher kwh sales levels were
  increased industrial and commercial sales,  primarily reflecting growth in the
  food  products  and  primary  metals  sectors and an increase in the number of
  commercial customers,  respectively.  These increases were partially offset by
  decreased  residential sales for the first nine months of 1997, as compared to
  the same period last year, as a result of mild weather.

  Mcf Sales and Transportation

  Mcf gas sales for the nine months ended September 30, 1997,  decreased  11.2%,
  while Mcf  transportation  volumes  increased  9.1%, when compared to the same
  period in 1996.  Decreased Mcf sales reflect, in part, cold weather during the
  first nine months of 1996, as compared to mild weather  during the same period
  of 1997, and were partially  offset by increases in residential and commercial
  customers.  Industrial sales declined and gas transportation volumes increased
  as customers  continued the trend of purchasing  gas directly from  suppliers,
  using transportation services provided by Cinergy.


  Operating Revenues

  Electric Operating Revenues

  Electric  operating  revenues  for the nine months ended  September  30, 1997,
  increased  $864  million  (42%),  as  compared  to the same  period last year,
  primarily as a result of the increased kwh sales as previously discussed. Also
  contributing  to the increase  were the effects of the December 1996 DSM Order
  and the  September  1996 Order (as amended by the August 1997 Order),  and the
  return of  approximately  $13 million to customers in 1996 in accordance  with
  the February 1995 Order. The February 1995 Order required all retail operating
  income above a certain rate of return to be refunded to  customers.  Partially
  offsetting these increases was the operation of CG&E's fuel adjustment clauses
  reflecting a lower average cost per kwh.

  An analysis of electric operating revenues is shown below:

                                   Nine Months
                               Ended September 30
                                  (in millions)

  Electric operating revenues - September 30, 1996              $2 060
  Increase (Decrease) due to change in:
    Price per kwh
      Retail                                                        21
      Sales for resale
        Firm power obligations                                      (9)
        Non-firm power transactions                                 32
    Total change in price per kwh                                   44

    Kwh sales
      Retail                                                       (14)
      Sales for resale
        Firm power obligations                                       8
        Non-firm power transactions                                826
    Total change in kwh sales                                      820

  Electric operating revenues - September 30, 1997              $2 924

  Gas Operating Revenues

  For a discussion of the continued trend of downward  pressure on gas operating
  revenues from increased transportation services, refer to the discussion under
  the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for
  the Quarter Ended September 30, 1997."

  Gas  operating  revenues  increased $21 million (7%) for the nine months ended
  September 30, 1997,  when compared to the same period last year.  Contributing
  to the  increase  was the December  1996 Order  approving  an overall  average
  increase  in gas  revenues  for CG&E of 2.5%  ($9  million  annually)  and the
  operation of a gas cost recovery  mechanism  reflecting a higher  average cost
  per Mcf of gas purchased. This increase was partially offset by the previously
  discussed changes in Mcf gas sales.

  Operating Expenses

  Fuel Used in Electric Production

  Electric fuel costs decreased $32 million (6%), as compared to the same period
  last year.

  An analysis of these fuel costs is shown below:

                                                 Nine Months
                                             Ended September 30
                                                (in millions)

  Fuel expense - September 30, 1996 $539 Increase (Decrease) due to change in:
    Price of fuel                                      (1)
    Deferred fuel cost                                (37)
    Kwh generation                                      6

  Fuel expense - September 30, 1997                  $507

  Gas Purchased

  Gas  purchased  for the nine months ended  September  30, 1997,  increased $25
  million  (17%),  when  compared to the same period  last year,  reflecting  an
  increase  in the average  cost per Mcf of gas  purchased  which was  partially
  offset by a decrease in volumes purchased.

  Purchased and Exchanged Power

  Purchased and exchanged power increased $868 million for the nine months ended
  September  30,  1997,  when  compared to the same period last year,  primarily
  reflecting  increased  purchases  of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Other Operation

  Other  operation  expenses for the first nine months of 1997  increased by $55
  million  (13%),  as  compared  to the same  period of 1996.  This  increase is
  primarily due to higher other operation  expenses of PSI relating to the Clean
  Coal Project,  amortization  of deferred DSM  expenses,  and  amortization  of
  deferred  expenses  associated  with the Clean Coal Project,  all of which are
  being recovered in revenues pursuant to either the September 1996 Order or the
  December 1996 DSM Order. The effect of PSI  discontinuing  deferral of certain
  DSM-related costs in accordance with provisions of the December 1996 DSM Order
  also added to the increase. Further contributing to the increase is the effect
  of CG&E curtailing  certain deferrals,  associated with its DSM programs,  for
  new participants  after December 31, 1996, due to a December 1996 order issued
  by the PUCO that changed the benefit/cost tests that DSM programs must surpass
  in Ohio in order for certain DSM- related  costs to be eligible for  deferral.
  These  increases were  partially  offset by the effect of CGE's charges in the
  second quarter of 1996 for early retirement and severance programs.

  Amortization of Post-in-service Deferred Operating Expenses

  Amortization  of  post-in-service  deferred  operating  expenses  reflects the
  amortization   and  related   recovery  in  rates  of  various   deferrals  of
  depreciation,  operation and maintenance  expenses  (exclusive of fuel costs),
  and property  taxes on certain  generating  units and other utility plant from
  the in-service date until the related plant was reflected in retail rates.

  Other Income and Expenses - Net

  Equity in Earnings of Unconsolidated Subsidiary

  The increase in equity in earnings of unconsolidated subsidiary of $32 million
  for the nine months ended  September  30, 1997, as compared to the same period
  last year,  primarily  reflects the effect of the investment in Midlands for a
  full nine months in 1997.  Midlands was purchased during the second quarter of
  1996.

  Other - net

  The  change  in other - net of $4  million  (19%)  for the nine  months  ended
  September  30, 1997,  from the same period of 1996, is primarily due to a gain
  of approximately $4 million in 1997 on the sale of a PSI investment and a loss
  of  approximately  $5 million in 1996 on the sale of a foreign  subsidiary.  A
  number of miscellaneous items,  including expenses of approximately $2 million
  associated  with the  acquisition  of GEP's  assets,  in the nine months ended
  1997, partially offset these increases.

  Interest and Other Charges

  Other Interest

  Other interest  increased $25 million for the nine months ended  September 30,
  1997, as compared to the same period last year,  primarily reflecting interest
  expense on increased  short-term  borrowings used to fund CG&E's redemption of
  first  mortgage  bonds and Cinergy's  investment in  non-regulated  companies,
  including Avon Energy.

  Preferred Dividend Requirements of Subsidiaries

  Preferred  dividend  requirements of subsidiaries  decreased $10 million (52%)
  for the nine months ended  September  30, 1997, as compared to the same period
  of 1996.  This  decrease is primarily  attributable  to the  reacquisition  of
  approximately  90% of the  outstanding  preferred  stock of CG&E,  pursuant to
  Cinergy's tender offer in September 1996.

  Extraordinary Item - Equity Share of Windfall Profits Tax

  Extraordinary item - equity share of windfall profits tax
  represents the one-time charge for the windfall profits tax
  levied against Midlands and recorded in the third quarter of
  1997.  (See Note 5 of the "Notes to Financial Statements" in
  "Part I.  Financial Information.")

  Costs of Reacquisition of Preferred Stock of Subsidiary

  Costs of reacquisition  of preferred stock  represents the difference  between
  the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender
  offer in September  1996 and the purchase  price paid  (including  tender fees
  paid to dealer managers) by Cinergy for these shares.

  RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales increased 73.4% for the twelve months ended September 30, 1997, from
  the comparable period of last year, primarily reflecting increased activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power sales for resale.  Also contributing to the higher kwh sales levels were
  increased industrial and commercial sales,  primarily reflecting growth in the
  primary  metals sector and an increase in the number of commercial  customers,
  respectively.  These increases were partially offset by decreased  residential
  sales for the twelve months ended  September 30, 1997, as compared to the same
  period last year, as a result of mild weather.

  Mcf Sales and Transportation

  Mcf gas sales for the twelve months ended September 30, 1997,  decreased 10.7%
  while Mcf  transportation  volumes  increased 10.4%, when compared to the same
  period in 1996.  Decreased Mcf sales reflect, in part, cold weather during the
  twelve months ended  September  1996,  as compared to mild weather  during the
  same period of 1997, and were partially offset by an increase in the number of
  residential,  commercial and industrial  customers.  Industrial sales declined
  and gas transportation  volumes increased as customers  continued the trend of
  purchasing gas directly from suppliers, using transportation services provided
  by Cinergy.


  Operating Revenues

  Electric Operating Revenues

  Electric operating revenues increased $932 million (35%) for the twelve months
  ended  September 30, 1997,  from the comparable  period last year,  reflecting
  increased  kwh sales as  previously  discussed and the effects of the December
  1996 DSM  Order,  the  September  1996 Order (as  amended  by the August  1997
  Order),  and the return of  approximately  $16 million to customers in 1996 in
  accordance with the February 1995 Order.  The February 1995 Order required all
  retail  operating  income  above a certain  rate of return to be  refunded  to
  customers.  These  increases were partially  offset by the operation of CG&E's
  fuel adjustment clauses reflecting a lower average cost per kwh.

  An analysis of electric operating revenues is shown below:

                                                     Twelve Months
                                                   Ended September 30
                                                     (in millions)

  Electric operating revenues - September 30, 1996       $2 700
  Increase (Decrease) due to change in:
    Price per kwh
      Retail                                                 34
      Sales for resale
        Firm power obligations                               (9)
        Non-firm power transactions                          30
    Total change in price per kwh                            55

    Kwh sales
      Retail                                                 (8)
      Sales for resale
        Firm power obligations                               10
        Non-firm power transactions                         873
    Total change in kwh sales                               875

    Other                                                     2

  Electric operating revenues - September 30, 1997       $3 632

  Gas Operating Revenues

  For a discussion of the continued trend of downward  pressure on gas operating
  revenues from increased transportation services, refer to the discussion under
  the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for
  the Quarter Ended September 30, 1997." 


  Gas operating revenues increased $44 million (10%) for the twelve months ended
  September 30, 1997,  when compared to the same period last year.  Contributing
  to the  increase  was the December  1996 Order  approving  an overall  average
  increase  in gas  revenues  for CG&E of 2.5%  ($9  million  annually)  and the
  operation of a gas cost recovery  mechanism  reflecting a higher  average cost
  per Mcf of gas purchased. This increase was partially offset by the previously
  discussed changes in Mcf gas sales.

  Operating Expenses

  Fuel Used in Electric Production

  Electric fuel costs decreased $29 million (4%), as compared to the same period
  last year.

  An analysis of these fuel costs is shown below:

                                                Twelve Months
                                              Ended September 30
                                                (in millions)

  Fuel expense - September 30, 1996 $711 Increase (Decrease) due to change in:
    Price of fuel                                     (11)
    Deferred fuel cost                                (25)
    Kwh generation                                      6

  Fuel expense - September 30, 1997                  $681

  Gas Purchased

  Gas purchased for the twelve  months ended  September 30, 1997,  increased $48
  million  (21%) when  compared  to the same  period  last year,  reflecting  an
  increase  in the average  cost per Mcf of gas  purchased  which was  partially
  offset by a decrease in volumes purchased.

  Purchased and Exchanged Power

  Purchased and  exchanged  power  increased  $917 million for the twelve months
  ended  September  30,  1997,  when  compared  to the same period of last year,
  primarily  reflecting  increased  purchases  of  non-firm  power for resale to
  others as a result of increased  activity in  Cinergy's  power  marketing  and
  trading operations.

