UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-K

(Mark One)

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

For the fiscal year ended .....................................December 31, 2004

                                       OR

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

For the transition period from _________________ to ____________________

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

                                                         Name of each exchange
      Title of each class                                 on which registered
      -------------------                                 -------------------

CH Energy Group, Inc.
Common Stock, $0.10 par value                            New York Stock Exchange

<PAGE>

Securities registered pursuant to Section 12(g) of the Act:

            Title of each class
            -------------------

Central Hudson Gas & Electric Corporation Cumulative Preferred Stock

            4 1/2% Series
             4.75% Series

      Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Act 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 |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

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

                  Yes |X|               No |_|

      The aggregate market value of the voting and non-voting common equity of
Energy Group held by non-affiliates as of February 1, 2005, was $743,966,400
based upon the lowest price at which Energy Group's Common Stock was traded on
that date, as reported on the New York Stock Exchange listing of composite
transactions.

      The aggregate market value of the voting and non-voting common equity of
Energy Group held by non-affiliates as of June 30, 2004, the last business day
of Energy Group's most recently completed second fiscal quarter, was
$731,987,280 computed by reference to the price at which Energy Group's Common
Stock was last traded on that date, as reported on the New York Stock Exchange
listing of composite transactions.

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

                  Yes |_|               No |X|

      The aggregate market value of the voting and non-voting common equity of
Central Hudson held by non-affiliates as of June 30, 2004, was zero.

      The number of shares outstanding of Energy Group's Common Stock, as of
February 1, 2005, was 15,762,000.

<PAGE>

      The number of shares outstanding of Central Hudson's Common Stock, as of
February 1, 2005, was 16,862,087. All such shares are owned by Energy Group.

      CENTRAL HUDSON MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (I)
(1) (a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (I) (2).

                       DOCUMENTS INCORPORATED BY REFERENCE

      Energy Group's definitive Proxy Statement, dated March 11, 2005, and to be
used in connection with its Annual Meeting of Shareholders to be held on April
26, 2005, is incorporated by reference in Part III hereof. Information required
by Part III hereof with respect to Central Hudson has been omitted pursuant to
General Instruction (I) (2) (c) of Form 10-K of the Act.

<PAGE>

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----

                                     PART I

ITEM 1  BUSINESS                                                               2

ITEM 2  PROPERTIES                                                            13

ITEM 3  LEGAL PROCEEDINGS                                                     18

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS                                                               18

                                     PART II

ITEM 5  MARKET FOR ENERGY GROUP'S COMMON EQUITY,
        RELATED STOCKHOLDER MATTERS AND ISSUER
        PURCHASES OF EQUITY SECURITIES                                        19

ITEM 6  SELECTED FINANCIAL DATA OF ENERGY GROUP AND
        ITS SUBSIDIARIES                                                      20

ITEM 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         23

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
        MARKET RISK                                                           50

ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           52

ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        ON ACCOUNTING AND FINANCIAL DISCLOSURE                               140

ITEM 9A CONTROLS AND PROCEDURES                                              140

ITEM 9B OTHER INFORMATION                                                    140

                                    PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF ENERGY GROUP                     141

ITEM 11 EXECUTIVE COMPENSATION                                               143

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
        AND MANAGEMENT                                                       143

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                       143

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES                               144

                                     PART IV

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                           144

        SIGNATURES                                                           146


                                      (i)
<PAGE>

                                TABLE OF CONTENTS

                  (NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)

                                                                            Page
                                                                            ----

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                            79

NOTE 2  REGULATORY MATTERS                                                    93

NOTE 3  INCOME TAX                                                           101

NOTE 4  ACQUISITIONS, DIVESTITURES AND DISCONTINUED
        OPERATIONS                                                           105

NOTE 5  GOODWILL AND OTHER INTANGIBLE ASSETS                                 106

NOTE 6  SHORT-TERM BORROWING ARRANGEMENTS                                    107

NOTE 7  CAPITALIZATION - COMMON AND PREFERRED STOCK                          108

NOTE 8  CAPITALIZATION - LONG-TERM DEBT                                      109

NOTE 9  POST-EMPLOYMENT BENEFITS                                             111

NOTE 10 EQUITY-BASED COMPENSATION INCENTIVE PLANS                            118

NOTE 11 COMMITMENTS AND CONTINGENCIES                                        121

NOTE 12 SEGMENTS AND RELATED INFORMATION                                     130

NOTE 13 FINANCIAL INSTRUMENTS                                                134


                                      (ii)
<PAGE>

                                     PART I

FILING FORMAT

      This Annual Report on Form 10-K for the fiscal year ended December 31,
2004 ("10-K Annual Report"), is a combined report being filed by two different
registrants: CH Energy Group, Inc. ("Energy Group") and Central Hudson Gas &
Electric Corporation ("Central Hudson"). Except where the content clearly
indicates otherwise, any references in this 10-K Annual Report to Energy Group
include all subsidiaries of Energy Group, including Central Hudson. Energy
Group's subsidiaries are each directly or indirectly wholly owned by Energy
Group. Central Hudson makes no representation as to the information contained in
this 10-K Annual Report in relation to Energy Group and its subsidiaries other
than Central Hudson. When this 10-K Annual Report is incorporated by reference
into any filing with the Securities and Exchange Commission ("SEC") made by
Central Hudson, the portions of this 10-K Annual Report that relate to Energy
Group and its subsidiaries, other than Central Hudson, are not incorporated by
reference therein.

FORWARD-LOOKING STATEMENTS

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

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


                                     - 1 -
<PAGE>

ITEM 1 - BUSINESS

CORPORATE STRUCTURE

      On December 15, 1999, Energy Group became the holding company parent
corporation of Central Hudson and Central Hudson Energy Services, Inc. ("CH
Services") (the "Holding Company Restructuring").

      For further information regarding the Holding Company Restructuring and
the Amended and Restated Settlement Agreement dated January 2, 1998, and
thereafter amended ("Settlement Agreement"), among Central Hudson, the Staff of
the Public Service Commission of the State of New York ("PSC"), and certain
others which, among other things, permitted the Holding Company Restructuring,
see the captions "Competitive Opportunities Proceeding Settlement Agreement" and
"Rate Proceedings - Electric and Natural Gas" in Note 2 - "Regulatory Matters"
to the Financial Statements contained in Item 8 - "Financial Statements and
Supplementary Data" of this 10-K Annual Report (each Note being hereinafter
called a "Note"). Surviving provisions of the Settlement Agreement discussed
herein may affect future operations of Energy Group and its subsidiaries.

      Effective December 31, 2002, Energy Group reorganized its competitive
business subsidiaries to streamline administration and improve managerial
effectiveness. As a result of this reorganization, CH Services was merged into
Energy Group; Greene Point Development Corporation ("Greene Point") and Prime
Industrial Energy Services, Inc. were merged into Central Hudson Enterprises
Corporation ("CHEC"); and CHEC replaced CH Services as the parent of the
remaining competitive business subsidiaries. Griffith Energy Services, Inc.
("Griffith") and SCASCO, Inc. ("SCASCO") remain direct subsidiaries of CHEC.
CHEC, Griffith, and SCASCO are collectively referred to herein as the
"competitive business subsidiaries." Energy Group's other subsidiary, Central
Hudson, wholly owns Phoenix Development Company, Inc. ("Phoenix"). Another
subsidiary of CH Services, CH Resources, Inc. ("CH Resources"), and its
subsidiary companies, CH Syracuse Properties, Inc. and CH Niagara Properties,
Inc., were sold in May 2002. For further information on the sale of CH
Resources, see Note 4 - "Acquisitions, Divestitures and Discontinued
Operations."

      Central Hudson's preferred stock and debt remain securities of Central
Hudson.

      Because of its ownership of Central Hudson, Energy Group is a "public
utility holding company" under the Public Utility Holding Company Act of 1935
("PUHCA"). However, Energy Group is exempt from the provisions of PUHCA under
the intrastate exemption provisions of ss.3(a)(1) of PUHCA except that, under
ss.9(a)(2) of PUHCA, the approval of the SEC is required for a direct or
indirect acquisition by a public utility holding company of 5% or more of the
voting securities of any electric or natural gas utility company subject to
PUHCA.

      For a discussion of Energy Group's and its subsidiaries' capital
structure, financing program, and short-term debt, see Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
this 10-K Annual Report under the subcaptions "Capital Structure," "Financing
Program of Energy Group and Its Subsidiaries," and "Credit Facilities and
Short-Term Debt" under the caption "Capital Resources and Liquidity." For a
discussion of short-term borrowing, capitalization, and long-term debt, see Note
6 - "Short-Term Borrowing Arrangements," Note 7 - "Capitalization - Energy Group
Capital Stock,"


                                     - 2 -
<PAGE>

and Note 8 - "Capitalization - Long-Term Debt," respectively. For information
concerning revenues, certain expenses, earnings per share, and information
regarding assets for Central Hudson's electric and natural gas segments and the
competitive business subsidiaries' segments, see Note 12 - "Segments and Related
Information."

SUBSIDIARIES OF ENERGY GROUP

CENTRAL HUDSON

      Central Hudson is a New York natural gas and electric corporation formed
on December 31, 1926, as a consolidation of several operating utilities that had
been accumulated under one management during the previous 26 years. Central
Hudson purchases, sells at wholesale, and distributes electricity and natural
gas in portions of New York State. Central Hudson also generates a small portion
of its electricity requirements.

      Central Hudson serves a territory extending about 85 miles along the
Hudson River and about 25 to 40 miles east and west of the Hudson River. The
southern end of the territory is about 25 miles north of New York City, and the
northern end is about 10 miles south of the city of Albany. The territory,
comprising approximately 2,600 square miles, has a population estimated at
681,500. Electric service is available throughout the territory and natural gas
service is provided in and about the cities of Poughkeepsie, Beacon, Newburgh,
and Kingston, New York, and in certain outlying and intervening territories. The
number of Central Hudson employees at December 31, 2004, was 843.

      Central Hudson's territory reflects a diversified economy, including
manufacturing industries, research firms, farms, governmental agencies, public
and private institutions, resorts, and wholesale and retail trade operations.

      The competitive marketplace continues to develop for electric and natural
gas utilities, and Central Hudson's electric and natural gas customers may
purchase energy and related services from other sources.

      Seasonality

      Central Hudson's delivery revenues vary seasonally in response to weather.
Sales of electricity are usually highest during the summer months, primarily due
to the use of air-conditioning and other cooling equipment. Sales of natural gas
are highest during the winter months, primarily due to space heating usage.

      Competition

      Central Hudson is a regulated utility with an exclusive right to deliver
electricity and natural gas within its PSC-approved franchise territory. Central
Hudson has no direct competitors in its electricity business; indirect
competitors may include distributed generation systems which could bypass the
electric delivery system, however Central Hudson believes such competition is
not imminent. Central Hudson's natural gas business competes with other fuels,
especially fuel oil and propane.


                                     - 3 -
<PAGE>

      Sales of Major Generating Assets

      For information with respect to the sales of Central Hudson's interests in
the Danskammer Point Steam Electric Generating Station ("Danskammer Plant"), the
Roseton Electric Generating Plant ("Roseton Plant"), and Unit No. 2 of the Nine
Mile Point Nuclear Generating Station ("Nine Mile 2 Plant") during 2001, see the
caption "Sales of Major Generating Assets" in Note 2 - "Regulatory Matters." The
Danskammer Plant, the Roseton Plant, and the Nine Mile 2 Plant are collectively
referred to herein as the "major generating assets."

      Regulation

      Central Hudson is subject to regulation by the PSC regarding, among other
things, services rendered (including the rates charged), major transmission
facility siting, accounting procedures, and issuance of securities. For certain
restrictions on Central Hudson's activities imposed by the Settlement Agreement,
see Note 2 - "Regulatory Matters" under the caption "Competitive Opportunities
Proceeding Settlement Agreement."

      Certain activities of Central Hudson, including accounting and the
acquisition and disposition of property, are subject to regulation by the
Federal Energy Regulatory Commission ("FERC") under the Federal Power Act.

      Central Hudson is not subject to the provisions of the Natural Gas Act.

      With the exception of the Groveville Hydroelectric Facility in Beacon, New
York, Central Hudson's hydroelectric facilities are not required to be licensed
under the Federal Power Act. The Groveville Hydroelectric Facility has an
Emergency Action Plan which has been approved by the FERC.

      For discussion of the PSC Order regarding stray voltage, see Note 2 -
"Regulatory Matters" under caption "Other Regulatory Matters."

      Rates

      Generally: The electric and natural gas rates collected by Central Hudson
applicable to service supplied to retail customers within New York State are
regulated by the PSC. Transmission rates and rates for electricity sold for
resale in interstate commerce by Central Hudson are regulated by the FERC. In
Central Hudson's most recent rate proceeding, rates for delivery and supply were
unbundled to facilitate competition.

      Central Hudson's present retail electricity rate structure consists of
various service classifications covering delivery service and full service
(which includes electricity supply) for residential, commercial, and industrial
customers. During 2004, the average price of electricity for full service
customers was 8.88 cents per kilowatt-hour ("kWh") as compared to an average of
8.83 cents per kWh for 2003. The average delivery price, excluding Customer
Benefit Fund refunds, for 2004 was 2.68 cents per kWh and 2.51 cents per kWh for
2003.


                                     - 4 -
<PAGE>

      Rate Proceedings - Electric and Natural Gas: For information regarding
Central Hudson's most recent electric and natural gas proceedings filed with the
PSC, see Note 2 - "Regulatory Matters" under the caption "Rate Proceedings -
Electric and Natural Gas."

      Cost Adjustment Clauses: For information regarding Central Hudson's
electric and natural gas cost adjustment clauses, see Note 1 - "Summary of
Significant Accounting Policies" under the caption "Rates, Revenues and Cost
Adjustment Clauses."

      Capital Expenditures and Financing

      For estimates of future capital expenditures for Central Hudson, see the
subcaption "Capital Expenditures" in Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of this 10-K Annual
Report under the caption "Capital Resources and Liquidity."

      Central Hudson's Certificate of Incorporation and its various debt
instruments do not contain any limitations upon the issuance of authorized, but
unissued, preferred stock or unsecured short-term debt.

      Central Hudson has in place certain credit facilities with financial
covenants that limit the amount of additional funded indebtedness Central Hudson
may incur. Additionally, Central Hudson's ability to issue debt securities is
limited by authority granted by the PSC. Central Hudson believes these
limitations will not impair its ability to issue any or all of the debt
described under the subcaption "Financing Program of Energy Group and Its
Subsidiaries" in Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of this 10-K Annual Report under the
caption "Capital Resources and Liquidity."

      Purchased Power and Generation Costs

      For the twelve-month period ended December 31, 2004, the sources and
related costs of purchased electricity and electricity generation for Central
Hudson were as follows:

                                             Aggregate
              Sources of                   Percentage of      Costs in 2004
                Energy                  Energy Requirements       ($000)
      -------------------------         -------------------   -------------

      Purchased Electricity                     96.4%           $ 256,192
      Hydroelectric and Other                    3.6%                 773
                                               -----
                                               100.0%
                                               =====
      Deferred Electricity Cost                                    (5,224)
                                                                ---------
                Total                                           $ 251,741
                                                                =========


                                     - 5 -
<PAGE>

      Other Central Hudson Matters

      Labor Relations: Central Hudson has an agreement with Local 320 of the
International Brotherhood of Electrical Workers for its 549 unionized employees,
representing construction and maintenance employees, customer representatives,
service workers, and clerical employees (excluding persons in managerial,
professional, or supervisory positions). This agreement became effective on May
1, 2003, and remains effective through April 30, 2008. It provides for an
average annual general wage increase of 3.5% and certain additional fringe
benefits.

      Subsidiary of Central Hudson - Phoenix Development Company, Inc.: Phoenix,
a New York corporation, is a wholly owned subsidiary of Central Hudson. Phoenix
was incorporated in 1950 to hold or lease real property for future use by
Central Hudson and to participate in energy-related ventures. Currently,
Phoenix's assets are not significant.

COMPETITIVE BUSINESS SUBSIDIARIES

      As of December 31, 2002, the effective date of the restructuring described
under the caption "Corporate Structure" of this Item 1 of this 10-K Annual
Report, CHEC became the holding company parent of the competitive business
subsidiaries.

CHEC and its Subsidiaries

      Central Hudson Enterprises Corporation: CHEC, a New York corporation, is a
wholly owned subsidiary of Energy Group. CHEC has been engaged in the business
of marketing electricity, natural gas, petroleum products, and related services
to retail and wholesale customers; conducting energy audits; and providing
services including, but not limited to, the design, financing, installation, and
maintenance of energy conservation measures and generation systems for private
businesses, institutions, and government entities. CHEC has also participated in
cogeneration, small hydroelectric, alternate fuel, and energy production
projects in Connecticut, New Jersey, New Hampshire, New York, and most recently,
a fuel ethanol production plant in Nebraska. For further discussion of the
ethanol fuel production plant, see Note 4 - "Acquisitions, Divestitures and
Discontinued Operations."

      Griffith Energy Services, Inc.: Griffith, a New York corporation, is a
wholly owned subsidiary of CHEC. Griffith is an energy services company engaged
in the distribution of heating oil, gasoline, diesel fuel, kerosene, and
propane, and the installation and maintenance of heating, ventilating, and air
conditioning ("HVAC") equipment in Virginia, West Virginia, Maryland, Delaware,
Pennsylvania, and in Washington, D.C. Since being acquired by CHEC in November
2000, Griffith has acquired assets of ten regional fuel oil, propane, and
related services companies.

      SCASCO, Inc.: SCASCO, a Connecticut corporation, is a wholly owned
subsidiary of CHEC. SCASCO is an energy services company engaged in the
distribution of heating oil, gasoline, diesel fuel, kerosene, and propane, and
the installation of electrical services and HVAC equipment in the states of
Connecticut, Massachusetts, and New York. On October 31, 2003, SCASCO completed
the sale of certain assets and liabilities of its natural gas unit. For further
discussion of the sale, see Note 4 - "Acquisitions, Divestitures and
Discontinued Operations."


                                     - 6 -
<PAGE>

      Neither CHEC nor its subsidiaries operate in Central Hudson's service
territory.

      Seasonality

      CHEC's revenues vary seasonally, as fuel oil deliveries are directly
related to use for space heating and are highest during the winter months.

      Competition

      CHEC and its subsidiaries participate in competitive supply and service
businesses that are subject to different risks than those found in the
businesses of the regulated utility, Central Hudson. As unregulated competitors
in the fuel oil delivery business, the competitive business subsidiaries face
competition from other fuel oil delivery companies and from companies supplying
other forms of fuel for heating such as natural gas. The competitive business
subsidiaries accounted for 30% of Energy Group's consolidated revenues (net of
fuel) in 2004. For a discussion of the competitive business subsidiaries'
operating revenues and operating income, see the caption "Results of Operations"
in Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of this 10-K Annual Report.

      Environmental Quality Regulation

      Central Hudson and certain of the competitive business subsidiaries are
subject to regulation by federal, state and, to some extent, local authorities
with respect to the environmental effects of their operations, including
regulations relating to air and water quality, noise, hazardous wastes, toxic
substances, protection of vegetation and wildlife, and limitations on land use.
Environmental matters may expose both Central Hudson and the competitive
business subsidiaries to potential liability that, in certain instances, may be
imposed without regard to fault or may be premised on historical activities that
were lawful at the time they occurred. Central Hudson and the competitive
business subsidiaries monitor their activities in order to determine the impact
of their activities on the environment and to comply with applicable
environmental laws and regulations.

      The principal environmental areas to which Central Hudson and certain of
the competitive business subsidiaries are subject are generally as follows:

      Air: Central Hudson's South Cairo and Coxsackie combustion turbines are
subject to the Clean Air Act Amendments of 1990 ("Clean Air Act Amendments"),
which address attainment and maintenance of national air quality standards,
including control of particulate emissions from fossil-fueled electric
generating plants (such as South Cairo and Coxsackie) and emissions that affect
"acid rain" and ozone. Both South Cairo and Coxsackie complied with the Clean
Air Act Amendments during 2004. See Note 11 - "Commitments and Contingencies"
under the caption "Environmental Matters" regarding the investigation by the
United States Environmental Protection Agency ("EPA") into the compliance of
Central Hudson's former major generating assets.

      Water: Central Hudson and certain of the competitive business subsidiaries
are required to comply with applicable federal and state laws and regulations
governing the discharge of pollutants into waterways and ground water.


                                     - 7 -
<PAGE>

      The discharge of any pollutants into waters of the United States is
prohibited except in compliance with a permit issued by the EPA under the
National Pollutant Discharge Elimination System ("NPDES") established under the
Clean Water Act of 1972. Likewise, under the New York Environmental Conservation
Law, pollutants cannot be discharged into state waters without a State Pollutant
Discharge Elimination System ("SPDES") permit, issued with regard to activities
in New York by the New York State Department of Environmental Conservation
("DEC") and for activities in other states by the relevant state's environmental
regulatory agency. Issuance of a SPDES permit satisfies the NPDES permit
requirement.

      Central Hudson has SPDES permits for its Eltings Corners maintenance and
warehouse facility and for its Rifton Recreation and Training Center, both in
New York. See Note 11 - "Commitments and Contingencies" under the subcaption
"Environmental Matters" regarding Central Hudson's application to the DEC for a
SPDES permit for its Neversink Hydroelectric Station. No other SPDES permits are
required for Central Hudson's operations.

      Griffith has SPDES permits for its Frederick Bulk Plant, its Westminster
Bulk Plant, its S. L. Bare Bulk Plant, its R. S. Leitch Bulk Plant, and its
Cheverly, Maryland office. Griffith also has storm water discharge permits for
its Charlestown, West Virginia bulk storage plant and its Martinsburg, West
Virginia bulk storage plant. SCASCO is not required to have SPDES permits for
its operations.

      Toxic Substances and Hazardous Wastes: Central Hudson and certain of the
competitive business subsidiaries are subject to federal and state laws and
regulations relating to the use, handling, storage, treatment, transportation,
and disposal of industrial, hazardous, and toxic wastes. See Note 11 -
"Commitments and Contingencies" under the caption "Environmental Matters"
regarding, among other things, former manufactured gas plant facilities, the
Orange County Landfill, and Newburgh Consolidated Iron Works.

      Other: Central Hudson expenditures attributable, in whole or in
substantial part, to environmental considerations totaled $1.6 million in 2004,
of which approximately $1.4 million was charged to expense. It is estimated that
these expenditures will total approximately $1.9 million in 2005.

      Expenditures attributable, in whole or in substantial part, to
environmental considerations for the competitive business subsidiaries totaled
$207,000 in 2004, all of which was applied to capital projects. It is estimated
that these expenditures will total less than $50,000 in 2005.

      Regarding environmental matters, except as described in Note 11 -
"Commitments and Contingencies" under the subcaption "Environmental Matters,"
neither Energy Group, Central Hudson, nor the competitive business subsidiaries
are involved as defendants in any material litigation, administrative
proceeding, or investigation and, to the best of their knowledge, no such
matters are threatened against any of them.


                                     - 8 -
<PAGE>

Research and Development

      Central Hudson is engaged in the conduct and support of research and
development ("R&D") activities, which are focused on the improvement of existing
energy technologies and the development of new technologies for the delivery and
customer use of energy. Central Hudson's R&D expenditures were $3.6 million in
2004 and $3.2 million in each of 2003 and 2002. These expenditures were for
internal research programs and for contributions to research administered by the
New York State Energy Research and Development Authority, the Electric Power
Research Institute, and other industry organizations. R&D expenditures are
provided for in Central Hudson's tariffs for electric and natural gas delivery
service. In addition, the PSC has authorized that differences between R&D
expense and the rate allowances covering these costs are deferred for future
recovery from or return to customers.

AVAILABLE INFORMATION

      Energy Group files annual, quarterly, and special reports, proxy
statements, and other information with the SEC. Central Hudson files annual,
quarterly, and special reports and other information with the SEC. The public
may read and copy any of the documents each company files at the SEC's Public
Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. SEC filings are also available to the public from the
SEC's Internet website at http://www.sec.gov.

      Energy Group makes available free of charge on or through its Internet
website at www.chenergygroup.com its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after it electronically files such
material with, or furnishes it to, the SEC. Energy Group's governance
guidelines, Code of Business Conduct and Ethics, and the charters of its Audit,
Compensation, Governance and Nominating, and Strategy and Finance Committees are
available on Energy Group's Internet website at www.chenergygroup.com. The
governance guidelines, the Code of Business Conduct and Ethics, and the charters
may also be obtained by writing to the Corporate Secretary, CH Energy Group,
Inc., 284 South Avenue, Poughkeepsie, New York 12601-4879.


                                     - 9 -
<PAGE>

Executive Officers

      All executive officers of Energy Group are elected or appointed annually
by its Board of Directors. There are no family relationships among any of the
executive officers of Energy Group or its subsidiaries. The names of the current
executive officers of Energy Group, their positions held and business experience
during the past five years, and ages (at December 31, 2004) are as follows:

<TABLE>
<CAPTION>
           Executive           Age    Current and Prior Positions                                           Date Commenced
--------------------------------------------------------------------------------------------------------------------------
Executive Officers of Energy Group
<S>                            <C>    <C>                                                                   <C>
Steven V. Lant(1)              47     Director, Chairman of the Board, President,
                                       and Chief Executive Officer(b)                                       May 10, 2004
                                      Director, Chairman of the Board, and Chief Executive Officer(a)       May 5, 2004
                                      Director, Chairman of the Board, President,
                                       and Chief Executive Officer(c)                                       April 27, 2004
                                      Director, President, and Chief Executive Officer(b) (c)               July 2003
                                      Director and Chief Executive Officer(a)                               July 2003
                                      Director, Chief Operating Officer
                                       and Chief Financial Officer(a) (b) (c)                               February 2002
                                      Chief Financial Officer(c)                                            May 2001
                                      Director(a) (b)                                                       December 1999
                                      Chief Financial Officer and Treasurer(a) (b)                          November 1999

Carl E. Meyer(2)               57     Director, President and Chief Operating Officer(a)                    December 1999
                                      Executive Vice President(c)                                           November 1999

Arthur R. Upright(2)           61     Director(a)                                                           December 1999
                                      Director(b)                                                           November 1999
                                      Senior Vice President(c)                                              November 1999
                                      Senior Vice President - Regulatory Affairs, Financial
                                        Planning & Accounting(a)                                            November 1998
</TABLE>


                                     - 10 -
<PAGE>

<TABLE>
<CAPTION>
           Executive           Age    Current and Prior Positions                                           Date Commenced
--------------------------------------------------------------------------------------------------------------------------
Executive Officers of Energy Group (Cont'd)
<S>                            <C>    <C>                                                                   <C>
Joseph J. DeVirgilio, Jr.(1)   53     Executive Vice President - Corporate Services
                                       and Administration(a) (c)                                            January 2005
                                      Executive Vice President(b)                                           January 2003
                                      Senior Vice President(b) (c)                                          October 2002
                                      Senior Vice President - Corporate Services
                                       and Administration(a)                                                November 1998

Christopher M. Capone(1)       42     Chief Financial Officer and Treasurer(a) (b) (c)                      September 2003
                                      Treasurer(a) (c)                                                      April 2003
                                      Managing Director, Furman Selz / ING(i)                               March 2002
                                      Treasurer(a) (b) (c)                                                  June 2001
                                      Assistant Treasurer - Investor Relations(a) (c)                       March 2000
                                      Vice President/Division Head, Personal Fixed
                                       Income Division, Bank of New York(ii)                                December 1998

Donna S. Doyle(2)              56     Director(b)                                                           June 2002
                                      Vice President - Accounting and Controller(a) (c)                     November 1999

Denise D. VanBuren(2)          43     Vice President - Corporate Communications and Community
                                        Relations(a) (c)                                                    November 2000
                                      Assistant Vice President - Corporate Communications(a)                November 1999

Lincoln E. Bleveans(1)         37     Secretary and Assistant Treasurer(a) (c)                              January 2003
                                      Secretary(b)                                                          January 2003
                                      Vice President - Greene Point
                                        (a former subsidiary of Energy Group)                               September 2000
                                      Senior Director - Structured Investments, Dynegy
                                        Marketing and Trade, Inc.(iii)                                      February 2000
                                      Managing Director - Development, Illinova Generating Company(iv)      December 1998
</TABLE>

(1)   Executive is an officer of Energy Group, Central Hudson, and CHEC.

(2)   Executive is an officer of Energy Group and Central Hudson.


                                     - 11 -
<PAGE>

(a)   For Central Hudson

(b)   For CHEC

(c)   For Energy Group

(i)   In this position, Mr. Capone managed fixed income portfolios for
      institutions and high net worth individuals.

(ii)  In this position, Mr. Capone was the head of a group that managed fixed
      income portfolios for institutions and high net worth individuals.

(iii) In this position, Mr. Bleveans managed Dynegy Marketing & Trade, Inc.'s
      equity ownership interests in Independent Power Producers ("IPPs") in
      South America and Asia.

(iv)  In this position, Mr. Bleveans managed Illinova Generating Company's
      project development and equity investment activities in Asia and in parts
      of Central America. Dynegy Marketing & Trade, Inc. was a successor to
      Illinova Generating Company as a result of the merger of each
      corporation's parent corporations - being Dynegy, Inc. and Illinova
      Corporation, respectively - in February 2000.


                                     - 12 -
<PAGE>

ITEM 2 - PROPERTIES

      Energy Group has no significant properties other than those of Central
Hudson and the competitive business subsidiaries.

CENTRAL HUDSON

      Electric: Central Hudson owns electric generating facilities (described in
the table below) and substations having an aggregate transformer capacity of 4.6
million kilovolt amps. Central Hudson's electric transmission system consists of
586 pole miles of line and the electric distribution system consists of 7,769
pole miles of overhead lines and 1,179 trench miles of underground lines.


                                     - 13 -
<PAGE>

      The aggregate net capability of Central Hudson's electric generating
plants as of December 31, 2004, the net output of each plant for the year ended
December 31, 2004, and the year each plant was placed in service or
rehabilitated are as set forth below:

<TABLE>
<CAPTION>
                                                                      Megawatt*                2004 Unit
Electric                                    Year Placed            Net Capability              Net Output
Generating                                  In Service/        (2004)        (2003-2004)      Megawatthour
Plant                   Type of Fuel       Rehabilitated       Summer          Winter           ("MWh")
----------              ------------       -------------       ------         ----------      ------------
<S>                     <C>                     <C>              <C>              <C>            <C>
Neversink**             Water                   1953             22.0             20.0           73,140
Hydro Station

Sturgeon Pool           Water                   1924             15.8             15.5           68,469
Hydro Station

Dashville               Water                   1920              5.5              5.5           22,292
Hydro Station

High Falls              Water                   1986              3.0              3.0            8,699
Hydro Station

Groveville              Water                   2000              0.8              0.8            1,526
Hydro Station

Coxsackie Gas           Kerosene or             1969             19.6             24.4               76
Turbine ("GT")          Natural Gas

South Cairo GT          Kerosene                1970             15.6             22.4              232
                                                              -------          -------          -------

                                  Total                          82.3             91.6          174,434
                                                              =======          =======          =======
</TABLE>

*     Reflects maximum one-hour net capability of Central Hudson's electric
      generating plants and therefore does not include firm purchases or sales.


                                     - 14 -
<PAGE>

**    Central Hudson's ownership interest in the Neversink Hydro Station
      ("Neversink") was initially governed by an agreement between Central
      Hudson and the City of New York dated April 21, 1948. That agreement
      provided for the transfer of Central Hudson's ownership interest in
      Neversink, which has a book value of zero, to the City of New York on
      December 31, 2003. In March 2004, Central Hudson and the City of New York
      entered into an agreement pursuant to which the date of such transfer was
      postponed until not later than December 31, 2004. In December 2004,
      Central Hudson and the City of New York entered into a further agreement
      which postpones the date of such transfer until not later than August 31,
      2005.


                                     - 15 -
<PAGE>

      Load and Capacity: Central Hudson's maximum one-hour demand within its own
territory for the year ended December 31, 2004, occurred on June 9, 2004, and
amounted to 1,043 megawatts ("MW"). Central Hudson's maximum one-hour demand
within its own territory for that part of the 2004-2005 winter capability period
through January 31, 2005, occurred on December 20, 2004, and amounted to 988 MW.

      As a result of the sales of Central Hudson's interests in its major
generating assets in 2001, Central Hudson owns minimal generating capacity and
relies on purchased capacity and energy from third-party providers to meet the
demands of its full service customers. To partially supply its full service
customers, Central Hudson entered into a transition power agreement with an
affiliate of Dynegy Power Corporation, Inc. ("Dynegy") for the period from
January 30, 2001, to and including October 31, 2003, for the purchase of
capacity and energy. Central Hudson exercised its option to extend this contract
to and including October 31, 2004, on which date this contract terminated in
accordance with its terms. This contract was "financially firm" in that Dynegy
was required to supply electricity under the terms of the contract regardless of
the operational status of its Danskammer Plant and its Roseton Plant, both sold
by Central Hudson to Dynegy in 2001. For more information, see Note 2 -
"Regulatory Matters."

