THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

         This Third  Amendment to Employment  Agreement (the "Third  Amendment")
dated  effective  June 1,  1998,  is by and  among  Cinergy  Corp.,  a  Delaware
corporation   ("Cinergy"),   Cinergy  Services,  Inc.,  a  Delaware  corporation
("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio corporation
("CG&E"),  PSI Energy,  Inc., an Indiana corporation  ("PSI"),  and John M. Mutz
(the "Executive").  Cinergy,  Cinergy Services,  CG&E, and PSI will sometimes be
referred to in this Third Amendment collectively as the "Company".

         WHEREAS,  the Executive has been employed by the Company pursuant to an
Employment  Agreement  dated  effective  as of October 4, 1993 (the  "Employment
Agreement"),  as amended by an  Agreement  dated  August  30,  1996 (the  "First
Amendment")  and by a Second  Amendment to Employment  Agreement dated effective
January 29, 1997 (the "Second Amendment");

         WHEREAS,  the  parties  desire  to  extend  the term of the  Employment
Agreement that currently terminates October 3, 1998, for an additional period of
time upon certain terms and conditions;

         NOW,  THEREFORE,  the  parties  have  agreed to enter  into this  Third
Amendment  which amends the  Employment  Agreement,  as previously  amended,  as
follows:

         1. The parties agree that Section 1(b) of the  Employment  Agreement is
hereby  amended  to  reflect  that the term of the  Employment  Agreement  shall
continue  until  December  31,  1999,  and that the  term of the  Agreement  may
automatically  be extended  for one  additional  year if the Company  shall have
given  notice to the  Executive of its intent to extend the  Agreement  prior to
December 31, 1999,  and the Executive  shall not have objected to such extension
in writing within ten (10) business days of receipt of the notice.

         2. The parties agree that Section 2(a) of the Employment Agreement,  as
previously  amended by the First  Amendment,  is hereby  amended to reflect that
during the remaining term of the Employment  Agreement the Executive  shall hold
the titles of Vice  President of Cinergy  Corp.  and either  President of PSI or
Vice  Chairman of the Board of Directors  of PSI, and that during the  remaining
term of the  Employment  Agreement,  the  Executive  shall  lead  the  Company's
legislative effort in Indiana to enact deregulation  legislation,  represent the
Company  to Indiana  communities;  lead the  Company's  economic  and  community
development  effort in Indiana;  serve as a member of the Company's  management,
strategic planning,  operating, and other committees as requested; assist in the
training of a successor to the title of  President of PSI,  conduct PSI Advisory
Board  meetings;  and  that he shall  have  such  other  authority,  duties  and
responsibilities  as may be  mutually  agreed  upon,  from time to time,  by the
Executive and James E. Rogers,  Vice Chairman and Chief Executive Officer of the
Company.

         3. The  parties  agree  that  although  the  Executive  will  remain an
employee of the Company through December 31, 1999, and will perform services for
the Company on a regular, full-time basis during the 1999 legislative session of
the Indiana General  Assembly,  he will not be required to perform  services for
the Company on more than one hundred fifty-six (156) days in 1999.  Accordingly,
the  parties  agree that  Section  3(a) of the  Employment  Agreement  is hereby
amended to reflect that effective  January 1, 1999, the Executive's  annual base
salary  shall be reduced to the annual rate of Two Hundred  Forty-Nine  Thousand
Dollars ($249,000).

         4. The parties agree that Section 3(b) of the  Employment  Agreement is
hereby  amended to reflect  that  effective  January 1, 1999,  the  Executive is
eligible to receive an annual  bonus paid by the Company of up to sixty  percent
(60%)  of the  Executive's  annual  base  salary  pursuant  to the  terms of the
Company's  Annual  Incentive  Plan (and such  successor  plans thereto as may be
adopted by the  Company).  The parties  further  agree that in  calculating  any
annual bonus paid by the Company to the Executive for 1999,  such bonus shall be
based on an  annual  base  salary of Two  Hundred  Forty-Nine  Thousand  Dollars
($249,000).

         5. The  parties  further  agree  that  Section  3(d) of the  Employment
Agreement  is hereby  amended to reflect that any stock  options  granted to the
Executive  pursuant  to the stock  option  portion  of the  Company's  Long-Term
Incentive  Plan's first cycle covering the years 1997 through 1999 will be based
on an annual base salary of Two Hundred Forty-Nine  Thousand Dollars ($249,000).
The  parties  further  agree that the  Executive's  restricted  stock grant made
pursuant to the terms of the Company's  Long Term  Incentive  Plan's first cycle
covering  the  years  1997  through  1999  will not be  reduced  because  of the
reduction  in annual base salary  that will  become  effective  January 1, 1999.
Except as otherwise provided by this Third Amendment,  the parties further agree
that during the remaining term of the Employment  Agreement the Executive  shall
continue to  participate  in all  incentive,  stock  option,  restricted  stock,
performance unit, savings, retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or other Senior Executives of the
Company who are classified as Tier-II Executives for compensation purposes.

         6. All other provisions of the Employment  Agreement,  First Amendment,
and Second Amendment remain unchanged by this Third Amendment.

         IN WITNESS  WHEREOF,  the  Executive  and the Company  have caused this
Third Amendment to Employment  Agreement to be executed  effective as of the day
and year first above written.

CINERGY CORP.,  CINERGY  SERVICES,  INC., THE CINCINNATI GAS & ELECTRIC COMPANY,
and PSI ENERGY, INC.



By:  _________________________   
          James E. Rogers     
         Vice Chairman and   
      Chief Executive Officer  



          EXECUTIVE    


-----------------------------  
         John M. Mutz