  Other Operation

  Other  operation  increased  $81  million  (14%) for the twelve  months  ended
  September 30, 1997, as compared to the same period last year, due, in part, to
  expenses  associated with the Clean Coal Project and increases  related to the
  amortization  of DSM  deferred  expenses  and  the  amortization  of  deferred
  expenses  associated  with the  Clean  Coal  Project,  all of which  are being
  recovered in revenues  pursuant to the  September  1996 Order and the December
  1996 DSM  Order.  Also  contributing  to the  increase  were the  charges  for
  disallowances  associated  with the December  1996 Order and the effect of PSI
  discontinuing  deferral  of  certain  DSM-related  costs  in  accordance  with
  provisions of the December 1996 DSM Order.  Further  adding to the increase is
  the  effect of CG&E  curtailing  certain  deferrals,  associated  with its DSM
  programs, for new participants after December 31, 1996, due to a December 1996
  order issued by the PUCO that changed the benefit/cost tests that DSM programs
  must surpass in Ohio in order for certain  DSM-  related  costs to be eligible
  for deferral.

  Amortization of Post-in-service Deferred Operating Expenses

  Amortization  of  post-in-service  deferred  operating  expenses  reflects the
  amortization   and  related   recovery  in  rates  of  various   deferrals  of
  depreciation,  operation and maintenance  expenses  (exclusive of fuel costs),
  and property  taxes on certain  generating  units and other utility plant from
  the in-service date until the related plant was reflected in retail rates.

  Other Income and Expenses - Net

  Equity in Earnings of Unconsolidated Subsidiary

  The increase in equity in earnings of unconsolidated subsidiary of $47 million
  for the twelve months ended September 30, 1997, as compared to the same period
  last year,  represents  the effect of the  investment  in Midlands  for a full
  twelve month period ending  September 1997.  Midlands was purchased during the
  second quarter of 1996.

  Other - net

  The change in other - net of $18  million  (92%) for the twelve  months  ended
  September 30, 1997, as compared to the same period last year, is primarily due
  to charges of  approximately  $14 million  associated  with the December  1996
  Order and increased  expenses of approximately $13 million associated with the
  sales of accounts  receivable for PSI,  CG&E,  and ULH&P.  These expenses were
  partially  offset by a gain of approximately $4 million in 1997 on the sale of
  a PSI investment and a loss of approximately $5 million in 1996 on the sale of
  a foreign subsidiary.

  Interest and Other Charges

  Interest on Long-term Debt

  Interest on long-term  debt  decreased  $12 million (6%) for the twelve months
  ended September 30, 1997, as compared to the same period last year,  primarily
  reflecting the net redemption of approximately  $360 million of long-term debt
  by CG&E, PSI, and ULH&P during the period from January 1996 through  September
  1997.

  Other Interest

  Other interest increased $34 million for the twelve months ended September 30,
  1997, as compared to the same period last year,  primarily reflecting interest
  expense on increased  short-term  borrowings used to fund CG&E's redemption of
  first  mortgage  bonds and Cinergy's  investment in  non-regulated  companies,
  including Avon Energy.

  Preferred Dividend Requirements of Subsidiaries

  The decrease in preferred dividend requirements of subsidiaries of $14 million
  (52%) for the twelve months ended  September 30, 1997, from the same period of
  1996, is primarily  attributable to the  reacquisition of approximately 90% of
  the outstanding preferred stock of CG&E, pursuant to Cinergy's tender offer in
  September 1996.

  Extraordinary Item - Equity Share of Windfall Profits Tax

  Extraordinary  item - equity  share of  windfall  profits tax  represents  the
  one-time  charge for the  windfall  profits tax levied  against  Midlands  and
  recorded in the third quarter of 1997.  (See Note 5 of the "Notes to Financial
  Statements" in "Part I.
  Financial Information.")

  Costs of Reacquisition of Preferred Stock of Subsidiary

  Costs of  reacquisition  of  preferred  stock  of  subsidiary  represents  the
  difference  between the par value of preferred stock of CG&E tendered pursuant
  to  Cinergy's  tender  offer in  September  1996 and the  purchase  price paid
  (including tender fees paid to dealer managers) by Cinergy for these shares.











  <PAGE>
  THE CINCINNATI GAS &
  ELECTRIC COMPANY
  AND SUBSIDIARY COMPANIES
  <PAGE>
  <TABLE>
  <CAPTION>
  THE CINCINNATI GAS & ELECTRIC COMPANY
  CONSOLIDATED BALANCE SHEETS
  (unaudited)


  ASSETS
                                                   September 30      December 31
                                                       1997             1996
                             (dollars in thousands)
  <S>                                              <C>              <C>
  Utility Plant - Original Cost
    In service
      Electric                                      $4,684,367       $4,631,605
      Gas                                              737,681          713,829
      Common                                           187,733          185,255
                                                     5,609,781        5,530,689
    Accumulated depreciation                         1,978,151        1,868,579
                                                     3,631,630        3,662,110
    Construction work in progress                      109,394           95,984
          Total utility plant                        3,741,024        3,758,094

  Current Assets
    Cash and temporary cash investments                  8,211            5,120
    Restricted deposits                                  1,173            1,171
    Notes receivable from affiliated companies           9,764           31,740
    Accounts receivable less accumulated
      provision for doubtful accounts of $10,373
      at September 30, 1997, and $9,178 at
      December 31, 1996                                176,933          117,912
    Accounts receivable from affiliated
      companies                                          8,725            2,453
    Materials, supplies, and fuel - at average cost
      Fuel for use in electric production               26,796           29,865
      Gas stored for current use                        37,680           32,951
      Other materials and supplies                      49,948           52,023
    Property taxes applicable to subsequent year        30,895          123,580
    Prepayments and other                               23,245           32,433
                                                       373,370          429,248

  Other Assets
    Regulatory assets
      Amounts due from customers - income taxes        332,677          344,126
      Post-in-service carrying costs and
        deferred operating expenses                    136,377          141,492
      Deferred merger costs                             16,975           17,709
      Deferred demand-side management costs             37,048           33,534
      Phase-in deferred return and depreciation         91,057           95,163
      Unamortized costs of reacquiring debt             37,472           38,439
      Other                                              8,192           19,545
    Other                                               97,823           89,908
                                                       757,621          779,916

                                                    $4,872,015       $4,967,258
  <FN>
  The accompanying notes as they relate to The Cincinnati Gas & Electric Company
  are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  THE CINCINNATI GAS & ELECTRIC COMPANY


  CAPITALIZATION AND LIABILITIES
                                                  September 30    December 31
                                                     1997            1996
                             (dollars in thousands)
  <S>                                            <C>              <C>
  Common Stock Equity
    Common stock - $8.50 par value; authorized shares - 120,000,000; outstanding
      shares - 89,663,086 at September 30, 1997, and
      December 31, 1996                           $  762,136       $  762,136
    Paid-in capital                                  534,612          536,276
    Retained earnings                                275,399          247,403
        Total common stock equity                  1,572,147        1,545,815

  Cumulative Preferred Stock
    Not subject to mandatory redemption               20,907           21,146

  Long-term Debt                                   1,222,831        1,381,108
        Total capitalization                       2,815,885        2,948,069

  Current Liabilities
    Long-term debt due within one year                  -             130,000
    Notes payable and other short-term
      obligations                                    358,000          214,488
    Notes payable to affiliated companies             35,435              103
    Accounts payable                                 246,398          166,064
    Accounts payable to affiliated companies          17,937           12,726
    Accrued taxes                                    171,721          267,841
    Accrued interest                                  26,870           30,570
    Other                                             28,087           32,191
                                                     884,448          853,983

  Other Liabilities
    Deferred income taxes                            776,653          767,085
    Unamortized investment tax credits               118,539          123,185
    Accrued pension and other postretirement
      benefit costs                                  175,473          165,282
    Other                                            101,017          109,654
                                                   1,171,682        1,165,206

                                                  $4,872,015       $4,967,258
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  THE CINCINNATI GAS & ELECTRIC COMPANY
  CONSOLIDATED STATEMENTS OF INCOME
  (unaudited)

                                            Quarter Ended                 Year to Date
                                             September 30                 September 30
                                          1997        1996            1997          1996
                                 (in thousands)
  <S>                                  <C>         <C>            <C>           <C>
  Operating Revenues
    Electric
      Non-affiliated companies          $667,301    $382,718       $1,467,043    $1,109,300
      Affiliated companies                 5,071       7,634           18,931        27,889
    Gas
      Non-affiliated companies            39,941      40,787          326,964       306,062
      Affiliated companies                     3           4                5             5
                                         712,316     431,143        1,812,943     1,443,256

  Operating Expenses
    Fuel used in electric production      88,741      82,449          219,338       267,007
    Gas purchased                         15,601      17,133          175,395       150,313
    Purchased and exchanged power
      Non-affiliated companies           295,528      10,355          460,299        24,021
      Affiliated companies                 3,094       5,821            7,731        14,576
    Other operation                       75,842      66,786          235,014       235,513
    Maintenance                           21,009      22,844           72,302        68,745
    Depreciation                          40,834      40,322          122,116       120,557
    Amortization of phase-in deferrals     3,371       3,399           10,112        10,198
    Amortization of post-in-service
      deferred operating expenses            823         786            2,468         2,431
    Income taxes                          36,014      41,675          106,851       115,902
    Taxes other than income taxes         52,980      49,820          159,001       154,733
                                         633,837     341,390        1,570,627     1,163,996

  Operating Income                        78,479      89,753          242,316       279,260

  Other Income and Expenses - Net
    Allowance for equity funds used
      during construction                    (52)        358              154         1,206
    Phase-in deferred return               2,002       2,093            6,006         6,279
    Income taxes                           3,290         819           10,026         4,299
    Other - net                           (3,782)     (1,505)         (12,818)       (6,095)
                                           1,458       1,765            3,368         5,689

  Income Before Interest                  79,937      91,518          245,684       284,949

  Interest
    Interest on long-term debt            25,973      30,304           83,849        93,392
    Other interest                         3,002         522            7,260         1,466
    Allowance for borrowed funds
      used during construction            (1,342)       (813)          (3,482)       (2,598)
                                          27,633      30,013           87,627        92,260

  Net Income                            $ 52,304    $ 61,505       $  158,057    $  192,689

  Preferred Dividend Requirement             217       3,475              653        10,423
  Costs of reacquisition of
    preferred stock                         -         18,175             -           18,175
  Net Income Applicable to Common
    Stock                               $ 52,087    $ 39,855        $ 157,404     $ 164,091
  <FN> The  accompanying  notes as they relate to The Cincinnati  Gas & Electric  Company are an integral part of
  these consolidated financial statements.
  </FN>
  <PAGE>
  </TABLE>
  <TABLE>
  <CAPTION>
  THE CINCINNATI GAS & ELECTRIC COMPANY
  CONSOLIDATED STATEMENTS OF CASH FLOWS
   (unaudited)

                                                        Year to Date
                                                        September 30
                                                      1997         1996
                                 (in thousands)
  <S>                                             <C>          <C>
  Operating Activities
    Net income                                     $ 158,057    $ 192,689
    Items providing (using) cash currently:
      Depreciation                                   122,116      120,557
      Deferred income taxes and investment tax
        credits - net                                 18,238       31,408
      Allowance for equity funds used during
        construction                                    (154)      (1,206)
      Regulatory assets - net                         22,261       25,226
      Changes in current assets and current
        liabilities
          Restricted deposits                             (2)         (27)
          Accounts and notes receivable, net of
            reserves on receivables sold             (42,472)     201,972
          Materials, supplies, and fuel                  415       (2,379)
          Accounts payable                            85,545      (33,609)
          Accrued taxes and interest                  (7,135)       5,974
      Other items - net                                  329       (9,326)
            Net cash provided by operating
              activities                             357,198      531,279

  Financing Activities
    Retirement of preferred stock                       (158)        -
    Redemption of long-term debt                    (290,612)    (157,583)
    Change in short-term debt                        178,844       83,600
    Dividends on preferred stock                        (655)     (10,423)
    Dividends on common stock                       (127,800)    (327,020)
            Net cash used in financing
              activities                            (240,381)    (411,426)

  Investing Activities
    Construction expenditures (less allowance
      for equity funds used during construction)    (106,612)     (95,677)
    Deferred demand-side management costs             (7,114)     (14,070)
            Net cash used in investing
              activities                            (113,726)    (109,747)

  Net increase in cash and temporary cash
    investments                                        3,091       10,106

  Cash and temporary cash investments at
    beginning of period                                5,120        6,612

  Cash and temporary cash investments at
    end of period                                    $ 8,211     $ 16,718 
  <FN> The accompanying notes as they relate to The  Cincinnati  Gas  &  Electric  Company  are  an  integral  part  of  these
  consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  THE CINCINNATI GAS & ELECTRIC COMPANY
  RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997

  Kwh Sales

  For the quarter ended  September  30, 1997,  kwh sales  increased  185.3% when
  compared to the same period last year  primarily due to increased  activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power  sales for  resale.  Also  contributing  to the  higher  kwh sales  were
  increased industrial and commercial sales,  primarily reflecting growth in the
  primary  metals sector and an increase in the number of commercial  customers,
  respectively.  These increases were partially offset by decreased  residential
  sales for the quarter ended September 30, 1997, as compared to the same period
  last year, as a result of mild weather.