      Central Hudson also entered into an agreement with Constellation, Inc.
("Constellation") to purchase capacity and energy from the Nine Mile 2 Plant for
a ten-year period beginning November 7, 2001, and ending November 30, 2011. The
agreement is "unit contingent" in that Constellation is only required to supply
electricity if the Nine Mile 2 Plant is operating. Central Hudson sold its
interest in the Nine Mile 2 Plant to Constellation in 2001. For more
information, see Note 2 - "Regulatory Matters."

      In the case of both contracts, capacity and energy are purchased at
defined prices that escalate over the lives of the respective contracts.

      On November 12, 2002, Central Hudson entered into agreements with Entergy
Nuclear Indian Point 2 LLC and Entergy Nuclear Indian Point 3 LLC to purchase
energy (but not capacity) on a unit contingent basis at defined prices for a
period from January 1, 2005, to and including December 31, 2007. On April 23,
2003, Central Hudson entered into an agreement with Entergy Nuclear Fitzpatrick
LLC to purchase energy (but not capacity) on a unit contingent basis at defined
prices from January 1, 2004, to and including December 31, 2004.

      Purchases under these contracts are supplemented by purchases from the
NYISO and other parties.

      The following table compares required capacity with currently existing
resources of Central Hudson by summer and winter capability periods for 2005 and
2006. Central Hudson intends to eliminate any capacity shortfalls through
additional purchases.


                                     - 16 -
<PAGE>

<TABLE>
<CAPTION>
                         Forecasted        UCAP
                            Peak -      Requirements     Available              Excess of
                            Total         for Peak         UCAP                 UCAP Over
                          Delivery          Loads        Capacity                NYISO(6)
          Capability    Requirements        (MW)           (MW)                Requirements
 Year       Period         (MW)(1)         (2)(3)         (4)(5)         (MW)(3)       Percent(3)
------    ----------    ------------    ------------     ---------       ------------------------
<S>         <C>             <C>            <C>              <C>           <C>            <C>
2005        Summer          1,114          1,110            975           (135)          (12.2%)
2005-6      Winter            988          1,110            706           (404)          (36.4%)
</TABLE>

(1)   Total delivery requirements include requirements for both full service
      (delivery and energy) and retail access (delivery only) customers.

(2)   Unforced capacity ("UCAP") is generation capacity adjusted for forced
      outages. Summer period UCAP requirements carry over to the following
      winter period.

(3)   Based on full service requirements.

(4)   Owned capacity of 62 MW plus firm contract capacity of 913 MW as of
      January 31, 2005, for the summer 2005 period.

(5)   Owned capacity of 75 MW plus firm contract capacity of 631 MW as of
      January 31, 2005, for the winter 2005-2006 period.

(6)   "NYISO" is the New York Independent System Operator, which oversees the
      bulk electricity transmission system in New York State.

      Natural Gas: Central Hudson's natural gas system consists of 161 miles of
transmission pipelines and 1,068 miles of distribution pipelines.

      For the year ended December 31, 2004, the total amount of natural gas
purchased by Central Hudson from all sources was 10,839,909 thousand cubic feet
("Mcf").

      Central Hudson also owns two propane-air mixing facilities for emergency
and peak-shaving purposes, one located in Poughkeepsie, New York, and the other
in Newburgh, New York. These facilities, in aggregate, are capable of supplying
8,000 Mcf per day with propane storage capability adequate to provide maximum
facility output for up to six consecutive days.

      The peak daily demand for natural gas of Central Hudson's customers for
the year ended December 31, 2004, and for that part of the 2004-2005 heating
season through January 31, 2005, occurred on January 27, 2005, and amounted to
125,496 Mcf. Central Hudson's firm peak day natural gas capability in the
2004-2005 heating season was 128,370 Mcf, which excludes approximately 15,000
Mcf of transport customer deliveries.

      Other Central Hudson Matters: Central Hudson's corporate headquarters is
located in Poughkeepsie, New York. Central Hudson's electric generating plants
and important property units are generally held by it in fee simple, except
certain rights-of-way and a portion of the property used in connection with
hydroelectric plants consisting of flowage or other riparian rights. Certain of
the Central Hudson properties are subject to rights-of-way and easements that do
not interfere with Central Hudson's operations. In the case of certain
distribution lines, Central Hudson owns only a partial interest in the poles
upon which its wires are installed, and the remaining interest is owned by
various telecommunications companies. In addition, certain electric and natural
gas transmission facilities owned by others are used by Central Hudson under
long-term contracts.


                                     - 17 -
<PAGE>

      All of the physical properties of Central Hudson, other than property such
as material and supplies and Central Hudson franchises, are from time to time
subject to liens for current taxes and assessments which Central Hudson pays
regularly and when due.

      During the three-year period ended December 31, 2004, Central Hudson made
gross property additions of $176.7 million and property retirements and
adjustments of $31.7 million, resulting in a net increase (including
Construction Work in Progress) in gross utility plant of $145 million, or 16%.

CHEC

Griffith

      As of December 31, 2004, Griffith owned or leased several office and bulk
petroleum storage facilities. In addition, Griffith stores petroleum products in
bulk storage facilities owned by others. These facilities are located throughout
Maryland, Delaware, Virginia, West Virginia, and Pennsylvania. The bulk
petroleum storage facilities have capacities from 60,000 gallons up to in excess
of 1.2 million gallons. Griffith purchased its corporate headquarters in
Cheverly, Maryland in 2004 for $1.1 million. Griffith had previously leased this
property.

SCASCO

      As of December 31, 2004, SCASCO owned or leased several office, warehouse,
and bulk storage facilities located throughout Connecticut. The bulk storage
facilities have capacities of between 107,000 and 400,000 gallons. SCASCO owns
its corporate headquarters in Winsted, Connecticut.

ITEM 3 - LEGAL PROCEEDINGS

      For a discussion of certain legal proceedings and certain administrative
matters involving Central Hudson and the competitive business subsidiaries, see
Note 11 - "Commitments and Contingencies," which discussion is incorporated
herein by reference.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 2004.


                                     - 18 -
<PAGE>

                                     PART II

ITEM 5 - MARKET FOR ENERGY GROUP'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
         AND ISSUER PURCHASES OF EQUITY SECURITIES

      For information regarding the market for Energy Group's common stock and
related stockholder matters, see Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of this 10-K Annual Report
under the captions "Capital Resources and Liquidity - Financing Program of
Energy Group and Its Subsidiaries" and "Common Stock Dividends and Price Ranges"
and Note 7 - "Capitalization - Energy Group Capital Stock."

      Under applicable statutes and their respective Certificates of
Incorporation, Energy Group may pay dividends on shares of its common stock and
Central Hudson may pay dividends on its common stock and its preferred stock, in
each case only out of surplus.


                                     - 19 -
<PAGE>

ITEM 6 - SELECTED FINANCIAL DATA OF ENERGY GROUP AND ITS SUBSIDIARIES

FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*
(ENERGY GROUP)
(In Thousands, except per share data)

<TABLE>
<CAPTION>
                                                       2004          2003          2002          2001          2000
                                                    ----------    ----------    ----------    ----------    ----------
<S>                                                 <C>           <C>           <C>           <C>           <C>
Operating Revenues
  Electric .....................................    $  430,575    $  457,395    $  427,978    $  428,346    $  531,732
  Natural gas ..................................       125,230       123,306       105,343       110,296       105,353
  Competitive business subsidiaries ............       235,707       225,983       162,520       192,061       111,027
                                                    ----------    ----------    ----------    ----------    ----------
      Total ....................................       791,512       806,684       695,841       730,703       748,112

Operating Income ...............................        75,133        76,301        63,683        71,486       115,692

Preferred Stock Dividends of Central Hudson ....           970         1,387         2,161         3,230         3,230

Income from continuing operations ..............        42,423        43,985        36,453        50,835        50,973
Net Gain on Discontinued Operations ............            --            --         4,828            --            --
                                                    ----------    ----------    ----------    ----------    ----------
Net Income .....................................        42,423        43,985        41,281        50,835        50,973
Dividends Declared on Common Stock .............        34,046        34,093        35,095        35,342        35,945
                                                    ----------    ----------    ----------    ----------    ----------
Amount Retained in the Business ................         8,377         9,892         6,186        15,493        15,028
Retained Earnings - beginning of year ..........       179,395       169,503       163,317       147,824       132,796
                                                    ----------    ----------    ----------    ----------    ----------
Retained Earnings - end of year ................    $  187,772    $  179,395    $  169,503    $  163,317    $  147,824
                                                    ==========    ==========    ==========    ==========    ==========

Common Stock
  Average shares outstanding - basic ...........        15,762        15,831        16,302        16,362        16,716
  Average shares outstanding - diluted .........        15,771        15,835        16,316        16,370        16,725
  Earnings per share on average shares
    outstanding - basic ........................    $     2.69    $     2.78    $     2.53    $     3.11    $     3.05
  Earnings per share on average shares
    outstanding - diluted ......................    $     2.69    $     2.77    $     2.51    $     3.09    $     3.04
  Dividends declared per share .................    $     2.16    $     2.16    $     2.16    $     2.16    $     2.16
  Book value per share (at year-end) ...........    $    31.31    $    30.80    $    30.31    $    30.33    $    29.38

Total Assets (at year-end) .....................    $1,287,004    $1,310,076    $1,282,907    $1,257,298    $1,593,373
Long-term Debt (at year-end) ...................       319,883       278,880       269,877       216,124       320,370
Cumulative Preferred Stock (at year-end) .......        21,030        21,030        33,530        56,030        56,030
Common Equity (at year-end) ....................       493,465       485,424       486,915       496,309       480,742
</TABLE>


                                     - 20 -
<PAGE>

*     This summary should be read in conjunction with the Consolidated Financial
      Statements and Notes thereto included in Item 8 - "Financial Statements
      and Supplementary Data" of this 10-K Annual Report.

      For additional information related to the impact of acquisitions and
      dispositions on the above, this summary should be read in conjunction with
      Item 7 - "Management Discussion and Analysis of Financial Condition and
      Results of Operations" of this 10-K Annual Report and Note 4 -
      "Acquisitions, Divestitures and Discontinued Operations" of Item 8 -
      "Financial Statements and Supplementary Data" of this 10-K Annual Report.

      Certain 2000-2003 amounts have been reclassified for comparative purposes.


                                     - 21 -
<PAGE>

FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*
(CENTRAL HUDSON)
(In Thousands)

<TABLE>
<CAPTION>
                                                           2004           2003           2002           2001            2000
                                                        -----------    -----------    -----------    -----------     -----------
<S>                                                     <C>            <C>            <C>            <C>             <C>
Operating Revenues
  Electric .........................................    $   430,575    $   457,395    $   427,978    $   428,346     $   531,732
  Natural gas ......................................        125,230        123,306        105,343        110,296         105,353
                                                        -----------    -----------    -----------    -----------     -----------
    Total ..........................................        555,805        580,701        533,321        538,642         637,085

Operating Income ...................................         68,293         69,387         62,870         67,078         111,633

Net Income .........................................         38,648         38,875         32,524         44,178          52,595

Dividends Declared on Cumulative Pref. Stock .......            970          1,387          2,161          3,230           3,230
                                                        -----------    -----------    -----------    -----------     -----------

Income Available for Common Stock ..................         37,678         37,488         30,363         40,948          49,365
Dividends Declared to Parent - Energy Group ........         25,500         34,162         30,000        145,642          27,600
                                                        -----------    -----------    -----------    -----------     -----------
Amount Retained in the Business ....................         12,178          3,326            363       (104,694)         21,765
Reverse Equity Transfer ............................             --             --             --             --          26,000
Transfer of Competitive Business Subsidiaries to
  Energy Group .....................................             --             --             --             --          (2,500)
Transfer of Property to Energy Group ...............             --             --             --            (75)             --
Retained Earnings - beginning of year ..............         13,466         10,140          9,777        114,546          69,281
                                                        -----------    -----------    -----------    -----------     -----------
Retained Earnings - end of year ....................    $    25,644    $    13,466    $    10,140    $     9,777     $   114,546
                                                        ===========    ===========    ===========    ===========     ===========

Total Assets (at year-end) .........................    $ 1,028,639    $ 1,052,295    $ 1,018,766    $   983,359     $ 1,394,698
Long-term Debt (at year-end) .......................        319,883        278,880        269,877        215,874         320,370
Cumulative Preferred Stock (at year-end) ...........         21,030         21,030         33,530         56,030          56,030
Common Equity (at year-end) ........................        279,974        267,796        264,143        263,277         466,230
</TABLE>

*     This summary should be read in conjunction with the Consolidated Financial
      Statements and Notes thereto included in Item 8 - "Financial Statements
      and Supplementary Data" of this 10-K Annual Report.

      Certain 2000-2003 amounts have been reclassified for comparative purposes.


                                     - 22 -
<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

INTRODUCTION

      The following is Management's assessment of certain significant factors
affecting the financial condition and operating results of Energy Group and its
subsidiaries over the past three years. The Consolidated Financial Statements
and the Notes thereto contain additional data. For the twelve months ended
December 31, 2004, 54% of Energy Group's operating revenues were derived from
Central Hudson's electric service, 16% from Central Hudson's natural gas
service, and 30% from the competitive business subsidiaries.

      For the purposes of this 10-K Annual Report, "per share" refers to the
shares of common stock issued by Energy Group.

EXECUTIVE SUMMARY

      Energy Group is a holding company that conducts substantially all of its
business operations through its subsidiaries. Energy Group's current business
operations are focused primarily in two areas of the energy industry: the
purchase, sale at wholesale, and retail distribution of electricity and natural
gas in portions of New York State through Central Hudson, and the business of
marketing petroleum products and related services to retail customers through
CHEC subsidiaries Griffith and SCASCO. Because of the diversity among their
respective operations, Energy Group reports the results of the regulated
business and the competitive business subsidiaries as separate segments in its
consolidated financial statements.

      Management focuses its strategic efforts on those areas of the company
that it believes would have the greatest effect on shareholder value. Efficient
operations are a key aspect of increasing shareholder value. As discussed below,
Management has implemented plans to achieve savings through continued expense
control and through new initiatives.

      In addition, because Central Hudson is subject to rate regulation, the
approved regulatory treatment on various matters could significantly affect
Central Hudson's operations and, therefore, its financial position and results
of operations. As discussed below, Central Hudson intends to seek approval of a
new rate plan in the near future.

      Please note that this "Executive Summary" section is merely a summary and
should be read together with the remainder of Item 7 - "Management's Discussion
and Analysis of Financial Condition and Results of Operations" of this 10-K
Annual Report, as well as the audited Consolidated Financial Statements,
including the Notes thereto, and the other information included in this 10-K
Annual Report.


                                     - 23 -
<PAGE>

2004 In Review

      In 2004, Energy Group and Central Hudson each achieved earnings within the
ranges that each company had projected at the beginning of the year: Energy
Group earned $2.69 per share on a consolidated basis in 2004, of which Central
Hudson contributed $2.39 per share. Energy Group's earnings decreased $0.09 per
share and Central Hudson's earnings increased $0.02 per share in 2004, as
compared to 2003, and as discussed in detail by business unit below.

      Central Hudson's 2004 earnings were driven by consistent sales growth and
continued expense control, as they have been in past years. These factors are
also reflected in Central Hudson's favorable performance under the Settlement
Agreement: Central Hudson earned above the Settlement Agreement's threshold
10.5% return on its ratemaking equity after sharing earnings above that
threshold - as mandated by the Settlement Agreement - with its customers.

      In addition to its improved earnings, Central Hudson achieved rising
customer satisfaction (for the sixth consecutive year) and electric delivery
rates among the lowest in New York State, and - despite a continued difficult
financial environment for the energy industry - maintained its solid "A" credit
rating, placing Central Hudson near the top of the industry in terms of
creditworthiness.

      Central Hudson also received a supportive decision from the PSC that
allowed it to net certain of its deferred regulatory assets against a
significant portion of its regulatory liabilities, reducing the magnitude of
pressures for future rate increases and prospective debt issuance.

      CHEC contributed $0.22 per share to Energy Group's 2004 earnings, a 10%
increase as compared to its contribution in 2003. This increase was primarily a
result of increased contributions from its fuel distribution subsidiaries,
Griffith and SCASCO, and its investments in cogeneration partnerships.

      Major initiatives were launched in 2004 to improve the profitability of
Griffith's and SCASCO's service departments, the efficiency of their delivery
functions, and the effectiveness of their marketing efforts. Energy Group
expects these initiatives to enhance CHEC's future contributions to earnings.

      Energy Group's 2004 unconsolidated earnings of $0.08 per share, while
reduced from 2003 levels, largely reflect increased business development
expenses related to Energy Group's continuing efforts to redeploy its available
cash reserves with a view to produce appropriate risk-adjusted returns on
capital and replace, in whole or in part, income produced by amortizations which
expired in 2004. At December 31, 2004, Energy Group's cash reserves available
for redeployment were approximately $90 million and are currently invested in
money market instruments and short-term securities with low principal risk.


                                     - 24 -
<PAGE>

      Energy Group's significant redeployment in 2004 occurred in November 2004:
a $10.7 million investment by CHEC in the Cornhusker Energy Lexington fuel
ethanol production plant to be located in Lexington, Nebraska. This investment
is expected to make a contribution to earnings following completion of the
plant's construction in the fourth quarter of 2005.

      In addition, Energy Group devoted much time and effort to the internal
control reviews required by Section 404 of the Sarbanes-Oxley Act of 2002. These
reviews were completed in a timely manner and to the satisfaction of management.
No material weaknesses were found in Energy Group's internal control over
financial reporting.

Looking Ahead

      Energy Group has identified the following goals as priorities for 2005:

            o     Redeploy a significant portion of Energy Group's available
                  cash reserves in energy-related investments with appropriate
                  risk-adjusted returns;

            o     Develop a regulatory filing to increase Central Hudson's rates
                  in order to fully recover the current and future cost of
                  providing service;

            o     Continue to improve productivity, primarily through process
                  improvement and the application of technology;

            o     Maintain Central Hudson's strong credit rating;

            o     Continue to improve the earnings and cash-flow contributions
                  of Griffith and SCASCO through growth and profitability
                  improvements; and

            o     Continue to develop staff, especially those who will provide
                  critical leadership throughout Energy Group in the years
                  ahead.

COMPETITION/DEREGULATION

Holding Company

      Energy Group is the holding company parent corporation of Central Hudson
and CHEC, as described under the caption "Subsidiaries of Energy Group" in Item
1 - "Business" of this 10-K Annual Report. Energy Group's operations are
conducted through Central Hudson, CHEC, and the other competitive business
subsidiaries. Energy Group's common stock trades on the New York Stock Exchange
under the symbol "CHG."

      The holding company structure was instituted to permit quick response to
changes in the evolving competitive energy industry. The structure permits the
use of financing techniques that are better suited to the particular
requirements, characteristics, and risks of competitive operations without
affecting the capital structure or creditworthiness of Central Hudson. This
increases Energy Group's financial flexibility by allowing it to establish
different capital structures for each of its individual lines of business.


                                     - 25 -
<PAGE>

      Energy Group is seeking to redeploy $90 million in energy-related assets
from the sales of Central Hudson's interests in its major generating assets and
Energy Group's sale of CH Resources.

CHEC's Business Plan

      CHEC's primary focus is fuel oil distribution and related services, and
CHEC expects such focus to continue. CHEC's fuel distribution subsidiaries,
Griffith and SCASCO, continue to explore opportunities to expand through both
internal growth and acquisitions, depending on financial performance and
opportunities available. There can be no assurance that such expansion
opportunities will exist, or if consummated, that they will be profitable.

Competitive Opportunities Proceeding Settlement Agreement

      For a discussion of the Settlement Agreement approved by the PSC in its
Competitive Opportunities Proceeding and a discussion of the impact of the
Settlement Agreement on Energy Group's accounting policies, see the caption
"Competitive Opportunities Proceeding Settlement Agreement" in Note 2 -
"Regulatory Matters."

Sales of Major Generating Assets

      For information on the sales of Central Hudson's interests in its major
generating assets in 2001, see Note 2 - "Regulatory Matters" under the caption
"Sales of Major Generating Assets." For information on the sale of CH Resources
in 2002, see Note 4 - "Acquisitions, Divestitures and Discontinued Operations."

FERC Restructuring and Independent System Operator

      For information with respect to the NYISO, the New York State Reliability
Council, and FERC rulings relating to electric industry restructuring, see Note
2 - "Regulatory Matters" under the caption "FERC Restructuring and Independent
System Operator."

Rate Proceedings - Electric and Natural Gas

      For information regarding Central Hudson's most recent electric and
natural gas rate filings and the Order of the PSC issued in the proceedings
related to those filings, see Note 2 - "Regulatory Matters" under the caption
"Rate Proceedings - Electric and Natural Gas."

RESULTS OF OPERATIONS

      The following discussion and analyses include explanations of significant
changes in revenues and expenses between 2003 and 2004 and between 2002 and 2003
for both Energy Group and Central Hudson. Additional information relating to
changes between these years is provided in the Notes.


                                     - 26 -
<PAGE>

Earnings

      Earnings per share (basic and diluted) of Energy Group's common stock are
computed on the basis of the average number of common shares outstanding (basic
and diluted) during the subject year. The number of average shares outstanding
of Energy Group common stock, the earnings per share, and the rate of return
earned on average common equity, which is net income as a percentage of a
monthly average of common equity, are as follows:

                                                2004         2003         2002
                                              -------      -------      -------
Average shares outstanding (000):
    Basic ...............................      15,762       15,831       16,302
    Diluted .............................      15,771       15,835       16,316

Earnings per share:
    Basic ...............................     $  2.69      $  2.78      $  2.53
    Diluted .............................     $  2.69      $  2.77      $  2.51

Return earned on common equity ..........         8.5%         9.0%         8.2%

      Energy Group's consolidated basic earnings per share for 2004 were $2.69
per share, a decrease of $0.09 per share from 2003 earnings of $2.78. The $0.09
per share decrease was comprised of a $0.13 per share reduction at the holding
company and a $0.02 per share increase at both Central Hudson and CHEC.

      Energy Group's (the holding company) 2004 earnings fell $0.13 per share as
compared to 2003 due primarily to a reduction in investment income and an
increase in business development costs. The reduction in investment income
resulted from the full liquidation, by July 2003, of Energy Group's Alternate
Investment Program and the reinvestment of the proceeds in lower yield money
market instruments and short-term securities with low principal risk. The
increase in business development costs reflects Energy Group's intensified
efforts to redeploy its available capital in suitable investment opportunities.

      Earnings for Central Hudson increased $0.02 per share in 2004 as compared
to 2003 due primarily to a reduction in regulatory carrying charges due to
customers and an increase in electric and natural gas net operating revenues
(net of the cost of purchased electricity, purchased natural gas, and revenue
taxes). The reduction in carrying charges was due largely to a declining
Customer Benefit Fund balance. In addition to the continuation of customer
refunds in 2004 and the funding of economic development initiatives and other
programs, the Customer Benefit Fund was also used to offset deferred pension and
other post-employment benefit costs, as authorized in Central Hudson's 2004
Joint Proposal approved by the PSC effective July 1, 2004. See Note 2 -
"Regulatory Matters" under the caption "Rate Proceedings - Electric and Natural
Gas" for more details. Electric net operating revenues increased due to a 2%
increase in sales reflecting increased usage by existing industrial customers
and an increase in residential and commercial sales primarily due to customer
growth. The increase in natural gas net revenues is primarily due to an increase
in large industrial transportation revenues and the recovery of increased
working capital and bad debt costs. The milder weather experienced


                                     - 27 -
<PAGE>

during the first half of the year as compared to 2003 decreased net revenues
from natural gas sales by approximately $0.03 per share, net of the effect of
weather hedging contracts, however, this was partially offset by growth in firm
natural gas deliveries. Also enhancing earnings was the favorable impact of a
lower number of Energy Group common stock shares outstanding and a reduction in
income taxes.

      The increase in earnings for Central Hudson was largely offset by the
effect of certain electric regulatory mechanisms, an increase in depreciation
and amortization on utility plant assets, and an increase in property and
payroll taxes. Electric regulatory mechanisms affecting earnings were an
increase in electric shared earnings and potential PSC assessments for service
interruptions. The increase in shared earnings resulted from an increase in
ratemaking operating income in 2004 as compared to 2003 and a reduction in the
sharing threshold per the provisions of the 2004 Joint Proposal effective July
1, 2004.

      CHEC's 2004 earnings also increased by $0.02 per share as compared to
2003, largely driven by a reduction in operating expenses. The reduction in
expenses was due to improved operating efficiencies at Griffith and SCASCO,
lower sales due to milder weather experienced in the first half of the year, and
the sale of SCASCO's natural gas business unit in October 2003. The increase in
earnings was partially offset by a decrease in net revenues (net of fuel and
other related expenses) from Griffith and SCASCO. Net revenues were reduced by
the sale of SCASCO's natural gas business and a reduction in gross profit from
sales of petroleum products resulting from customer conservation due to the
increased cost of heating oil. The reduction in net revenues was partially
offset by an increase in service department gross profit. CHEC's earnings were
also enhanced by an increase in net income from its energy services projects and
investments in partnerships.

      Consolidated basic earnings per share for Energy Group were $2.78 for 2003
as compared to $2.53 in 2002, an increase of $0.25 per share. The increase in
earnings reflects a $0.51 per share increase from Central Hudson operations due
largely to increases in electric and natural gas net operating revenues (net of
the cost of purchased electricity, purchased natural gas, and revenue taxes), an
increase in the amortization of shareholder benefits relating to the sale of
Central Hudson's interests in its major generating assets, the favorable effect
of the recording of regulatory carrying charges, a reduction of interest charges
and preferred stock dividends, and the positive impact of Energy Group's
repurchases of its common stock, further described in Note 7 - "Capitalization -
Energy Group Capital Stock." The increase in net revenues results from an
increase in sales volume due to the colder weather experienced in the early part
of 2003 and customer growth, a reduction in shared earnings, and the recording
of previously deferred electric and natural gas delivery revenues to income over
the twelve months ended June 30, 2004. The increase in net revenues was
partially offset by an increase in operating expenses, increased depreciation on
utility plant assets, and the effect of non-recurring income recorded in 2002
from the sale of insurance stock. The stock was received due to the
demutualization of certain insurance companies through which Central Hudson
provided employee benefits.


                                     - 28 -
<PAGE>

      Earnings for CHEC decreased $0.07 per share in 2003 as compared to 2002
resulting largely from a $0.29 per share reduction relating to the net gain
recorded in 2002 from the sale of CH Resources. The decrease in earnings was
largely offset by an increase in earnings from operations due to increased fuel
oil distribution sales volumes attributable to the colder weather in 2003, the
acquisition of the assets of certain fuel oil distribution companies in the
fourth quarter of 2002 and in January 2003, and increases in productivity and a
related reduction in operating expenses. The earnings from Griffith and SCASCO
increased from $0.04 per share in 2002 to $0.18 per share in 2003. A nominal
gain on the sale of SCASCO's natural gas business unit in October 2003 and the
favorable impact of Energy Group's common stock repurchase program also
partially offset the reduction in earnings.

      The increase in consolidated earnings in 2003 was also partially offset by
a $0.19 per share reduction in earnings, mainly from the liquidation of Energy
Group's Alternate Investment Program by July 2003 and the absence of favorable
state income tax adjustments recorded in 2002 related to the sale of Central
Hudson's interest in its major generating assets in 2001. Proceeds from the
liquidation of approximately $90 million were reinvested in lower yield money
market instruments with lower principal risk.


                                     - 29 -
<PAGE>

Operating Revenues

      Total operating revenues of Energy Group decreased $15.2 million, or 2%,
in 2004 as compared to 2003, and increased $110.8 million, or 16%, in 2003 as
compared to 2002.

      See the table below for details of the variations:

<TABLE>
<CAPTION>
                                                            Increase or (Decrease) from Prior Year
                            -------------------------------------------------------------------------------------------------------
                                                  2004                                                 2003
                            --------------------------------------------------   --------------------------------------------------
                            Electric        Gas            Other       Total     Electric        Gas            Other       Total
                            ---------    ---------       ---------   ---------   ---------    ---------       ---------   ---------
                                                                         (In Thousands)
<S>                         <C>          <C>             <C>         <C>         <C>          <C>             <C>         <C>
Operating Revenues

Customer sales(a) ......... $   2,113    $    (288)(b)   $      --   $   1,825   $   2,342    $   2,465(b)    $      --   $   4,807
Sales to other utilities ..      (255)         544              --         289        (834)      (4,213)             --      (5,047)
Energy cost adjustment ....   (19,240)       1,167              --     (18,073)     14,796       19,767              --      34,563
Deferred revenues(c) ......   (10,456)        (409)             --     (10,865)     12,974          509              --      13,483
Miscellaneous .............     1,018          910              --       1,928         139         (565)             --        (426)
                            ---------    ---------       ---------   ---------   ---------    ---------       ---------   ---------
   Subtotal ...............   (26,820)       1,924              --     (24,896)     29,417       17,963              --      47,380
                            ---------    ---------       ---------   ---------   ---------    ---------       ---------   ---------
Competitive business
   subsidiary sales(d) ....        --           --           9,724       9,724          --           --          63,463      63,463
                            ---------    ---------       ---------   ---------   ---------    ---------       ---------   ---------
         Total ............ $ (26,820)   $   1,924       $   9,724   $ (15,172)  $  29,417    $  17,963       $  63,463   $ 110,843
                            =========    =========       =========   =========   =========    =========       =========   =========
</TABLE>

(a)   Includes delivery of electricity and natural gas supplied by others and an
      offsetting restoration of revenues from Central Hudson's Customer Benefit
      Fund (described in Note 2 - "Regulatory Matters" under the captions
      "Summary of Regulatory Assets and Liabilities" and "Rate Proceedings -
      Electric and Natural Gas") for customer refunds to all customers and
      back-out credits for retail access customers.

(b)   Includes both firm and interruptible revenues.

(c)   Includes the restoration of other revenues from Central Hudson's Customer
      Benefit Fund for other authorized programs, the restoration of previously
      deferred delivery revenues, and the deferral of electric and natural gas
      shared earnings in accordance with the provisions of the Joint Proposal
      effective July 1, 2001, and 2004 (described in Note 2 - "Regulatory
      Matters").

(d)   The increase of $63.5 million in 2003 as compared to 2002 primarily
      reflects increased sales of petroleum products due to colder weather and
      acquisitions of additional fuel oil distribution companies in the fourth
      quarter of 2002 and in January 2003.


                                     - 30 -
<PAGE>

Sales - Central Hudson

      Central Hudson's revenues from sales vary seasonally in response to
weather. In particular, electric revenues peak in the summer while natural gas
revenues peak in the winter.

      Utility delivery sales of electricity within Central Hudson's service
territory increased 2% in 2004 as compared to 2003. Sales to residential
customers increased 1%, sales to commercial customers increased 2%, and sales to
industrial customers increased 3%. Sales to residential and commercial customers
increased due primarily to customer growth and increased usage despite milder
weather in the first half of 2004 and a cooler summer, in each case as compared
to 2003. Industrial sales increased due to additional usage by existing
customers. Actual heating billing degree-days in 2004 were 9% lower than in 2003
and 4% lower than normal. Actual cooling billing degree-days for July through
September 2004 were 5% lower than in 2003 and 2% lower than normal.

      Utility delivery sales of natural gas to firm Central Hudson customers
decreased 3% in 2004 as compared to 2003. Residential and commercial sales,
primarily space heating sales, decreased 5% and 1%, respectively, due largely to
a decrease in usage resulting from the milder weather experienced in the first
half of 2004. The decrease in sales was partially offset by customer growth.
Industrial sales, representing approximately 5% of total firm sales in 2004 and
2003, decreased 9%. Interruptible sales increased 3% due largely to an increase
in sales to large industrial natural gas transportation customers.

      Utility delivery sales of electricity within Central Hudson's service
territory increased 3% in 2003 as compared to 2002. Sales to residential
customers increase 6%, sales to commercial customers increased 1% and sales to
industrial customers increased 3%. The across-the-board increase in delivery
sales was due largely to colder weather and a modest increase in the average
number of residential and commercial customers. Billing heating degree-days were
17% higher than last year and 6% higher than normal.

      Utility delivery sales of natural gas to firm Central Hudson customers
increased 19% in 2003 as compared to the prior year. Residential and commercial
sales, primarily space heating sales, both increased by 21% due to the colder
weather experienced in 2003 and modest growth in the average number of
customers. Industrial sales, representing approximately 5% of total firm sales
in 2003 and 6% in 2002, decreased slightly by 1%. Interruptible sales decreased
37% due to a reduction in the sale of natural gas for electric generation and to
the curtailment of interruptible service to meet increased demand from firm
customers.

      Changes in delivery sales by major customer classification, including
interruptible natural gas sales, are set forth below.