  Mcf Sales and Transportation

  Mcf gas sales for the quarter ended  September 30, 1997,  decreased 1.5% while
  Mcf  transportation  volumes increased 12.6%, when compared to the same period
  in 1996. Industrial sales declined and gas transportation volumes increased as
  customers continued the trend of purchasing gas directly from suppliers, using
  transportation services provided by CG&E.

  Operating Revenues

  Electric Operating Revenues

  Electric  operating  revenues  for  the  quarter  ended  September  30,  1997,
  increased  $282  million  (72%),  from the  comparable  period  of last  year,
  primarily reflecting increased kwh sales as previously discussed.

  An analysis of electric operating revenues is shown below:

                                                         Quarter
                                                    Ended September 30
                                                      (in millions)

  Electric operating revenues - September 30, 1996 $390 Increase  (Decrease) due
  to change in:
    Price per kwh
      Retail                                                 (2)
      Sales for resale
        Non-firm power transactions                          19
    Total change in price per kwh                            17

    Kwh sales
      Retail                                                 10
      Sales for resale
        Non-firm power transactions                         255
    Total change in kwh sales                               265

  Electric operating revenues - September 30, 1997         $672

  Gas Operating Revenues

  The  increasing  trend of industrial  customers  purchasing  gas directly from
  producers and utilizing CG&E  facilities to transport the gas continues to put
  downward  pressure on gas operating  revenues.  When CG&E sells gas, the sales
  price  reflects the cost of gas purchased by CG&E to support the sale plus the
  costs to deliver  the gas.  When gas is  transported,  CG&E does not incur any
  purchased  gas costs but delivers gas the  customer has  purchased  from other
  sources. Since providing transportation services does not necessitate recovery
  of gas  purchased  costs,  the  revenue per Mcf  transported  is less than the
  revenue per Mcf sold. As a result, a higher relative volume of gas transported
  to gas sold translates into lower gas operating revenues.

  Operating Expenses

  Fuel Used in Electric Production

  Electric fuel costs  increased $7 million (8%) for the quarter ended September
  30, 1997, as compared to the same period last year.

  An analysis of these fuel costs is shown below:

                                                      Quarter
                                                 Ended September 30
                                                   (in millions)

  Fuel expense - September 30, 1996                     $82
  Increase due to change in:
    Price of fuel                                         3
    Deferred fuel cost                                    1
    Kwh generation                                        3

  Fuel expense - September 30, 1997                     $89

  Gas Purchased

  Gas purchased for the quarter  ended  September 30 1997,  decreased $2 million
  (9%), when compared to the same period last year, reflecting decreased volumes
  purchased  which were partially  offset by an increase in the average cost per
  Mcf of gas purchased.

  Purchased and Exchanged Power

  Purchased  and  exchanged  power for the quarter  ended  September  30,  1997,
  increased  $282  million  over  the  comparable  period  of  1996,   primarily
  reflecting  increased  purchases  of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Other Operation

  Other  operation  expenses  increased $9 million  (14%) for the quarter  ended
  September 30, 1997,  as compared to the same period of 1996.  This increase is
  primarily  attributable  to the effect of CG&E  curtailing  certain  deferrals
  related to its DSM programs for new participants  after December 31, 1996, due
  to a December  1996 order  issued by the PUCO that  changed  the  benefit/cost
  tests that DSM programs must surpass in Ohio in order for certain  DSM-related
  costs to be eligible for deferral.

  Maintenance

  The $2 million (8%)  decrease in  maintenance  expenses for the quarter  ended
  September  30,  1997,  as compared to the same  period of 1996,  is  primarily
  associated  with electric  production  facilities.  Partially  offsetting this
  decrease was an increase in  maintenance  expenses  associated  with  electric
  distribution facilities.

  Taxes Other Than Income Taxes

  The $3 million (6%)  increase in taxes other than income taxes for the quarter
  ended  September  30,  1997,  as compared  to the same  period  last year,  is
  primarily due to an increase in the Ohio Gross Receipts Tax.

  Other Income and Expenses - Net

  Other - net

  The change in other - net of $2 million for the quarter  ended  September  30,
  1997, as compared to the same period last year, is primarily attributable to a
  decrease  in  interest  income  due to a  reduction  in  short-term  loans  to
  affiliated companies through Cinergy's money pool arrangement.

  Interest

  Interest on Long-term Debt

  Interest on long-term  debt  decreased $4 million  (14%) for the quarter ended
  September 30, 1997,  as compared to the same period of 1996,  primarily due to
  the redemption of $290 million of long-term debt during 1997.

  Other Interest

  The $2 million  increase in other  interest for the third  quarter of 1997, as
  compared to the third quarter of 1996, is primarily due to increased  interest
  expense on short-term borrowings used to fund the acquisition of approximately
  90% of the  outstanding  preferred  stock of CG&E during the third  quarter of
  1996 and the redemption of first mortgage bonds.

  Preferred Dividend Requirement

  The preferred  dividend  requirement  decreased $3 million (94%) for the third
  quarter of 1997,  as  compared to the same  period in 1996.  This  decrease is
  primarily  attributable  to  the  reacquisition  of  approximately  90% of the
  outstanding preferred stock of CG&E, pursuant to Cinergy's tender offer during
  the third quarter of 1996.

  Costs of Reacquisition of Preferred Stock

  Costs of reacquisition  of preferred stock  represents the difference  between
  the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender
  offer in September  1996 and the purchase  price paid  (including  tender fees
  paid to dealer managers) by Cinergy for these shares.

  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales  increased  93.2% for the nine months ended September 30, 1997, from
  the comparable period of last year, primarily reflecting increased activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power sales for resale.  Also contributing to the higher kwh sales levels were
  increased industrial and commercial sales,  primarily reflecting growth in the
  primary  metals and food  products  sectors  and an  increase in the number of
  commercial customers,  respectively.  These increases were partially offset by
  decreased  residential sales for the first nine months of 1997, as compared to
  the same period last year, as a result of mild weather.

  Mcf Sales and Transportation

  Mcf gas sales for the nine months ended September 30, 1997,  decreased  11.2%,
  while Mcf  transportation  volumes  increased  9.1%, when compared to the same
  period in 1996.  Decreased Mcf sales reflect, in part, cold weather during the
  first nine months of 1996,  as compared  to the mild  weather  during the same
  period of 1997,  and were partially  offset by an increase in residential  and
  commercial customers. Industrial sales declined and gas transportation volumes
  increased as customers  continued  the trend of  purchasing  gas directly from
  suppliers, using transportation services provided by CG&E.

  Operating Revenues

  Electric Operating Revenues

  Electric  operating  revenues  for the nine months ended  September  30, 1997,
  increased $349 million (31%),  as compared to the same period last year.  This
  increase primarily  reflects the increased kwh sales as previously  discussed.
  Partially offsetting this increase was the operation of CG&E's fuel adjustment
  clauses reflecting a lower average cost per kwh.

  An analysis of electric operating revenues is shown below:

                                                       Nine Months
                                                    Ended September 30
                                                      (in millions)

  Electric operating revenues - September 30, 1996       $1 137
  Increase (Decrease) due to change in:

    Price per kwh
      Retail                                                (42)
      Sales for resale
        Non-firm power transactions                          37
    Total change in price per kwh                            (5)

    Kwh sales
      Retail                                                (18)
      Sales for resale
        Firm power obligations                               (1)
        Non-firm power transactions                         374
    Total change in kwh sales                               355

    Other                                                    (1)

  Electric operating revenues - September 30, 1997       $1 486

  Gas Operating Revenues

  For a discussion of the continued trend of downward  pressure on gas operating
  revenues from increased transportation services, refer to the discussion under
  the caption "Gas  Operating  Revenues" for CG&E in "Results of Operations  for
  the Quarter Ended September 30, 1997."

  Gas  operating  revenues  increased $21 million (7%) for the nine months ended
  September 30, 1997,  when compared to the same period last year.  Contributing
  to the  increase  was the December  1996 Order  approving  an overall  average
  increase  in gas  revenues  for CG&E of 2.5%  ($9  million  annually)  and the
  operation of a gas cost recovery  mechanism  reflecting a higher  average cost
  per Mcf of gas purchased. This increase was partially offset by the previously
  discussed changes in Mcf gas sales.

  Operating Expenses

  Fuel Used in Electric Production

  Electric  fuel costs  decreased  $48 million  (18%) for the nine months  ended
  September 30, 1997, as compared to the same period last year.

  An analysis of these fuel costs is shown below:

                                                    Nine Months
                                                 Ended September 30
                                                   (in millions)

  Fuel expense - September 30, 1996 $267 Increase (Decrease) due to change in:
    Price of fuel                                         2
    Deferred fuel cost                                  (47)
    Kwh generation                                       (3)

  Fuel expense - September 30, 1997                    $219

  Gas Purchased

  Gas  purchased  for the nine months ended  September  30, 1997,  increased $25
  million  (17%) when  compared  to the same  period  last year,  reflecting  an
  increase  in the average  cost per Mcf of gas  purchased  which was  partially
  offset by a decrease in volumes purchased.

  Purchased and Exchanged Power

  Purchased  and exchanged  power for the nine months ended  September 30, 1997,
  increased  $429  million  over  the  comparable  period  of  1996,   primarily
  reflecting  increased  purchases  of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Maintenance

  The $4 million (5%) increase in maintenance expenses for the nine months ended
  September  30, 1997,  as compared to the same period of 1996, is primarily due
  to  scheduled  outages at  Beckjord  and Miami  Fort,  and a forced  outage at
  Zimmer,  all of which  occurred  during the first  quarter of 1997.  Increased
  maintenance expenses,  associated with electric distribution  facilities,  for
  the current  nine month time period also  contributed  to the higher  level of
  expenses.

  Other Income and Expenses - Net

  Other - net

  The change in other - net of $7 million in the first nine  months of 1997,  as
  compared to the same period of 1996, is  attributable,  in part, to a decrease
  in  interest  income due to a  reduction  in  short-term  loans to  affiliated
  companies through  Cinergy's money pool arrangement.  Also contributing to the
  increase  was a higher  level of expenses  associated  with CG&E's and ULH&P's
  sales of accounts receivables.

  Interest

  Interest on Long-term Debt

  Interest on long-term  debt  decreased  $10 million  (10%) for the nine months
  ended  September 30, 1997,  as compared to the same period of 1996,  primarily
  due to the redemption or maturity of $290 million of long-term debt during the
  period from March 1997 to September 1997.