                                         % Increase (Decrease) from Prior Year
                                        ----------------------------------------
                                        Electric (MWh(1))      Natural Gas (Mcf)
                                        -----------------      -----------------
                                         2004       2003        2004        2003
                                         ----       ----        ----        ----
Residential ......................          1          6         (5)         21
Commercial .......................          2          1         (1)         21
Industrial .......................          3          3         (9)         (1)
Interruptible ....................        N/A        N/A          3         (37)

(1)   "MWh" means megawatt-hour.


                                     - 31 -
<PAGE>

      Because of sharing arrangements established for interruptible natural gas
sales and interruptible transportation of customer-owned natural gas, as
described under the caption "Incentive Arrangements" below, variations in these
sales from year to year typically have a minimal impact on earnings.

Incentive Arrangements

      Under certain earnings sharing formulas approved by the PSC, Central
Hudson either shares with its customers certain revenues and/or cost savings
exceeding predetermined levels or is penalized in some cases for shortfalls from
certain performance standards.

      Earnings sharing formulas are currently effective for interruptible
natural gas sales, natural gas capacity release transactions, electric service
reliability, certain aspects of customer service and satisfaction, and certain
aspects of market participant satisfaction.

      See Note 2 - "Regulatory Matters" under the caption "Rate Proceedings -
Electric and Natural Gas" for a description of earnings sharing formulas
approved by the PSC for Central Hudson.

      The net results of these and previous earnings sharing formulas also had
the effect of increasing pretax earnings by $0.3 million, $1 million, and $0.1
million during 2004, 2003, and 2002, respectively, above the applicable sharing
thresholds.

Sales and Revenues - Competitive Business Subsidiaries

      Sales

      CHEC's sales of petroleum products decreased 6.4 million gallons, or 4%,
to 147.7 million gallons in 2004 from 154.1 million gallons in 2003. This
decrease was primarily due to a decrease in heating oil of 8.2 million gallons,
or 10%, to 73.2 million gallons in 2004 from 81.4 million gallons in 2003. This
decrease was primarily due to warmer weather as evidenced by a 6% average
decrease in heating degree-days for 2004 as compared to 2003 and customer
conservation due to the increased cost of heating oil. Additionally, the sales
of propane decreased 0.3 million gallons, or 10%, from 2.9 million gallons in
2003 to 2.6 million gallons in 2004. This decrease is also primarily due to the
warmer weather in 2004 in comparison to 2003. Partially offsetting these
decreases, motor fuel sales increased 2.1 million gallons, or 3%, from 69.8
million gallons in 2003 to 71.9 million gallons in 2004.

      Due to the sale of certain assets and liabilities of SCASCO's natural gas
business unit on October 31, 2003, there were no sales of natural gas in 2004 as
compared to sales of 1,841,000 Mcf in 2003.

      CHEC's sales of petroleum products increased 27.2 million gallons, or 21%,
to 154.1 million gallons in 2003 from 126.9 million gallons in 2002. This
increase was primarily due to colder weather as evidenced by a 12% average
increase in heating degree-days for 2003 as compared to 2002, and increased
sales as a result of acquisitions made in the fourth quarter of 2002 and in
January 2003.


                                     - 32 -
<PAGE>

      In 2003, CHEC's sales of natural gas decreased approximately 424,000 Mcf,
or 19%, to 1,841,000 Mcf as compared to 2,265,000 Mcf in 2002. This decrease was
primarily due to the sale of certain assets and liabilities of SCASCO's natural
gas business unit on October 31, 2003.

Revenues

      Total revenues for CHEC, net of the effect of weather hedging contracts,
increased $9.7 million, or 4.3%, from $226 million in 2003 to $235.7 million in
2004. Revenues from petroleum products increased $24.1 million, or 13%, from
$192 million in 2003 to $216.1 million in 2004 largely due to an increase in
motor fuel revenues. These revenues increased $22.7 million, or 30%, from $76.4
million in 2003 to $99.1 million in 2004 due primarily to a rise in the average
selling price of motor fuels and an increase in sales volume. Heating oil
revenues also increased $1.5 million to $112 million largely due to the effect
of weather hedging contracts with more favorable terms for 2004 than 2003.
Partially offsetting the overall increase in revenues was a reduction of $13.7
million in natural gas revenues due to the sale of SCASCO's natural gas business
unit in October 2003. Other revenues related to service and installations,
energy services, and propane sales decreased by $0.8 million.

      Total revenues, net of weather hedging contracts, increased $64.4 million,
or 39.9%, from $161.6 million in 2002 to $226 million in 2003. Revenues from
petroleum products increased $64 million, or 49.3%, to $194 million from $130
million in 2002. This increase was the result of increased sales volumes as a
result of acquisitions in the fourth quarter of 2002 and January 2003 and colder
weather in 2003 as compared to 2002. In 2003, natural gas revenues increased
$2.2 million, or 19.1%, to $13.7 million from $11.5 million in 2002. This
increase was due primarily to higher wholesale prices for natural gas in 2003.
Partially offsetting the increase was a $2.1 million reduction in revenues from
CHEC's retail electric program which CHEC terminated in 2002.

Operating Expenses - Central Hudson

      The most significant elements of Central Hudson's operating expenses are
purchased electricity and purchased natural gas. The following reflects, as a
percentage of every revenue dollar related to electric or natural gas sales, the
amount expended for purchased electricity (including nominal amounts spent for
fuel used in electric generation) and purchased natural gas for years 2002
through 2004.

                                              2004        2003        2002
                                              ----        ----        ----
      Purchased Electricity                    58%         59%         59%
      Purchased Natural Gas                    62%         62%         59%

      Central Hudson negotiated multi-year electricity purchase contracts with
the new owners of the major generating assets it divested. Purchases under these
contracts are supplemented by purchases from the NYISO and other parties. For
information regarding these electricity purchase contracts, see Item 2 -
"Properties" under the subcaption "Load and Capacity" and Note 2 - "Regulatory
Matters" under the caption "Sales of Major Generating Assets."

      Total utility operating expenses decreased $23.8 million, or 4.7%, from
$511.3 million in 2003 to $487.5 million in 2004. Purchased electricity and fuel
used in electric generation decreased $17 million due largely to the recording
of amounts related to the recovery of electric supply costs via Central Hudson's
cost recovery mechanism and an increase in volumes


                                     - 33 -
<PAGE>

supplied directly by marketers to customers opting for retail access service.
Other expenses of operation decreased $8.4 million due primarily to a reduction
in expenses for Central Hudson's Electric Reliability Program and a decrease in
storm restoration costs. The Electric Reliability Program was effectively
completed in 2003 and was funded by the Customer Benefit Fund (see Note 2 -
"Regulatory Matters" under the subcaption "Rate Proceedings - Electric and
Natural Gas" for discussion of the Customer Benefit Fund). Partially offsetting
the decrease in utility operating expenses was an increase of $1.4 million in
the cost of purchased natural gas. This increase was largely driven by an
increase in wholesale costs partially offset by a decrease in costs relative to
volume and the recording of amounts related to the full recovery of natural gas
supply costs.

      Total utility operating expenses increased $40.9 million, or 8.7%, from
$470.4 million in 2002 to $511.3 million in 2003. Purchased electricity and
purchased natural gas expenses increased by a total of $30.7 million due
primarily to increases in the wholesale cost of these commodities. The balance
of Central Hudson's operating expenses increased $10.2 million, reflecting a
significant increase in costs related to Central Hudson's Electric Reliability
and Economic Development programs that were funded by the Customer Benefit Fund.
The rise in operating expenses also reflects increases in storm restoration and
other electric distribution and maintenance costs, uncollectible accounts,
property and other insurance costs, property taxes, and employee compensation
and benefit costs.

Operating Expenses - CHEC

      CHEC's operating expenses for 2004 increased $9.8 million, or 4.5%, from
$219.1 million in 2003 to $228.9 million in 2004. The most significant operating
expense for CHEC is the cost of petroleum, which increased $24.7 million due
primarily to higher wholesale market prices of petroleum. This was partially
offset by a decrease of $12.3 million in natural gas costs due to the sale of
the natural gas business unit in 2003. Other operating expenses decreased $2.6
million largely due to improved operating efficiencies by the fuel oil
distribution subsidiaries and lower sales due to milder weather experienced in
the first half of the year.

      As compared to 2002, CHEC's operating expenses for 2003 increased $57.4
million, or 35.5%, from $161.7 million in 2002 to $219.1 million in 2003. The
cost of petroleum and natural gas increased $53.9 million due primarily to an
increase in sales by Griffith and SCASCO. The higher sales were attributable to
colder weather in the first quarter of 2003 and acquisitions made in January of
2003 and in the fourth quarter of 2002. The increase in the cost of petroleum
and natural gas was also due to a rise in wholesale market prices and was
partially offset by the sale of SCASCO's natural gas business. Other operating
expenses increased by $3.5 million due primarily to an increase in distribution
costs resulting from the increase in sales.

Other Income

      Other Income for Energy Group (consolidated) for 2004, as compared to
2003, decreased $4 million, including a $1.8 million decrease for Central
Hudson. The reduction in Other Income is due primarily to a decrease in
investment income resulting from the liquidation of Energy Group's Alternate
Investment Program and an increase in Energy Group's business development costs,
a reduction in Central Hudson interest income due to a decrease in temporary
cash investments and the early settlement of a balance due to Central Hudson
from the purchaser of its interest in the Nine Mile 2 Plant, and a reduction in
regulatory carrying charges due from customers related to pension costs. The
Alternate Investment Program was


                                     - 34 -
<PAGE>

fully liquidated by July 2003 and the proceeds were reinvested in lower yield
money market instruments and short-term securities with low principal risk (see
Note 13 - "Financial Instruments"). The increase in business development costs
reflects Energy Group's efforts to redeploy this available capital in suitable
investment opportunities. In Central Hudson's June 2004 Order adopting the terms
of the 2004 Joint Proposal (see Note 2 - "Regulatory Matters" under the caption
"Rate Proceedings - Electric and Natural Gas"), the PSC authorized the use of
the Customer Benefit Fund to offset deferred pension costs, which serves to
further reduce the balance upon which carrying charges for pension costs are
determined.

      In 2003, Other Income for Energy Group (consolidated) remained relatively
flat as compared to 2002. A reduction in investment income due primarily to the
liquidation of Energy Group's Alternate Investment Program was largely offset by
an increase of $2.4 million in Other Income for Central Hudson. The increase for
Central Hudson was due primarily to an increase in the amortization of
shareholder benefits relating to the sales of Central Hudson's interests in its
major generating assets and an increase in the recording of carrying charges due
from customers related to pension costs. These increases were partially offset
by a reduction in Central Hudson interest income due primarily to the reasons
stated above for the change in 2004 versus 2003, and also, the effect of
non-recurring income recorded in 2002 that related to the sale of the stock of
certain insurance companies through which Central Hudson provided employee
benefits.

      Expiring Amortization: Under a prior PSC regulatory settlement related to
the sales of Central Hudson's interests in its major generating assets, a
portion of the gain recognized on those sales was recorded as other income over
a four-year period which commenced in 2001 and ended in 2004. Amounts recorded
by year, net of tax, were as follows: 2001 - $3.2 million, 2002 - $2.9 million,
2003 - $5.9 million, and 2004 - $5.9 million. Energy Group is seeking to use its
cash reserves and debt capacity to make investments with a view to produce new
earnings intended to replace, in whole or in part, the income previously
provided by the sales of Central Hudson's interests in its major generating
assets. In this connection, Energy Group is actively seeking new energy-related
investments that provide diversification and offer attractive returns with
acceptable risks. Such opportunities may include, but are not limited to,
currently operating assets that use proven technology and have a relatively
stable customer base such as electric generating plants and natural gas
pipelines, in either case with a significant portion of their output under
long-term contract. Energy Group also may use its cash reserves to repurchase
shares of its common stock. Such repurchases, depending on the number and
average price of shares repurchased, could have the effect of offsetting a
substantial portion of the earnings per share impact of the expiring
amortization noted above.

Interest Charges

      Interest charges in 2004, as compared to 2003, decreased $4 million for
Energy Group and $4.1 million for Central Hudson. The reductions in interest
charges were due largely to a decrease in regulatory carrying charges accrued on
Central Hudson's declining Customer Benefit Fund balance.

      In 2003, as compared to 2002, interest charges decreased $2.7 million and
$2.8 million for Energy Group and Central Hudson, respectively. The reductions
were due primarily to a decrease in regulatory carrying charges accrued on
Central Hudson's declining Customer Benefit Fund balance and the redemption and
repurchases of higher cost long-term debt.


                                     - 35 -
<PAGE>

      The following table sets forth some of the pertinent data on Energy
Group's outstanding debt (this debt relates to Central Hudson):

                                             2004          2003          2002
                                           --------      --------      --------
                                                      (In Thousands)
Long-Term Debt:
  Debt retired .......................     $ 15,000      $ 15,000      $ 20,000
  Debt issued ........................     $ 41,000      $ 24,000      $ 69,000
  Outstanding at year-end:
  Amount (including current
    portion) .........................     $319,883      $293,880      $284,877
  Estimated effective interest rate ..         3.93%         3.91%         4.27%
Short-Term Debt:
  Average daily amount
    outstanding ......................     $  9,929      $  7,151      $  1,534
  Weighted average interest rate .....         1.73%         1.41%         2.15%

      See Note 6 - "Short-Term Borrowing Arrangements" and Note 8 -
"Capitalization - Long-Term Debt" for additional information on short-term and
long-term debt of Energy Group and/or Central Hudson.

Preferred Stock Dividends

      Preferred stock dividends of Central Hudson decreased $0.4 million in 2004
as compared to 2003 and $0.8 million in 2003 as compared to 2002. The reductions
reflect the repurchase of certain issues of preferred stock in October 2003 and
May 2002.

Income Taxes

      Energy Group's consolidated federal and state income taxes for 2004
increased $0.8 million as compared to 2003. The increase reflects an increase in
income taxes for Central Hudson of $1.4 million partially offset by a reduction
in income taxes for Energy Group (the holding company), which was due to a
decrease in investment income. The increase for Central Hudson is due primarily
to an increase in taxable income as well as an increase to flow through
operating reserves.

      In 2003, as compared to 2002, consolidated income taxes for Energy Group's
continuing operations increased $8.1 million including an increase in taxes for
Central Hudson of $5.3 million and an increase in taxes for CHEC of $2.5
million. The increase in income taxes for both Central Hudson and CHEC resulted
largely from higher taxable income due to increased sales from colder weather
and, also for CHEC, acquisitions made in January of 2003 and in the fourth
quarter of 2002.

      For further information regarding income taxes, see Note 3 - "Income Tax."


                                     - 36 -
<PAGE>

Nuclear Operations

      Nine Mile 2 Plant: For additional information regarding Central Hudson's
sale of its 9% ownership interest in the Nine Mile 2 Plant on November 7, 2001,
see Note 2 - "Regulatory Matters" under the caption "Sales of Major Generating
Assets."

      Prior to the sale of its interest in the Nine Mile 2 Plant in November
2001, Central Hudson's share of operating expenses, taxes, and depreciation
pertaining to the operation of the Nine Mile 2 Plant were included in Energy
Group's financial results. Underruns in costs of operation and maintenance
expenses for the Nine Mile 2 Plant, compared to the amount allowed in rates,
were deferred for the future benefit of customers. Carrying charges are being
recorded on the regulatory liability balance. For further information regarding
the deferred Nine Mile 2 Plant costs, see Note 2 - "Regulatory Matters."

Other Matters

      Changes in Accounting Standards: See Note 1 - "Summary of Significant
Accounting Policies" under the caption "New Accounting Standards and Other FASB
Projects - Standards Implemented" for discussion of other relevant Financial
Accounting Standards Board ("FASB") proposals.

      Retirement Plan: As described more fully in Note 9 - "Post-Employment
Benefits," Central Hudson has a non-contributory Retirement Income Plan
("Retirement Plan") covering substantially all of its employees. The Retirement
Plan is a defined benefit plan which provides pension benefits that are based on
an employee's compensation and years of service.

      The significant assumptions and estimates used to account for the pension
plan are the discount rate, the expected long-term rate of return on Retirement
Plan assets, the rate of compensation increase, and the method of amortizing
gains and losses.

      Central Hudson periodically confers with its actuarial consultant to
determine an appropriate discount rate under applicable guidelines. Central
Hudson's actuarial consultant has indicated the Moody's Aa corporate bond yield
prevailing at the valuation date, September 30, is appropriate for this purpose
as it is the best estimate of the rate at which the benefit obligation could be
settled. Such rate was 5.75% as of the most recent valuation date, September 30,
2004.

      An equal weighted average of three methods was used to estimate the
long-run expected returns of each equity asset class in the Trust Fund. The
three methods were (i) the building block method, based on the Capital Asset
Pricing Model, which states that the return of an asset class is a function of
the risk-free rate and a risk-based return premium; (ii) the historical return
method, which uses the historical average return for each market index as a
proxy for future average returns; and (iii) the economic growth method, which is
based on long-run averages of estimates for economic growth, dividend yield, and
expected inflation.

      For the fixed income asset class, three methods were used: the historical
return and building block methods, both described above, and the market
observable rate of return, represented by the average yield to maturity of
representative market indices.

      For the real estate asset class, the historical return and building block
method, described above, were used to estimate long-run expected returns.


                                     - 37 -
<PAGE>

      The rate of compensation increase was based on historical and current
compensation practices of Central Hudson giving consideration to any anticipated
changes in this practice.

      Actuarial gains and losses, which include investment returns and
demographic experience which are different than anticipated based on the
actuarial assumptions, are amortized in accordance with procedures set forth by
the PSC which require the full gain or loss arising each year to be amortized
uniformly over ten years.

      The current unrecognized net losses are $113 million, including losses for
the years 1995 through 2004. Therefore, the future annual amortization of these
losses will increase pension expense, determined under Statement of Financial
Accounting Standards No. 87, entitled Employers' Accounting for Pensions, from
its current level unless there are offsetting future gains or other offsetting
components of pension expense.

      Since September 30, 2004, the latest measurement date, there have been no
material changes in the level of Retirement Plan assets, the discount rate used
to determine the Retirement Plan liabilities, or the assumptions regarding
expected returns on Retirement Plan assets.

      Based on current levels of Retirement Plan assets and obligations, a
change of one-quarter percent in the long-term rate of return assumption would
change pension expense by $762,000 and a change of one-quarter percent in the
discount rate would change pension expense by approximately $1.3 million.

      Under the policy of the PSC regarding pension costs, Central Hudson
recovers its net periodic pension costs through customer rates with differences
from rate allowances deferred for future recovery from or return to customers.
As a result, Central Hudson fully expects to recover its net periodic pension
costs over time. The Retirement Plan's liquidity is primarily affected by the
cash contributions made by Central Hudson to the Plan. Central Hudson
contributed $32 million to the Retirement Plan in 2002 and $10 million in 2003.
Central Hudson did not make a contribution in 2004.

      For additional information regarding the Retirement Plan, see Note 9 -
"Post-Employment Benefits."

CAPITAL RESOURCES AND LIQUIDITY

Cash Flow

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

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


                                     - 38 -
<PAGE>

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

      Changes in Energy Group's and Central Hudson's cash and temporary cash
investments resulting from operating, investing, and financing activities for
the twelve months ended December 31, 2004, and December 31, 2003, are summarized
below:

Energy Group - Cash Flow Summary

                                                                     Variance
(Millions of Dollars)                      2004          2003      2004 vs. 2003
---------------------                     ------        ------     -------------
Operating Activities                      $ 72.5        $ 55.5        $ 17.0
Investing Activities                       (66.7)         21.8         (88.5)
Financing Activities                       (12.5)        (35.0)         22.5
                                          ------        ------        ------
Net change for the period                   (6.7)         42.3         (49.0)
Balance at beginning of period             125.8          83.5          42.3
                                          ------        ------        ------
Balance at end of period                  $119.1        $125.8        $ (6.7)
                                          ======        ======        ======

      Energy Group's net cash flows provided by operating activities during the
twelve months ended December 31, 2004 were $17 million higher as compared to
2003. Cash flows increased due primarily to the receipt of a refund in 2004 for
an amended Utility Service Tax Return for 2001 for Central Hudson, a reduction
in costs related to various programs funded by the Customer Benefit Fund
(notably the Electric Reliability Program which was substantially completed by
the end of 2003), the proceeds from the sale of emissions allowances by Central
Hudson in 2004, and the absence of a pension contribution for Central Hudson.
Energy Group does not anticipate the recurrence in 2005 of a refund for Utility
Service Taxes for Central Hudson or the sale of emissions allowances that
occurred in 2004.

      Additionally, as authorized in the 2004 Joint Proposal approved by the
PSC, deferred electric pension and OPEB costs as of December 31, 2004, including
carrying charges, were offset against the Customer Benefit Fund with no impact
to cash flow for 2004. The total amount offset through December 31, 2004, was
$89.9 million. Energy Group will continue to use the Customer Benefit Fund to
offset the cost of various programs as well as undercollected pension and OPEB
costs subject to certain limitations. For further details see Note 2 -
"Regulatory Matters" under the caption "Rate Proceedings - Electric and Natural
Gas."

      The net change in cash flows related to investing activities was a
reduction of $88.5 million when comparing 2004 with 2003. The reduction is due
primarily to the absence of proceeds from the sale of investments that were
reflected in 2003.

      Net cash flows related to financing activities were $22.5 million higher
during 2004 as compared to 2003. The increase in cash flows was primarily due to
the issuance of $41 million, in aggregate, of medium-term notes by Central
Hudson throughout the year 2004, as compared to $24 million in issuances during
the year 2003. In addition, contributing to the increase was the absence of both
the redemption of preferred stock that occurred in 2003 and the Stock


                                     - 39 -
<PAGE>

Repurchase Program that was suspended in the latter part of 2003 in order to
assess alternative investment opportunities. Partially offsetting the increases
was the net repayment of short-term debt for $4 million in 2004 as compared to
net borrowings of $16 million in 2003.

Central Hudson - Cash Flow Summary

                                                                     Variance
(Millions of Dollars)                      2004          2003      2004 vs. 2003
---------------------                     ------        ------     -------------
Operating Activities                      $59.1         $35.3         $23.8
Investing Activities                      (58.6)        (54.1)         (4.5)
Financing Activities                       (5.0)        (23.5)         18.5
                                          -----         -----         -----
Net change for the period                  (4.5)        (42.3)         37.8
Balance at beginning of period             12.7          55.0         (42.3)
                                          -----         -----         -----
Balance at end of period                  $ 8.2         $12.7         $(4.5)
                                          =====         =====         =====

      Central Hudson's net cash flows provided by operating activities during
2004 were $23.8 million higher as compared to 2003. Cash flows increased due
primarily to the receipt of a refund in 2004 for an amended Utility Service Tax
Return for 2001, a reduction in costs related to various programs funded by the
Customer Benefit Fund (notably the Electric Reliability Program, which was
substantially completed by the end of 2003), the absence of a pension
contribution, and the proceeds from the sale of emissions allowances in 2004.
Central Hudson does not anticipate the recurrence in 2005 of a refund for
Utility Service Taxes or additional proceeds from the sale of emissions
allowances that occurred in 2004.

      Additionally, as authorized in the 2004 Joint Proposal approved by the
PSC, deferred electric pension and OPEB costs as of December 31, 2004, including
carrying charges, were offset against the Customer Benefit Fund with no impact
to cash flow in 2004. The total amount offset through December 31, 2004, was
$89.9 million.

      Net cash flows used in investing activities were $4.5 million higher
during 2004 as compared to 2003, due to increased expenditures related to
property, plant, and equipment.

      Net cash flows used in financing activities were lower during 2004 as
compared to 2003, resulting in an increase of $18.5 million. The increase in
cash flows was primarily due to the issuance of $41 million, in aggregate, of
medium-term notes during 2004 as compared to $24 million in issuances during
2003. The use of $12.5 million for the redemption of preferred stock that
occurred in 2003 and the reduction in the dividend amount paid to Energy Group
in 2004, as compared to 2003, also contributed to the increase in cash flows in
2004. Partially offsetting the increase was the net repayment of $4 million of
short-term debt in 2004 as compared to net borrowings of $16 million in 2003.

Capital Expenditures

      Energy Group's capital expenditures reflect the activities of its two
subsidiaries, Central Hudson and CHEC.

      Central Hudson's cash flows from investing activities of $58.6 million in
2004 were comprised entirely of capital expenditures. These expenditures include
construction, improvement, and expansion of natural gas and electric
transmission and distribution assets and improvement of hydroelectric and gas
turbine generation facilities. Capital expenditures were funded with cash from
operations and long-term borrowings.


                                     - 40 -
<PAGE>

      Central Hudson's planned capital expenditures during 2005 are expected to
total approximately $65 million. For 2006, planned capital expenditures are
expected to range from $65 million to $70 million. Capital expenditures are
expected to be funded with cash from operations and a combination of short-term
and long-term borrowings. Central Hudson may alter its plan for capital
expenditures as needed to mitigate the need for future borrowings or as its
business needs require.

      Energy Group's consolidated cash flows from investing activities also
reflects CHEC's capital expenditures of approximately $5.1 million in 2004. In
addition, CHEC acquired $2.7 million in preferred units of Cornhusker Holdings
(defined below) in 2004. CHEC's capital expenditures are expected to be
approximately $6.6 million during 2005, excluding any possible acquisitions,
which includes $3 million for construction of the new corporate headquarters and
fuel oil storage facility for Griffith in Beltsville, Maryland. For 2006,
capital expenditures, excluding any possible acquisitions, are expected to range
from $5.5 million to $7 million. These capital expenditures are expected to be
funded primarily with cash from operations. CHEC may alter its plan for capital
expenditures as its business needs require.

Acquisitions and Divestitures by CHEC

      CHEC's fuel distribution subsidiaries, Griffith and SCASCO, continue to
explore opportunities to expand through both internal growth and acquisitions,
depending on financial performance and opportunities available. The actual
amount expended for and the financing of any future acquisitions will depend on
the opportunities that develop.

      As reported in a Current Report on Form 8-K filed by Energy Group on
November 3, 2004, in November 2004, CHEC acquired $2.7 million of preferred
units issued by Cornhusker Energy Lexington Holdings, LLC ("Cornhusker
Holdings") and also agreed to acquire $8 million of subordinated notes issued by
Cornhusker Holdings. CHEC plans to fund these notes in 2005 with a portion of
Energy Group's cash reserves, currently held in money market instruments.
Cornhusker Holdings is the owner of Cornhusker Energy Lexington, LLC, a fuel
ethanol production facility to be located in Nebraska, the construction of which
is expected to be completed in the fourth quarter of 2005.

Capital Structure

      As provided in the PSC's Order Establishing Rates (see Note 2 -
"Regulatory Matters" under the caption "Rate Proceedings - Electric and Natural
Gas"), Central Hudson's common equity ratio was capped for the purposes of the
PSC's return on equity ("ROE") calculation at 47% for the twelve months ended
June 30, 2002, at 46% for the twelve months ended June 30, 2003, and at 45% for
subsequent twelve-month periods. Central Hudson intends to maintain a common
equity ratio of approximately 45% in 2005.

      Central Hudson's current senior debt ratings are "A2 (stable)" by Moody's
Investors Service and "A (stable)" by Standard and Poor's Corporation and by
Fitch Ratings.


                                     - 41 -
<PAGE>

      Year-end capital structures for Energy Group and its subsidiaries are set
forth below as of December 31, 2004, 2003, and 2002:

Energy Group                                     Year-end Capital Structure
------------                                 ----------------------------------
                                              2004          2003          2002
                                             ------        ------        ------
Long-term debt .......................         37.8%         36.0%         35.4%
Short-term debt ......................          1.4           2.0            --
Preferred stock ......................          2.5           2.6           4.2
Common equity ........................         58.3          59.4          60.4
                                             ------        ------        ------
                                              100.0%        100.0%        100.0%
                                             ======        ======        ======

Central Hudson                                   Year-end Capital Structure
--------------                               ----------------------------------
                                              2004          2003          2002
                                             ------        ------        ------
Long-term debt .......................         50.5%         49.1%         48.9%
Short-term debt ......................          2.0           2.7            --
Preferred stock ......................          3.3           3.5           5.8
Common equity ........................         44.2          44.7          45.3
                                             ------        ------        ------
                                              100.0%        100.0%        100.0%
                                             ======        ======        ======

CHEC                                             Year-end Capital Structure
----                                         ----------------------------------
                                              2004          2003          2002
                                             ------        ------        ------
Long-term debt .......................         50.1%         48.3%         48.5%
Short-term debt ......................           --            --            --
Preferred stock ......................           --            --            --
Common equity ........................         49.9          51.7          51.5
                                             ------        ------        ------
                                              100.0%        100.0%        100.0%
                                             ======        ======        ======

*     Based on stand-alone financial statements and includes intercompany
      balances which are eliminated in consolidation.

Financing Program of Energy Group and Its Subsidiaries

      Effective August 1, 2002, Energy Group's Board of Directors authorized a
common stock repurchase program ("Repurchase Program") for the purchase of up to
25% of its then-outstanding common stock over a five-year period, and projected
that 800,000 shares would be repurchased during the first twelve months of this
program. Between August 2002 and December 2003, Energy Group repurchased 600,087
shares under the Repurchase Program at a cost of $27.5 million. No shares were
purchased under the Repurchase Program in 2004. Energy Group intends to set
repurchase targets, if any, each year based on circumstances then prevailing.
Repurchases have been suspended while Energy Group assesses opportunities to
redeploy its cash reserves in energy-related investments. See Note 7 -
"Capitalization - Energy Group Capital Stock." Energy Group reserves the right
to modify, suspend, or terminate the Repurchase Program at any time without
notice.

      At January 1, 2003, investments in Energy Group's Alternate Investment
Program ("Investment Program") consisted of electric utility common stocks,
preferred stocks, and an intermediate-term bond fund. As of December 31, 2003,
all holdings in the Investment Program had been liquidated and the proceeds
invested in money market instruments and short-term securities with lower
principal risk. Since its inception in mid-2002, the Investment Program produced
a return of $0.15 per share over a period of about one year. Money market


                                     - 42 -
<PAGE>

alternatives were estimated to have returned $0.055 per share over the same
period, resulting in a net benefit of $0.095 per share from the Investment
Program.

      Proceeds from sales of securities during the year ended December 31, 2003,
were $111.5 million. Realized gains associated with sales of securities were
$2.9 million, offset by realized losses of $3 million. The cost basis of these
securities was determined on a specific identification basis.

      Central Hudson received authority from the PSC to issue up to $100 million
of unsecured medium-term notes during the three years ended June 30, 2004.
During 2002 and 2003, $69 million and $24 million, respectively, of such notes
were issued. In February 2004, the remaining $7 million was issued at a rate of
4.73% with a maturity date of February 27, 2014.

      On March 16, 2004, the PSC adopted Central Hudson's petition to enter into
short-term financing arrangements and to issue and sell medium-term notes. The
financing order authorized Central Hudson to issue up to $85 million of
medium-term notes during the period April 6, 2004, through December 31, 2006.
Under this program, on November 3, 2004, Central Hudson issued $27 million of
5.05% medium-term notes due November 4, 2019, and on November 5, 2004, Central
Hudson issued $7 million of 4.8% notes due November 5, 2014. The proceeds of
these issuances were used to reduce outstanding short-term debt and for general
corporate purposes.

      On July 2, 2004, Central Hudson redeemed at maturity $15 million of 7.85%
medium-term notes using its available cash balance and short-term borrowings.

      For more information with respect to the financing program of Energy
Group, see Note 7 - "Capitalization - Energy Group Capital Stock" and Note 8 -
"Capitalization - Long-Term Debt."

      Griffith funded its acquisitions in 2003 with funds received from Energy
Group. For more details see Note 4 - "Acquisitions, Divestitures and
Discontinued Operations."

Credit Facilities and Short-Term Debt

      In November 2003, Energy Group entered into a $75 million revolving credit
facility with several commercial banks. The credit facility, along with
available cash, is currently earmarked for acquisitions and investments and is
described further in Note 6 - "Short-Term Borrowing Arrangements." Energy Group
also has a $7.7 million letter of credit with a commercial bank.

      As more fully discussed in Note 6 - "Short-Term Borrowing Arrangements,"
Central Hudson, pursuant to authority from the PSC, entered into a $75 million
revolving credit facility effective July 1, 2004, through June 30, 2009. In
addition, Central Hudson maintains a committed line of credit of $1 million with
a regional bank and certain uncommitted lines of credit with various banks.
These arrangements give Central Hudson competitive options to minimize the cost
of its short-term borrowing. Authorization from the PSC limits the amount
Central Hudson may have outstanding at any time under all of its short-term
borrowing arrangements to $77 million in the aggregate.

      As of December 31, 2004, CHEC had an unsecured line of credit totaling $15
million.


                                     - 43 -
<PAGE>

Contractual Obligations

      A review of capital resources and liquidity should also consider other
contractual obligations and commitments, which are further disclosed in Note 11
- "Commitments and Contingencies."