  Other Interest

  The $6 million  increase in other  interest for the first nine months of 1997,
  as compared to the first nine months of 1996,  is  primarily  due to increased
  interest  expense on short-term  borrowings  used to fund the  acquisition  of
  approximately 90% of the outstanding  preferred stock of CG&E during the third
  quarter of 1996 and the redemption of first mortgage bonds.

  Preferred Dividend Requirement

  The preferred dividend  requirement  decreased $10 million (94%) for the first
  nine months of 1997, as compared to the same period in 1996.  This decrease is
  primarily  attributable  to  the  reacquisition  of  approximately  90% of the
  outstanding preferred stock of CG&E, pursuant to Cinergy's tender offer during
  the third quarter of 1996.

  Costs of Reacquisition of Preferred Stock

  Costs of reacquisition  of preferred stock  represents the difference  between
  the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender
  offer in September  1996 and the purchase  price paid  (including  tender fees
  paid to dealer managers) by Cinergy for these shares.






  <PAGE>
  PSI ENERGY, INC.
  AND SUBSIDIARY COMPANIES
  <PAGE>
  <TABLE>
  <CAPTION>
  PSI ENERGY, INC.
  CONSOLIDATED BALANCE SHEETS
  (unaudited)


  ASSETS
                                                   September 30          December 31
                                                       1997                 1996
                             (dollars in thousands)
  <S>                                              <C>                  <C>
  Electric Utility Plant - Original Cost
    In service                                      $4,260,374           $4,178,181
    Accumulated depreciation                         1,780,823            1,723,279
                                                     2,479,551            2,454,902
    Construction work in progress                       60,295               76,630
        Total electric utility plant                 2,539,846            2,531,532

  Current Assets
    Cash and temporary cash investments                 21,230                2,911
    Restricted deposits                                    777                  550
    Notes receivable                                       138                  299
    Notes receivable from affiliated companies          50,511                    3
    Accounts receivable less accumulated
      provision for doubtful accounts of $808
      at September 30, 1997, and $1,269 at
      December 31, 1996                                182,792               73,990
    Accounts receivable from affiliated companies       17,582                4,016
    Materials, supplies, and fuel - at average cost
      Fuel                                              30,975               41,865
      Other materials and supplies                      29,702               28,268
    Prepayments and other                                4,681                3,184
                                                       338,388              155,086

  Other Assets
    Regulatory assets
      Amounts due from customers - income taxes         35,661               33,068
      Post-in-service carrying costs and
        deferred operating expenses                     44,100               44,904
      Coal contract buyout costs                       125,029              138,171
      Deferred merger costs                             74,887               76,290
      Deferred demand-side management costs             78,683              101,208
      Unamortized costs of reacquiring debt             30,305               32,079
      Other                                             48,928               52,938
    Other                                              134,972              129,667
                                                       572,565              608,325

                                                    $3,450,799           $3,294,943
  <FN>
  The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  PSI ENERGY, INC.


  CAPITALIZATION AND LIABILITIES
                                                     September 30         December 31
                                                         1997                1996
                             (dollars in thousands)
  <S>                                                <C>                  <C>
  Common Stock Equity
    Common stock - without par value;  $0.01 stated value;  authorized  shares -
      60,000,000; outstanding shares - 53,913,701
      at September 30, 1997, and December 31, 1996    $      539           $      539
    Paid-in capital                                      400,855              402,947
    Retained earnings                                    628,538              626,089
        Total common stock equity                      1,029,932            1,029,575

  Cumulative Preferred Stock
    Not subject to mandatory redemption                  157,209              173,086

  Long-term Debt                                         875,788              945,270
        Total capitalization                           2,062,929            2,147,931

  Current Liabilities
    Long-term debt due within one year                    35,000               10,000
    Notes payable and other short-term obligations       310,345              171,729
    Notes payable to affiliated companies                   -                  13,186
    Accounts payable                                     222,932              114,330
    Accounts payable to affiliated companies               4,555               12,850
    Accrued taxes                                         98,693               73,206
    Accrued interest                                      14,482               24,045
    Other                                                  2,688               17,107
                                                         688,695              436,453

  Other Liabilities
    Deferred income taxes                                364,635              372,997
    Unamortized investment tax credits                    50,156               52,750
    Accrued pension and other postretirement
      benefit costs                                      111,880               98,037
    Other                                                172,504              186,775
                                                         699,175              710,559

                                                      $3,450,799           $3,294,943
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  PSI ENERGY, INC.
  CONSOLIDATED STATEMENTS OF INCOME
  (unaudited)

                                          Quarter Ended                 Year to Date
                                          September 30                  September 30
                                       1997            1996          1997           1996
                                 (in thousands)
  <S>                               <C>             <C>         <C>              <C>
  Operating Revenues
    Non-affiliated companies         $647,864        $342,199    $1,456,612       $951,171
    Affiliated companies                3,123           5,856         7,768         14,691
                                      650,987         348,055     1,464,380        965,862

  Operating Expenses
    Fuel                              108,375         101,644       288,126        272,343
    Purchased and exchanged power
      Non-affiliated companies        311,753          26,665       502,938         71,422
      Affiliated companies              5,100           7,669        18,968         28,004
    Other operation                    81,253          62,434       243,040        188,443
    Maintenance                        21,489          23,059        67,251         68,964
    Depreciation                       31,551          30,489        93,996         91,046
    Amortization of post-in-service
      deferred operating expenses         268          (1,716)          804         (5,068)
    Income taxes                       16,159          23,445        49,451         55,597
    Taxes other than income taxes      14,011          13,729        44,191         41,361
                                      589,959         287,418     1,308,765        812,112

  Operating Income                     61,028          60,637       155,615        153,750

  Other Income and Expenses - Net
    Allowance for equity funds used
      during construction                (130)           -               35           -
    Post-in-service carrying costs       -                391          -             1,228
    Income taxes                       (5,795)         (2,438)       (6,639)        (3,332)
    Other - net                         6,946           3,280        11,019          1,420
                                        1,021           1,233         4,415           (684)

  Income Before Interest               62,049          61,870       160,030        153,066

  Interest
    Interest on long-term debt         17,552          16,218        53,928         50,286
    Other interest                      4,098           3,790        10,630         10,386
    Allowance for borrowed funds
      used during construction           (281)           (642)       (1,237)        (1,637)
                                       21,369          19,366        63,321         59,035

  Net Income                         $ 40,680        $ 42,504    $   96,709       $ 94,031

  Preferred Dividend Requirement        2,925           3,020         8,964          9,518

  Net Income Applicable to Common
    Stock                            $ 37,755        $ 39,484    $   87,745       $ 84,513
  <FN>
  The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  PSI ENERGY, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (unaudited)

                                  Year to Date
                                  September 30
                                    1997 1996
                                 (in thousands)
  <S>                                                 <C>           <C>
  Operating Activities
    Net income                                         $  96,709     $ 94,031
    Items providing (using) cash currently:
      Depreciation                                        93,996       91,046
      Deferred income taxes and investment tax
        credits - net                                    (13,548)       5,145
      Allowance for equity funds used during
        construction                                         (35)        -
      Regulatory assets - net                             35,055      (25,676)
      Changes in current assets and current
        liabilities
          Restricted deposits                               (227)        (335)
          Accounts and notes receivable, net of
            reserves on receivables sold                (175,510)      23,039
          Materials, supplies, and fuel                    9,456       25,679
          Accounts payable                               100,307       17,058
          Accrued taxes and interest                      15,924      (12,467)
      Other items - net                                   (6,985)        (810)
            Net cash provided by operating
              activities                                 155,142      216,710

  Financing Activities
    Funds on deposit from issuance of long-term debt        -             973
    Retirement of preferred stock                        (16,024)     (15,114)
    Redemption of long-term debt                         (45,700)     (50,000)
    Change in short-term debt                            125,430       63,500
    Dividends on preferred stock                          (9,059)      (9,609)

    Dividends on common stock                            (85,200)     (82,363)
            Net cash used in financing activities        (30,553)     (92,613)

  Investing Activities
    Construction expenditures (less allowance
      for equity funds used during construction)         (96,423)    (107,061)
    Deferred demand-side management costs                 (9,847)     (18,356)
            Net cash used in investing activities       (106,270)    (125,417)

  Net increase (decrease) in cash and
    temporary cash investments                            18,319       (1,320)

  Cash and temporary cash investments at
    beginning of period                                    2,911       15,522

  Cash and temporary cash investments at
    end of period                                      $  21,230     $ 14,202
  <FN>
  The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
  </FN>
  <PAGE>
  </TABLE>


  PSI ENERGY, INC.
  RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales increased  129.9% for the third quarter of 1997, from the comparable
  period  last year,  primarily  due to higher  non-firm  power sales for resale
  resulting from  increased  activity in Cinergy's  power  marketing and trading
  operations.  Also  contributing  to the higher kwh sales levels were increased
  industrial and commercial  sales,  primarily  reflecting growth in the primary
  metals and transportation  sectors and an increase in the number of commercial
  customers,  respectively.  These increases were partially  offset by decreased
  residential sales for the quarter ended September 30, 1997, as compared to the
  same period last year, as a result of mild weather.

  Operating Revenues

  Operating  revenues  increased  $303  million  (87%)  for  the  quarter  ended
  September 30, 1997, when compared to the same period last year, reflecting, in
  part,  increased kwh sales as previously  discussed.  Also contributing to the
  increase were the effects of the December  1996 DSM Order the  September  1996
  Order (as amended by the August 1997 Order).

  An analysis of operating revenues is shown below:

                                                    Quarter
                                               Ended September 30
                                                 (in millions)

  Operating revenues - September 30, 1996 $348 Increase (Decrease) due to change
  in:
    Price per kwh
      Retail                                            17
      Sales for resale
        Firm power obligations                          (2)
        Non-firm power transactions                     45
    Total change in price per kwh                       60

    Kwh sales
      Sales for resale
        Firm power obligations                           7
        Non-firm power transactions                    236
    Total change in kwh sales                          243

  Operating revenues - September 30, 1997             $651

  Operating Expenses

  Fuel

  Fuel  costs  increased  $7  million  (7%) for the third  quarter  of 1997,  as
  compared to the same period last year.

  An analysis of fuel costs is shown below:

                                     Quarter
                               Ended September 30
                                  (in millions)

  Fuel expense - September 30, 1996 $102 Increase (Decrease) due to change in:
    Price of fuel                                                    2
    Deferred fuel cost                                              (1)
    Kwh generation                                                   6

  Fuel expense - September 30, 1997                               $109

  Purchased and Exchanged Power

  For the quarter  ended  September  30, 1997,  purchased  and  exchanged  power
  increased  $283  million,  as  compared  to the same  period  last  year,  due
  primarily to increased  purchases of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Other Operation

  Other  operation  expenses  increased  $19 million (30%) for the quarter ended
  September 30, 1997, as compared to the same period last year. This increase is
  primarily due to increased  production expenses associated with the Clean Coal
  Project and increases related to the amortization of deferred DSM expenses and
  the amortization of deferred expenses  associated with the Clean Coal Project,
  all of which are being recovered in revenues  pursuant to either the September
  1996 Order or the December 1996 DSM Order.  Also  contributing to the increase
  is the  effect of  discontinuing  deferral  of  certain  DSM-related  costs in
  accordance with provisions of the December 1996 DSM Order.

  Maintenance

  The $2 million (7%) decrease in maintenance  expenses for the third quarter of
  1997,  as  compared to the same period of 1996,  is  primarily  due to reduced
  outage related charges associated with PSI's production facilities.