      The following is a summary of the contractual obligations for Energy Group
and its affiliates as of December 31, 2004:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                             Projected Payments Due By Period (In Thousands)
------------------------------------------------------------------------------------------------------------------------
                                                                    Years          Years          Years
                                                  Less than        Ending         Ending         Beyond
                                                    1 year        2006-2008      2009-2010        2010           Total
------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>            <C>            <C>
Long-Term Debt(1)                                 $       --     $   33,000     $   44,000     $  242,950     $  319,950
------------------------------------------------------------------------------------------------------------------------
Interest Payments - Long-Term Debt(1)                 12,380         33,751         18,275         84,657        149,063
------------------------------------------------------------------------------------------------------------------------
Operating Leases                                       2,900          5,908          2,720         11,703         23,231
------------------------------------------------------------------------------------------------------------------------
Construction/Maintenance & Other Projects(2)          22,785         13,121          3,557          1,759         41,222
------------------------------------------------------------------------------------------------------------------------
Purchased Electric Contracts(3)                       81,162        180,328         75,703         53,152        390,345
------------------------------------------------------------------------------------------------------------------------
Purchased Natural Gas Contracts(3)                    72,351         86,495         14,409          4,846        178,101
------------------------------------------------------------------------------------------------------------------------
Purchased Fixed Liquid Petroleum Contracts            11,493            148             --             --         11,641
------------------------------------------------------------------------------------------------------------------------
Purchased Variable Liquid Petroleum Contracts(4)      47,328             --             --             --         47,328
------------------------------------------------------------------------------------------------------------------------
Total Contractual Obligations(5)                  $  250,399     $  352,751     $  158,664     $  399,067     $1,160,881
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Includes fixed rate obligations and variable interest rate bonds with
      estimated variable interest payments based on the end of year rate.

(2)   Including Specific, Term, and Service Contracts, briefly defined as
      follows: Specific Contracts consist of work orders for construction; Term
      Contracts consist of maintenance contracts; Service Contracts include
      consulting, educational, and professional service contracts.

(3)   Purchased electric and purchased natural gas costs for Central Hudson are
      fully recovered via their respective regulatory cost adjustment
      mechanisms.

(4)   Estimated based on pricing at January 7, 2005.

(5)   The estimated present value of Energy Group's total contractual
      obligations is $890.7 million, assuming a discount rate of 5.25%.


                                     - 44 -
<PAGE>

      The following is a summary of the contractual obligations for Central
Hudson as of December 31, 2004:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                            Projected Payments Due By Period (In Thousands)
-----------------------------------------------------------------------------------------------------------------------
                                                                   Years          Years          Years
                                                 Less than        Ending         Ending         Beyond
                                                   1 year        2006-2008      2009-2010        2010           Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>            <C>            <C>
Long-Term Debt(1)                                $       --     $   33,000     $   44,000     $  242,950     $  319,950
-----------------------------------------------------------------------------------------------------------------------
Interest Payments - Long-Term Debt(1)                12,380         33,751         18,275         84,657        149,063
-----------------------------------------------------------------------------------------------------------------------
Operating Leases                                      2,211          5,132          2,670         11,597         21,610
-----------------------------------------------------------------------------------------------------------------------
Construction/Maintenance & Other Projects(2)         22,785         13,121          3,557          1,759         41,222
-----------------------------------------------------------------------------------------------------------------------
Purchased Electric Contracts(3)                      81,162        180,328         75,703         53,152        390,345
-----------------------------------------------------------------------------------------------------------------------
Purchased Natural Gas Contracts(3)                   72,351         86,495         14,409          4,846        178,101
-----------------------------------------------------------------------------------------------------------------------
Total Contractual Obligations(4)                 $  190,889     $  351,827     $  158,614     $  398,961     $1,100,291
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Includes fixed rate obligations and variable interest rate bonds with
      estimated variable interest payments based on the end of year rate.

(2)   Including Specific, Term, and Service Contracts.

(3)   Purchased electric and purchased natural gas costs for Central Hudson are
      fully recovered via their respective regulatory cost adjustment
      mechanisms.

(4)   The estimated present value of Central Hudson's total contractual
      obligations is $830.3 million, assuming a discount rate of 5.25%.

      Central Hudson may also have an obligation to fund its Retirement Plan and
other post-retirement benefit obligations. Decisions to fund the Retirement Plan
are made annually and are primarily affected by the discount rate used to
determine benefit obligations and the projection of the Retirement Plan assets.
Central Hudson's actuarial consultant has estimated that total contributions for
the five-year period from 2005 to 2009 could range from $36 million to $69
million. These estimated contributions would eliminate any Pension Benefit
Guaranty Corporation variable rate premiums or would maintain a 90% gateway
current liability funded level.

      Contributions to funds for other post-retirement benefits were $7 million
for 2004. Obligations for future funding depend on a number of factors,
including the discount rate, expected return, and medical claims assumptions
used. If these factors remain stable, annual funding for the next few years is
expected to approximate the 2004 amount.

      Under the policy of the PSC regarding pension and other post-retirement
costs, Central Hudson recovers these costs through customer rates with
differences from rate allowances deferred for future recovery from or return to
customers. As a result, Central Hudson fully recovers its net periodic pension
and other post-retirement costs over time.


                                     - 45 -
<PAGE>

Parental Guarantees

      For information on parental guarantees issued by Energy Group and certain
of its competitive business subsidiaries, see Note 1 - "Summary of Significant
Accounting Policies" under the caption "Parental Guarantees."

Product Warranties

      For information on product warranties issued by certain of Energy Group's
competitive business subsidiaries, see Note 1 - "Summary of Significant
Accounting Policies" under the caption "Product Warranties."

COMMON STOCK DIVIDENDS AND PRICE RANGES

      Energy Group and its principal predecessors (including Central Hudson)
have paid dividends on their respective common stock in each year commencing in
1903, which common stock has been listed on the New York Stock Exchange since
1945. The price ranges and the dividends paid for each quarterly period during
the last two fiscal years are as follows:

                            2004                             2003
                -----------------------------    -----------------------------
                 High        Low     Dividend     High        Low     Dividend
                 ----        ---     --------     ----        ---     --------

1st Quarter     $49.56     $45.13     $ 0.54     $49.69     $40.21     $ 0.54
2nd Quarter      49.58      43.39       0.54      45.70      41.31       0.54
3rd Quarter      46.75      43.14       0.54      46.00      42.26       0.54
4th Quarter      48.66      44.15       0.54      47.00      42.54       0.54

      In 2004, Energy Group maintained the quarterly dividend rate at $0.54 per
share. In making future dividend decisions, Energy Group will evaluate all
circumstances at the time of making such decisions, including business,
financial, and regulatory considerations.

      The Settlement Agreement contains certain dividend payment restrictions on
Central Hudson, including limitations on the amount of dividends payable if
Central Hudson's senior debt ratings are downgraded by more than one major
rating agency due to performance or concerns about the financial condition of
Energy Group or any Energy Group subsidiary other than Central Hudson. These
limitations would result in the average annual income available for dividends on
a two-year rolling average basis being reduced to: (i) 75%, if the downgrade
were to a rating below "BBB+," (ii) 50% if the senior debt were placed on
"Credit Watch" (or the equivalent) because of a rating below "BBB," or (iii) no
dividends payable if the downgrade were to a rating below "BBB-." These
restrictions survived the June 30, 2001, expiration of the Settlement Agreement.
Central Hudson is currently rated "A" or the equivalent and therefore the
restrictions noted above do not apply.

      The number of registered holders of common stock of Energy Group as of
December 31, 2004, was 17,041. Of these, 16,303 were accounts in the names of
individuals with total holdings of 3,850,246 shares, or an average of 236 shares
per account. The 738 other accounts were in the names of institutional or other
non-individual holders and for the most part hold shares of common stock for the
benefit of individuals.


                                     - 46 -
<PAGE>

      All of the outstanding common stock of Central Hudson and all of the
outstanding common stock of CHEC is held by Energy Group.

CRITICAL ACCOUNTING POLICIES

      The following accounting policies have been identified that could result
in material changes to the financial condition or results of operations of
Energy Group and its subsidiaries under different conditions or using different
assumptions:

      Accounting for Regulated Operations: Central Hudson follows Generally
Accepted Accounting Principles, including the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 71, entitled Accounting for the
Effects of Certain Types of Regulation ("SFAS 71"). The application of SFAS 71
may cause the allocation of costs to accounting periods to differ from
accounting methods generally applied to non-regulated companies. See Note 2 -
"Regulatory Matters" under the caption "Regulatory Accounting Policies" for
additional discussion.

      Post-Employment Benefits: Central Hudson's reported costs of providing
non-contributory defined pension benefits as well as certain health care and
life insurance benefits for retired employees are dependent upon numerous
factors resulting from actual plan experience and assumptions of future plan
performance. A change in assumptions regarding discount rates and expected
long-term rate of return on plan assets, as well as current market conditions,
could cause a significant change in the level of costs to be recorded. See Note
9 - "Post-Employment Benefits" for additional discussion.

      Use of Estimates: Preparation of the Consolidated Financial Statements in
accordance with Generally Accepted Accounting Principles includes the use of
estimates and assumptions by Management that affect financial results, and
actual results may differ from those estimated. See Note 1 - "Summary of
Significant Accounting Policies" under the caption "Use of Estimates" for
additional discussion.

      Accounting for Derivatives: Energy Group and its subsidiaries use
derivatives to manage their commodity and financial market risks. The accounting
requirements for derivatives and hedging activities are complex and still
evolving. All derivatives, other than those specifically excepted, are reported
on the Consolidated Balance Sheet at fair value. For discussions relating to
market risk and derivative instruments, see Item 7A - "Quantitative and
Qualitative Disclosure About Market Risk" of this 10-K Annual Report and Note 1
- "Summary of Significant Accounting Policies" under the caption "Accounting for
Derivative Instruments and Hedging Activities."

      Goodwill and Other Intangible Assets: As required by SFAS 142, entitled
Goodwill and Other Intangible Assets and effective January 1, 2002, Energy Group
no longer amortizes goodwill and does not amortize intangible assets with
indefinite lives, known as "unamortized intangible assets." Both goodwill and
unamortized intangible assets are tested at least annually for impairment.
Intangible assets with finite lives are amortized and are reviewed at least
annually for impairment. Impairment testing compares fair value of the reporting
units (Griffith and SCASCO) to the carrying amount of their goodwill. Fair value
is estimated using a multiple of earnings measurement. For Central Hudson's
determination of an impairment, see Note 5 - "Goodwill and Other Intangible
Assets."


                                     - 47 -
<PAGE>

      Accounting for Deferred Taxes: Central Hudson provides for income taxes
based on the asset and liability method required by SFAS 109, entitled
Accounting for Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, as well as net operating loss
and credit carry-forwards. See Note 3 - "Income Tax" for additional discussion.

RISK FACTORS

      Redeployment of Capital

      Energy Group is seeking to invest $90 million in energy-related assets.
These funds were generated from the sales of Central Hudson's interests in its
major generating assets and Energy Group's sale of CH Resources and are
currently held in low risk and low return money market instruments and
short-term securities. Investments in new business ventures may provide returns
that are not commensurate with their risk profile, including potential losses or
write offs, and they may cause Energy Group's earnings to be more volatile.

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

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

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

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

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

      CHEC's revenues from its fuel oil delivery businesses are generated by the
delivery of various petroleum products within their areas of operation. In order
to conduct these businesses, CHEC's subsidiaries need access to petroleum
supplies from storage facilities in their service territories. Some of these
storage facilities are owned or leased by CHEC's subsidiaries, and some are
owned and operated by third party entities. These facilities are at risk of
damage from storms, natural disasters, wars, terrorist acts, and other
catastrophic events and supply of petroleum products to these facilities could
be delayed, curtailed, or lost due to developments in the world oil markets. If
such damage or disruption were to occur, and


                                     - 48 -
<PAGE>

if the affected CHEC subsidiary were unable to procure petroleum from
alternative sources of supply in a timely manner, the customers of such
subsidiary could experience a service disruption and the subsidiary could
experience lower revenues, or increased expenses, or both, that the subsidiary
might not be able to recover fully through insurance, sales margins, or other
means in a timely manner, or at all.

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

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

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

      As a transmission and distribution company delivering electricity and
natural gas within New York State, Central Hudson is regulated by the PSC, which
regulates retail rates, terms and conditions of service, various business
practices and transactions, financings, and transactions between Central Hudson
and Energy Group or Energy Group's competitive business subsidiaries. The PSC's
Order Establishing Rates in Central Hudson's rate proceeding, which was issued
on October 25, 2001, and became effective November 1, 2001, and the PSC's Joint
Proposal Order issued on June 14, 2004, and effective July 1, 2004, (together
the "Rate Plans") cover the rates Central Hudson can charge customers and
contain a number of related provisions. Rates charged to customers generally may
not be changed during the respective limited terms of the Rate Plans, other than
for the recovery of energy costs and limited other exceptions. As a result, the
Rate Plans may not reflect all of the increased construction and other costs
that may be experienced after the date the Rate Plans became effective. The
approval of new rate plans or changes to existing Rate Plans (including the
modification or elimination of Central Hudson's energy cost adjustment clauses)
could have a significant effect on Central Hudson's financial condition, results
of operations, or cash flows. The current Rate Plans and material matters
relating to potential rate changes are described in Note 2 - "Regulatory
Matters." The current Rate Plans permit Central Hudson to file for changes in
rates any time after June 30, 2004, but rates are generally not changed by the
PSC until eleven months after the filing of proposed rate changes. Central
Hudson expects to file for new retail rates within the next two-year period.
Central Hudson cannot predict the rates that will be established by the PSC, or
whether its business may be adversely affected by the rates determined, in such
proceeding.


                                     - 49 -
<PAGE>

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

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

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The primary market risks for Energy Group and its subsidiaries are
commodity price risk and interest rate risk. Commodity price risk, related
primarily to purchases of natural gas, electricity, and petroleum products for
resale, is mitigated in several different ways. Central Hudson, under the
Settlement Agreement, collects its actual purchased electricity and purchased
natural gas costs through cost adjustment clauses in its rates. These adjustment
clauses provide for the collection of costs, including risk management costs,
from customers to reflect the actual costs incurred in obtaining supply. Risk
management costs are defined by the PSC as "costs associated with transactions
that are intended to reduce price volatility or reduce overall costs to
customers. These costs include transaction costs, and gains and losses
associated with risk management instruments." Griffith and SCASCO may increase
the prices charged for the commodities they sell in response to changes in
costs; however, the ability to raise prices is limited by the competitive
market. Depending on market conditions, Central Hudson, Griffith, and SCASCO
enter into long-term fixed supply and long-term forward supply contracts for the
purchase of these commodities. Central Hudson also uses natural gas storage
facilities, which enable it to purchase and hold quantities of natural gas at
pre-heating season prices for use during the heating season.

      Central Hudson and the competitive business subsidiaries have in place an
energy risk management program to manage, through the use of defined risk
management practices, various risks associated with their respective operations,
namely commodity price risk and sales volatility due to weather. This risk
management program permits the use of derivative financial instruments for
hedging purposes and does not permit their use for trading or speculative
purposes. Central Hudson, Griffith, and SCASCO have entered into either
exchange-traded futures contracts or over-the-counter ("OTC") contracts with
third parties to hedge commodity price risk associated with the purchase of
natural gas, electricity, and petroleum products and to hedge the effect on
earnings due to significant variances in weather conditions from normal
patterns. The types of derivative instruments used include natural gas futures
and basis swaps to hedge natural gas purchases, contracts for differences to
hedge electricity purchases, put and call options to hedge oil purchases, and
weather derivatives. OTC derivative transactions are entered into only with
counter-parties that meet certain credit criteria. The creditworthiness of these
counter-parties is determined primarily by reference to published credit
ratings.

      At December 31, 2004, Central Hudson had open derivative contracts to
hedge natural gas prices through October 2005, covering approximately 16.7% of
Central Hudson's projected total natural gas requirements during this period. In
2004, derivative transactions were used to hedge 19.2% of Central Hudson's total
natural gas supply requirements as compared to 18.2% in 2003. In its electric
operations, Central Hudson had open derivatives at December 31, 2004,


                                     - 50 -
<PAGE>

hedging approximately 4.1% of its required electricity supply through February
2005. In 2004, Central Hudson hedged approximately 5.1% of its total electricity
supply requirements with OTC derivative contracts as compared to 13.7% in 2003.
In addition, Central Hudson has in place a number of agreements, of varying
terms, to purchase electricity produced by certain of its former major
generating assets and other generating facilities at fixed prices. The notional
amounts hedged by the derivatives and the electricity purchase agreements
represent approximately 37% for 2005 and 2006, of its total anticipated
electricity supply requirements in each year.

      At December 31, 2004, Griffith and SCASCO had open OTC put and call option
positions covering approximately 2.7% of their combined anticipated fuel oil
supply requirements for the period from January 2005 through June 2005. The
percentage hedged at December 31, 2003, for the period January 2004 to June 2004
was 18.1%. The reduction from 2003 to 2004 was due to a change in marketing
strategy which reduced the volume of fuel oil required to be hedged with
derivatives. In 2004, derivatives were used to hedge 13.5% of these requirements
as compared to 12.3% in 2003.

      Derivative contracts are discussed in more detail in Note 1 - "Summary of
Significant Accounting Policies" under the subcaption "Accounting for Derivative
Instruments and Hedging Activities."

      Interest rate risk largely affects Central Hudson and is managed through
the issuance of fixed-rate debt with varying maturities and variable rate debt
for which interest is reset on a periodic basis to reflect current market
conditions. The difference between costs associated with actual variable
interest rates related to Central Hudson's bonds issued by the New York State
Energy Research Development Authority and costs embedded in customer rates is
deferred for eventual refund to, or recovery from, customers. The variability in
interest rates is also managed with the use of a derivative financial
instrument, known as an interest rate cap agreement, for which the premium cost
and any realized benefits also pass through the aforementioned regulatory
recovery mechanism. Central Hudson also repurchases or redeems existing debt at
a lower cost when market conditions permit. Please refer to Note 8 -
"Capitalization - Long-Term Debt" and Note 13 - "Financial Instruments" for
additional disclosure related to long-term debt.


                                     - 51 -
<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

I - Index to Financial Statements:                                          Page
                                                                            ----

        Report of Independent Registered Public Accounting Firm               53
        Report of Management on Internal Control Over Financial Reporting     57

      ENERGY GROUP
        Energy Group Consolidated Statement of Income for the three
             years ended December 31, 2004                                    61
        Energy Group Consolidated Statement of Comprehensive
             Income for the three years ended December 31, 2004               63
        Energy Group Consolidated Statement of Cash Flows for the
             three years ended December 31, 2004                              64
        Energy Group Consolidated Balance Sheet at December 31, 2004,
             and 2003                                                         66
        Energy Group Consolidated Statement of Shareholder Equity
             for the three years ended December 31, 2004                      68

      CENTRAL HUDSON
        Central Hudson Consolidated Statement of Income for the three
             years ended December 31, 2004                                    70
        Central Hudson Consolidated Statement of Comprehensive Income
             for the three years ended December 31, 2004                      72
        Central Hudson Consolidated Statement of Shareholder Equity
             for the three years ended December 31, 2004                      73
        Central Hudson Consolidated Balance Sheet at December 31, 2004,
             and 2003                                                         75
        Central Hudson Consolidated Statement of Cash Flows for the
             three years ended December 31, 2004                              77
        Notes to Consolidated Financial Statements                            79
        Selected Quarterly Financial Data (Unaudited)                        136

      FINANCIAL STATEMENT SCHEDULES
        Schedule II - Reserves - Energy Group                                138
        Schedule II - Reserves - Central Hudson                              139

      All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.

II - Supplementary Data

      Supplementary data are included in "Selected Quarterly Financial Data
(Unaudited)" referred to in "I" above, and reference is made thereto.


                                     - 52 -
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CH Energy Group, Inc.

We have completed an integrated audit of CH Energy Group, Inc.'s 2004
consolidated financial statements and of its internal control over financial
reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of CH
Energy Group, Inc. and its subsidiaries at December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in the Energy Group
Report of Management on Internal Control Over Financial Reporting appearing
under Item 8, that CH Energy Group, Inc. maintained effective internal control
over financial reporting as of December 31, 2004 based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all
material respects, based on those criteria. Furthermore, in our opinion, CH
Energy Group, Inc. maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2004, based on criteria
established in Internal Control - Integrated Framework issued by the COSO. CH
Energy Group, Inc.'s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express opinions on management's assessment and on the effectiveness of CH
Energy Group, Inc.'s internal control over financial reporting based on our
audit. We conducted our audit of internal control over financial reporting in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. An audit of
internal control over financial reporting includes obtaining an understanding of
internal control over financial


                                     - 53 -
<PAGE>

reporting, evaluating management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
February 10, 2005


                                     - 54 -
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of Central Hudson Gas & Electric
Corporation

We have completed an integrated audit of Central Hudson Gas & Electric
Corporation's 2004 consolidated financial statements and of its internal control
over financial reporting as of December 31, 2004 and audits of its 2003 and 2002
consolidated financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Our opinions, based on our
audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Central Hudson Gas & Electric Corporation and its subsidiary at December 31,
2004 and 2003, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit of financial statements includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in the Central Hudson
Report of Management on Internal Control Over Financial Reporting appearing
under Item 8, that Central Hudson Gas & Electric Corporation maintained
effective internal control over financial reporting as of December 31, 2004
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, Central Hudson Gas and Electric Corporation
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2004, based on criteria established in Internal
Control - Integrated Framework issued by the COSO. Central Hudson Gas & Electric
Corporation's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express
opinions on management's assessment and on the effectiveness of Central Hudson
Gas & Electric Corporation's internal control over financial reporting based on
our audit. We conducted our audit of internal control over financial reporting
in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control


                                     - 55 -
<PAGE>

over financial reporting was maintained in all material respects. An audit of
internal control over financial reporting includes obtaining an understanding of
internal control over financial reporting, evaluating management's assessment,
testing and evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
February 10, 2005


                                     - 56 -
<PAGE>

ENERGY GROUP
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      The management of CH Energy Group, Inc. ("Management") is responsible for
establishing and maintaining adequate internal control over financial reporting
for CH Energy Group, Inc. as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934. Internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America. Internal control over financial reporting includes
those policies and procedures that:

o     pertain to the maintenance of records that, in reasonable detail,
      accurately and fairly reflect the transactions and dispositions of the
      assets of the Corporation;

o     provide reasonable assurance that transactions are recorded as necessary
      to permit preparation of financial statements in accordance with
      accounting principles generally accepted in the United States of America
      and that receipts and expenditures of the Corporation are being made only
      in accordance with authorization of management and directors of the
      Corporation; and

o     provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of assets that could have a
      material effect on the consolidated financial statements.

      Internal control over financial reporting includes the controls
themselves, monitoring (including internal auditing practices) and actions taken
to correct deficiencies as identified.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

      Management assessed the effectiveness of the Corporation's internal
control over financial reporting as of December 31, 2004. Management based this
assessment on criteria for effective internal control over financial reporting
described in "Internal Control - Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, management determined that, as of December 31, 2004, the Corporation
maintained effective internal control over financial reporting.


                                     - 57 -
<PAGE>

      Our Management's assessment of the effectiveness of the Corporation's
internal control over financial reporting as of December 31, 2004 has been
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which appears herein.

STEVEN V. LANT                     DONNA S. DOYLE
Chairman of the Board,             Vice President - Accounting
President, and                     and Controller
Chief Executive Officer

February 10, 2005


                                     - 58 -
<PAGE>

CENTRAL HUDSON
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      The management of Central Hudson Gas & Electric Corporation ("Management")
is responsible for establishing and maintaining adequate internal control over
financial reporting for Central Hudson Gas & Electric Corporation as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.
Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes those policies and procedures
that:

o     pertain to the maintenance of records that, in reasonable detail,
      accurately and fairly reflect the transactions and dispositions of the
      assets of the Corporation;

o     provide reasonable assurance that transactions are recorded as necessary
      to permit preparation of financial statements in accordance with
      accounting principles generally accepted in the United States of America
      and that receipts and expenditures of the Corporation are being made only
      in accordance with authorization of management and directors of the
      Corporation; and

o     provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of assets that could have a
      material effect on the consolidated financial statements.

      Internal control over financial reporting includes the controls
themselves, monitoring (including internal auditing practices) and actions taken
to correct deficiencies as identified.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

      Management assessed the effectiveness of the Corporation's internal
control over financial reporting as of December 31, 2004. Management based this
assessment on criteria for effective internal control over financial reporting
described in "Internal Control - Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, management determined that, as of December 31, 2004, the Corporation
maintained effective internal control over financial reporting.


                                     - 59 -
<PAGE>

      Our Management's assessment of the effectiveness of the Corporation's
internal control over financial reporting as of December 31, 2004 has been
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which appears herein.

STEVEN V. LANT                     DONNA S. DOYLE
Chairman of the Board,             Vice President - Accounting
and Chief Executive Officer        and Controller

February 10, 2005


                                     - 60 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME
(In Thousands)

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                                    2004         2003         2002
                                                  --------     --------     --------
<S>                                               <C>          <C>          <C>
Operating Revenues
  Electric ..................................     $430,575     $457,395     $427,978
  Natural gas ...............................      125,230      123,306      105,343
  Competitive business subsidiaries .........      235,707      225,983      162,520
                                                  --------     --------     --------
      Total Operating Revenues ..............      791,512      806,684      695,841
                                                  --------     --------     --------

Operating Expenses
  Operation:
    Purchased electricity and fuel
       used in electric generation ..........      251,741      268,757      254,249
    Purchased natural gas ...................       77,847       88,767       71,991
    Purchased petroleum .....................      168,699      143,992       92,125
    Other expenses of operation -
       regulated activities .................       98,748      107,105       92,246
    Other expenses of operation -
       competitive business subsidiaries ....       53,666       56,195       51,711
  Depreciation and amortization
       (Note 1) .............................       34,640       33,611       31,230
  Taxes, other than income tax ..............       31,038       31,956       38,606
                                                  --------     --------     --------
      Total Operating Expenses ..............      716,379      730,383      632,158
                                                  --------     --------     --------

Operating Income ............................       75,133       76,301       63,683
                                                  --------     --------     --------

Other Income
  Allowance for equity funds
     used during construction
     (Note 1) ...............................          151          436          591
  Interest on regulatory assets and
     investment income ......................        9,920       12,225       13,780
  Other - net ...............................        7,391        8,810        7,469
                                                  --------     --------     --------
      Total Other Income ....................       17,462       21,471       21,840
                                                  --------     --------     --------
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 61 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME (CONT'D)
(In Thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                                      2004          2003          2002
                                                    --------      --------      --------
<S>                                                 <C>           <C>           <C>
Interest Charges
  Interest on mortgage bonds ..................           --      $    570      $  2,136
  Interest on other long-term debt ............       11,488        10,699         9,819
  Interest on regulatory liabilities and
    other interest ............................        6,679        10,987        12,908
  Allowance for borrowed
     funds used during
     construction (Note 1) ....................         (221)         (291)         (248)
                                                    --------      --------      --------
      Total Interest Charges ..................       17,946        21,965        24,615
                                                    --------      --------      --------
Income from continuing operations before
   income taxes and preferred dividends of
   subsidiary .................................       74,649        75,807        60,908
Income taxes (Note 3) .........................       31,256        30,435        22,294
                                                    --------      --------      --------
Income from continuing operations before
    preferred dividends of subsidiary .........       43,393        45,372        38,614
Cumulative preferred stock dividends
     of subsidiary ............................          970         1,387         2,161
                                                    --------      --------      --------
Income from continuing operations .............     $ 42,423      $ 43,985      $ 36,453
Loss from discontinued
    operations, net of income tax
    benefit of $1,377 .........................           --            --        (2,237)
Gain on disposal of discontinued
     operations, net of income tax
     of ($5,239) ..............................           --            --         7,065
                                                    --------      --------      --------
Net Income ....................................     $ 42,423      $ 43,985      $ 41,281
                                                    ========      ========      ========
Dividends Declared on Common
   Stock ......................................       34,046        34,093        35,095
Balance Retained in the Business ..............     $  8,377      $  9,892      $  6,186
                                                    ========      ========      ========
   Average number of common stock
     shares outstanding
     Basic ....................................       15,762        15,831        16,302
     Diluted ..................................       15,771        15,835        16,316
   Earnings per share - Basic:
       Income from continuing operations ......     $   2.69      $   2.78      $   2.24
       Discontinued operations ................           --            --      $   0.29
                                                    --------      --------      --------
       Net Income .............................     $   2.69      $   2.78      $   2.53
   Earnings per share - Diluted:
       Income from continuing operations ......     $   2.69      $   2.77      $   2.22
       Discontinued operations ................           --            --      $   0.29
                                                    --------      --------      --------
       Net Income .............................     $   2.69      $   2.77      $   2.51
    Dividends Declared Per Share ..............     $   2.16      $   2.16      $   2.16
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 62 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                            2004          2003          2002
                                                          --------      --------      --------
<S>                                                       <C>           <C>           <C>
Net Income ..........................................     $ 42,423      $ 43,985      $ 41,281

    Fair value of cash flow hedges - FAS 133:
      Unrealized gain, net of tax of $0, ($59)
        and ($13) ...................................            1            88            19

    Reclassification for gains realized in net
      income, net of tax of $58, $13 and $0 .........          (87)          (19)           --

Investment Securities:
    Net unrealized losses on investment
      securities, net of tax of $896 ................           --            --        (1,394)
    Change in fair value, net of tax of ($880) ......           --         1,320            --
    Reclassification adjustment for losses
      (gains) included in net income, net of tax
      of $0, ($49) and $26 ..........................           --            74           (38)

Net unrealized losses on equity method
    investments, net of tax
    of $165, $26 and $219 ...........................         (250)          (38)         (319)
                                                          --------      --------      --------

Other comprehensive income (loss) ...................         (336)        1,425        (1,732)
                                                          --------      --------      --------

Comprehensive Income ................................     $ 42,087      $ 45,410      $ 39,549
                                                          ========      ========      ========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 63 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                      2004          2003          2002
                                                                    --------      --------      --------
<S>                                                                 <C>           <C>           <C>
Operating Activities:
     Net Income ...............................................     $ 42,423      $ 43,985      $ 41,281
        Adjustments to reconcile net
           income to net cash provided
           by operating activities:
           Depreciation and amortization ......................       34,640        33,611        31,230
           Deferred income taxes - net ........................       26,458        34,424        25,639
           Gain on disposal of subsidiary .....................           --           302       (18,985)
           Loss on sale of temporary investments ..............           --           123           960
           Provision for uncollectibles .......................        5,835         5,862         3,582
           Accrued/deferred pension
             costs ............................................      (13,468)      (13,410)      (12,776)
           Amortization of fossil plant incentive .............       (9,887)       (9,887)       (4,794)
        Changes in operating assets and liabilities - net:
           Accounts receivable, unbilled utility
             revenues and other receivables ...................       (2,892)      (16,049)        3,986
           Fuel, materials and supplies .......................       (1,612)       (3,814)         (820)
           Special deposits and
             prepayments ......................................        2,548        21,426        (3,423)
           Contribution - prefunded pensions costs ............           --       (10,000)      (32,000)
           Accounts payable ...................................        2,816        (5,007)        2,742
           Deferred natural gas and electric costs ............      (10,783)       10,927         9,596
           Customer benefit fund ..............................      (13,845)      (46,983)      (34,859)
           Proceeds from sale of emission
              allowances ......................................       13,576            --            --
           Other - net ........................................       (3,328)        9,953        22,587
                                                                    --------      --------      --------

        Net cash provided by operating
         activities ...........................................       72,481        55,463        33,946
                                                                    --------      --------      --------
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 64 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                                         2004           2003           2002
                                                      ---------      ---------      ---------
<S>                                                   <C>            <C>            <C>
Investing Activities:
    Proceeds from sale of subsidiary ............            --            567         58,373
    Purchase of temporary investments ...........            --        (22,221)      (124,062)
    Proceeds from sale of temporary
      investments ...............................            --        111,539         33,616
    Note receivable - sale of
      Nine Mile 2 Plant .........................            --          1,289         28,885
    Additions to utility and other property
      and plant .................................       (62,735)       (59,681)       (72,287)
    Acquisitions made by competitive
      business subsidiary .......................        (2,703)        (7,624)        (1,461)
    Other - net .................................        (1,215)        (2,070)          (974)
                                                      ---------      ---------      ---------
    Net cash (used in) provided by investing
      activities ................................       (66,653)        21,799        (77,910)
                                                      ---------      ---------      ---------

Financing Activities:
    Proceeds from issuance of
      long-term debt ............................        41,000         24,000         69,000
    Redemption of preferred stock ...............            --        (12,500)       (22,500)
    Borrowings (repayments) of short-term
      debt - net ................................        (4,000)        16,000             --
    Retirement of long-term debt ................       (15,000)       (15,000)            --
    Dividends paid on common
      stock .....................................       (34,046)       (34,080)       (35,095)
    Repurchase of common stock ..................            --        (13,135)       (14,351)
    Issuance and redemption costs ...............          (499)          (236)        (1,962)
                                                      ---------      ---------      ---------
    Net cash used in financing activities .......       (12,545)       (34,951)        (4,908)
                                                      ---------      ---------      ---------

Net Change in Cash and Cash
    Equivalents .................................        (6,717)        42,311        (48,872)
Cash and Cash Equivalents at
    Beginning of Year ...........................       125,834         83,523        132,395
                                                      ---------      ---------      ---------
Cash and Cash Equivalents at
    End of year .................................     $ 119,117      $ 125,834      $  83,523
                                                      =========      =========      =========

Supplemental Disclosure of Cash
    Flow Information
      Interest paid .............................     $  13,604      $  14,229      $  12,498
      Federal and State income tax paid .........        11,320          1,532          2,370
</TABLE>

As authorized in the 2004 Joint Proposal, dated June 14, 2004, $89.9 million of
deferred electric pension and OPEB costs, including carrying charges, were
offset against the Customer Benefit Fund with no impact to cash flow for 2004.