  Amortization of the Post-in-service Deferred Operating Expenses

  Amortization  of  post-in-service  deferred  operating  expenses  reflects the
  amortization and related recovery in rates of depreciation deferred on certain
  major projects,  primarily  environmental in nature,  from the in-service date
  until the related projects are reflected in retail rates.

  Other Income and Expenses - Net

  Other - net

  The change of $4 million for other - net for the quarter  ended  September 30,
  1997, as compared to the same period of 1996, is primarily  attributable  to a
  gain of  approximately  $4 million in 1997 on the sale of an investment and an
  increase  in  interest  income  related  to an  increase  of  $.5  million  in
  short-term  loans  to  affiliated   companies  through  Cinergy's  money  pool
  arrangement.

  Interest

  Interest on Long-term Debt

  Interest on long-term  debt  increased  $1 million (8%) for the quarter  ended
  September 30, 1997,  as compared to the same period of 1996.  The increase was
  primarily due to the net issuance of  approximately  $100 million of long-term
  debt during the third and fourth quarters of 1996.

  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

  Kwh Sales

  For the nine months ended September 30, 1997, kwh sales increased 73.1%,  when
  compared to the same period last year,  primarily due to increased activity in
  Cinergy's power marketing and trading  operations which led to higher non-firm
  power  sales for  resale.  Also  contributing  to the  higher kwh sales was an
  increase in industrial sales primarily reflecting growth in the primary metals
  sector.  Partially offsetting these increases were the effects of mild weather
  during the period.

  Operating Revenues

  Total  operating  revenues  increased  $498 million  (52%) for the nine months
  ended  September  30,  1997,  when  compared  to the same  period  last  year,
  primarily as a result of the increased kwh sales as previously discussed. Also
  contributing  to the increase  were the effects of the December 1996 DSM Order
  and the  September  1996 Order (as amended by the August 1997 Order),  and the
  return of  approximately  $13 million to customers in 1996 in accordance  with
  the February 1995 Order. The February 1995 Order required all retail operating
  income above a certain rate of return to be refunded to customers.

  An analysis of operating revenues is shown below:

                                   Nine Months
                               Ended September 30
                                  (in millions)

  Operating revenues - September 30, 1996                        $  966
  Increase (Decrease) due to change in:
    Price per kwh
      Retail                                                         65
      Sales for resale
        Firm power obligations                                       (9)
        Non-firm power transactions                                  77
    Total change in price per kwh                                   133

    Kwh sales
      Retail                                                          1
      Sales for resale
        Firm power obligations                                        8
        Non-firm power transactions                                 355
    Total change in kwh sales                                       364

    Other                                                             1

  Operating revenues - September 30, 1997                        $1 464

  Operating Expenses

  Fuel

  Fuel costs for the nine months ended September 30, 1997, increased $16 million
  (6%) when compared to the same period last year.

  An analysis of fuel costs is shown below:

                                   Nine Months
                               Ended September 30
                                  (in millions)


  Fuel expense - September 30, 1996 $272 Increase (Decrease) due to change in:
    Price of fuel                                                (4)
    Deferred fuel cost                                           10
    Kwh generation                                               10

  Fuel expense - September 30, 1997                            $288

  Purchased and Exchanged Power

  For the nine months ended  September 30, 1997,  purchased and exchanged  power
  increased  $422 million,  as compared to the same period last year,  primarily
  reflecting  increased  purchases  of non-firm  power for resale to others as a
  result  of  increased  activity  in  Cinergy's  power  marketing  and  trading
  operations.

  Other Operation

  Other operation expenses increased $55 million (29%) for the nine months ended
  September  30, 1997,  as compared to the same period last year.  This increase
  was primarily due to increased  production  expenses associated with the Clean
  Coal  Project  and  increases  related to the  amortization  of  deferred  DSM
  expenses and the amortization of deferred  expenses  associated with the Clean
  Coal Project,  all of which are being recovered in revenues pursuant to either
  the September 1996 Order or the December 1996 DSM Order.  Also contributing to
  the increase is the effect of  discontinuing  deferral of certain  DSM-related
  costs in accordance with provisions of the December 1996 DSM Order.


  Amortization of Post-in-service Deferred Operating Expenses

  Amortization  of  post-in-service  deferred  operating  expenses  reflects the
  amortization and related recovery in rates of depreciation deferred on certain
  major projects,  primarily  environmental in nature, from the in- service date
  until the related projects are reflected in retail rates.

  Taxes Other than Income Taxes

  The $3 million  (7%)  increase in taxes  other than income  taxes for the nine
  months ended  September 30, 1997, as compared to the same period last year, is
  primarily due to an increase in the Indiana Corporate Gross Income Tax.

  Other Income and Expenses - Net

  Other - net

  The change of $10 million for other - net for the nine months ended  September
  30,  1997,  as  compared  to the same  period  of 1996,  is due to a number of
  factors,  including a gain of  approximately $4 million in 1997 on the sale of
  an investment and an increase of  approximately  $1 million in interest income
  related to an increase in  short-term  loans to affiliated  companies  through
  Cinergy's money pool arrangement.

  Interest

  Interest on Long-term Debt

  Interest on long-term debt increased $4 million (7%) for the nine month period
  ended September 30, 1997, as compared to the same period of 1996. The increase
  was  primarily  due to the  net  issuance  of  approximately  $90  million  of
  long-term debt during the period from August 1996 to March 1997.





  <PAGE>
  THE UNION LIGHT, HEAT
  AND POWER COMPANY

  <PAGE>
  <TABLE>
  <CAPTION>
  THE UNION LIGHT, HEAT AND POWER COMPANY
  BALANCE SHEETS
  (unaudited)


  ASSETS
                                                     September 30       December 31
                                                         1997              1996
                             (dollars in thousands)
  <S>                                                 <C>               <C>
  Utility Plant - Original Cost
    In service
      Electric                                         $202,941          $195,053
      Gas                                               152,758           148,203
      Common                                             19,233            19,285
                                                        374,932           362,541
    Accumulated depreciation                            131,039           122,310
                                                        243,893           240,231

    Construction work in progress                        10,035             9,050
        Total utility plant                             253,928           249,281

  Current Assets
    Cash and temporary cash investments                   2,790             1,197
    Notes receivable from affiliated companies             -                  100
    Accounts receivable less accumulated provision
      for doubtful accounts of $1,350 at
      September 30, 1997, and $1,024 at
      December 31, 1996                                   4,657            12,763
    Accounts receivable from affiliated companies           325               620
    Materials, supplies, and fuel - at average cost
      Gas stored for current use                          6,727             6,351
      Other materials and supplies                          694               716
    Property taxes applicable to subsequent year            650             2,600
    Prepayments and other                                   520               370
                                                         16,363            24,717

  Other Assets
    Regulatory assets
      Deferred merger costs                               5,218             5,218
      Unamortized costs of reacquiring debt               3,628             3,764
      Other                                               2,669             2,357
    Other                                                 7,000             5,146
                                                         18,515            16,485

                                                       $288,806          $290,483
<FN>
  The  accompanying  notes as they  relate  to The Union  Light,  Heat and Power
  Company are an integral part of these financial statements.
  </FN>
  <PAGE>
  </TABLE>
  <TABLE>
  <CAPTION>
  THE UNION LIGHT, HEAT AND POWER COMPANY


  CAPITALIZATION AND LIABILITIES
                                                         September 30      December 31
                                                             1997             1996
                                                             (dollars in thousands)
  <S>                                                     <C>              <C>
  Common Stock Equity
    Common stock - $15.00 par value; authorized shares - 1,000,000;  outstanding
      shares - 585,333
      at September 30, 1997, and December 31, 1996         $  8,780         $  8,780
    Paid-in capital                                          18,683           18,839
    Retained earnings                                        97,025           92,484
        Total common stock equity                           124,488          120,103

  Long-term Debt                                             44,657           44,617
        Total capitalization                                169,145          164,720

  Current Liabilities
    Notes payable to affiliated companies                    24,661           30,649
    Accounts payable                                          4,312           12,018
    Accounts payable to affiliated companies                 14,658           16,771
    Accrued taxes                                             5,895            1,014
    Accrued interest                                            957            1,284
    Other                                                     4,089            5,248
                                                             54,572           66,984

  Other Liabilities
    Deferred income taxes                                    31,495           33,463
    Unamortized investment tax credits                        4,587            4,797
    Accrued pension and other postretirement benefit
      costs                                                  13,693           12,983
    Income taxes refundable through rates                     6,978            5,121
    Other                                                     8,336            2,415
                                                             65,089           58,779

                                                           $288,806         $290,483
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  THE UNION LIGHT, HEAT AND POWER COMPANY
  STATEMENTS OF INCOME
  (unaudited)


                                            Quarter Ended                Year to Date
                                             September 30                September 30
                                         1997           1996          1997           1996
                                 (in thousands)
  <S>                                  <C>            <C>          <C>            <C>
  Operating Revenues
    Electric                            $56,666        $52,704      $152,560       $147,970
    Gas
      Non-affiliated companies            8,581          5,646        53,369         50,713
      Affiliated companies                   66             14           256             81
                                         65,313         58,364       206,185        198,764

  Operating Expenses
    Electricity purchased from parent
      company for resale                 44,237         39,850       113,992        109,337
    Gas purchased                         3,002          2,129        30,006         26,252
    Other operation                       7,968          7,268        24,705         23,664
    Maintenance                           1,434          1,093         4,493          3,445
    Depreciation                          3,048          3,013         9,229          8,887
    Income taxes                          1,003          1,067         6,648          7,824
    Taxes other than income taxes           905            986         3,119          3,092
                                         61,597         55,406       192,192        182,501

  Operating Income                        3,716          2,958        13,993         16,263

  Other Income and Expenses - Net
    Allowance for equity funds used
      during construction                    10             42            33             21
    Income taxes                            272              4           570             31
    Other - net                            (606)          (436)       (1,567)        (1,079)
                                           (324)          (390)         (964)        (1,027)

  Income Before Interest                  3,392          2,568        13,029         15,236

  Interest
    Interest on long-term debt              881            881         2,643          3,135
    Other interest                          317            167           951            433
    Allowance for borrowed funds
      used during construction              (45)           (26)          (82)           (90)
                                          1,153          1,022         3,512          3,478

  Net Income                            $ 2,239        $ 1,546      $  9,517       $ 11,758
  <FN>
  The  accompanying  notes as they  relate  to The Union  Light,  Heat and Power
  Company are an integral part of these financial statements.
  </FN>
  </TABLE>
  <PAGE>
  <TABLE>
  <CAPTION>
  THE UNION LIGHT, HEAT AND POWER COMPANY
  STATEMENTS OF CASH FLOWS
   (unaudited)


                                                       Year to Date
                                                       September 30
                                                     1997        1996
                                                      (in thousands)
  <S>                                             <C>         <C>
  Operating Activities
    Net income                                     $  9,517    $ 11,758
    Items providing (using) cash currently:
      Depreciation                                    9,229       8,887
      Deferred income taxes and investment tax
        credits - net                                  (322)      7,607
      Allowance for equity funds used during
        construction                                    (33)        (21)
      Regulatory assets - net                          (312)         80
      Changes in current assets and current
        liabilities
          Accounts and notes receivable, net of
            reserves on receivables sold              7,687      29,590
          Materials, supplies, and fuel                (354)     (2,621)
          Accounts payable                           (9,819)    (11,463)
          Accrued taxes and interest                  6,504       1,446
      Other items - net                               5,267      (3,866)
            Net cash provided by operating
              activities                             27,364      41,397

  Financing Activities
    Redemption of long-term debt                       -        (26,083)
    Change in short-term debt                        (5,988)     (1,450)
    Dividends on common stock                        (4,975)       -
            Net cash used in financing
              activities                            (10,963)    (27,533)

  Investing Activities
    Construction expenditures (less allowance
      for equity funds used during construction)    (14,808)    (12,827)
            Net cash used in investing
              activities                            (14,808)    (12,827)

  Net increase in cash and
    temporary cash investment                         1,593       1,037

  Cash and temporary cash investments at
    beginning of period                               1,197       1,750

  Cash and temporary cash investments at
    end of period                                   $ 2,790     $ 2,787 
  <FN> The accompanying  notes as they relate to The  Union  Light,  Heat  and  Power  Company  are an  integral  part of these
  financial statements.
  </FN>
  </TABLE>
  <PAGE>
  THE UNION LIGHT, HEAT AND POWER COMPANY
  RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales  increased 6.6% for the quarter ended  September 30, 1997,  from the
  comparable  period  last  year,  primarily  due to growth in  residential  and
  commercial sales reflecting, in part, an increase in the number of customers.