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 65 -
<PAGE>

ENERGY GROUP CONSOLIDATED BALANCE SHEET
(In Thousands)

<TABLE>
<CAPTION>
                                                                          December 31,
                                 ASSETS                                2004           2003
                                                                    ----------     ----------
<S>                                                                 <C>            <C>
Utility Plant
       Electric ...............................................     $  702,206     $  656,192
       Natural gas ............................................        214,866        199,221
       Common .................................................        104,840        104,532
                                                                    ----------     ----------
                                                                     1,021,912        959,945

       Less: Accumulated depreciation .........................        315,691        309,208
                                                                    ----------     ----------
                                                                       706,221        650,737
       Construction work in progress ..........................         38,846         56,764
                                                                    ----------     ----------
               Net Utility Plant ..............................        745,067        707,501
                                                                    ----------     ----------

Other Property and Plant - net ................................         23,139         21,589
                                                                    ----------     ----------

Current Assets
       Cash and cash equivalents ..............................        119,117        125,834
       Accounts receivable from customers - net of
             allowance for doubtful accounts; $5.6 million
             in 2004 and $4.6 million in 2003 .................         64,436         61,223
       Accrued unbilled utility revenues ......................          9,130          7,618
       Other receivables ......................................          4,548         12,216
       Fuel and materials and supplies, at average cost .......         21,459         19,847
       Regulatory assets (Note 2) .............................         17,454          4,432
       Fair value of derivative instruments ...................             --            869
       Special deposits and prepayments .......................         20,767         23,315
       Accumulated deferred income tax ........................          9,454          9,584
                                                                    ----------     ----------
                Total Current Assets ..........................        266,365        264,938
                                                                    ----------     ----------

Deferred Charges and Other Assets
       Regulatory assets - pension plan
            (Notes 2 and 9) ...................................         88,633        124,210
       Intangible asset - pension plan (Note 9) ...............         22,291         24,447
       Goodwill ...............................................         50,462         50,462
       Other intangible assets - net ..........................         28,780         31,518
       Regulatory assets (Note 2) .............................         37,231         63,042
       Unamortized debt expense ...............................          4,041          3,901
       Other ..................................................         20,995         18,468
                                                                    ----------     ----------
                Total Deferred Charges and Other Assets .......        252,433        316,048
                                                                    ----------     ----------

                          Total Assets ........................     $1,287,004     $1,310,076
                                                                    ==========     ==========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 66 -
<PAGE>

ENERGY GROUP CONSOLIDATED BALANCE SHEET (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                                               December 31,
                    CAPITALIZATION AND LIABILITIES                        2004             2003
                                                                       -----------      -----------
<S>                                                                    <C>              <C>
Capitalization
        Common Stock Equity:
            Common Stock, 30,000,000 shares authorized:
                15,762,000 shares outstanding,
                16,862,087 shares issued, $0.10 par value ........     $     1,686      $     1,686
             Paid-in capital .....................................         351,230          351,230
             Retained earnings ...................................         187,772          179,395
            Treasury stock (1,100,087 shares) ....................         (46,252)         (46,252)
            Accumulated other comprehensive loss .................            (643)            (307)
            Capital stock expense ................................            (328)            (328)
                                                                       -----------      -----------
                Total Common Stock Equity ........................         493,465          485,424
                                                                       -----------      -----------

        Cumulative Preferred Stock
             Not subject to mandatory redemption (Note 7) ........          21,030           21,030
                                                                       -----------      -----------

        Long-term debt - net of current portion (Note 8) .........         319,883          278,880
                                                                       -----------      -----------
                Total Capitalization .............................         834,378          785,334
                                                                       -----------      -----------

Current Liabilities
        Current maturities of long-term debt .....................              --           15,000
        Notes payable ............................................          12,000           16,000
        Accounts payable .........................................          43,418           40,602
        Accrued interest .........................................           4,629            4,274
        Dividends payable ........................................           8,754            8,754
        Accrued vacation and payroll .............................           3,788            5,289
        Customer deposits ........................................           6,496            5,813
        Regulatory liabilities (Note 2) ..........................              --              722
        Fair value of derivative instruments .....................             906               --
        Deferred revenues ........................................           8,931            8,197
        Other ....................................................          12,580           16,050
                                                                       -----------      -----------
                Total Current Liabilities ........................         101,502          120,701
                                                                       -----------      -----------

Deferred Credits and Other Liabilities
        Regulatory liabilities (Note 2) ..........................         156,339          227,336
        Operating reserves .......................................           6,515            5,084
        Deferred gain - sale of major generating assets ..........              --            9,887
        Accrued environmental remediation costs ..................          19,500           19,500
        Accrued OPEB costs .......................................          16,030           10,561
        Accrued pension costs ....................................          18,470            9,775
        Other ....................................................          13,495           16,266
                                                                       -----------      -----------
                Total Deferred Credits and Other Liabilities .....         230,349          298,409
                                                                       -----------      -----------

Accumulated Deferred Income Tax (Note 3) .........................         120,775          105,632
                                                                       -----------      -----------

                         Total Capitalization and Liabilities ....     $ 1,287,004      $ 1,310,076
                                                                       ===========      ===========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 67 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF SHAREHOLDER EQUITY

<TABLE>
<CAPTION>
                                                  Common Stock, $0.10 par value; 30,000,000 shares authorized
                                                  -----------------------------------------------------------
                                                         Common Stock                    Treasury Stock
                                                  --------------------------      ---------------------------
                                                    Shares          Amount          Shares           Amount       Paid-In Capital
                                                    Issued          ($000)        Repurchased        ($000)           ($000)
                                                  ----------      ----------      -----------      ----------     ---------------
<S>                                               <C>             <C>             <C>              <C>              <C>
Balance at January 1, 2002                        16,862,087      $    1,686        (500,000)        ($18,766)      $  351,230
Net income .................................
Dividends declared ($2.16 per share)
Repurchase program .........................                                        (297,487)         (14,351)
Amortization ...............................
Transfer to regulatory asset ...............
Change in fair value:
     Derivative instruments ................
     Investments ...........................
Reclassification adjustments for gains
    recognized in net income ...............
                                                  ----------      ----------      ----------       ----------       ----------
Balance at December 31, 2002                      16,862,087      $    1,686        (797,487)        ($33,117)      $  351,230
Net income .................................
Dividends declared ($2.16 per share)
Repurchase program .........................                                        (302,600)         (13,135)
Amortization ...............................
Transfer to regulatory asset ...............
Change in fair value:
     Derivative instruments ................
     Investments ...........................
Reclassification adjustments for losses
    recognized in net income ...............
                                                  ----------      ----------      ----------       ----------       ----------
Balance at December 31, 2003                      16,862,087      $    1,686      (1,100,087)        ($46,252)      $  351,230
Net income .................................
Dividends declared ($2.16 per share) .......
Change in fair value:
     Derivative instruments ................
     Investments ...........................
Reclassification adjustments for gains
    recognized in net income ...............
                                                  ----------      ----------      ----------       ----------       ----------
Balance at December 31, 2004                      16,862,087      $    1,686      (1,100,087)        ($46,252)      $  351,230
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 68 -
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF SHAREHOLDER EQUITY (CONT'D)

<TABLE>
<CAPTION>
                                                                           Accumulated
                                              Capital                         Other           Total
                                               Stock          Retained    Comprehensive    Shareholder
(Thousands of Dollars)                        Expense         Earnings   Income / (Loss)      Equity
--------------------------                   ---------       ---------   ---------------   -----------
<S>                                            <C>            <C>           <C>              <C>
Balance at January 1, 2002                     ($1,158)       $163,317      $      --        $496,309
Net income ............................                         41,281                         41,281
Dividends declared ($2.16 per share) ..                        (35,095)                       (35,095)
Repurchase program ....................                                                       (14,351)
Amortization ..........................             42                                             42
Transfer to regulatory asset ..........            461                                            461
Change in fair value:
     Derivative instruments ...........                                            19              19
     Investments ......................                                        (1,713)         (1,713)
Reclassification adjustments for gains
    recognized in net income ..........                                           (38)            (38)
                                             ---------       ---------      ---------       ---------
Balance at December 31, 2002                     ($655)       $169,503        ($1,732)       $486,915
Net income ............................                         43,985                         43,985
Dividends declared ($2.16 per share) ..                        (34,093)                       (34,093)
Repurchase program ....................                                                       (13,135)
Amortization ..........................             15                                             15
Transfer to regulatory asset ..........            312                                            312
Change in fair value:
     Derivative instruments ...........                                            88              88
     Investments ......................                                         1,282           1,282
Reclassification adjustments for losses
    recognized in net income ..........                                            55              55
                                             ---------       ---------      ---------       ---------
Balance at December 31, 2003                     ($328)       $179,395          ($307)       $485,424
Net income ............................                         42,423                         42,423
Dividends declared ($2.16 per share) ..                        (34,046)                       (34,046)
Change in fair value:
     Derivative instruments ...........                                             1               1
     Investments ......................                                          (250)           (250)
Reclassification adjustments for gains
    recognized in net income ..........                                           (87)            (87)
                                             ---------       ---------      ---------       ---------
Balance at December 31, 2004                     ($328)       $187,772          ($643)       $493,465
</TABLE>

   The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 69 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF INCOME
(In Thousands)

<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                   2004         2003         2002
                                                 --------     --------     --------
<S>                                              <C>          <C>          <C>
Operating Revenues
  Electric .................................     $430,575     $457,395     $427,978
  Natural gas ..............................      125,230      123,306      105,343
                                                 --------     --------     --------
      Total Operating Revenues .............      555,805      580,701      533,321
                                                 --------     --------     --------

Operating Expenses
  Operation:
    Purchased electricity and fuel used
      in electric generation ...............      251,741      268,757      252,787
    Purchased natural gas ..................       77,847       76,452       61,672
    Other expenses of operation ............       98,748      107,105       92,246
    Depreciation and amortization
    (Note 1) ...............................       28,408       27,275       25,350
    Taxes, other than income tax ...........       30,768       31,725       38,396
                                                 --------     --------     --------
      Total Operating Expenses .............      487,512      511,314      470,451
                                                 --------     --------     --------

Operating Income ...........................       68,293       69,387       62,870
                                                 --------     --------     --------

Other Income
  Allowance for equity funds
    used during construction
    (Note 1) ...............................          151          436          591
  Interest on regulatory assets and
    other interest income ..................        8,678        9,974        9,102
  Other - net ..............................        7,802        8,024        6,379
                                                 --------     --------     --------
      Total Other Income ...................       16,631       18,434       16,072
                                                 --------     --------     --------
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 70 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF INCOME (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                         Year ended December 31,
                                                    2004          2003          2002
                                                  --------      --------      --------
<S>                                               <C>           <C>           <C>
Interest Charges
  Interest on mortgage bonds ................           --           570         2,136
  Interest on other long-term debt ..........       11,488        10,699         9,819
  Interest on regulatory liabilities and
    other interest ..........................        6,583        10,987        13,021
  Allowance for borrowed
    funds used during
    construction (Note 1) ...................         (221)         (291)         (248)
                                                  --------      --------      --------
      Total Interest Charges ................       17,850        21,965        24,728
                                                  --------      --------      --------

Income before income taxes ..................       67,074        65,856        54,214

Income taxes (Note 3) .......................       28,426        26,981        21,690
                                                  --------      --------      --------

Net Income ..................................     $ 38,648      $ 38,875      $ 32,524
                                                  ========      ========      ========
Dividends Declared on Cumulative
  Preferred Stock ...........................          970         1,387         2,161
                                                  --------      --------      --------

Income Available for Common
  Stock .....................................     $ 37,678      $ 37,488      $ 30,363
                                                  ========      ========      ========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 71 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)

                                                   Year ended December 31,
                                               2004         2003         2002
                                             --------     --------     --------

Net Income .............................     $ 38,648     $ 38,875     $ 32,524

  Net unrealized gains on
    Marketable securities:
      Unrealized gain, net of tax
      of $(26) .........................           --           --           38
      Less: reclassifiction adjustment
            for gain included in net
            income, net of tax of
            $26 ........................           --           --          (38)
                                             --------     --------     --------

                  Subtotal .............

Comprehensive Income ...................     $ 38,648     $ 38,875     $ 32,524
                                             ========     ========     ========

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 72 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF SHAREHOLDER EQUITY

<TABLE>
<CAPTION>
                                                   Common Stock, $5.00 par value; 30,000,000 shares authorized
                                                   -----------------------------------------------------------
                                                         Common Stock                 Treasury Stock
                                                   -------------------------    --------------------------
                                                     Shares         Amount        Shares          Amount     Paid-In Capital
                                                     Issued         ($000)      Repurchased       ($000)         ($000)
                                                   ----------     ----------    -----------     ----------   ---------------
<S>                                                <C>            <C>            <C>            <C>            <C>
Balance at January 1, 2002                         16,862,087     $   84,311             --     $       --     $  174,980
Net income ...................................
Dividends declared
  On cumulative preferred stock
  On common stock to parent - Energy Group
Amortization .................................
Transfer to regulatory asset .................
Change in fair value of investments ..........
Reclassification adjustments for gains
    recognized in net income .................
                                                   ----------     ----------     ----------     ----------     ----------
Balance at December 31, 2002                       16,862,087     $   84,311             --     $       --     $  174,980

Net income ...................................
Dividends declared
  On cumulative preferred stock
  On common stock to parent - Energy Group
Amortization .................................
Transfer to regulatory asset .................
                                                   ----------     ----------     ----------     ----------     ----------
Balance at December 31, 2003                       16,862,087     $   84,311             --     $       --     $  174,980

Net income ...................................
Dividends declared
  On cumulative preferred stock
  On common stock to parent - Energy Group
                                                   ----------     ----------     ----------     ----------     ----------
Balance at December 31, 2004                       16,862,087     $   84,311             --     $       --     $  174,980
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 73 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF SHAREHOLDER EQUITY (CONT'D)

<TABLE>
<CAPTION>
                                                     Capital                        Other         Total
                                                      Stock        Retained     Comprehensive  Shareholder
(Thousands of Dollars)                               Expense       Earnings    Income / (Loss)    Equity
----------------------                              ---------      ---------   --------------- -----------
<S>                                                   <C>          <C>            <C>           <C>
Balance at January 1, 2002                            ($5,791)     $   9,777      $      --     $ 263,277
Net income .....................................                      32,524                       32,524
Dividends declared
  On cumulative preferred stock                                       (2,161)                      (2,161)
  On common stock to parent - Energy Group                           (30,000)                     (30,000)
Amortization ...................................           42                                          42
Transfer to regulatory asset ...................          461                                         461
Change in fair value of investments ............                                         38            38
Reclassification adjustments for gains
    recognized in net income ...................                                        (38)          (38)
                                                    ---------      ---------      ---------     ---------
Balance at December 31, 2002                          ($5,288)     $  10,140      $      --     $ 264,143

Net income .....................................                      38,875                       38,875
Dividends declared
  On cumulative preferred stock                                       (1,387)                      (1,387)
  On common stock to parent - Energy Group                           (34,162)                     (34,162)
Amortization ...................................           15                                          15
Transfer to regulatory asset ...................          312                                         312
                                                    ---------      ---------      ---------     ---------
Balance at December 31, 2003                          ($4,961)     $  13,466      $      --     $ 267,796

Net income .....................................                      38,648                       38,648
Dividends declared
  On cumulative preferred stock                                         (970)                        (970)
  On common stock to parent - Energy Group                           (25,500)                     (25,500)
                                                    ---------      ---------      ---------     ---------
Balance at December 31, 2004                          ($4,961)     $  25,644      $      --     $ 279,974
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 74 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED BALANCE SHEET
(In Thousands)

<TABLE>
<CAPTION>
                                                                          December 31,
                                ASSETS                                 2004           2003
                                                                    ----------     ----------
<S>                                                                 <C>            <C>
Utility Plant
       Electric ...............................................     $  702,206     $  656,192
       Natural Gas ............................................        214,866        199,221
       Common .................................................        104,840        104,532
                                                                    ----------     ----------
                                                                     1,021,912        959,945

       Less: Accumulated depreciation .........................        315,691        309,208
                                                                    ----------     ----------
                                                                       706,221        650,737

       Construction work in progress ..........................         38,846         56,764
                                                                    ----------     ----------
               Net Utility Plant ..............................        745,067        707,501
                                                                    ----------     ----------

Other Property and Plant - net ................................            962            968
                                                                    ----------     ----------

Current Assets
       Cash and cash equivalents ..............................          8,227         12,720
       Accounts receivable from customers - net of
             allowance for doubtful accounts; $4.6 million
             in 2004 and $3.0 million in 2003 .................         36,901         37,487
       Accrued unbilled utility revenues ......................          9,130          7,618
       Other receivables ......................................          2,048          9,566
       Fuel and materials and supplies - at average
          cost ................................................         17,207         16,158
       Regulatory assets (Note 2) .............................         17,454          4,432
       Fair value of derivative instruments ...................             --            722
       Special deposits and prepayments .......................         20,354         22,503
       Accumulated deferred income tax ........................          8,696          8,920
                                                                    ----------     ----------
                Total Current Assets ..........................        120,017        120,126
                                                                    ----------     ----------

Deferred Charges and Other Assets
       Regulatory assets - pension plan (Notes 2 and 9) .......         88,633        124,210
       Intangible asset - pension plan (Note 9) ...............         22,291         24,447
       Regulatory assets (Note 2) .............................         37,231         63,042
       Unamortized debt expense ...............................          4,041          3,901
       Other ..................................................         10,397          8,100
                                                                    ----------     ----------
                Total Deferred Charges and Other Assets .......        162,593        223,700
                                                                    ----------     ----------

                          Total Assets ........................     $1,028,639     $1,052,295
                                                                    ==========     ==========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 75 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED BALANCE SHEET (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                                              December 31,
                 CAPITALIZATION AND LIABILITIES                          2004             2003
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
Capitalization
        Common Stock Equity:
             Common stock, 30,000,000 Shares Authorized;
              16,862,087 shares issued, $5 par value ............     $    84,311      $    84,311
        Paid-in capital .........................................         174,980          174,980
        Retained earnings .......................................          25,644           13,466
        Capital stock expense ...................................          (4,961)          (4,961)
                                                                      -----------      -----------
                Total Common Stock Equity .......................         279,974          267,796
                                                                      -----------      -----------

        Cumulative Preferred Stock
             Not subject to mandatory redemption (Note 7) .......          21,030           21,030
                                                                      -----------      -----------

        Long-term debt - net of current portion (Note 8) ........         319,883          278,880
                                                                      -----------      -----------
                Total Capitalization ............................         620,887          567,706
                                                                      -----------      -----------

Current Liabilities
        Current maturities of long-term debt ....................              --           15,000
        Notes payable ...........................................          12,000           16,000
        Accounts payable ........................................          32,951           33,084
        Accrued interest ........................................           4,629            4,274
        Dividends payable - preferred stock .....................             242              242
        Accrued vacation and payroll ............................           4,619            5,289
        Customer deposits .......................................           6,359            5,690
        Regulatory liabilities (Note 2) .........................              --              722
        Fair value of derivative instruments ....................             907               --
        Other ...................................................           5,869            6,622
                                                                      -----------      -----------
                Total Current Liabilities .......................          67,576           86,923
                                                                      -----------      -----------

Deferred Credits and Other Liabilities
        Regulatory liabilities (Note 2) .........................         156,339          227,336
        Operating reserves ......................................           5,969            5,043
        Deferred gain - sale of major generating assets .........              --            9,887
        Accrued environmental remediation costs .................          19,500           19,500
        Accrued OPEB costs ......................................          16,030           10,561
        Accrued pension costs ...................................          18,470            9,775
        Other ...................................................           8,168           12,524
                                                                      -----------      -----------
                Total Deferred Credits and Other Liabilities ....         224,476          294,626
                                                                      -----------      -----------

Accumulated Deferred Income Tax (Note 3) ........................         115,700          103,040
                                                                      -----------      -----------

                Total Capitalization and Liabilities ............     $ 1,028,639      $ 1,052,295
                                                                      ===========      ===========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 76 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                                    2004          2003          2002
                                                                  --------      --------      --------
<S>                                                               <C>           <C>           <C>
Operating Activities:
    Net Income ..............................................     $ 38,648      $ 38,875      $ 32,524
        Adjustments to reconcile net income to net
            cash provided by operating activities:
                 Depreciation and amortization ..............       28,408        27,275        25,350
                 Deferred income taxes - net ................       24,069        34,169        25,984
                 Provision for uncollectibles ...............        5,071         4,741         3,062
                 Accrued/deferred pension costs .............      (13,468)      (13,410)      (12,776)
                 Amortization of fossil plant incentive .....       (9,887)       (9,887)       (4,794)

            Changes in operating assets and
                 liabilities - net:
                 Accounts receivable, unbilled
                   revenues and other receivables ...........        1,520       (13,895)        3,536
                 Fuel, materials and supplies ...............       (1,049)       (3,699)        1,408
                 Special deposits and prepayments ...........        2,149        11,428         3,332
                 Contribution - prefunded pension costs .....           --       (10,000)      (32,000)
                 Accounts payable ...........................         (133)       (3,982)        4,941
                 Deferred natural gas and electric costs ....      (10,783)       10,927         9,596
                 Customer benefit fund ......................      (13,845)      (46,983)      (34,859)
                 Proceeds from sales of emissions
                   allowances ...............................       13,576            --            --
                 Other - net ................................       (5,198)        9,787         7,620
                                                                  --------      --------      --------

        Net cash provided by operating activities ...........       59,078        35,346        32,924
                                                                  --------      --------      --------
</TABLE>

   The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 77 -
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                   2004          2003          2002
                                                                 --------      --------      --------
<S>                                                              <C>           <C>           <C>
Investing Activities:
        Note receivable - sale of
            Nine Mile 2 Plant ..............................           --         1,289        28,885
        Additions to plant .................................      (57,522)      (53,361)      (65,830)
        Other - net ........................................       (1,080)       (2,050)         (875)
                                                                 --------      --------      --------
        Net cash used in investing activities ..............      (58,602)      (54,122)      (37,820)
                                                                 --------      --------      --------

Financing Activities:
        Proceeds from issuance of
         long-term debt ....................................       41,000        24,000        69,000
        Redemption of preferred stock ......................           --       (12,500)      (22,500)
        Borrowings (repayments) of short-term debt - net ...       (4,000)       16,000            --
        Retirement of long-term debt .......................      (15,000)      (15,000)           --
        Dividends paid to parent - Energy Group ............      (25,500)      (34,162)      (30,000)
        Dividends paid on cumulative preferred stock .......         (970)       (1,596)       (2,517)
        Issuance and redemption costs ......................         (499)         (235)       (1,962)
                                                                 --------      --------      --------
        Net cash (used in) provided by financing
            activities .....................................       (4,969)      (23,493)       12,021
                                                                 --------      --------      --------

Net Change in Cash and Cash
     Equivalents ...........................................       (4,493)      (42,269)        7,125

Cash and Cash Equivalents at
     Beginning of Year .....................................       12,720        54,989        47,864
                                                                 --------      --------      --------

Cash and Cash Equivalents at End
     of Year ...............................................     $  8,227      $ 12,720      $ 54,989
                                                                 ========      ========      ========

Supplemental Disclosure of Cash
     Flow Information
        Interest paid ......................................     $ 11,314      $ 11,867      $ 10,740
        Federal and State income tax paid ..................       10,733         2,917         5,068
</TABLE>

As authorized in the 2004 Joint Proposal, dated June 14, 2004, $89.9 million of
deferred electric pension and OPEB costs, including carrying charges, were
offset against the Customer Benefit Fund with no impact to cash flow for 2004.

  The Notes to Consolidated Financial Statements are an integral part hereof.


                                     - 78 -
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

      This is a combined report of CH Energy Group, Inc. ("Energy Group") and
Central Hudson Gas & Electric Corporation ("Central Hudson"), a wholly owned
subsidiary of Energy Group. The Notes to the Consolidated Financial Statements
apply to the Consolidated Financial Statements of both Energy Group and Central
Hudson. Energy Group's Consolidated Financial Statements include the accounts of
Energy Group and its wholly owned subsidiaries, including Central Hudson. Energy
Group's Consolidated Financial Statements, following a one-for-one common stock
share exchange with Central Hudson effective on December 15, 1999 (the "Holding
Company Restructuring"), have been prepared from Central Hudson's prior period
consolidated financial statements.

      Central Hudson and the competitive business subsidiaries (as hereinafter
defined) are each wholly owned, directly or indirectly, by Energy Group. Their
businesses are comprised of an electric and natural gas utility, cogeneration,
fuel distribution, energy management, and investments in energy related assets.

Reclassification

      Certain amounts in the 2002 and 2003 Consolidated Financial Statements
have been reclassified to conform to the 2004 presentation. In addition, the
consolidated statements of income for Energy Group have been reformatted to
reflect line item presentation changes related to income taxes, cumulative
preferred dividends of subsidiary and income line items. Presentation changes
were also made to Central Hudson's statements of consolidated income related to
income taxes and income line items. The December 31, 2003 Energy Group and
Central Hudson balance sheets have been revised to present $9.6 million and
$8.9 million, respectively, of current deferred tax assets and $4.4 million of
current regulatory assets within the current assets section of the balance
sheets with corresponding decreases to previously reported long-term deferred
tax liabilities and regulatory assets.

Principles of Consolidation

      Upon the Holding Company Restructuring, Central Hudson became a wholly
owned subsidiary of Energy Group. Phoenix Development Company, Inc. is a wholly
owned subsidiary of Central Hudson. In addition, Central Hudson Energy Services,
Inc. ("CH Services") became a wholly owned subsidiary of Energy Group for the
purpose of becoming the holding company parent of Central Hudson Enterprises
Corporation ("CHEC"), SCASCO, Inc. ("SCASCO"), Prime Industrial Energy Services,
Inc. ("Prime Industrial"), CH Syracuse Properties, Inc. ("CH Syracuse"), CH
Niagara Properties, Inc. ("CH Niagara"), CH Resources, Inc. ("CH Resources"),
and Greene Point Development Corporation ("Greene Point").

      See Note 2 - "Regulatory Matters" under the caption "Competitive
Opportunities Proceeding Settlement Agreement" for further details regarding the
Holding Company Restructuring.

      In November 2002, the Boards of Directors of Energy Group and the
competitive business subsidiaries approved a reorganization of the competitive


                                     - 79 -
<PAGE>

business subsidiaries, effective December 31, 2002. CH Services, which had been
the holding company parent of all competitive business subsidiaries of Energy
Group, was merged into Energy Group and CHEC replaced CH Services as the holding
company parent of Griffith Energy Services, Inc. ("Griffith") and SCASCO. In
addition, Greene Point and Prime Industrial were merged into CHEC, effective the
same date. CHEC, Griffith, and SCASCO are hereinafter referred to collectively
as the "competitive business subsidiaries."

      Energy Group's Consolidated Financial Statements include the accounts of
Energy Group, Central Hudson, and the competitive business subsidiaries.
Intercompany balances and transactions have been eliminated.

Rates, Revenues and Cost Adjustment Clauses

      Central Hudson's electric and natural gas retail rates are regulated by
the Public Service Commission of the State of New York ("PSC"). Transmission
rates, facilities charges, and rates for electricity sold for resale in
interstate commerce are regulated by the Federal Energy Regulatory Commission
("FERC").

      Central Hudson's tariffs for retail electric and natural gas service
include purchased electricity and purchased natural gas cost adjustment clauses
by which electric and natural gas rates are adjusted to collect actual purchased
electricity and purchased natural gas costs incurred in providing service.

Revenue Recognition

      Central Hudson records revenue on the basis of meters read. In addition,
Central Hudson records an estimate of unbilled revenue for service rendered to
bimonthly customers whose meters are read in the prior month. The estimate
covers 30 days subsequent to the meter-read date.

      Revenues are recognized by the competitive business subsidiaries when
products are delivered to customers or services have been rendered. Deferred
revenues include unamortized payments from fuel oil burner maintenance
contracts. These contracts require a one-time payment from the customer at
inception of the contract. Also included in deferred revenues are payments
received from customers who participate in budget billing programs, whose
balance represents the amount paid in excess of fuel oil deliveries received at
December 31. At the conclusion of the heating season, each such customer's
budget billings are reconciled with their actual purchases and the accounts are
settled.

Utility Plant - Central Hudson

      The costs of additions to utility plant and replacements of retired units
of property are capitalized at original cost. Capitalized costs include labor,
materials and supplies, indirect charges for such items as transportation,
certain taxes, pension and other employee benefits, and an Allowance for the
Funds Used During Construction ("AFDC"), as further discussed below. Replacement
of minor items of property is included in operating expenses.

      The original cost of property, together with removal cost less salvage, is
charged to accumulated depreciation at the time the property is retired and
removed from service as required by the PSC.


                                     - 80 -
<PAGE>

      The following summarizes the type and amount of assets included in the
Electric, Natural Gas, and Common categories of Central Hudson's utility plant
balances at December 31, 2004, and 2003.

                                   Estimated              Utility Plant
                                   Depreciable            (In Thousands)
                                  Life in Years        2004            2003
                                  -------------        ----            ----

Electric
    Production                        27-75          $ 27,506        $ 27,398
    Transmission                      25-85           163,328         154,355
    Distribution                      25-65           510,480         473,517
    Other                              50                 892             922
                                                     --------        --------
    Total                                            $702,206        $656,192

Natural Gas
    Production                        25-40          $  5,010        $  4,874
    Transmission                      17-70            41,267          40,691
    Distribution                      20-85           168,147         153,214
    Other                              N/A                442             442
                                                     --------        --------
    Total                                            $214,866        $199,221

Common
    Land and Structures                50            $ 34,567        $ 34,001
    Office & Other Equipment,
      Radios, and Tools               8-35             36,326          36,871
    Transportation Equipment          8-12             33,840          33,553
    Other                              N/A                107             107
                                                     --------        --------
    Total                                            $104,840        $104,532

Allowance For Funds Used During Construction

      Central Hudson's regulated utility plant includes AFDC, which is defined
as the net cost of borrowed funds used for construction purposes and a
reasonable rate on other funds when so used. The concurrent credit for the
amount so capitalized is reported in the Consolidated Statement of Income as
follows: the portion applicable to borrowed funds is reported as a reduction of
interest charges while the portion applicable to other funds (the equity
component, a noncash item) is reported as other income. The AFDC rate was 3.00%
in 2004, 4.50% in 2003, and 6.75% in 2002.

Depreciation and Amortization

      The regulated assets of Central Hudson include electric, natural gas, and
common assets and are listed under the heading of Utility Plant on Central
Hudson's and Energy Group's Consolidated Balance Sheet. The accumulated
depreciation associated with these regulated assets is also reported on the
Consolidated Balance Sheets.

      The unregulated property and plant assets are reported net of accumulated
depreciation on Energy Group's Consolidated Balance Sheet as Other Property and
Plant, net. Accumulated depreciation for the competitive business subsidiaries
was $11.7 million and $8.6 million at December 31, 2004, and 2003, respectively.


                                     - 81 -
<PAGE>

      For financial statement purposes, Central Hudson's depreciation provisions
are computed on the straight-line method using rates based on studies of the
estimated useful lives and estimated net salvage values of properties. The
anticipated costs of removing assets upon retirement are provided for over the
life of those assets as a component of depreciation expense. This depreciation
method is consistent with industry practice and the applicable depreciation
rates have been approved by the PSC.

      Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 143, entitled Accounting for Asset Retirement
Obligations ("SFAS 143"), precludes the recognition of expected future
retirement obligations as a component of depreciation expense or accumulated
depreciation; however, Central Hudson is required to use depreciation methods
and rates that the PSC has approved under regulatory accounting. In accordance
with FASB Statement No. 71, entitled Accounting for the Effects of Certain Types
of Regulation ("SFAS 71"), Central Hudson continues to accrue for the future
cost of removal for its rate-regulated natural gas and electric utility assets.
In connection with the adoption of SFAS 143, Central Hudson has classified $88.2
million and $79.3 million of net cost of removal as a regulatory liability as of
December 31, 2004 and 2003, respectively. Previously such amounts were included
in accumulated depreciation.

      Central Hudson performs depreciation studies on a continuing basis and,
upon approval by the PSC, periodically adjusts the depreciation rates of its
various classes of depreciable property. Central Hudson's composite rates for
depreciation were 3.17% in 2004, 3.25% in 2003, and 3.20% in 2002, in each case
of the original cost of average depreciable property. The ratio of the amount of
accumulated depreciation to the original cost of depreciable property at
December 31 was 23.2% in 2004, 24.6% in 2003, and 25.2% in 2002.

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

      Amortization of intangibles (other than goodwill) is computed on the
straight-line method over the assets' expected useful lives. See Note 5 -
"Goodwill and other Intangible Assets" for further discussion.

Cash and Cash Equivalents

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


                                     - 82 -
<PAGE>

Inventory

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

                                      Energy Group           Central Hudson
                                      ------------           --------------

As of December 31,                    2004        2003        2004        2003
-------------------------          -------     -------     -------     -------
(In Thousands)

Natural Gas                        $10,856     $ 9,802     $10,856     $ 9,802
Petroleum Products and Propane       3,389       2,779         613         505
Materials and Supplies               7,214       7,266       5,738       5,851
                                   -------     -------     -------     -------

Total                              $21,459     $19,847     $17,207     $16,158
                                   -------     -------     -------     -------

Investments in Marketable Securities

      Any marketable securities held by Energy Group in 2004 were considered
cash equivalents. All other marketable securities, including debt and equity
instruments, were liquidated in 2003. Energy Group realized a net loss of
$123,000 in 2003 from the sale of these investments (see Note 13 - "Financial
Instruments").

Investments in Limited Partnerships

      CHEC's investments in limited partnerships ("Partnerships") are accounted
for under the equity method. The Company's proportionate share of the change in
fair value of available for sale securities held by the Partnerships is recorded
in Energy Group's Consolidated Statement of Comprehensive Income.


                                     - 83 -
<PAGE>

Earnings Per Share

The following table presents Energy Group's basic and diluted earnings per share
("EPS") included on the Consolidated Statement of Income:

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                 2004                            2003                           2002
                                      ----------------------------   ----------------------------    ----------------------------
                                                        (In Thousands, except for Earnings Per Share)
                                        Avg.      Net                  Avg.      Net                   Avg.      Net
                                       Shares    Income    $/Share    Shares    Income    $/Share     Shares    Income    $/Share
                                      -------   -------    -------   -------   -------    -------    -------   -------    -------
<S>                                    <C>      <C>        <C>        <C>      <C>        <C>         <C>      <C>        <C>
Earnings applicable to Common
  Stock - Continuing Operations (1)             $42,423                        $43,985                         $36,453
Average number of common
  shares outstanding - basic           15,762        --    $  2.69    15,831        --    $  2.78     16,302        --    $  2.24
Average dilutive effect of:
  Stock Options (2) (3)                     4       (53)        --         3       (41)     (0.01)        13      (373)     (0.02)
  Performance Shares (3)                    5        --         --         1        --         --          1        --         --
                                      -------------------------------------------------------------------------------------------
Average number of common
shares outstanding - diluted           15,771   $42,370    $  2.69    15,835   $43,944    $  2.77     16,316   $36,080    $  2.22
                                      ===========================================================================================
</TABLE>

(1)   Total earnings (basic) for 2002 of $41.3 million include $4.8 million, or
      $0.29 per share, from discontinued operations. These earnings were not
      affected by the dilutive effect related to the above stock options and
      performance shares.

(2)   For 2004 and 2003, there are stock options excluded from the computation
      of diluted earnings per share because the exercise prices were greater
      than the average market price of the common stock shares for each of the
      years presented. The number of common stock shares represented by the
      options excluded from the above calculation were 36,900 shares for 2004
      and 94,400 shares for 2003.

(3)   See Note 10 - "Equity-Based Compensation Incentive Plans" for additional
      information regarding stock options and performance shares.


                                     - 84 -
<PAGE>

Equity-Based Compensation

      Energy Group has an equity-based employee compensation plan that is
described more fully in Note 10 - "Equity-Based Compensation Incentive Plans."
As permitted by FASB Statement No. 123, entitled Accounting for Stock-Based
Compensation ("SFAS 123"), Energy Group had previously accounted for this plan
under the recognition and measurement provisions of Accounting Principles Board
("APB") Opinion No. 25, entitled Accounting for Stock Issued to Employees, and
related Interpretations. No equity-based employee compensation cost was
reflected in 2002 net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. Effective January 1, 2003, Energy Group adopted the fair value
recognition provisions of SFAS 123 utilizing the modified prospective method
under the provisions of FASB Statement No. 148, entitled Accounting for
Stock-Based Compensation - Transition and Disclosure ("SFAS 148"). Equity-based
compensation cost recognized in 2004 and 2003 is what would have been recognized
had the recognition provisions of SFAS 123 been applied from its original
effective date. Accordingly, a total compensation cost of $145,000 and $120,000
was recorded in 2004 and 2003, respectively.

      The following table illustrates the effect on net income and earnings per
share if the fair value method had been applied to all outstanding and unvested
awards in each period:

                                                     Year Ended December 31
                                               ---------------------------------
                                                 2004        2003        2002
                                               --------    --------    --------
                                                        (In Thousands)
Net income, as reported                        $ 42,423    $ 43,985    $ 41,281
Deduct: Total equity-based
     employee compensation expense
     determined under fair value
     based method for all awards, net
     of related tax effects                          --          --         (41)
                                               --------    --------    --------

Pro forma net income                           $ 42,423    $ 43,985    $ 41,240
                                               ========    ========    ========

Earnings per share:
         Basic - as reported                   $   2.69    $   2.78    $   2.53
                                               ========    ========    ========
         Diluted - as reported                 $   2.69    $   2.77    $   2.51
                                               ========    ========    ========

         Basic - pro forma                     $   2.69    $   2.78    $   2.53
                                               ========    ========    ========
         Diluted - pro forma                   $   2.69    $   2.77    $   2.51
                                               ========    ========    ========

Income Tax

      Energy Group and its subsidiaries file consolidated federal and New York
State income tax returns. Income taxes are deferred under the asset and
liability method in accordance with FASB Statement No. 109, entitled Accounting
for Income Taxes ("SFAS 109"). Under the asset and liability method, deferred
income taxes are provided for all differences between the financial statement
and the tax basis of assets and liabilities. Additional deferred income taxes
and offsetting regulatory assets or liabilities are recorded by Central Hudson
to recognize that income taxes will be recovered or refunded through future
revenues. For federal and state income tax purposes, Energy Group and its
subsidiaries use an accelerated method of depreciation and generally use the
shortest life permitted for each class of assets. Deferred


                                     - 85 -
<PAGE>

investment tax credits are amortized over the estimated life of the properties
giving rise to the credits. For state income tax purposes, Central Hudson uses
book depreciation for property placed in service in 1999 or earlier in
accordance with transition property rules under Article 9-A of the New York
State Tax Law. The competitive business subsidiaries also file state income tax
returns in those states in which they conduct business. For more information,
see Note 3 - "Income Tax."

Use of Estimates

      Preparation of the financial statements in accordance with Generally
Accepted Accounting Principles includes the use of estimates and assumptions by
Management that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amount of revenues and expenses during the reporting
period. Actual results may differ from those estimated. Expense items most
affected by the use of estimates are depreciation and amortization (including
amortization of intangible assets), the reserve for uncollectible accounts,
other operating reserves, and unbilled revenues. Depreciation and amortization
is based on estimates of the useful lives and estimated net salvage value of
properties (as described in this Note under the caption "Depreciation and
Amortization"). Amortizable intangible assets include the amortization of
customer lists related to CHEC's operations, which is based on an assessment of
customer turnover as described in Note 5 - "Goodwill and Other Intangible
Assets." Depreciation and amortization amounts included in Energy Group income
for years 2004, 2003, and 2002 are $34.6 million, $33.6 million, and $31.2
million, respectively.

      Estimates for uncollectible accounts are based on customer accounts
receivable aging data as well as consideration for special collection issues.
The estimates for other operating reserves are based on assessments of future
obligations related to injuries and damages and workers compensation claims.
Unbilled revenues are determined based on the estimated sales for bi-monthly
accounts that have not been billed by Central Hudson in the current month. The
estimation methods used in determining these sales are the same methods used for
billing customers when actual meter readings cannot be obtained. Revenues for
2004 include an estimate of $5.8 million for unbilled revenues, 2003 includes an
estimate of $5.2 million, and 2002 includes an estimate of $5.3 million.

      Estimates are also reflected for certain commitments and contingencies
where there is sufficient basis to project a future obligation. Disclosures
related to these certain commitments of contingencies can be found in Note 11 -
"Commitments and Contingencies."

Related Party Transactions

      Thompson Hine LLP (formerly Gould & Wilkie LLP) serves as general counsel
to Energy Group and Central Hudson. A partner in that firm serves as Assistant
Secretary of each corporation. This Assistant Secretary appointment serves to
assist in closure of specified transactions in the ordinary course of business.
While this partner receives no additional compensation for his role as Assistant
Secretary, time spent performing the duties of Assistant Secretary is charged to
Energy Group and Central Hudson on an hourly basis. The combined fees paid by
Energy Group and Central Hudson to Thompson Hine LLP were $3.2 million in 2004,
$3.4 million in 2003, and $2.5 million in 2002.


                                     - 86 -
<PAGE>

Parental Guarantees

      Energy Group and certain of the competitive business subsidiaries have
issued guarantees in conjunction with certain commodity and derivative contracts
that provide financial or performance assurance to third parties on behalf of a
subsidiary. The guarantees are entered into primarily to support or enhance the
creditworthiness otherwise attributed to a subsidiary on a stand-alone basis,
thereby facilitating the extension of sufficient credit to accomplish the
relevant subsidiary's intended commercial purposes. In addition, Energy Group
agreed to guarantee the post-closing obligations of CH Services under the
agreement related to the sale of CH Resources, which guarantee now applies to
CHEC. See Note 11 - "Commitments and Contingencies" under the caption "CHEC."

      The guarantees described have been issued to counter-parties to assure the
payment, when due, of certain obligations incurred by the Energy Group
subsidiaries in physical and financial transactions related to heating oil,
propane, other petroleum products, weather and commodity hedges, and certain
obligations related to the sale of CH Resources. At December 31, 2004, the
aggregate amount of subsidiary obligations (excluding obligations related to CH
Resources) covered by these guarantees was $7.5 million. Where liabilities exist
under the commodity-related contracts subject to these guarantees, these
liabilities are included in the Energy Group Consolidated Balance Sheet.

Product Warranties

      Griffith and SCASCO offer a multi-year warranty on heating system
installations and have offered multi-year service contracts as an incentive to
new heating oil delivery customers, and have recorded liabilities for the
estimated costs of fulfilling their respective obligations under these warranty
and service contracts. The aggregate amounts of these liabilities were
approximately $504,000 and $830,000 at December 31, 2004, and 2003,
respectively. The accounting policy and methodology used to determine each
subsidiary's liability for these product warranties is to accrue the present
value of future warranty expense based on the number and type of contracts
outstanding and historical costs for these contracts.

Accounting for Derivative Instruments and Hedging Activities

      FASB Statement No. 133, entitled Accounting for Derivative Instruments and
Hedging Activities ("SFAS 133"), which was amended in June 2000 and in April
2003, established accounting and reporting requirements for derivative
instruments and hedging activities. SFAS 133 requires that an entity recognize
the fair value of all derivative instruments as either assets or liabilities in
the balance sheet with the corresponding unrealized gains or losses recognized
in earnings. SFAS 133 permits the deferral of unrealized hedge gains and losses,
under stringent hedge accounting provisions, until the hedged transaction is
realized. SFAS 133 also provides an exception for certain derivative
transactions that qualify as "normal purchases and normal sales." These are
transactions that are exempt from SFAS 133 if they provide for the purchase or
sale of something other than a financial or derivative instrument to be
delivered in quantities for probable use or sale by the reporting entity in the
normal course of business within a reasonable period of time.

      Energy Group and its subsidiaries do not enter into derivative instruments
for speculative purposes.


                                     - 87 -
<PAGE>

      Central Hudson uses derivative instruments to hedge exposure to
variability in the prices of natural gas and electricity and to hedge exposure
to variability in interest rates for its variable rate long-term debt. The types
of derivative instruments used by Central Hudson are natural gas futures and
basis swaps to hedge natural gas purchases, contracts for differences to hedge
electricity purchases, and interest rate caps to hedge interest payments on
variable rate debt. These derivatives are not designated as hedges under the
provisions of SFAS 133, and the related gains and losses are included as part of
Central Hudson's commodity cost and/or price-reconciled in its natural gas and
electricity cost adjustment charge clauses. The premium related to interest rate
hedges, as well as any related actual gains, is also subject to a true-up
mechanism authorized by the PSC for the variable long-term debt. The earnings
impacts from these derivatives are, therefore, deferred for refund to, or
recovery from, customers under their respective regulatory adjustment
mechanisms.

      At December 31, 2004, Central Hudson had open derivative contracts to
hedge natural gas prices through October 2005, covering approximately 16.7% of
Central Hudson's projected total natural gas requirements during this period. In
2004, derivative transactions were used to hedge 19.2% of Central Hudson's total
natural gas supply requirements as compared to 18.2% in 2003. In its electric
operations, Central Hudson had open derivatives at December 31, 2004, hedging
approximately 4.1% of its required electricity supply through February 2005. In
2004, Central Hudson hedged approximately 5.1% of its total electricity supply
requirements with over-the-counter ("OTC") derivative contracts as compared to
13.7% in 2003. In addition, Central Hudson has in place a number of agreements
of varying terms to purchase electricity produced by certain of its former major
generating assets and other generating facilities at fixed prices. The notional
amounts hedged by the derivatives and the electricity purchase agreements
represent approximately 37% of Central Hudson's total anticipated electricity
supply requirements for 2005 and 2006.

      The total fair value (net unrealized loss) of Central Hudson's derivatives
at December 31, 2004, was ($908,000) as compared to a fair value (net unrealized
gain) of $722,000 at December 31, 2003. Fair value is determined based on market
quotes for exchange traded derivatives and broker quotes for OTC derivatives.
Actual net losses of $1.5 million were recorded as additional energy costs in
2004, which were recovered through Central Hudson's electric and natural gas
cost adjustment clauses as part of the overall cost of electricity and natural
gas. This compares to a total net loss of $1 million recorded in 2003, which
also served to increase energy costs.

      The competitive business subsidiaries use derivative instruments to hedge
variability in the price of heating oil purchased for delivery to their
customers. Griffith and SCASCO generally enter into heating oil put option
contracts to hedge firm heating oil purchase commitments and also enter into
call option contracts to cover forecasted heating oil supply requirements for
fixed and capped price programs not hedged by firm contracts. The call options
hedge commodity price increases and/or supply restrictions resulting from colder
than normal weather. These derivatives are designated as either fair value
hedges or cash flow hedges under the provisions of SFAS 133 and are accounted
for under the deferral method with actual gains and losses from the hedging
activity included in the cost of sales as the hedged transaction occurs. The put
and call options entered into have been effective with no gains or losses from
ineffectiveness recorded in 2004 or 2003. The assessment of hedge effectiveness
for these hedges excludes the change in the fair value of the premium paid for
these derivative instruments. These premiums, which are not material, are
expensed based on the change in their respective fair value. The fair values of
open derivative instruments at December 31, 2004, and at December 31, 2003, were
not material. Including premium costs, a


                                     - 88 -
<PAGE>

net gain was recorded in 2004 and a net loss was recorded in 2003 as part of the
cost or price of the related commodity transactions. The amounts recorded were
not material, representing less than 1% of total petroleum costs for each of the
years. The fair values of put and call options are determined based on the
market value of the underlying commodity.

      At December 31, 2004, Griffith and SCASCO had open OTC put and call option
positions covering approximately 2.7% of their combined anticipated fuel oil
supply requirements for the period January 2005 through June 2005. The
percentage hedged at December 31, 2003, for the period January 2004 to June 2004
was 18.1%. The reduction from 2003 to 2004 was due to a change in marketing
strategy which reduced the volume of fuel oil required to be hedged with
derivatives. In 2004, derivative transactions were used to hedge 13.5% of total
fuel oil requirements as compared to 12.3% in 2003.

      In addition to the above, Central Hudson, Griffith, and SCASCO use weather
derivative contracts to hedge the effect on earnings of significant variances in
weather conditions from normal patterns if such contracts can be obtained on
reasonable terms. These weather derivatives are entered into for the heating
season, which runs from November through March. In addition, Central Hudson has
entered into similar contracts for the cooling season, which runs from June
through August. Weather derivative contracts are not subject to the provisions
of SFAS 133 and are accounted for in accordance with Emerging Issues Task Force
("EITF") Statement 99-2, entitled Accounting for Weather Derivatives. In 2004,
Central Hudson received a total net payment from counter-parties of $146,000 due
to a cooler summer and in 2003 a total net payment of $3.6 million was made to
counter-parties by Central Hudson, Griffith, and SCASCO due to colder than
normal weather. In each case these amounts partially offset variations in
revenues experienced due to the actual weather patterns that occurred in each
period. Central Hudson has entered into a weather derivative contract for
January, February, and March 2005. Weather derivative contracts are currently in
place to cover Griffith for the months of February and March 2005 and SCASCO for
January through March.

New Accounting Standards and Other FASB Projects - Standards Implemented

Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003

      In December 2003, the President of the United States signed into law the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
"Medicare Act"). On January 12, 2004, the FASB issued its FASB Staff Position
("FSP") 106-1, entitled Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003, which
permitted a sponsor of a post-retirement health care plan that provides a
prescription drug benefit to make a one-time election to defer accounting for
the effects of the Medicare Act under SFAS 106, entitled Employers Accounting
for Postretirement Benefits Other Than Pensions. On May 19, 2004, the FASB
issued FSP 106-2, which supersedes FSP 106-1 and provides guidance on the
accounting and disclosure requirements for the effects of the Medicare Act.

      Under the provisions of FSP 106-1, Central Hudson elected to defer
recognition of the effects of the Medicare Act for the six months ended June 30,
2004, and as such, the net periodic post-employment cost, as previously
reported, did not reflect this federal subsidy.


                                     - 89 -
<PAGE>

      Central Hudson's actuarial consultant believes that, based on the current
guidance relating to the Medicare Act, Central Hudson's prescription drug plan
offered to Medicare-eligible retirees is actuarially equivalent and will qualify
for this federal subsidy. Accordingly, Central Hudson adopted the provisions of
FSP 106-2 on a retroactive basis effective July 1, 2004. Based on a measurement
date of December 31, 2003, Central Hudson's actuarial consultant determined that
the effect of the Medicare Act on the valuation of post-employment health
benefits is a reduction in the accumulated post-employment benefit obligations
of $12 million as of December 31, 2003, and a reduction in the net periodic
post-employment benefit costs of $2.2 million (after-tax) for 2004.

      Under the policy of the PSC regarding post-employment benefits, Central
Hudson is able to defer differences between actual costs and rate allowances
covering these costs for future recovery from or return to customers. Therefore,
the adoption of FSP 106-2 is not expected to have a material impact on the
financial condition, results of operations, or cash flows of Central Hudson or
Energy Group.

Pension Discount Rate

      In April 2004, federal legislation was enacted that temporarily changes
the way pension plan obligations are calculated; this, in turn, impacts the
amount of a company's required pension plan contributions. The legislation
suspends a requirement that pension obligations be tied to interest rates on
30-year Treasury bonds; instead it substitutes for 2004 and 2005 a rate based on
a composite of long-term corporate bonds. As discussed in Note 9 -
"Post-Employment Benefits," Central Hudson did not make a contribution to its
pension plan in 2004 and therefore this change did not impact the financial
condition, results of operations, or cash flows of Energy Group or its
subsidiaries at that time.

EITF 03-1: The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments

      In March 2004, the FASB ratified the consensus reached by the EITF on
Issue No. 03-1, entitled The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments, regarding disclosures about unrealized
losses on available-for-sale debt and equity securities accounted for under FASB
Statement 115, entitled Accounting for Certain Investments in Debt and Equity
Securities. The scope of the consensus is to give guidance on when an investment
is impaired, whether the impairment is other than temporary, and the measurement
of an impairment loss. The guidance for evaluating whether an investment is
other than temporarily impaired is applicable to evaluations made in reporting
periods beginning after June 15, 2004. The adoption of EITF Issue No. 03-1 does
not impact the financial condition, results of operations, or cash flows of
Energy Group or its subsidiaries at this time.

EITF 04-8: The Effect of Contingently Convertible Debt on Diluted Earnings Per
Share

      In September 2004, the EITF reached a consensus regarding the draft
abstract entitled The Effect of Contingently Convertible Debt on Diluted
Earnings Per Share. The draft abstract reflects the EITF's conclusion that
contingently convertible debt instruments ("Co-Cos") should be included in
diluted earnings per share computations regardless of whether the market price
trigger has been met. Co-Cos are financial instruments that add a contingent
feature to a convertible debt instrument and are generally convertible into
common shares of the issuer after the common stock price has exceeded a
predetermined threshold for a specified time period (known as a market price
trigger). Currently, most issuers of Co-Cos exclude the


                                     - 90 -
<PAGE>

potential dilutive effect of the conversion feature from diluted earnings per
share until the market price contingency is met. The consensus reached by the
EITF on this issue is effective for reporting periods ending after December 15,
2004. Currently, neither Energy Group nor Central Hudson have contingently
convertible debt and therefore neither entity expects this issue to have any
impact on its financial condition, results of operations, or cash flows.

FIN 46 - Consolidation of Variable Interest Entities

      In December 2003, the FASB issued a revised Interpretation No. 46,
entitled Consolidation of Variable Interest Entities ("FIN 46R"), which
clarifies the application of Accounting Research Bulletin No. 51, entitled
Consolidated Financial Statements, as it relates to the consolidation of a
variable interest entity ("VIE"). The original interpretation was issued in
January 2003 and its application is required for periods ending after December
15, 2003, for companies that had interests in special-purpose entities. The
application of FIN 46R for all other types of VIEs is required for periods
ending after March 15, 2004. FIN 46R was adopted by Energy Group effective with
the quarter ended March 31, 2004.

      A VIE is an entity that is not controllable through voting interests where
the equity investment at risk is not sufficient to permit the VIE to finance its
activities without additional subordinated financial support provided by any
party, including the equity holders. Variable interests are the investments or
other interests that will absorb portions of a VIE's expected losses or receive
portions of a VIE's expected residual returns.

      The objective of FIN 46R is to provide guidance on the identification of a
variable interest and a VIE to determine when the assets, liabilities, and
results of operations should be consolidated in a company's financial
statements. A company that holds a variable interest in an entity is required to
consolidate the entity if the company's interest in the VIE is such that the
company will absorb a majority of the VIE's expected losses and/or receive a
majority of the VIE's expected residual returns.

      Energy Group and its subsidiaries do not have any interests in special
purpose entities and are not affiliated with any VIEs that require consolidation
under the provisions of FIN 46R. In arriving at this determination, long-term
power purchase contracts currently in effect for Central Hudson were reviewed,
including contracts with a number of independent power producers ("IPPs").
Central Hudson does not have a controlling financial interest in or operational
control of these IPPs. Under federal and New York State laws and regulations,
Central Hudson is required to purchase the electrical output of IPPs which meet
certain criteria for Qualifying Facilities as such term is defined in the
applicable legislation. Payments are made under these contracts at rates often
higher than those prevailing in the wholesale market; however, these costs are
fully recoverable through Central Hudson's electric energy adjustment mechanism,
which provides for the recovery of purchased electricity costs. In 2004, Central
Hudson had contracts with IPPs which represented approximately 1.9% of Central
Hudson's electricity purchases.

      CHEC has a number of limited partnership interests that are presently
accounted for under the equity method. These were also reviewed relative to FIN
46R and it was determined that consolidation is not required. CHEC has limited
partnership interests in two cogeneration facilities, a preferred unit
investment in a limited liability company which will build and operate a fuel
ethanol production facility, and a limited partnership interest in a venture
capital fund. Neither of the two cogeneration partnerships nor the preferred
unit investment meet any of the criteria for classification as a VIE. CHEC is
one of 26 limited partners that own a 99% interest in the venture capital fund.
A general partner holds the remaining 1%. CHEC's limited


                                     - 91 -
<PAGE>

partnership interest is 4.1%, which is less than four other limited partners who
each hold an 8.2% interest. All of the limited partners have equal rights in the
venture capital fund agreement. CHEC's total equity investment in these limited
partnerships is not material, comprising less than 2% of Energy Group's total
equity.

New Accounting Standards and Other FASB Projects - Standards to be Implemented

Earnings Per Share, an Amendment of FASB Statement No. 128

      On December 15, 2003, the FASB issued an Exposure Draft entitled Earnings
Per Share, an Amendment of FASB Statement No. 128. The draft was proposed to
improve and converge United States Generally Accepted Accounting Principles with
existing International Accounting Standards Board's ("IASB") standards. The
Exposure Draft reflects three specific changes to the calculation of EPS as
follows:

1)    When applying the treasury stock method for year-to-date diluted EPS, the
      number of incremental shares included would be computed using the average
      market price of common shares for the year-to-date period, instead of the
      weighted average.

2)    Contracts with the option of settling in either cash or stock will be
      presumed to settle in stock.

3)    A requirement that shares to be issued upon conversion of mandatorily
      convertible security be included in the computation of basic EPS from the
      date that conversion becomes mandatory.

      The FASB has continued to discuss issues related to the Exposure Draft and
expects to issue a final statement in the first quarter of 2005. The proposed
Statement currently would be effective for interim and annual periods ending
after December 15, 2004, although the FASB is reconsidering a later date due to
the expected timing of the final Statement. The implementation of this Statement
is not expected to have any material impact on the financial position, results
of operations, and/or cash flows of either Energy Group or Central Hudson.

Equity-Based Compensation

      On December 16, 2004, the FASB issued a revision of SFAS 123, entitled
Accounting for Stock-Based Compensation ("SFAS 123"), entitled Share-Based
Payment ("SFAS 123(R)"), which establishes standards for share-based payment
transactions in which an entity receives an employee's services in exchange for
(a) equity instruments of the entity or (b) liabilities that are based on the
fair value of the entity's equity instruments or that may be settled by the
issuance of such equity instruments. SFAS 123(R) eliminates the option of
accounting for share-based compensation transactions using APB Opinion No. 25,
entitled Accounting for Stock Issued to Employees, and requires that all such
compensation be recorded using a fair value based method.

      For public companies, SFAS 123(R) is effective at the beginning of the
first interim or annual reporting period that begins after June 15, 2005.

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


                                     - 92 -
<PAGE>

NOTE 2 - REGULATORY MATTERS

Competitive Opportunities Proceeding Settlement Agreement

      In response to the May 1996 Order of the PSC issued in its generic
Competitive Opportunities Proceeding, Central Hudson, the PSC Staff, and certain
other parties entered into an Amended and Restated Settlement Agreement dated
January 2, 1998. The PSC approved the Amended and Restated Settlement Agreement
by its final Order issued and effective June 30, 1998, for which a final
amendment was issued and approved as of March 7, 2000 (hereinafter called the
"Settlement Agreement").

      The Settlement Agreement, which expired on June 30, 2001, included the
following major provisions which survive its expiration date: (i) certain
limitations on ownership of electric generation facilities by Central Hudson and
its affiliates in Central Hudson's franchise territory; (ii) standards of
conduct in transactions between Central Hudson, Energy Group, and the
competitive business subsidiaries; (iii) prohibitions against Central Hudson
making loans to Energy Group or any other subsidiary of Energy Group and against
Central Hudson guaranteeing debt of Energy Group or any other subsidiary of
Energy Group; (iv) limitations on the transfer of Central Hudson employees to
Energy Group or other Energy Group subsidiaries, and the use of Central Hudson
officers in common with other Energy Group subsidiaries; (v) certain dividend
payment restrictions on Central Hudson, and (vi) treatment of savings up to the
amount of an acquisition's or merger's premium or costs flowing from a merger
with another utility company.

Regulatory Accounting Policies

      Central Hudson follows generally accepted accounting principles which, for
regulated public utilities, include SFAS 71. Under SFAS 71, regulated companies
apply AFDC to the cost of construction projects and defer costs and credits on
the balance sheet as regulatory assets and liabilities (see the caption "Summary
of Regulatory Assets and Liabilities" of this Note 2) when it is probable that
those costs and credits will be recoverable through the rate-making process in a
period different from when they otherwise would have been reflected in income.
These deferred regulatory assets and liabilities and the related deferred taxes
are then either eliminated by offset as directed by the PSC or reflected in the
income statement in the period in which the same amounts are reflected in rates.
In addition, current accounting practices reflect the regulatory accounting
authorized in the most recent Settlement Agreement or Rate Order.

Sales of Major Generating Assets

      Pursuant to the Settlement Agreement, on January 30, 2001, Central Hudson,
after a competitive bidding process, sold its Danskammer Point Steam Electric
Generating Station ("Danskammer Plant") and its interest in the Roseton Electric
Generating Station ("Roseton Plant") to affiliates of Dynegy Power Corp.
(collectively, "Dynegy") for $713 million. By Order issued and effective October
26, 2001 ("Nine Mile 2 Order"), the PSC authorized the sale of Central Hudson's
interest in the Nine Mile 2 Nuclear Generating Plant ("Nine Mile 2 Plant"). The
Danskammer Plant, the Roseton Plant, and the Nine Mile 2 Plant are referred to
collectively herein as the "major generating assets." On November 7, 2001,
Central Hudson sold its interest in the Nine Mile 2 Plant to an affiliate of
Constellation Nuclear LLC ("Constellation") for approximately $58.2 million, of
which $28.4 million was paid in cash with the remaining principal to be paid
under a five-year, 11% promissory note, all subject to


                                     - 93 -
<PAGE>

certain post-closing adjustments. On April 12, 2002, Constellation elected to
pay the then-remaining balance of $29.8 million on the promissory note. Central
Hudson's proceeds, after-tax, from these sales were used to recover the book
value and the net regulatory assets related to Central Hudson's interests in its
major generating assets.

      Central Hudson remains obligated by the PSC to supply electricity to its
retail electric customers. Under the Settlement Agreement, Central Hudson's
retail customers may elect to procure electricity from third party suppliers or
may continue to rely on Central Hudson. No prediction can be made as to the
amount of service that Central Hudson will be obligated to provide or the cost
or availability of electricity to satisfy Central Hudson's retail customers'
requirements. To partially supply these customers, Central Hudson entered into a
Transition Power Agreement ("TPA") with Dynegy to purchase capacity and energy
from January 30, 2001, through October 31, 2003. On August 2, 2002, Central
Hudson exercised an option to extend the TPA through October 31, 2004, at which
date the TPA terminated in accordance with its terms. Central Hudson also
entered into an agreement with Constellation to purchase capacity and energy,
comprising approximately 8% of the output of the Nine Mile 2 Plant, at
negotiated prices, from the Nine Mile 2 Plant during the ten-year period
beginning on the sale of Central Hudson's interest in the Nine Mile 2 Plant on
November 7, 2001, and ending November 30, 2011. The agreement is "unit
contingent" in that Constellation is only required to supply electricity if the
Nine Mile 2 Plant is operating. Following the expiration of this purchase
agreement, a Revenue Sharing Agreement with Constellation begins, which will
provide Central Hudson with a hedge against electricity price increases and
could provide additional future revenue for Central Hudson through 2021. In the
case of each of the TPA and the Constellation agreements, electricity is
purchased at defined prices that escalate over the lives of the respective
contracts. The capacity and energy supplied under these two agreements in 2004
was sufficient to supply approximately 37% of Central Hudson's retail customer
requirements. On November 12, 2002, Central Hudson entered into an agreement
with Entergy Nuclear Indian Point 2 LLC and Entergy Nuclear Indian Point 3 LLC
to purchase electricity (but not capacity) on a unit-contingent basis at defined
prices from January 1, 2005, to and including December 31, 2007. On April 23,
2003, Central Hudson entered into an agreement with Entergy Nuclear Fitzpatrick,
LLC to purchase electricity (but not capacity) on a unit-contingent basis at
defined prices from January 1, 2004, to and including December 31, 2004.