  Mcf Sales and Transportation

  Mcf gas sales and  transportation  volumes for the quarter ended September 30,
  1997, increased 31.5%, when compared to the same period in 1996. This increase
  is  primarily   attributable  to  an  adjustment  resulting  from  the  annual
  reconciliation  performed during the third quarter related to unbilled Mcf gas
  sales.  An increase in the number of  residential  customers  and the trend of
  industrial   customers   purchasing   gas  directly  from   suppliers,   using
  transportation services provided by ULH&P, also contributed to the increase.

  Operating Revenues

  Electric Operating Revenues

  Electric  operating  revenues  for  the  quarter  ended  September  30,  1997,
  increased  $4 million  (8%),  as compared  to the same period last year,  as a
  result of the increased kwh sales as previously discussed.

  Gas Operating Revenues

  The  increasing  trend of industrial  customers  purchasing  gas directly from
  producers and utilizing ULH&P facilities to transport the gas continues to put
  downward pressure on gas operating  revenues.  When ULH&P sells gas, the sales
  price reflects the cost of gas purchased by ULH&P to support the sale plus the
  costs to deliver the gas.  When gas is  transported,  ULH&P does not incur any
  purchased  gas costs but delivers gas the  customer has  purchased  from other
  sources. Since providing transportation services does not necessitate recovery
  of gas  purchased  costs,  the  revenue per Mcf  transported  is less than the
  revenue per Mcf sold. As a result, a higher relative volume of gas transported
  to gas sold translates into lower gas operating revenues.

  Gas operating  revenues  increased $3 million  (52.8%) in the third quarter of
  1997, when compared to the same period of last year. The increase is primarily
  attributable  to the  previously  discussed  increase in Mcf gas sales and the
  operation of a gas cost recovery  mechanism  reflecting a higher  average cost
  per Mcf of gas purchased.

  Operating Expenses

  Electricity Purchased from Parent Company for Resale

  Electricity  purchased  increased  $4.4  million  (11%) for the quarter  ended
  September 30, 1997, as compared to the same period last year. This increase is
  primarily attributable to higher kwh purchased.

  Gas Purchased

  Gas purchased for the quarter ended September 30, 1997,  increased $.9 million
  (41%) from the third  quarter  of last year,  reflecting  an  increase  in the
  average cost per Mcf of gas purchased.

  Other Operation

  The $.7 million  (10%)  increase  in other  operation  expenses  for the third
  quarter of 1997,  as compared to the same period of 1996,  is primarily due to
  higher administrative and general expenses. Partially offsetting this increase
  were lower gas distribution and electric transmission expenses.

  Maintenance

  The $.3 million (31%) increase in  maintenance  expenses for the third quarter
  of 1997, as compared to the same period of 1996, is primarily due to increased
  maintenance expenses associated with gas and electric distribution facilities.
  This  increase  was  partially  offset  by  decreased   maintenance   expenses
  associated with gas production facilities.

  Other Income and Expenses - Net

  Other - net

  The change in other - net of $.2 million (39%) for the quarter ended September
  30, 1997, as compared to the same period of 1996, is primarily attributable to
  a higher level of expenses  associated with the sales of accounts  receivables
  and a decrease in interest  income related to a reduction in short-term  loans
  to affiliated companies through Cinergy's money pool arrangement.

  Interest

  Other Interest

  Other  interest  charges  increased  $.2 million  (90%) for the quarter  ended
  September 30, 1997,  as compared to the same period of 1996,  primarily due to
  increased short-term borrowings.

  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

  Kwh Sales

  Kwh sales remained relatively constant for the nine months ended September 30,
  1997,  from the  comparable  period of last  year.  Increased  industrial  and
  commercial sales, primarily reflecting growth in the primary metals sector and
  an  increase  in  the  number  of  commercial  customers,  respectively,  were
  substantially  offset  by  decreased  residential  sales as a  result  of mild
  weather.

  Mcf Sales and Transportation

  For the nine months ended September 30, 1997, Mcf gas sales and transportation
  volumes decreased 2.3%, as compared to the same period in 1996.  Decreased Mcf
  gas sales reflect, in part, cold weather during the first nine months of 1996,
  as  compared  to the same  period  of 1997,  and were  slightly  offset  by an
  increase in the number of residential customers. Industrial sales declined and
  gas  transportation  volumes  increased  as customers  continued  the trend of
  purchasing gas directly from suppliers, using transportation services provided
  by ULH&P.

  Operating Revenues

  Gas Operating Revenues

  For a discussion of the continued trend of downward  pressure on gas operating
  revenues from increased transportation services, refer to the discussion under
  the caption "Gas  Operating  Revenues" for ULH&P in "Results of Operations for
  the Quarter Ended September 30, 1997."

  Gas  operating  revenues  increased  $3 million (6%) for the nine month period
  ended  September 30, 1997, when compared to the same period of last year. This
  increase is primarily  attributable  to the  operation of a gas cost  recovery
  mechanism  reflecting a higher  average cost per Mcf of gas  purchased and was
  partially offset by the effect of the previously  discussed changes in Mcf gas
  sales.

  Operating Expenses

  Maintenance

  The $1.0 million (30%)  increase in  maintenance  expenses for the nine months
  ended September 30, 1997, as compared to the same period of 1996, is primarily
  due to  increased  maintenance  expenses  associated  with  gas  and  electric
  distribution  facilities.  This  increase  is  partially  offset by  decreased
  maintenance expenses associated with gas production facilities.

  Other Income and Expenses - Net

  Other - net

  The  change of $.5  million  (45%) for other - net for the nine  months  ended
  September  30,  1997,  as compared to the same  period of 1996,  is  primarily
  attributed to a higher level of expenses associated with the sales of accounts
  receivables.

  Interest

  Interest on Long-term Debt

  Interest  charges  decreased  $.5  million  (16%)  for the nine  months  ended
  September  30,  1997,  from the same  period  of  1996,  primarily  due to the
  redemption of $10 million of long-term debt in May 1996.

  Other Interest

  Other  interest  charges  increased  $.5  million  for the nine  months  ended
  September 30, 1997,  as compared to the same period of 1996,  primarily due to
  increased short-term  borrowings used to fund the redemption of first mortgage
  bonds. This increase was partially offset by interest charges recorded in 1996
  on customer rate refunds.





  NOTES TO FINANCIAL STATEMENTS

  Cinergy, CG&E, PSI, and ULH&P
  1. These  Financial  Statements  reflect all  adjustments  (which include only
  normal, recurring adjustments) necessary in the opinion of the registrants for
  a fair presentation of the interim results. These statements should be read in
  conjunction  with the Financial  Statements and the notes thereto  included in
  the combined 1996 Form 10-K of the  registrants.  Certain  amounts in the 1996
  Financial   Statements   have  been   reclassified  to  conform  to  the  1997
  presentation.

  Cinergy and CG&E
  2.    In March 1997,  CG&E retired $16 million  principal  amount of its 8.95%
        Series First Mortgage Bonds,  due December 15, 2021. In April 1997, CG&E
        redeemed the remaining $84 million  principal  amount of such bonds at a
        price of 100% through the M&R Fund provisions of its first mortgage bond
        indenture.  CG&E also  redeemed,  in April 1997,  the entire $60 million
        principal  amount of its 8 1/8% Series First Mortgage Bonds,  due August
        1, 2003, at a redemption price of 100.72% through the M&R Fund.

  Cinergy and PSI
        On September 1, 1997, PSI redeemed all  outstanding  shares of its 7.15%
  Cumulative  Preferred Stock (158,640 shares) at a redemption price of $101 per
  share.

  Cinergy and PSI
  3. In February 1997, the City of Princeton,  Indiana, loaned the proceeds from
  the sale of its $35 million  Pollution  Control Revenue  Refunding Bonds, 1997
  Series, to PSI. Proceeds from the issuance were used to refund, in March 1997,
  the  outstanding  $35 million  City of  Princeton,  Indiana,  7.60%  Pollution
  Control Refunding Revenue Bonds,  1987 Series,  which previously  refunded the
  City of Princeton, Indiana, 12.75% Pollution Control Revenue Bonds 1982 Series
  B, which were issued to finance  PSI's  portion of the costs of acquiring  and
  constructing  PSI's undivided  interest in certain pollution control and solid
  waste disposal facilities at Gibson.

        The 1997 Series bonds were issued in an initial daily rate mode and will
  mature April 1, 2022, subject to redemption prior to maturity. Pursuant to the
  loan  agreement  between  PSI and  Princeton,  PSI  will  make  loan  payments
  sufficient to pay, when due, principal and interest on the 1997 Series bonds.

  Holders  of the 1997  Series and the 1996  Series  bonds have the right to put
  their bonds on any business day. Accordingly, these issuances are reflected in
  the  Consolidated  Balance  Sheets as  "Notes  payable  and  other  short-term
  obligations."

  Cinergy and CG&E
  On October 9, 1997, CG&E issued and sold $100 million  principal amount of its
  LANCEs.  The LANCEs will mature on October 1, 2007 but are subject to optional
  redemption  prior to that date.  Interest on the LANCEs will float  during the
  first two years at LIBOR plus an agreed upon  spread,  with a fixed rate being
  set at 6.50% commencing  October 1, 1999.  Holders of not less than 66 2/3% in
  aggregate  principal  amount of the LANCEs  shall have the  one-time  right to
  convert  from the 6.50% fixed rate to a floating  rate of LIBOR plus an agreed
  upon spread at any interest  rate  payment  date  between  October 1, 1999 and
  October 1, 2002. Proceeds from the sale were used to repay a portion of CG&E's
  outstanding short-term indebtedness.

  Cinergy, CG&E, PSI, and ULH&P
  4. In  February  1997,  the FASB  issued  Statement  128,  which is  effective
  December 31, 1997,  for Cinergy.  Statement 128 replaces the  calculation  and
  disclosure  of primary and fully  diluted  earnings per share under Opinion 15
  with basic and diluted earnings per share. Statement 128 also requires certain
  disclosures   regarding  the  determination  of  earnings  per  share  amounts
  presented  in the  accompanying  income  statements  that were not  previously
  required under Opinion 15.  Earnings per share  presented in the  accompanying
  income  statements  has been  computed in  accordance  with the  provisions of
  Opinion  15.  Earnings  per share for the  quarter,  year to date,  and twelve
  months ended September 30, 1997,  determined in accordance with the provisions
  of Statement  128,  would not have been  significantly  different from amounts
  shown.

  Cinergy, CG&E, PSI, and ULH&P
        In June 1997,  the FASB issued  Statement  130,  which is effective  for
  fiscal years  beginning  after  December 15, 1997.  Statement 130  establishes
  standards for reporting and displaying comprehensive income and its components
  in a full set of general-purpose financial statements.
   Comprehensive  income is  defined  as the  change  in  equity  of a  business
  enterprise   during  a  period  from   transactions   and  other   events  and
  circumstances from nonowner sources.