                                     - 94 -
<PAGE>

Summary of Regulatory Assets and Liabilities

The following table sets forth Central Hudson's regulatory assets and
liabilities:

At December 31,                                            2004         2003
--------------------------------------------------------------------------------
Regulatory Assets (Debits):                                  (In Thousands)

Current:
  Deferred purchased electric and natural gas costs
    (Notes 1 and 2) ................................    $  15,215     $   4,432
  FAS 133 - deferred unrealized losses (Note 1) ....          908            --
  Deferred New York State taxes ....................        1,331            --
                                                        ---------     ---------
                                                           17,454         4,432
Long-term:
  Deferred pension costs undercollection
    (Note 9) .......................................    $  88,633     $ 124,210
  Carrying charges - pension reserve (Note 9) ......        4,096        18,026
  Deferred manufactured gas sites (Note 11) ........       14,565        14,360
  Deferred OPEB(1) costs undercollection
   (Note 9) ........................................        2,985         9,226
  Deferred debt expense on reacquired debt
   (Note 8) ........................................        7,898         8,603
  Income taxes recoverable
    through future rates ...........................           --         5,410
  Other ............................................        7,687         7,417
                                                        ---------     ---------
                                                          125,864       187,252
                                                        ---------     ---------

        Total Regulatory Assets ....................    $ 143,318     $ 191,684
                                                        =========     =========

Regulatory Liabilities (Credits):

Current:
  FAS 133 - Deferred unrealized gains (Note 1) .....           --           722

Long-term:
  Customer benefit fund (Note 2) ...................    $  31,265     $ 133,043
  Deferred cost of removal (Note 1) ................       88,200        79,300
  Deferred proceeds from sale of emission
    allowances .....................................       13,576            --
  Deferred interest overcollection - variable
    rate bonds (Note 8) ............................        4,763         3,302
  Deferred Nine Mile 2 Plant costs overcollection ..        2,107         1,960
  Income taxes refundable through future rates .....        7,834           463
  Other ............................................        8,594         9,268
                                                        ---------     ---------
                                                          156,339       227,336
                                                        ---------     ---------

      Total Regulatory Liabilities .................    $ 156,339     $ 228,058
                                                        =========     =========

              Net Regulatory Liabilities ...........    $ (13,021)    $ (36,374)
                                                        =========     =========

(1)   "OPEB" means Other Post-Employment Benefit.


                                     - 95 -
<PAGE>

      The significant regulatory assets and liabilities include:

      Deferred Pension Costs Undercollection: As discussed further in Note 9 -
"Post-Employment Benefits," the amount of deferred pension cost undercollected
for December 31, 2004 includes $77.5 million related to the accounting required
under SFAS 87, entitled Employer's Accounting for Pensions ("SFAS 87"), for
recording a minimum pension liability. The remaining $11.1 million is the
cumulative undercollected pension costs to be recovered from Central Hudson
customers. At December 31, 2003, the balances were $83.6 million and $40.6
million, respectively.

      Carrying Charges - Pension Reserve: Under the policy of the PSC regarding
pension costs, carrying charges are accrued on cash differences between rate
allowances and cash contributions to the Retirement Plan. For further discussion
regarding the Retirement Plan, see Note 9 - "Post-Employment Benefits."

      Income Taxes Recoverable/Refundable: The adoption of SFAS 109 in 1993
increased Central Hudson's net deferred taxes. As it is probable that the
related balances will be either recoverable from or refundable to customers,
Central Hudson established a net regulatory asset for the recoverable future
taxes and a net regulatory liability for balances refundable to customers.

      Customer Benefit Fund: See discussion in this Note under the caption "Rate
Proceedings - Electric and Natural Gas."

      Deferred Cost of Removal: The adoption of SFAS 143 resulted in classifying
$88.2 million and $79.3 million of net cost of removal as a regulatory liability
as of December 31, 2004 and 2003, respectively. The amounts represent the future
cost of removing assets upon retirement that prior to 2003 were included in the
amount reported as accumulated depreciation.

      Sale of Emission Allowances: After the sale of the Roseton Plant and
Danskammer Plant in 2001, Central Hudson retained a number of sulphur dioxide
(or "SO2") emission allowances. The emission allowances were sold in 2004 in
response to favorable market conditions and the proceeds deferred for the
benefit of customers in accordance with a PSC mandate issued in 1997.

      Deferred Nine Mile 2 Plant Costs: A PSC Order provided for the deferral of
the difference between actual and authorized operating and maintenance expenses
for the Nine Mile 2 Plant. Central Hudson's interest in the Nine Mile 2 Plant
was sold in November 2001. The regulatory liability recorded represents the
residual overcollection balance and related carrying charges due to customers.

Rate Proceedings - Electric and Natural Gas

      On August 1, 2000, Central Hudson filed an electric and natural gas case
with the PSC. On August 21, 2001, after full evidentiary hearings, several
public hearings, and numerous negotiation sessions, a joint proposal ("Joint
Proposal") was filed by Central Hudson, the Staff of the PSC, and other parties
to the case.


                                     - 96 -
<PAGE>

      On October 25, 2001, the PSC issued its Order Establishing Rates ("Rate
Order") in the proceeding incorporating the provisions of the Joint Proposal.
New rates became effective November 1, 2001. All accounting related to the rate
proceeding and any offsetting balances, which would have resulted as if the new
rates had been in effect on July 1, 2001, were reconciled.

      Significant terms and conditions of the Joint Proposal and the Rate Order
are: (i) a three-year term, beginning July 1, 2001, with a Central Hudson option
to extend the Rate Order for up to two additional years; (ii) a 1.2% reduction
in electric delivery rates, which were then frozen at rates in effect on June
30, 2001, for the remainder of the term of the Rate Order and frozen natural gas
delivery rates for the term of the Rate Order; (iii) continued purchase of
electricity and natural gas by Central Hudson for its full service customers and
recovery of these costs from customers through energy adjustment mechanisms;
(iv) increases in customer charges and reductions in volumetric delivery
charges; (v) reformatting of customer bills to show the market price of
electricity in order to encourage competition and enhance customer migration to
third-party energy suppliers; (vi) refunds to electric customers of $25 million
in aggregate for each of the first three years; (vii) a base return on equity
("ROE") of 10.3% on the equity portion of Central Hudson's rate base; (viii) a
common equity ratio cap, for purposes of the PSC's ROE calculation, at 47% in
the first year of the Rate Order, declining 1% per year in each of the following
two years; (ix) retention by Central Hudson of earnings above the 10.3% base ROE
up to 11.3%, with an equal sharing of earnings between customers and Central
Hudson, between 11.3% and 14%, and crediting of earnings above 14% to a fund to
benefit customers ("Customer Benefit Fund"); (x) establishment of customer
service standards with associated penalties if standards are not met and
enhanced low income and customer education programs; and (xi) making available
excess proceeds from the sales of Central Hudson's interests in its major
generating assets and net deferred regulatory accounts approximating $169
million (net of tax) for the Customer Benefit Fund and the use of a portion of
such Fund as follows:

              1)    Customer refunds                  $45 million (net of tax)
              2)    Rate base reduction               $42.5 million (net of tax)
              3)    Enhanced electric
                    reliability program               $13 million (net of tax)
              4)    Offset of manufactured gas
                    plant site remediation costs      $12.6 million (net of tax)

      Also included in the Rate Order and the Nine Mile 2 Order were approval
for Central Hudson to recognize $19.8 million of tax benefits related to the
sales of its interests in its major generating assets, offset by $11.4 million
of after-tax contributions by Central Hudson to the Customer Benefit Fund, or a
net benefit to shareholders of $8.4 million, which amount was recorded in the
fourth quarter of 2001. Central Hudson has additionally recognized net income
for shareholders under a prior PSC regulatory settlement as follows: $2.9
million in 2002, $5.9 million in 2003, and $5.9 million in 2004. These tax
benefits and prior settlement-related amounts are excluded from the earnings
that are subject to the ROE-sharing formula described above.

      On October 3, 2002, the PSC issued two additional Orders in the electric
rate proceeding. The first such Order authorized and directed Central Hudson to
refund to its electric customers an additional $10 million in aggregate from the
Customer Benefit Fund over the period from November 1, 2002, through June 30,
2004. The second such Order authorized


                                     - 97 -
<PAGE>

the implementation of an $11 million economic development program to be funded
from the Customer Benefit Fund over a period of five years.

      On June 14, 2004, the PSC issued an Order adopting the terms of the 2004
Joint Proposal submitted March 29, 2004, by Central Hudson, the Staff of the
PSC, and certain energy service companies. The 2004 Joint Proposal was developed
in response to PSC Orders concerning future uses of the Customer Benefit Fund,
public policy programs, and other matters relating to the encouragement and
expansion of retail access and customer choice programs. The significant terms
of the 2004 Joint Proposal, which became effective July 1, 2004, include: (i)
continuation of the rate levels, rate designs, and related accounting provisions
(including deferrals) previously established by the PSC in July 2001; (ii) an
additional $5 million refund from the Customer Benefit Fund for certain classes
of electric customers; (iii) continued funding from the Customer Benefit Fund
for other purposes such as economic development and retail access rate credits
previously approved by the PSC; (iv) enhanced programs to promote retail
competition and service quality; (v) recovery, subject to specified limitations,
of deferred pension and other post-employment benefit costs from the Customer
Benefit Fund; (vi) a lowering of the threshold for sharing of earnings with
customers (from an 11.3% to a 10.5% ROE); and (vii) modified earnings sharing so
that earnings above 10.5% ROE and up to 11.3% will be shared 70%/30% between
Central Hudson and ratepayers; and earnings above 11.3% ROE and up to 14% shared
65%/35% between Central Hudson and ratepayers. Earnings above 14% ROE will be
added to the Customer Benefit Fund.

      Expiring Amortization: Under a prior PSC regulatory settlement related to
the sales of Central Hudson's interests in its major generating assets, a
portion of the gain recognized on those sales was recorded as other income over
a four-year period which commenced in 2001 and ended in 2004. Amounts recorded
by year, net of tax, were as follows: 2001 - $3.2 million, 2002 - $2.9 million,
2003 - $5.9 million, and 2004 - $5.9 million. Energy Group is seeking to use its
cash reserves and debt capacity to make investments with a view to produce new
earnings intended to replace, in whole or in part, the income previously
provided by the sales of Central Hudson's interests in its major generating
assets. In this connection, Energy Group is actively seeking new energy-related
investments that provide diversification and offer attractive returns with
acceptable risks. Such opportunities may include, but are not limited to,
currently operating assets that use proven technology and have a relatively
stable customer base such as electric generating plants and natural gas
pipelines, in either case with a significant portion of their output under
long-term contract. Energy Group also may use its cash reserves to repurchase
shares of its common stock. Such repurchases, depending on the number and
average price of shares repurchases, could have the effect of offsetting a
substantial portion of the earnings per share impact of the expiring
amortization noted above.

FERC Restructuring and Independent System Operator

      In its Order No. 888 ("Order 888"), the FERC directed jurisdictional
transmission owners to restructure their operations to promote open transmission
access. As proposed in response to Order 888 and as approved by the FERC, on
December 1, 1999, the New York State Independent System Operator ("NYISO") was
created and given responsibility for the operation of the New York State
transmission system.

      The NYISO is a not-for-profit New York corporation open to buyers,
sellers, consumers, and transmission owners, and representatives of each group
are represented on the NYISO's Management Committee. As part of the
restructuring, the New York State Reliability Council ("Reliability Council")
was also established. The Reliability Council is governed by a committee


                                     - 98 -
<PAGE>

comprised of transmission owners and representatives of buyers, sellers, and
consumer and environmental groups. The Reliability Council promotes and
preserves the reliability of the bulk power system within New York State through
its promulgation of reliability rules; the NYISO develops the procedures
necessary to operate the system within those reliability rules. Central Hudson
is a member of both the NYISO and the Reliability Council.

      In its Order No. 2000 ("Order 2000"), the FERC directed all utilities
subject to its jurisdiction under the Federal Power Act that belong to an
Independent System Operator ("ISO") to make a filing on or before January 15,
2001, addressing the extent to which such ISO conforms to the minimum
characteristics and functions of a Regional Transmission Organization ("RTO") as
described in Order 2000, a plan for such conformation, and any obstacles to full
compliance with the FERC's RTO requirements. A compliance filing was made by the
six jurisdictional New York State transmission owners (including Central
Hudson). Upon review of this compliance filing, the FERC issued an order
determining that the NYISO does not satisfy the RTO requirements set forth in
Order 2000.

      On November 7, 2001, the FERC issued an "Order Providing Guidance on
Continued Processing of RTO Filings" under which the FERC intends to complete
the RTO effort using two parallel tracks to resolve business and process issues
relating to (i) geographic scope and governance of qualifying RTOs across the
United States and (ii) transmission tariff and market design rulemaking for
public utilities, including RTOs, to accomplish the objectives of Order 2000.

      On July 31, 2002, the FERC released its third major restructuring
initiative by issuing a Notice of Proposed Rulemaking on Remedying Undue
Discrimination through Open Access Transmission Service and Standard Electricity
Market Design ("SMD NOPR"). A significant requirement of the SMD NOPR is that
all public utilities become Independent Transmission Providers ("ITP"), turn
over their transmission facilities to an ITP, or contract with an ITP to operate
their transmission facilities.

      In order to address concerns raised by various parties, on April 28, 2003,
the FERC issued a white paper entitled "Wholesale Power Market Platform" ("White
Paper") identifying changes to its proposed market design rules. In addition,
the White Paper announced a series of regional technical conferences to further
discuss market design issues with the states and market participants. The
technical conference for New York State was held on October 20, 2003.

      At this time, the FERC has not identified a date for issuance of a final
rule on Standard Market Design ("SMD"). There are a number of proposals before
Congress that seek to delay or prohibit the implementation of SMD.

      The NYISO has undertaken an initiative to develop a more comprehensive
electric system planning process for New York State. The PSC and market
participants, including Central Hudson, are participating in this effort. On
August 20, 2004, the NYISO filed with the FERC proposed amendments to its Open
Access Transmission Tariff to establish a comprehensive planning process for the
reliability needs of New York State. On October 19, 2004, the FERC notified the
NYISO that its filing was deficient and requested certain additional information
in order to assist in making a decision on the proposed comprehensive planning
process for reliability needs. The NYISO filed a response to the FERC deficiency
letter on October 29, 2004. On December 18, 2004, the FERC issued an order
accepting in part and rejecting in part the proposed tariff revisions. The NYISO
must make a compliance filing on


                                     - 99 -
<PAGE>

February 28, 2005. As part of the comprehensive planning process, and as
approved by FERC, the New York transmission owners have agreed to construct
"backstop" projects for reliability needs if requested by the NYISO. Cost
recovery for such projects, if any, would take place under the NYISO Open Access
Transmission Tariff. An expansion of the planning process to additionally
address economic needs is also under consideration by the NYISO and its
stakeholders. At this time there is no consensus as to the need and, if so, the
scope of such an additional process.

      On January 20, 2004, the FERC, the NYISO, and the New York Transmission
Owners (including Central Hudson) made a joint filing in compliance with FERC
Order Nos. 2003 and 2003-A (together "Order 2003") proposing variations from the
pro forma Large Generator Interconnection Procedures and Large Generator
Interconnection Agreement. The joint filing was accepted by the FERC on August
6, 2004, subject to certain modifications. A joint compliance filing was made on
October 5, 2004. One element of compliance with Order 2003 that remains
outstanding is a determination of how to integrate a deliverability component
into interconnection service under the NYISO Open Access Transmission Tariff.
This determination is currently under discussion in the NYISO committee process.
At this time there is no consensus as to the need and, if so, the scope of such
a deliverability component.

      The FERC issued a series of rules (Order 2004 issued November 25, 2003,
Order 2004-A issued April 16, 2004, and Order 2004-B issued August 2, 2004)
relating to standards of conduct for transmission providers. On February 9,
2004, Central Hudson submitted to the FERC a plan and schedule for implementing
these standards of conduct. The FERC established a deadline for compliance of
September 22, 2004, and Central Hudson completed its implementation of the
requirements as of that date.

      No prediction can be made as to the final outcome of the FERC electric
restructuring effort or the NYISO planning process initiative.

Other Regulatory Matters

      On January 5, 2005, the PSC issued an Order that requires each New York
State utility, including Central Hudson, to institute a comprehensive stray
voltage testing and inspection program for all of its electric facilities, with
each such facility to be inspected at least every five years. The additional
testing and inspection required by the Order would cause Central Hudson to incur
incremental expenses. Central Hudson currently tests and inspects its facilities
in accordance with good utility practice and the costs associated with such
testing and inspection are reflected in Central Hudson's electric delivery
rates. The Order may limit the ability of a utility (such as Central Hudson) to
recover additional costs imposed by the Order through its electric delivery
rates. Central Hudson is currently developing estimates of the incremental
costs, and neither Energy Group nor Central Hudson can presently estimate the
impact of the Order on their respective financial conditions, results of
operations, or cash flows.

      On February 4, 2005, Central Hudson and several other New York State
utilities filed a Petition for Rehearing and clarification with the PSC seeking
to modify portions of the Order, including those that deal with the required
testing schedule and the authority of the PSC to change existing rate plans.
Central Hudson cannot predict what action the PSC will take with respect to this
petition.


                                    - 100 -
<PAGE>

NOTE 3 - INCOME TAX

      Energy Group and its subsidiaries file a consolidated federal and New York
State income tax return. The competitive business subsidiaries also file state
income tax returns in those states in which they conduct business.

      In 2000, New York State law was changed such that Central Hudson and other
New York State utilities became subject to an income-based state income tax. The
tax law repealed the three-quarter percent, or 0.75%, tax on gross earnings and
the excess dividends tax under Section 186 of the New York State Tax Law and
replaced them with an income-based tax under Article 9-A of the New York State
Tax Law. The Article 9-A state income tax obligation is recovered from Central
Hudson customers as a revenue tax, and this treatment will continue until such
time that the PSC includes this obligation in the base rates of Central Hudson
in the same manner as Central Hudson's federal income tax obligation is already
included.

      See Note 2 - "Regulatory Matters" under the caption "Summary of Regulatory
Assets and Liabilities" for additional information regarding Energy Group's and
its subsidiaries' income taxes.

Components of Income Tax

      The following is a summary of the components of state and federal income
taxes for Energy Group as reported in its Consolidated Statement of Income:

                                                2004        2003         2002
                                              --------    --------     --------
                                                       (In Thousands)
Federal income tax .......................    $  1,788    $ (3,533)    $   (315)
State income tax ("SIT") .................       3,010        (129)      (3,097)
Federal income tax from
    discontinued operations ..............          --          --        2,939
State income tax from
    discontinued operations ..............          --          --          923
Deferred federal income tax ..............      24,228      30,628       22,474
Deferred state income tax ................       2,230       3,469        3,232
                                              --------    --------     --------

  Total income tax .......................    $ 31,256    $ 30,435     $ 26,156
                                              ========    ========     ========


                                    - 101 -
<PAGE>

Reconciliation: The following is a reconciliation between the amount of federal
income tax computed on income before taxes at the statutory rate and the amount
reported in the Energy Group Consolidated Statement of Income:

                                              2004         2003         2002
                                            --------     --------     --------
                                                      (In Thousands)

Net income from continuing operations ...   $ 42,423     $ 43,985     $ 36,453
Federal income tax ......................      1,788       (3,533)        (315)
SIT .....................................      3,010         (129)      (3,097)
Deferred federal income tax .............     24,228       30,628       22,474
Deferred state income tax ...............      2,230        3,469        3,232
                                            --------     --------     --------
  Income before taxes ...................   $ 73,679     $ 74,420     $ 58,747
                                            ========     ========     ========

Computed federal tax @ 35%
 statutory rate .........................   $ 25,788     $ 26,047     $ 20,561
SIT net of federal tax benefit ..........      3,405        2,171           88
Depreciation flow through ...............      3,173        3,736        2,907
Other ...................................     (1,110)      (1,519)      (1,262)
                                            --------     --------     --------
  Total income tax ......................   $ 31,256     $ 30,435     $ 22,294
                                            ========     ========     ========

Effective tax rate - federal ............       35.3%        36.4%        37.7%
Effective tax rate - state ..............        7.1%         4.5%         0.2%
                                            --------     --------     --------
Effective tax rate - combined ...........       42.4%        40.9%        37.9%
                                            ========     ========     ========


                                    - 102 -
<PAGE>

      The following is a summary of the components of deferred taxes at December
31, 2004, and December 31, 2003, as reported in Energy Group's Consolidated
Balance Sheet:

                                                             2004         2003
                                                           --------     --------
Accumulated Deferred Income                                    (In Thousands)
  Tax Assets:
    Customer benefit fund ............................     $     --     $ 43,332
    Future tax benefits on investment
      tax credit basis difference ....................        1,600        1,794
    Unbilled revenues ................................       11,981        8,541
    Carrying charge - customer benefit
      fund ...........................................       12,303       10,893
    OPEB expense .....................................        7,137        4,092
    Other ............................................       31,727       19,900
                                                           --------     --------
Accumulated Deferred Income
  Tax Assets .........................................     $ 64,748     $ 88,552
                                                           --------     --------
Accumulated Deferred Income
  Tax Liabilities:
    Tax depreciation .................................     $102,385     $ 92,241
    Accumulated deferred investment
      tax credit .....................................        2,971        3,332
    Future revenues - recovery of plant
      basis differences ..............................        5,730        5,703
Pension expense ......................................       32,432       39,062
  Other ..............................................       32,551       44,262
                                                           --------     --------
Accumulated Deferred Income
  Tax Liabilities ....................................     $176,069     $184,600
                                                           --------     --------
Net Accumulated Deferred Income
  Tax Liability ......................................     $111,321     $ 96,048
                                                           ========     ========

      The following is a summary of the components of state and federal income
taxes for Central Hudson as reported in its Consolidated Statement of Income:

                                                2004        2003         2002
                                              --------    --------     --------
                                                        (In Thousands)
Federal income tax .......................    $  1,855    $ (6,538)    $ (2,970)
SIT ......................................       2,502        (650)      (1,046)
Deferred federal income tax ..............      22,179      30,700       22,474
Deferred state income tax ................       1,890       3,469        3,232
                                              --------    --------     --------
  Total income tax .......................    $ 28,426    $ 26,981     $ 21,690
                                              ========    ========     ========


                                    - 103 -
<PAGE>

Reconciliation: The following is a reconciliation between the amount of federal
income tax computed on income before taxes at the statutory rate and the amount
reported in Central Hudson's Consolidated Statement of Income:

                                            2004          2003          2002
                                          --------      --------      --------
                                                     (In Thousands)

Net income from continuing operations     $ 38,648      $ 38,875      $ 32,524
Federal income tax ...................       1,855        (6,538)       (2,970)
SIT ..................................       2,502          (650)       (1,046)
Deferred federal income tax ..........      22,179        30,700        22,474
Deferred state income tax ............       1,890         3,469         3,232
                                          --------      --------      --------
  Income before taxes ................    $ 67,074      $ 65,856      $ 54,214
                                          ========      ========      ========

Computed federal tax @ 35%
 statutory rate ......................    $ 23,476      $ 23,050      $ 18,975
SIT net of federal tax benefit .......       2,855         1,832         1,421
Depreciation flow through ............       3,173         3,736         2,907
Other ................................      (1,078)       (1,637)       (1,613)
                                          --------      --------      --------
  Total income tax ...................    $ 28,426      $ 26,981      $ 21,690
                                          ========      ========      ========

Effective tax rate - federal .........        35.8%         36.7%         36.0%
Effective tax rate - state ...........         6.6%          4.3%          4.0%
                                          --------      --------      --------
Effective tax rate - combined ........        42.4%         41.0%         40.0%
                                          ========      ========      ========


                                    - 104 -
<PAGE>

      The following is a summary of the components of deferred taxes at December
31, 2004, and December 31, 2003, as reported in Central Hudson's Consolidated
Balance Sheet:

                                                             2004         2003
                                                           --------     --------
Accumulated Deferred Income                                    (In Thousands)
  Tax Assets:
    Customer benefit fund ............................     $     --     $ 43,332
    Future tax benefits on investment
      tax credit basis difference ....................        1,600        1,794
    Unbilled revenues ................................       11,981        8,541
    Carrying charge - customer
      benefit fund ...................................       12,303       10,893
    OPEB Expense .....................................        7,137        4,092
    Other ............................................       29,411       19,900
                                                           --------     --------
Accumulated Deferred Income
  Tax Assets .........................................     $ 62,432     $ 88,552
                                                           --------     --------
Accumulated Deferred Income
  Tax Liabilities:
    Tax depreciation .................................     $ 99,479     $ 92,241
    Accumulated deferred investment
      tax credit .....................................        2,971        3,332
    Future revenues - recovery of plant
      basis differences ..............................        5,730        5,703
Pension expense ......................................       32,432       39,062
Other ................................................       28,824       42,334
                                                           --------     --------
Accumulated Deferred Income
  Tax Liabilities ....................................     $169,436     $182,672
                                                           --------     --------
Net Accumulated Deferred Income
  Tax Liability ......................................     $107,004     $ 94,120
                                                           ========     ========

NOTE 4 - ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

      In November 2004, CHEC acquired a 12% interest for $2.7 million of
preferred units issued by Cornhusker Energy Lexington Holdings, LLC ("Cornhusker
Holdings") and also agreed to acquire $8 million of subordinated notes issued by
Cornhusker Holdings. Cornhusker Holdings is the owner of Cornhusker Energy
Lexington, LLC, a fuel ethanol production facility to be located in Nebraska
that is expected to be completed in the fourth quarter of 2005. This investment
will be accounted for under the equity method.

      In January 2003, Griffith acquired certain assets of two companies for
$7.5 million. The amount charged to intangible assets (including goodwill) was
$6.9 million, of which $3.7 million was allocated to goodwill.

      On October 31, 2003, SCASCO completed the sale of certain assets and
liabilities related to its natural gas business unit. Energy Group recognized an
after-tax gain on the sale of approximately $181,000. This disposition is not
expected to materially impact the future financial condition, results of
operations, or cash flows of Energy Group or its subsidiaries.

      On December 21, 2001, CH Services entered into an agreement to sell all of
its stock ownership interest in CH Resources and its subsidiaries, CH Syracuse
and CH Niagara, to WPS Power Development, Inc., a Wisconsin corporation. The
sale closed on May 31, 2002.


                                    - 105 -
<PAGE>

      The CH Resources sale was accounted for in accordance with APB Opinion No.
30, entitled Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, and EITF Abstract 85-36, entitled Discontinued
Operations with Expected Gain and Interim Operating Losses. CH Resources'
principal assets at the sale closing date were long-term leasehold interests in
three electric generating facilities and ownership interests in various fuel,
spare parts, and other inventories, consisting of aggregate fixed assets of
$32.3 million, inventory of $3.2 million, and other assets of $7.1 million. The
sale proceeds of $58.4 million resulted in a gain of $7 million (net of income
taxes of $5.2 million). A net operating loss of $2.2 million (net of an income
tax benefit of $1.4 million) was recorded in 2002. Therefore, the net income
from discontinued operations in 2002 was $4.8 million, or $0.29 per share.

      In December 2001, CH Resources, in accordance with the accounting
pronouncements noted above, deferred a net operating loss of $293,000 for offset
against the expected gain on the date of disposal. This operating loss is
included in the $2.2 million loss from discontinued operations recognized in
2002.

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

      Goodwill, customer lists, and covenants not to compete associated with
acquisitions are included in intangible assets. The balances reflected on Energy
Group's Consolidated Balance Sheet at December 31, 2004, and 2003 for "Goodwill"
and "Other intangible assets - net" relate to the competitive business
subsidiaries, specifically the operations of CHEC's fuel oil distribution
subsidiaries. Goodwill represents the excess of cost over the fair value of the
net tangible and identifiable intangible assets of businesses acquired as of the
date of acquisition. In July 2001, the FASB issued Statement No. 142, entitled
Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 142 requires that
goodwill and other intangible assets that have indefinite useful lives no longer
be amortized against earnings, but instead be periodically reviewed for
impairment. Upon implementation of SFAS 142, and annually thereafter, the
competitive business subsidiaries tested the intangible assets remaining on the
balance sheet for impairment and confirmed that no impairment existed.
Impairment testing compares fair value of the reporting units (Griffith and
SCASCO) to the carrying amount. Fair value is estimated using a multiple of
earnings measurement.

      In accordance with SFAS 142, intangible assets that have finite useful
lives continue to be amortized over their useful lives. The estimated useful
life for customer lists is 15 years, which is believed to be appropriate in view
of currently experienced customer turnover. However, if customer turnover were
to substantially increase, a shorter amortization period would be used,
resulting in an increase in amortization expense. For example, if a 10-year
amortization period were used, annual amortization expense would increase by
approximately $1.3 million. The useful life of a covenant not to compete is
based on the term of each covenant, generally between two to ten years.


                                    - 106 -
<PAGE>

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

                           December 31, 2004             December 31, 2003
                           -----------------             -----------------
                      Gross Carrying  Accumulated   Gross Carrying  Accumulated
                           Amount     Amortization       Amount     Amortization
                      --------------  ------------  --------------  ------------

Customer Lists .....      $38,371        $10,170        $38,371        $ 7,609
Covenants Not To
Compete ............        1,439            860          1,439            683
                          -------        -------        -------        -------
Total Amortizable
Intangibles ........      $39,810        $11,030        $39,810        $ 8,292
                          =======        =======        =======        =======

      Amortization expense was $2.7 million for the year ended December 31,
2004, and $2.9 million for each of the years ended December 31, 2003, and 2002.
The estimated amortization expense for each of the next five years, assuming no
new acquisitions, will be approximately $2.7 million.

      Goodwill is not subject to amortization. The carrying amount for goodwill
was $50.5 million, as of December 31, 2004, and 2003. During 2002, the
competitive business subsidiaries recognized an impairment loss on goodwill of
$92,000 associated with assets purchased from an energy services company
specializing in energy efficiency projects; this loss is included in "Other
expenses of operation - competitive business subsidiaries" on Energy Group's
Consolidated Statement of Income. The impairment was caused by negative cash
flows and the loss of key employees relating to the assets acquired. The
competitive business subsidiaries retested the intangible balance at December
31, 2004, and found no further impairment.

NOTE 6 - SHORT-TERM BORROWING ARRANGEMENTS

      In November 2003, Energy Group entered into a $75 million revolving credit
agreement with several commercial banks. The credit facility and available cash
are currently earmarked for the acquisition of energy-related assets. Energy
Group also has a $7.7 million letter of credit with a commercial bank. At
December 31, 2004, there were no loans outstanding under either of these
agreements.

      In June 2004, pursuant to PSC authorization, Central Hudson entered into a
five-year $75 million revolving credit facility with several commercial banks
through June 30, 2009 ("Borrowing Agreement"). Compensating balances are not
required under the Borrowing Agreement. In addition, Central Hudson maintains a
committed line of credit of $1 million with a regional bank. There were no
outstanding loans under the Borrowing Agreement or the line of credit at
December 31, 2004, or 2003. In order to diversify its sources and minimize its
costs of short-term borrowing, Central Hudson has arranged uncommitted lines of
credit with several commercial banks. At December 31, 2004, Central Hudson had
$12 million in short-term debt outstanding and had cash and cash equivalents,
including investments in short-term securities, of $8.2 million. The PSC limits
the amount Central Hudson may have outstanding, at any time, under all of its
short-term borrowing arrangements to $77 million in the aggregate.


                                    - 107 -
<PAGE>

      For years ended December 31, 2004, and 2003, Central Hudson had an average
daily amount of short-term debt outstanding of $9.9 million and $7.2 million,
respectively. The weighted-average interest rate for short-term borrowing was
1.73% for 2004 and 1.41% for 2003.

      The competitive business subsidiaries have a line of credit totaling $15
million. There were no borrowings against this line of credit at December 31,
2004.

      At December 31, 2004, Energy Group had no short-term debt outstanding
other than the above-referenced $12 million in short-term debt of Central
Hudson. Cash and cash equivalents for Energy Group, including investments in
short-term securities, were $119.1 million at December 31, 2004.

NOTE 7 - CAPITALIZATION - COMMON AND PREFERRED STOCK

For a schedule of activity related to common stock, paid-in capital, and capital
stock, see the Consolidated Statements of Shareholders' Equity for Energy Group
and Central Hudson.

Cumulative Preferred Stock: Central Hudson, $100 par value; 1,200,000 shares
authorized:

                                                          Shares Outstanding
                                           Redemption     ------------------
                                             Price           December 31,
                                Series      12/31/04      2004         2003
                                ------      --------      ----         ----
Not Subject to Mandatory
 Redemption:
                                4 1/2%      $107.00       70,300       70,300
                                 4.75%       106.75       20,000       20,000
                                 4.35%       102.00       60,000       60,000
                                 4.96%       101.00       60,000       60,000
                                                         -------      -------
                                                         210,300      210,300
                                                         -------      -------

      Capital Stock Expense: Expenses incurred on issuance of capital stock are
accumulated and reported as a reduction in common stock equity. These expenses
are generally not amortized; however, as directed by the PSC, certain issuance
and redemption costs and unamortized expenses associated with certain issues of
preferred stock that were redeemed have been deferred and are being amortized
over the remaining lives of the issues subject to mandatory redemptions.