  Cinergy, CG&E, PSI, and ULH&P
        In June 1997, the FASB issued Statement 131, which supersedes  Statement
  14. It is effective for fiscal years  beginning  after December 15, 1997, with
  less detailed  disclosures  being required for interim  periods  beginning the
  first quarter of 1999.  Statement 131 requires that companies disclose segment
  information  based on how management makes decisions for allocating  resources
  to and  measuring  the  performance  of  segments.  It also  requires  certain
  entity-wide  disclosures  to be made  about  revenues  generated  by  types of
  products and  services,  revenues  generated  from  operations  and the dollar
  amount of long-lived  asset balances  maintained in the country of domicile as
  well as foreign  countries  in which there are  material  operations,  and the
  identity of and amount of revenues generated from major customers.

  Cinergy
  5. Cinergy accounts for its 50% investment in Avon Energy,  which owns 100% of
  Midlands, using the equity method of accounting. Avon Energy acquired Midlands
  during the second and third quarters of 1996,  with  substantially  all of the
  Midlands' common stock being acquired during the second quarter.  Accordingly,
  Midlands' results are fully reflected in the quarter, year to date, and twelve
  months ended September 30, 1997.

        During the third quarter,  a "windfall profits tax" was enacted into law
  in the UK. The tax was levied against a limited  number of British  companies,
  including  Midlands.  The tax is  intended  to be  recovery  of  funds  by the
  government  due to the under valuing of the companies  subject to the tax when
  they were  privatized by the  government  via public stock  offerings  several
  years ago.

        Cinergy's share of the tax to be paid by Midlands is approximately  $109
  million,  to be paid in two equal  installments due December 1, 1997 and 1998.
  As  management  believes  this  charge to be unusual  in nature,  and does not
  expect such a charge to reoccur, the tax has been recorded as an extraordinary
  item in the  Consolidated  Statement of Income  during the third  quarter.  No
  related tax benefit has been  recorded for the charge as the windfall  profits
  tax is not deductible for corporate income tax purposes in the UK, and Cinergy
  expects that benefits,  if any, derived for U.S. Federal income taxes will not
  be significant.

        Also,  during the third quarter,  legislation  lowering the UK corporate
  tax rate from 33% to 31% was  enacted  into law.  As a  result,  deferred  tax
  liabilities at Avon Energy and Midlands were adjusted downward.  The amount of
  this adjustment, after giving effect to U.S. Federal income taxes with respect
  to Cinergy's investment in Avon Energy, was not significant.

  Cinergy and CG&E
  6. As discussed in the 1996 Form 10-K, the PUCO issued its December 1996 Order
  approving an overall  average  increase in gas revenues for CG&E of 2.5% ($9.3
  million annually).  The PUCO disallowed certain of CG&E's requests,  including
  the  requested  working  capital  allowance,  recovery of certain  capitalized
  information systems development costs, and certain merger-related costs. These
  disallowances  resulted  in a pretax  charge to  earnings  during  the  fourth
  quarter of $20 million  ($15  million net of taxes or $.10 per share).  CG&E's
  request for a rehearing on the disallowed  information systems costs and other
  aspects of the order was denied.

  On April 14,  1997,  CG&E filed a notice of appeal with the  Supreme  Court of
  Ohio  challenging  the  disallowance  of  information  systems  costs  and the
  exclusion of certain  imputed  revenues.  Cinergy and CG&E cannot predict what
  action the Supreme Court of Ohio may take with respect to this appeal.

  Cinergy, CG&E, and PSI
  7. Cinergy and its subsidiaries use derivative financial  instruments to hedge
  exposures to foreign currency  exchange rates,  lower funding costs and reduce
  exposures to fluctuations in interest rates.  Instruments  used as hedges must
  be  designated  as a  hedge  at the  inception  of the  contract  and  must be
  effective at reducing the risk  associated  with the  exposure  being  hedged.
  Accordingly,  changes in market values of designated hedge instruments must be
  highly correlated with changes in market values of the underlying hedged items
  at inception of the hedge and over the life of the hedge contract.

  Cinergy uses a currency  swap to hedge  exposures to  fluctuations  in foreign
  currency  exchange  rates.  The currency  swap is accounted  for as a hedge of
  Cinergy's   pound  sterling   denominated   net  investment  in  Avon  Energy.
  Accordingly, any translation gains or losses on the currency swap are recorded
  in the cumulative foreign currency translation  adjustment which is a separate
  component of common stock equity and the estimated  fair value of the currency
  swap is reflected in "Other  Liabilities - Other" in the Consolidated  Balance
  Sheets.

  Cinergy and its subsidiaries enter into interest rate swap agreements to lower
  funding costs and manage exposures to fluctuations in interest rates. Interest
  rate swaps are accounted for under the accrual method. Accordingly,  gains and
  losses based on any interest differential between fixed-rate and floating-rate
  interest amounts,  calculated on agreed upon notional principal  amounts,  are
  recognized in the Consolidated Statements of Income as a component of interest
  expense as realized over the life of the agreement.

  Cinergy  actively  markets  and  trades  over-the-counter  contracts  for  the
  purchase  and  sale of  electricity.  The  majority  of  these  contracts  are
  fixed-price  forward  purchase and sales  contracts,  which  require  physical
  delivery of  electricity.  Cinergy  also enters  into  option  contracts,  the
  majority  of these being on physical  electricity.  To the extent  options are
  exercised, they are settled via physical delivery of electricity or netted out
  in accordance with industry  trading  standards.  Option premiums are deferred
  and included in the  Consolidated  Balance  Sheet and  amortized to "Operating
  Revenues - Electric" or "Purchased  and exchanged  power" in the  Consolidated
  Statement of Income over the term of the option  contract.  Cinergy values its
  portfolio of  over-the-counter  and option contracts using the aggregate lower
  of cost or market method.  To the extent there are net aggregate losses in the
  portfolio, Cinergy will reserve for such losses. Net gains are recognized when
  realized.

  The use of these types of derivative  instruments allows Cinergy to manage and
  hedge  its  contractual  commitments,  reduce  its  exposure  relative  to the
  volatility of cash market  prices,  and take  advantage of selected  arbitrage
  opportunities.   Option   contracts  and  derivative   instruments   requiring
  settlement  in cash  are  used on a  limited  basis  and the  impacts  of such
  instruments   are  not   significant  to  Cinergy's   Consolidated   Financial
  Statements.

  During  June 1997,  Capital & Trading  acquired  the assets of GEP.  Capital &
  Trading  specializes in energy risk  management,  marketing,  and  proprietary
  arbitrage  trading.  Capital & Trading  actively trades  derivative  commodity
  instruments including futures, forwards, swaps, and options. Capital & Trading
  accounts for these  derivatives at fair value with unrealized gains and losses
  reflected  in  its  statement  of  operations.  At  September  30,  1997,  the
  operations  of  Capital & Trading  were not  significant  to the  Consolidated
  Financial Statements of Cinergy.

  Cinergy, CG&E, PSI, and ULH&P
  8. As  discussed  in the 1996 Form  10-K,  in March  1997,  Cinergy's  utility
  subsidiaries,  including  CG&E,  PSI,  and  ULH&P  and  other  Cinergy  system
  companies,  which  participate  in the  money  pooling  arrangement,  filed an
  application with the SEC under the PUHCA requesting authorization of the money
  pool  through  December  31,  2002.  In May  1997,  the SEC  issued  an  order
  authorizing  Cinergy's utility subsidiaries and other Cinergy system companies
  to continue use of the money pool and granting  other  financing  transactions
  for which the companies requested approval, in each case, through December 31,
  2002.

  Cinergy and PSI
  9.    As  discussed  in the 1996 Form 10-K,  the UCC and the CAC filed a Joint
        Petition for the  Reconsideration  and Rehearing of the  September  1996
        Order with the IURC in October of 1996.

        A settlement  agreement was filed May 27, 1997,  with the IURC regarding
  the petition for rehearing and/or reconsideration filed by the UCC and the CAC
  in PSI's latest rate order dated October 2, 1996. On August 27, 1997, the IURC
  issued an order which approved the settlement  agreement in its entirety.  The
  settlement agreement reduces the original rate increase by $2.1 million (.2%).
  Major  provisions of the settlement  agreement  include PSI increasing  annual
  amortization of certain  regulatory assets by $4.1 million,  the reflection of
  an August 31,  1995  cut-off  date for costs to achieve  merger  savings  with
  amounts  subsequent to that date and prior to October 31, 1996 being  deferred
  for subsequent recovery (reduces rates $.9 million annually), and PSI reducing
  its  jurisdictional  revenues  by $1 million  annually  in addition to the $.9
  million reduction related to costs to achieve merger savings.



  Cinergy, CG&E, and ULH&P
  10. As discussed in the 1996 Form 10-K,  under the PUHCA,  the  divestiture of
  CG&E's gas operations may be required.  In its order approving the merger, the
  SEC reserved  judgment over  Cinergy's  ownership of CG&E's gas operations for
  three years,  at the end of which period  Cinergy would be required to address
  the matter,  in light of the applicable  requirements  under the PUHCA, on the
  merits.  In August 1997, the SEC issued an order  permitting  another electric
  registered  holding  company to retain gas  operations  comparable  in size to
  those of CG&E.

        On October 17,  1997,  Cinergy  made a filing with the SEC  requesting a
  deferral on the gas retention issue for an additional  year, until October 21,
  1998,  in order to afford  Cinergy  sufficient  time to prepare a revised  and
  updated  economic  analysis  of a  hypothetical  divestiture  of the  CG&E gas
  operations  in light of and  consistent  with,  the SEC's  recent  order noted
  above.  That analysis is relevant to the SEC's ultimate  determination on this
  question. Cinergy believes it has a justifiable basis for retention of its gas
  operations and will continue its pursuit of SEC approval.

  Cinergy and PSI
  11.  As  discussed  in the  1996  Form  10-K,  IGC and PSI  had  entered  into
  negotiations  regarding  IGC's  claim  that  PSI  should  contribute  to IGC's
  response costs related to investigating and remediating contamination at 18 of
  the 19 MGP sites which PSI sold to IGC.

  In August  1997,  PSI reached an  agreement  with IGC  settling  IGC's  claims
  against PSI pursuant to CERCLA and other laws for  contribution  to IGC's past
  and future  response  costs  involving 13 MGP sites  conveyed by PSI to IGC in
  1945. The agreement with IGC calls for sharing past and future  response costs
  equally  (50/50) at the 13 sites.  Further,  the parties must jointly  approve
  future  management of the sites and the decisions to spend  additional  funds.
  The  settlement  does not  address  five sites PSI  acquired  from  NIPSCO and
  subsequently  sold  to IGC  (including  the  Lafayette  site).  Resolution  of
  liability  on these five sites will  require  further  negotiations  among all
  three companies.

  On August 29,  1997,  NIPSCO  filed  suit  against  PSI in the  United  States
  District  Court for the  Northern  District of Indiana,  South Bend  Division,
  claiming,  pursuant to CERCLA,  recovery  from PSI of NIPSCO's past and future
  costs of investigating and remediating MGP related contamination at the Goshen
  MGP site.  NIPSCO alleged that PSI and its  predecessors  previously owned and
  operated  the Goshen MGP.  NIPSCO also  alleged  that it has already  incurred
  about $400,000 in response costs at the site and that  remediation of the site
  will cost  about  $2.7  million.  PSI  denied  liability  in its answer to the
  complaint. The case has not yet been scheduled for trial.

  PSI has notified its general  liability  insurance  carriers of the settlement
  with IGC and the NIPSCO lawsuit.

  Based on information  received to date,  PSI's potential  exposure to probable
  and  reasonably  estimable  liabilities  associated  with  various  MGP sites,
  including the 13 sites which are the subject of the agreement with IGC and the
  Goshen site which is the subject of NIPSCO's complaint,  would not be material
  to  its  financial  condition  or  results  of  operations.  However,  further
  investigation and remediation  activities at these sites may indicate that the
  potential liability for MGP sites could be material.

  As also discussed in the 1996 Form 10-K,  IGC  petitioned the Indiana  Supreme
  Court to review  the  January  1997 Court of  Appeals  decision.  The Court of
  Appeals  decision  affirmed the IURC's denial of IGC's request for recovery of
  MGP costs.  In August 1997, the Indiana  Supreme Court denied transfer of this
  case.  Accordingly,  the IURC's decision denying rate recovery for these costs
  by IGC remains intact. PSI is unable to predict the extent to which it will be
  able to recover through rates any MGP site investigation and remediation costs
  ultimately incurred.






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

  FINANCIAL CONDITION

  Recent Developments

  Cinergy
  Securities  Ratings In October 1997,  Cinergy's  newly  instituted  commercial
  paper program received credit ratings of A-2, D-2, P-2, and F-2 from S&P, D&P,
  Moody's, and Fitch, respectively.  For additional information relating to such
  commercial paper program, see "CAPITAL RESOURCES-Short-term Debt" herein.

  During the second quarter of 1997,  S&P, D&P, and Fitch assigned a BBB+ rating
  to Cinergy and Moody's  assigned a Baa2 rating to Cinergy.  These  ratings are
  not assigned to specific issues of long-term debt,  rather they are indicative
  corporate  ratings.  In  assigning  the rating,  Fitch  stated,  "The  ratings
  primarily  reflect the credit strength and favorable  competitive  position of
  CIN's two domestic operating companies,  which are the principal source of the
  parent company's cash flow."

  Cinergy
  Joint  Venture In  September  1997,  Cinergy  announced a joint  venture  with
  Florida  Progress  Corporation and New Century  Energies to form Cadence.  The
  three owners will each have a one-third  interest in the new company.  Cadence
  will provide a single source for both energy management  services and products
  designed to lower energy costs for national companies that operate in multiple
  locations across the country.

  Cinergy, CG&E, PSI and ULH&P
  Ambient Air  Standards  The EPA recently  revised the NAAQS for ozone and fine
  particulate  matter.  These new rules  increase the  pressure  for  additional
  emissions  reductions.  On September 23, 1997, Cinergy announced a proposal to
  reduce its NOx  emissions  rate by two-thirds to .25 pounds of NOx per million
  Btu.  Cinergy's  preliminary  cost estimate for the  two-thirds  reduction was
  between $74 and $204 million.  Subsequent to Cinergy's  announcement,  the EPA
  announced on October 10, 1997,  its  proposed  call for  revisions to SIPs for
  state wide reductions in NOx emissions,  proposing  utility NOx emissions at a
  rate  of .15  pounds  per  million  Btu.  The  EPA's  schedule  calls  for all
  reductions to be in place by 2002. These  initiatives  will force  significant
  reductions  in NOx  emissions  from  many  sources.  The EPA has  stated  that
  electric utility generating  facilities  specifically are targeted.  The final
  total level of NOx reductions will depend upon the outcome of the SIP revision
  process. Reductions could be as high as 85% from 1990 levels during the summer
  ozone season.  Cinergy  estimates  that the capital costs for  additional  NOx
  controls at its  facilities  at the rate proposed by the EPA could exceed $540
  million over the next five years  depending upon the final level of reductions
  and the time frame.

  The impact of the particulate standards cannot be determined at this time. The
  EPA estimates it will take up to five years to collect  sufficient ambient air
  monitoring  data.  The  states  will  then  determine  the  sources  of  these
  particulates  and determine a reduction  strategy.  The ultimate effect of the
  new standard  could be  requirements  for newer and cleaner  technologies  and
  additional  controls on conventional  particulates and/or reductions in sulfur
  dioxide and NOx  emissions  from  utility  sources.  Since  these  studies and
  determinations  have not been made,  Cinergy  cannot  predict  the  outcome or
  effect of the new particulate standards on its operation.



  Regulatory Matters

  Cinergy and CG&E
  CG&E's Gas Rate Proceeding  See Note 6 of the "Notes to Financial Statements"
  in "Part I.  Financial Information."

  Cinergy and CG&E
  CG&E's Customer Choice Pilot On July 2, 1997, the PUCO approved implementation
  of a pilot program which will allow residential  customers to choose their gas
  supplier and have CG&E transport the gas for them effective  November 1, 1997.
  The pilot extends to residential  customers the choice that has been available
  for several years to large volume commercial and industrial customers.

  Cinergy, CG&E, and ULH&P
  Potential  Divestiture of Gas Operations  Under the PUHCA,  the divestiture of
  CG&E's gas operations may be required.  In its order approving the merger, the
  SEC reserved  judgment over  Cinergy's  ownership of CG&E's gas operations for
  three years,  at the end of which period  Cinergy would be required to address
  the matter,  in light of the applicable  requirements  under the PUHCA, on the
  merits.  In August 1997, the SEC issued an order  permitting  another electric
  registered  holding  company to retain gas  operations  comparable  in size to
  those of CG&E.

       On October 17,  1997,  Cinergy  made a filing with the SEC  requesting  a
  deferral on the gas retention issue for an additional  year, until October 21,
  1998,  in order to afford  Cinergy  sufficient  time to prepare a revised  and
  updated  economic  analysis  of a  hypothetical  divestiture  of the  CG&E gas
  operations  in light of and  consistent  with,  the SEC's  recent  order noted
  above.  That analysis is relevant to the SEC's ultimate  determination on this
  question. Cinergy believes it has a justifiable basis for retention of its gas
  operations and will continue its pursuit of SEC approval.

  Cinergy and PSI
  PSI's Retail Rate Proceeding  See Note 9 of the "Notes to Financial
  Statements" in "Part I.  Financial Information."


  Accounting Issues

  Cinergy, CG&E, PSI, and ULH&P
  New Accounting Standards  See Note 4 of the "Notes to Financial Statements" in
  "Part I.  Financial Information."

  CAPITAL RESOURCES

  Cinergy, CG&E, PSI, and ULH&P
  Long-term Debt  For information regarding recent securities issuances and
  redemptions, see Notes 2 and 3 of the "Notes to Financial Statements" in "Part
  I.  Financial Information."

  In June 1997, CG&E received from the PUCO authorization through June 1998, to,
  among other things:  1) issue and sell up to $400 million of debt securities;
  and 2) enter into $200 million of capital lease obligations.

  Also in June 1997, the KPSC authorized ULH&P to, among other things, issue and
  sell through September 1999, up to $50 million of long-term debt.

  On September 10, 1997, PSI received authorization from the IURC through March
  31, 1999, to, among other things:  1) issue and sell up to $300 million of
  debt securities; and 2) enter into $100 million of capital lease obligations.

  Cinergy, CG&E, PSI, and ULH&P
  Short-term  Debt  The  operating  subsidiary  companies  of  Cinergy  have the
  following short-term debt authorizations and lines of credit:

                                                  Committed           Unused
                                Authorized          Lines__            Lines
                                                (in millions)

      Cinergy & Subsidiaries       $853              $275               $162
      CG&E & Subsidiaries           453                90                 60
      PSI                           400               185                102
      ULH&P                          50                 -                  -

  Cinergy's  $500 million  acquisition  commitment  and $200  million  revolving
  agreement  have $11  million  and $127  million,  respectively,  unused  as of
  September 30, 1997. Both facilities  expire in May 2001. The revolving  credit
  agreement was increased to $400 million on October 28, 1997, to provide credit
  support for Cinergy's newly instituted  commercial paper program. Such program
  is limited to a maximum  outstanding  principal amount of $200 million.  As of
  November 13, 1997,  Cinergy had sold $150  million of  commercial  paper under
  this  program,  the  proceeds of which were used to repay $150  million of the
  $500 million acquisition commitment.

  Cinergy UK's $40 million  non-recourse  credit  agreement  was  terminated  on
  October 22, 1997.  This agreement was replaced by a $115 million  non-recourse
  credit agreement which has $45 million outstanding as of November 13, 1997.

  Lastly, as discussed in Note 5 of the "Notes to Financial Statements" in "Part
  I. Financial Information," a windfall profits tax was levied against Midlands.
  This tax will be paid in two equal installments due December 1, 1997 and 1998.
  Cinergy  anticipates that Midlands and/or Avon Energy will borrow the funds to
  finance the tax payments.

  POWER MARKETING AND TRADING

  Cinergy, CG&E, and PSI
  As discussed in the 1996 Form 10-K, the transactions associated with Cinergy's
  power marketing and trading function give rise to market risk and credit risk.
  Market risk  represents  the potential risk of loss from changes in the market
  value of a particular  commitment arising from adverse changes in market rates
  and prices.  Credit risk  represents  the  potential  risk of loss which would
  occur as a result of nonperformance by counterparties pursuant to the terms of
  their   contractual   obligations.   Cinergy's  power  marketing  and  trading
  operations are actively  conducted in all regions of the United States.  These
  operations  subject Cinergy to the risks and volatilities  associated with the
  energy  commodities which it markets and trades. The wholesale power marketing
  and  trading  business  continues  to be very  competitive  and,  as a result,
  margins have declined throughout the year. As Cinergy continues to develop and
  expand its power  marketing and trading  business (and due to its  substantial
  investment  in generating  assets),  its exposure to movements in the price of
  electricity and other energy  commodities  will become  greater.  As a result,
  Cinergy may ultimately be subject to increased  earnings  volatility.  Cinergy
  has  established a risk management  function and has  implemented  active risk
  management  policies and procedures  designed to manage the Company's exposure
  to market and credit risks.  These  policies and  procedures  are reviewed and
  monitored on a continuous  basis to ensure  their  responsiveness  to changing
  market and business conditions.


  RESULTS OF OPERATIONS

  Cinergy, CG&E, PSI, and ULH&P
  Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I.  FINANCIAL
  INFORMATION.





  PART II.  OTHER INFORMATION

  ITEM 1.  LEGAL PROCEEDINGS

  Cinergy, CG&E, and PSI

  See Notes 6, 9, and 11 of the "Notes to Financial Statements" in "Part I.
  Financial Information."


  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  The following exhibits are filed herewith:

         Exhibit
       Designation                        Nature of Exhibit

  Cinergy and CG&E\tab \tab
          4-a              Third Supplemental Indenture between
                           CG&E and The Fifth Third Bank, as Trustee
                           dated October 9, 1997.

  Cinergy, CG&E, PSI, and ULH&P
           27              Financial Data Schedules (included in
                           electronic submission only).

  Cinergy, CG&E, PSI, and ULH&P
    (b) No reports on Form 8-K were filed during the quarter.





  SIGNATURES

  Certain  information and footnote  disclosures  normally included in financial
  statements   prepared  in  accordance  with  generally   accepted   accounting
  principles  have  been  condensed  or  omitted  pursuant  to  such  rules  and
  regulations,   although  Cinergy,  CG&E,  PSI,  and  ULH&P  believe  that  the
  disclosures are adequate to make the information presented not misleading.  In
  the opinion of Cinergy,  CG&E, PSI, and ULH&P,  these  statements  reflect all
  adjustments (which include only normal,  recurring  adjustments)  necessary to
  reflect the results of operations  for the respective  periods.  The unaudited
  statements are subject to such  adjustments as the annual audit by independent
  public accountants may disclose to be necessary.

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the  Registrants  have duly caused this report to be signed by an
  officer and the chief  accounting  officer on their behalf by the  undersigned
  thereunto duly authorized.

  CINERGY CORP.
  THE CINCINNATI GAS & ELECTRIC COMPANY
  PSI ENERGY, INC.
  THE UNION LIGHT, HEAT AND POWER COMPANY
  Registrants






  Date:  November 13, 1997                            John P. Steffen        
                                                Duly Authorized Officer
                                                          and
                                                Chief Accounting Officer