      Repurchase Program: On July 25, 2002, the Board of Directors of Energy
Group authorized a Common Stock Repurchase Program ("Repurchase Program") to
repurchase up to 4 million shares, or approximately 25% of its outstanding
common stock, over the five years beginning August 1, 2002. The Board of
Directors had targeted 800,000 shares for repurchase in the first year of the
Repurchase Program, but had authorized the repurchase of up to 1.2 million
shares during that first year. Between August 1, 2002, and December 31, 2003,
the number of shares repurchased under the Repurchase Program was 600,087 at a
cost of $27.5 million. No shares were repurchased during the twelve months ended
December 31, 2004. Energy Group intends to set repurchase targets, if any, each
year based on circumstances then prevailing. Repurchases have been suspended
while Energy Group assesses opportunities to redeploy its cash reserves in
regulated and competitive energy-related businesses. Energy Group reserves the
right to modify, suspend, or terminate the Repurchase Program at any time
without notice.


                                    - 108 -
<PAGE>

NOTE 8 - CAPITALIZATION - LONG-TERM DEBT

      Details of Central Hudson's long-term debt are as follows:

          Series                  Maturity Date             December 31,
          ------                  -------------      -------------------------
                                                       2004             2003
                                                     ---------       ---------
                                                          (In Thousands)
Promissory Notes:
1992 Series A (7.85%)(b) (c)      July 2, 2004       $      --       $  15,000
2002 Series D (5.87%)(b)          Mar. 28, 2007         33,000          33,000
1999 Series C (6.00%)(b)          Jan. 15, 2009         20,000          20,000
2003 Series D (4.33%)(b)          Sep. 23, 2010         24,000          24,000
2002 Series D (6.64%)(b)          Mar. 28, 2012         36,000          36,000
2004 Series D (4.73%)(b)          Feb. 27, 2014          7,000              --
2004 Series E (4.80%)(b)          Nov. 5, 2014           7,000              --
2004 Series E (5.05%)(b)          Nov. 4, 2019          27,000              --
1999 Series A (5.45%)(a)          Aug. 1, 2027          33,400          33,400
1999 Series C (Var. rate)(a)      Aug. 1, 2028          41,150          41,150
1999 Series D (Var. rate)(a)      Aug. 1, 2028          41,000          41,000
1998 Series A (3.00%)(a)          Dec. 1, 2028          16,700          16,700
1999 Series B (Var. rate)(a)      July 1, 2034          33,700          33,700
                                                     ---------       ---------
                                                       319,950         293,950

Unamortized Discount on Debt                               (67)            (70)
                                                     ---------       ---------
                                                     $ 319,883       $ 293,880
Less: Current Portion                                       --         (15,000)
                                                     ---------       ---------
                                  Total              $ 319,883       $ 278,880
                                                     =========       =========

(a)   Promissory Notes issued in connection with the sale by NYSERDA of
      tax-exempt pollution control revenue bonds.

(b)   Issued under Central Hudson's medium-term note program, described below.

(c)   Redeemed in July 2004 using available cash and short-term borrowings.

      In October 2001, the PSC approved the issuance by Central Hudson prior to
June 30, 2004, of up to $100 million of unsecured medium-term notes. In March
2002, $33 million of five-year, Series D Notes were issued at 5.87% and $36
million of ten-year, Series D Notes were issued at 6.64%. In September 2003, $24
million of Series D Notes were issued at 4.33% under this program resulting in a
total amount issued through that date of $93 million. In February 2004, $7
million of ten-year Series D Notes were issued at 4.73%, completing the $100
million total authorized by the PSC.

      In April 2004, the PSC approved the issuance by Central Hudson of up to
$85 million of unsecured debt securities prior to December 31, 2006. In November
2004, $27 million of fifteen-year, Series E Notes were issued at 5.05% and $7
million of ten-year, Series E Notes were issued at 4.80%. As a result, the
amount remaining under the current PSC authorization is $51 million.

      The competitive business subsidiaries had no third-party long-term debt
outstanding as of December 31, 2004, or 2003. The only debt outstanding at CHEC
is amounts borrowed from Energy Group.


                                    - 109 -
<PAGE>

Long-Term Debt Maturities

      See Note 13 - "Financial Instruments" for a schedule of long-term debt
maturing or to be redeemed during the next five years and thereafter.

NYSERDA

      On December 1, 2003, Central Hudson completed the reoffering of its $16.7
million promissory notes issued in conjunction with the sale of tax-exempt
pollution control revenue bonds by New York State Energy Research and
Development Authority ("NYSERDA"). The new rate, which will be in place for five
years, is 3%, down from the previous rate of 4.2%.

      Central Hudson's 1999 NYSERDA Bonds Series B, C, and D are unsecured,
variable rate bonds and are insured as to payment of principal and interest as
they become due by a municipal bond insurance policy issued by AMBAC Assurance
Corporation. In its rate orders, the PSC has authorized deferred accounting for
the interest costs of these bonds. This authorization provides for full recovery
of the actual interest costs supporting utility operations. Interest costs
supporting utility operations represent approximately 94% of the total costs.
The deferred balances under this accounting were $4.8 million and $3.3 million
at December 31, 2004, and 2003, respectively, and are included in Regulatory
Liabilities in Energy Group's and Central Hudson's Consolidated Balance Sheets.
The deferred balances at June 30, 2001, were eliminated in accordance with a
Rate Order from the PSC. The ongoing deferred balances are to be addressed in
future rate cases. To further mitigate the risk of rising interest rates,
Central Hudson purchased derivative instruments known as interest rate caps to
limit its exposure to a defined 4.5% interest rate ceiling for the period from
April 1, 2004, to March 31, 2006.

Debt Expense

      Expenses incurred in connection with Central Hudson's debt issuance and
any discount or premium on debt are deferred and amortized over the lives of the
related issues. Expenses incurred on debt redemptions prior to maturity have
been deferred and are usually amortized over the shorter of the remaining lives
of the related extinguished issues or the new issues, as directed by the PSC.

Debt Covenants

      Energy Group's $75 million credit facility requires that Energy Group
maintains certain financial ratios and contains other restrictive covenants.
Currently, Energy Group is in compliance with all of its debt covenants.

      Central Hudson's $75 million credit facility requires that Central Hudson
maintains certain financial ratios and contains other restrictive covenants.
Currently, Central Hudson is in compliance with all of its debt covenants.

      The only debt outstanding at CHEC is amounts borrowed from Energy Group.
As of December 31, 2004, there were no amounts outstanding on CHEC's line of
credit with its commercial bank and it is in compliance with all of its debt
covenants.


                                    - 110 -
<PAGE>

NOTE 9 - POST-EMPLOYMENT BENEFITS

Pension Benefits

      Central Hudson has a non-contributory Retirement Income Plan ("Retirement
Plan") covering substantially all of its employees. The Retirement Plan is a
defined benefit plan which provides pension benefits that are based on an
employee's compensation and years of service. It has been Central Hudson's
practice to provide periodic updates to the benefit formula stated in the
Retirement Plan.

      Central Hudson contributed $10 million in 2003 and $32 million in 2002 to
the Trust Fund for the Retirement Plan ("Trust Fund") to reduce the difference
between the Accumulated Benefit Obligation ("ABO") for the Retirement Plan and
the market value of related pension assets. No contributions were made in 2004.
In accordance with SFAS 87, Central Hudson was required to show minimum pension
liability balances at December 31, 2004, and 2003 of $18.5 million and $9.8
million, respectively, for the difference between the ABO and the market value
of the pension assets. These balances include consideration for non-qualified
executive plans. The following reflects the impact of the recording of SFAS 87
adjustments on the December 31, 2004, and 2003 balance sheets of Energy Group
and Central Hudson.

                                                              December 31,
                                                             (In thousands)
                                                           2004          2003
                                                        ---------     ---------
Prefunded (accrued) pension costs prior to SFAS 87
  adjustment .......................................    $  81,362     $  98,307
Additional liability required ......................      (99,832)     (108,082)
                                                        ---------     ---------
Accrued pension liability per SFAS 87 ..............    $ (18,470)    $  (9,775)
                                                        =========     =========

Regulatory assets - pension plan ...................    $  77,541     $  83,635
Intangible asset - pension plan ....................       22,291        24,447
                                                        ---------     ---------
Total SFAS 87 offset to additional liability .......    $  99,832     $ 108,082
                                                        =========     =========

      The intangible asset recorded represents unrecognized prior service costs
and the recording of the regulatory asset is consistent with the PSC's 1993
Statement of Policy regarding pensions and other post-retirement benefits. Under
this policy, differences between pension expense and rate allowances covering
these costs are deferred for future recovery or return to customers with
carrying charges accrued on cash differences. Central Hudson's $10 million and
$32 million contributions to the Retirement Plan in 2003 and 2002, respectively,
are subject to such carrying charges.

      It should be noted that the valuation of the ABO was determined as of the
measurement date of September 30, 2004, using a 5.75% discount rate (as
determined with reference to interest rates then applicable to domestic
long-term corporate bonds rated "Aa" by Moody's Investors Services, Inc.) and
that a 0.25% change in the discount rate would affect the projection of ABO by
approximately $9.5 million. The discount rate on the prior measurement date of
September 30, 2003, was 6%.

      Declines in the market value of the Trust Fund's investment portfolio and
a reduction in the discount rate used to determine the ABO have resulted in a
significant increase in annual pension expense as compared to the level upon
which current rates were set. This difference is deferred under the PSC's policy
for recovery of pension expense and post-retirement

                                    - 111 -
<PAGE>

benefits. In its 2004 Joint Proposal with the PSC, effective July 1, 2004,
Central Hudson was authorized to offset deferred balances for pension expense
and post-retirement benefits expense for the electric department only with the
Customer Benefit Fund (see Note 2 - "Regulatory Matters" under the caption "Rate
Proceedings - Electric and Natural Gas"). However, this deferral, which Central
Hudson anticipates will continue in the future, could result in the accumulation
of a significant regulatory asset which Central Hudson will seek to recover from
customers as provided for under the PSC's policy. This balance was $11.1 million
and $40.6 million at December 31, 2004, and 2003, respectively, and is included
in Regulatory Assets - Pension Plan on the Consolidated Balance Sheets of Energy
Group and Central Hudson.

      Central Hudson accounts for pension activity in accordance with
PSC-prescribed provisions which, among other things, require ten-year
amortization of actuarial gains and losses.

      In addition to the Retirement Plan, Central Hudson's and Energy Group's
executives are covered under a non-qualified Directors and Executives Deferred
Compensation Plan and a non-qualified Supplementary Retirement Plan. Central
Hudson also sponsors a non-qualified Retirement Benefit Restoration Plan.

Estimates of Long-Run Rates of Return

      An equal weighted average of three methods was used to estimate the
long-run expected returns of each equity asset class in the Trust Fund. The
three methods were (i) the building block method, based on the Capital Asset
Pricing Model, which states that the return of an asset class is a function of
the risk-free rate and a risk-based return premium; (ii) the historical return
method, which uses the historical average return for each market index as a
proxy for future average returns; and (iii) the economic growth method, which is
based on long-run averages of estimates for economic growth, dividend yield, and
expected inflation.

      For the fixed income asset class, three methods were used: the historical
return and building block methods, both described above, and the market
observable rate of return, represented by the average yield to maturity of
representative market indexes.

      For the real estate asset class, the historical return and building block
method, described above, were used to estimate long-run expected returns.

Retirement Plan Policy and Strategy

      Central Hudson's Retirement Plan seeks to match the long-term nature of
its funding obligations with investment objectives for long-term growth and
income. Retirement Plan assets are invested in accordance with sound investment
practices that emphasize long-term investment fundamentals. The Retirement Plan
recognizes that assets are exposed to risk and the market value of assets may
vary from year to year. Potential short-term volatility, mitigated through a
well-diversified portfolio structure, is acceptable in accordance with the
objective of capital appreciation over the long-term.

      The Retirement Plan of Central Hudson seeks to earn a return commensurate
with the risk of its underlying assets. The benchmark index is comprised of 33%
Standard & Poor's 500 Stock Index, 12% Russell 2000 Stock Index, 15% Morgan
Stanley Capital International Europe, Australasia, and Far East International
Stock Index, 5% NCREIF Real Estate Composite Index,


                                    - 112 -
<PAGE>

and 35% Merrill Lynch Domestic Master Bond Index. The Retirement Plan seeks to
exceed the average annual return of this benchmark on a risk-adjusted basis over
a three-to-five-year rolling time period and a full market cycle. It is
understood that there can be no guarantees about the attainment of the
Retirement Plan's return objectives.

      The asset allocation strategy employed in the Retirement Plan reflects
Central Hudson's return objectives and risk tolerance. Asset allocation targets,
expressed as a percentage of the market value of the Retirement Plan, are
summarized in the table below:

--------------------------------------------------------------------------------
                                                            Target
Asset Class                                     Minimum     Average      Maximum
--------------------------------------------------------------------------------
Domestic Large/Medium Capitalization Stocks     28%         33%          38%
--------------------------------------------------------------------------------
Domestic Small/Medium Capitalization Stocks     9%          12%          15%
--------------------------------------------------------------------------------
International Equity                            10%         15%          20%
--------------------------------------------------------------------------------
Alternate Investment                            0%          5%           7%
--------------------------------------------------------------------------------
Fixed Income                                    30%         35%          40%
--------------------------------------------------------------------------------
Cash and Cash Equivalents                       0%          0%           10%
--------------------------------------------------------------------------------

      Due to the dynamic nature of market value fluctuations, Retirement Plan
assets will require rebalancing from time to time to maintain the target asset
allocation. The Retirement Plan recognizes the importance of maintaining a
long-term strategic allocation and does not intend any tactical asset allocation
or market timing asset allocation shifts.

      The Retirement Plan utilizes multiple managers and funds of complementary
investment styles and asset classes to invest plan assets.

Other Post-Retirement Benefits

      Central Hudson provides certain health care and life insurance benefits
for retired employees through its post-retirement benefit plans. Substantially
all of Central Hudson's employees may become eligible for these benefits if they
reach retirement age while employed by Central Hudson. These and similar
benefits for active employees are provided through insurance companies whose
premiums are based on the benefits paid during the year. In order to reduce the
total costs of these benefits, Central Hudson requires employees who retired on
or after October 1, 1994, to contribute toward the cost of these benefits.

      Central Hudson is fully recovering its net periodic post-retirement costs
in accordance with PSC guidelines. Under these guidelines, the difference
between the amounts of post-retirement benefits recoverable in rates and the
amounts of post-retirement benefits determined by an actuarial consultant under
SFAS 106, entitled Employers Accounting for Post-retirement Benefits Other Than
Pensions, is deferred as either a regulatory asset or liability, as appropriate.

      The effect of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act") was reflected in 2004 assuming Central
Hudson will continue to provide a prescription drug benefit to retirees that is
at least actuarially equivalent to Medicare Part D and that Central Hudson will
receive the federal subsidy.

      The benefit obligation as of December 31, 2003, decreased by $12 million
due to the effect of the Act. The net periodic benefit cost for 2004 decreased
by $2.2 million.


                                    - 113 -
<PAGE>

      Central Hudson, Griffith, and SCASCO each maintain a 401(k) retirement
plan for their employees, one of which contains a discretionary profit-sharing
benefit. Each plan provides for employee tax-deferred salary deductions for
participating employees and their respective employer matches contributions made
by participating employees. The matching benefit varies by employer and employee
group. For Central Hudson, the cost of its matching contributions was $1.4
million for 2004, $1.2 million for 2003, and $1.1 million for 2002. For Griffith
and SCASCO, the cost of their combined matching contributions was $643,000 in
2004, $670,000 in 2003, and $743,000 in 2002. Profit sharing contributions made
by Griffith were $490,000, $499,000, and $463,000 for 2004, 2003, and 2002,
respectively.


                                    - 114 -
<PAGE>

      As of December 31, 2004, the only post-retirement benefit plans provided
to employees of any of the competitive business subsidiaries were provided under
the 401(k) retirement plans.

      Reconciliations of Central Hudson's pension and other post-retirement
plans' benefit obligations, plan assets, and funded status, as well as the
components of net periodic pension cost and the weighted average assumptions
(excluding competitive business subsidiary employees not covered by these plans)
are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                          Pension Benefits               Other Benefits
-------------------------------------------------------------------------------------------------------------
                                                         2004           2003           2004           2003
-------------------------------------------------------------------------------------------------------------
                                                           (In Thousands)                (In Thousands)
-------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>
          Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year     $ 362,443      $ 314,467      $ 155,938      $ 111,177
                                     Service cost         6,957          5,942          3,314          2,860
                                    Interest cost        21,511         20,961          9,009          8,643
                        Participant contributions            --             --            333            259
                                  Plan amendments            --          6,017         (1,515)            --
                                    Benefits paid       (20,940)       (18,342)        (6,276)        (5,099)
                                   Actuarial loss        16,882         33,398          8,116         38,098
-------------------------------------------------------------------------------------------------------------
      Projected Benefit Obligation at End of Year     $ 386,853      $ 362,443      $ 168,919      $ 155,938
-------------------------------------------------------------------------------------------------------------
                           Change in Plan Assets:
   Fair value of plan assets at beginning of year     $ 316,717      $ 287,354      $  70,323      $  58,833
                     Actual return on plan assets        36,132         39,433          5,680         10,950
                           Employer contributions           471         10,289          6,989          5,700
                        Participant contributions            --             --            333            259
                                    Benefits paid       (20,940)       (18,342)        (6,276)        (5,099)
                          Administrative expenses        (2,329)        (2,017)          (349)          (320)
-------------------------------------------------------------------------------------------------------------
         Fair Value of Plan Assets at end of Year     $ 330,051      $ 316,717      $  76,700      $  70,323
-------------------------------------------------------------------------------------------------------------
</TABLE>


                                    - 115 -
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                Pension Benefits                 Other Benefits
--------------------------------------------------------------------------------------------------------------------
                     (In Thousands)                           2004            2003            2004            2003
--------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>             <C>
Reconciliation of Funded Status:
  Funded Status                                            $ (56,803)      $ (45,727)      $ (92,219)      $ (85,616)
  Unrecognized actuarial loss                                116,039         119,755          57,108          52,042
  Unrecognized transition obligation                              --              --          20,513          23,079
  Unamortized prior service cost                              22,126          24,279          (1,433)            (66)
--------------------------------------------------------------------------------------------------------------------
Accrued Benefit Cost                                       $  81,362       $  98,307       $ (16,031)      $ (10,561)
--------------------------------------------------------------------------------------------------------------------
Amounts Recognized on Consolidated Balance Sheet:
  Prepaid benefit cost                                     $      --       $      --       $   3,112       $   6,147
  Accrued benefit liability                                  (18,470)         (9,775)        (19,143)        (16,708)
  Intangible asset                                            22,291          24,447              --              --
  Regulatory asset                                            77,541          83,635              --              --
--------------------------------------------------------------------------------------------------------------------
Net Amount Recognized at End of Year                       $  81,362       $  98,307       $ (16,031)      $ (10,561)
Change in Regulatory Assets attributable to changes in
  additional minimum liability recognition                    (6,094)         83,635              --              --
--------------------------------------------------------------------------------------------------------------------
Components of Net Periodic Benefit Cost:
  Service cost                                             $   6,957       $   5,942       $   3,314       $   2,860
  Interest cost                                               21,511          20,961           9,009           8,643
  Expected return on plan assets                             (22,041)        (21,410)         (5,183)         (4,596)
  Amortization of prior service cost                           2,153           1,706            (147)             (9)
  Amortization of transitional (asset) or obligation              --              --           2,566           2,566
  Recognized actuarial loss or (gain)                          8,836           8,780           2,934           2,693
--------------------------------------------------------------------------------------------------------------------
Net Periodic Benefit Cost                                  $  17,416       $  15,979       $  12,493       $  12,157
--------------------------------------------------------------------------------------------------------------------
Weighted-average assumptions used to determine
benefit obligations at September 30:
  Discount rate                                                 5.75%           6.00%           5.75%           6.00%
  Rate of compensation increase                                 4.50%           4.50%           4.50%           4.50%
Weighted-average assumptions used to determine net
periodic benefit cost for years ended September 30:
  Discount rate                                                 6.00%           6.75%           6.00%           6.75%
  Expected long-term rate of return on plan assets              8.00%           8.50%           7.80%           8.25%
  Rate of compensation increase                                 4.50%           4.50%           4.50%           4.50%
--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                    - 116 -
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                Pension Benefits           Other Benefits
--------------------------------------------------------------------------------------------------------------
                     (In Thousands)                             2004         2003         2004         2003
--------------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>          <C>
Assumed health care cost trend rates at September 30:
  Health care cost trend rate assumed for next year                 --           --        11.00%       11.50%
  Rate to which the cost trend rate is assumed to decline
  (the ultimate trend rate)                                         --           --         5.00%        5.00%
  Year that the rate reaches the ultimate trend rate                --           --         2013         2013
--------------------------------------------------------------------------------------------------------------
Pension plans with accumulated benefit obligations in
excess of plan assets:
  Projected benefit obligation                                $386,853     $362,443     $     --     $     --
  Accumulated benefit obligation                               348,521      326,413           --           --
  Fair Value of plan assets                                    330,051      316,717           --           --
--------------------------------------------------------------------------------------------------------------
</TABLE>

      The accumulated benefit obligation for defined benefit pension plans was
$348.5 million and $326.4 million at December 31, 2004, and December 31, 2003,
respectively.

      Central Hudson's pension and other post-retirement plans' weighted average
asset allocations at December 31, 2004, and 2003 by asset category are as
follows:

--------------------------------------------------------------------------------
                                      Pension Benefits         Other Benefits
--------------------------------------------------------------------------------
                                      2004        2003        2004        2003
--------------------------------------------------------------------------------
              Equity Securities       62.7%       61.6%       62.6%       62.0%
                Debt Securities       30.8%       30.5%       34.8%       35.1%
           Alternate Investment        5.0%        6.7%         --          --
                          Other        1.5%        1.2%        2.6%        2.9%
--------------------------------------------------------------------------------
                         Total:        100%        100%        100%        100%
--------------------------------------------------------------------------------

For the pension plan and other benefit plans (other than the 401(k) retirement
plans), equity securities include no Energy Group common stock at December 31,
2004, and 2003, respectively. Effective January 20, 2004, an Energy Group common
stock investment fund was added as an investment option under the 401(k)
retirement plans.
--------------------------------------------------------------------------------


                                    - 117 -
<PAGE>

      Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A 1% change in assumed health care
cost trend rates would have the following effects:

                                               One Percentage     One Percentage
                                               Point Increase     Point Decrease
                                               --------------     --------------

Effect on total of service
 and interest cost components
 for 2004                                       $  2,149,000       $ (1,695,000)

Effect on year-end 2004
 post-retirement benefit obligation             $ 24,718,000       $(19,948,000)

Estimated Future Benefit Payments: The following benefit payments which reflect
expected future service as appropriate, are expected to be paid.

--------------------------------------------------------------------------------
            Year                    Pension Benefits              Other Benefits
            ----                    ----------------              --------------
                                         ($000)                       ($000)
--------------------------------------------------------------------------------
            2005                        $ 22,871                     $ 6,647
            2006                          23,531                       6,713
            2007                          25,332                       7,478
            2008                          28,097                       8,169
            2009                          30,475                       8,906
        2010 - 2014                      185,649                      54,429
--------------------------------------------------------------------------------

NOTE 10 - EQUITY-BASED COMPENSATION INCENTIVE PLANS

      Energy Group's Long-Term Performance-Based Incentive Plan ("Incentive
Plan"), adopted in 2000 and amended in 2001 and 2003, reserves 500,000 shares of
Energy Group's common stock for awards to be granted under the Incentive Plan.
The Incentive Plan provides for the granting of stock options, stock
appreciation rights, restricted stock awards, performance shares, and
performance units. No participant may be granted total awards in excess of
150,000 shares over the life of the Incentive Plan. Stock options granted to
officers of Energy Group and its subsidiaries are exercisable over a period of
ten years, with 40% of the options vesting after two years and 20% of the
options vesting each year thereafter for the following three years; however,
stock options granted to executives retiring prior to June 30, 2006, are
immediately exercisable upon retirement. Additionally, stock options granted to
non-employee Directors are immediately exercisable.

      The Incentive Plan was amended in the third quarter of 2003. The amendment
allows executives to defer receipt of performance shares and performance units
in accordance with the terms of Energy Group's Directors and Executives Deferred
Compensation Plan. Also, an amendment to the Stock Plan for Outside Directors
provides for shares of stock previously accrued for retired Directors to be paid
in the form of cash and provides that active Directors could elect to transfer
previously accrued shares payable to them to Energy Group's Directors and
Executives Deferred Compensation Plan. In addition, the amendment freezes future
participation and future accruals under the Plan.


                                    - 118 -
<PAGE>

      Effective January 1, 2000, stock options covering 30,300 shares were
granted with an exercise price per share of $31.94. Further, effective January
1, 2001, stock options covering 59,900 shares were granted with an exercise
price per share of $44.06. There were no options granted in 2002. Effective
January 1, 2003, stock options covering a total of 36,900 shares were granted
with an exercise price per share of $48.62. There were no stock options granted
in 2004.

      The fair market value per option of Energy Group stock options granted in
2003 is $6.51. These fair market values were estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:

                                                         2003
                                                         ----

      Risk-free interest rate                            4.40%

      Expected life - in years                             10

      Expected stock volatility                         17.50%

      Dividend yield                                     4.40%

      A summary of the status of stock options awarded to executives and
non-employee Directors of Energy Group under the Incentive Plan as of December
31, 2004, and changes since inception are as follows:

                                                   Weighted
                                                    Average
                                    Stock          Exercise        Remaining
                                   Options           Price      Contractual Life
--------------------------------------------------------------------------------
Outstanding at 12/31/01             89,400         $  39.95        8.66 years
        Granted 1/1/02                  --               --        --
        Exercised                   (3,600)        $  31.94
        Forfeited                     (800)        $  44.06
--------------------------------------------------------------------------------
Outstanding at 12/31/02             85,000         $  40.25        7.70 years
        Granted 1/1/03              36,900         $  48.62        8 years
        Exercised                  (13,740)        $  31.94
        Forfeited                     (800)        $  44.06
--------------------------------------------------------------------------------
Outstanding at 12/31/03            107,360         $  44.16        7.567 years
        Granted 1/1/04                  --               --        --
        Exercised                  (15,960)        $  38.50
        Forfeited                       --               --
--------------------------------------------------------------------------------
Total Outstanding at 12/31/04       91,400         $  45.15        6.75 years
--------------------------------------------------------------------------------


                                    - 119 -
<PAGE>

The following table summarizes information concerning outstanding and
exercisable stock options at December 31, 2004, by exercise price:

                                                     Weighted
                                      Number of       Average      Number of
     Exercise                          Options       Remaining      Options
       Price                         Outstanding   Life in Years  Exercisable
       -----                         -----------   -------------  -----------

      $31.94                             5,640          5.00         4,984
      $44.06                            48,860          6.00        44,924
      $48.62                            36,900          8.00        16,200
                                        ------        ------        ------

          Total                         91,400          6.75        66,108
                                        ------        ------        ------

      A total of 15,960 non-qualified stock options were exercised during the
year ended December 31, 2004. These options had exercise prices of $31.94 and
$44.06 and resulted in recognition of compensation expense that was not
material.

      Effective January 1, 2003, Energy Group adopted the fair value method of
recording equity-based compensation utilizing the "modified prospective"
approach under the provisions of SFAS 123, whereby existing options are expensed
prospectively over their respective vesting periods. Under the fair value
method, all future employee stock option grants and other equity-based
compensation will be expensed over their respective vesting periods based on
their fair value at the date on which the equity-based compensation is granted.
Compensation expense recorded for the year ended December 31, 2004, and pro
forma expense for the years ended December 31, 2003, and 2002, resulting from
the implementation of fair value accounting for stock options was not material.
It should be noted that SFAS 123(R) (see Note 1 - "Summary of Significant
Accounting Policies" under the caption "Equity-Based Compensation") will be
effective for the first interim reporting period that begins after June 15,
2005. It is not expected that the adoption of SFAS 123(R) will significantly
impact the financial condition, results of operations, or cash flow of Energy
Group or its subsidiaries.

      On January 1, 2003, the number of performance shares granted was 14,800,
in aggregate, to executives covered under the Incentive Plan. On January 1,
2004, the number of performance shares granted was 29,300, in aggregate, to
executives covered under the Incentive Plan. Due to the retirement of the former
Chairman in mid-2004, pro-rated shares of 2003 and 2004 grants were awarded to
him in 2004. As of December 31, 2004, the number of these performance shares
that remain outstanding were 9,700 for 2003 grants and 19,800 for 2004 grants.
The ultimate number of shares awarded is based on the performance of Energy
Group's common stock over the three years following the date of the relevant
grant, but shall not exceed 150% of the number of shares granted. Compensation
expense is recorded as performance shares are earned over the three-year life of
the relevant performance share grant prior to this award. Compensation expense
recorded related to performance shares was $250,000, $332,000, and $458,000 for
2004, 2003, and 2002, respectively. Energy Group anticipates less use of stock
options and more use of performance shares in connection with future executive
compensation.

      For additional discussion regarding the dilutive and pro forma effects of
equity-based compensation, see Note 1 - "Summary of Significant Accounting
Policies" under the captions "Earnings Per Share" and "Equity-Based
Compensation."


                                    - 120 -
<PAGE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Electricity Purchase Commitments

      Under federal and New York State laws and regulations, Central Hudson is
required to purchase the electrical output of unregulated cogeneration
facilities which meet certain criteria for Qualifying Facilities ("QFs"), as the
term is defined in the applicable legislation. Purchases are made under
long-term contracts which require payment at rates often higher than those
prevailing in the wholesale market. These costs are currently fully recoverable
through Central Hudson's energy adjustment mechanism, which provides for
recovery from customers of certain costs of fuels used to generate electricity.
Central Hudson had contracts with QFs in 2004 which represented approximately
1.9% of Central Hudson's energy purchases. These contracts are considered normal
purchases under the provisions of SFAS 133 and, accordingly, are not recorded at
their fair value.

      Central Hudson has entered into an agreement with Constellation to
purchase capacity and energy, comprising approximately 8% of the output of the
Nine Mile 2 Plant, at negotiated defined prices, from the Nine Mile 2 Plant
during the ten-year period beginning on the sale of Central Hudson's interest in
the Nine Mile 2 Plant on November 7, 2001, and ending November 30, 2011. The
agreement is "unit contingent" in that Constellation is only required to supply
electricity if the Nine Mile 2 Plant is operating. On November 12, 2002, Central
Hudson entered into an agreement with Entergy Nuclear Indian Point 2 LLC and
Entergy Nuclear Indian Point 3 LLC to purchase electricity (but not capacity) on
a unit-contingent basis at defined prices from January 1, 2005, to and including
December 31, 2007.

Operating Leases

      Energy Group and its subsidiaries have entered into agreements with
various companies which provide products and services to be used in their normal
operations. These agreements include operating leases for the use of data
processing and office equipment, vehicles, office space, and bulk petroleum
storage locations. The provisions of these leases generally provide for renewal
options and some contain escalation clauses.

      Operating lease rental payment amounts charged to expense by Energy Group
and its subsidiaries were $2.8 million in 2004, $2.9 million in 2003, and $2.8
million in 2002. Included in these amounts are payments for contingent rentals,
which amounted to $556,000 in 2004, $538,000 in 2003, and $523,000 in 2002.
Contingent rentals are those operating lease agreements that contain provisions
for a change in lease payments subsequent to the inception of the lease.

      Future minimum lease payments excluding executory costs, such as property
taxes and insurance, are included in the following table of Other Commitments.
All leases are non-cancelable, recognizing payments on a straight-line basis
over the minimum lease term. Contingent rental payments are adjusted
incrementally based on the Consumer Price Index, as specified in the terms of
each lease agreement and are considered when calculating the future minimum
payments.


                                    - 121 -
<PAGE>

Other Commitments

      The following is a summary of commitments for Energy Group and its
affiliates as of December 31, 2004:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                             Projected Payments Due By Period (In Thousands)
----------------------------------------------------------------------------------------------------------------------
                                                                Year        Year        Year        Year
                                                  Less than    Ending      Ending      Ending      Ending
                                                   1 year       2006        2007        2008        2009        Total
----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>         <C>         <C>         <C>         <C>
Operating Leases                                     2,900       2,542       1,811       1,555       1,360      10,168
----------------------------------------------------------------------------------------------------------------------
Construction/Maintenance & Other Projects(1)        22,785       6,864       3,880       2,377       1,813      37,719
----------------------------------------------------------------------------------------------------------------------
Purchased Electric Contracts(2)                     81,162      71,523      71,102      37,703      37,532     299,022
----------------------------------------------------------------------------------------------------------------------
Purchased Natural Gas Contracts(2)                  72,351      56,166      20,848       9,481       8,976     167,822
----------------------------------------------------------------------------------------------------------------------
Purchased Fixed Liquid Petroleum Contracts          11,493         148          --          --          --      11,641
----------------------------------------------------------------------------------------------------------------------
Purchased Variable Liquid Petroleum Contracts(3)    47,328          --          --          --          --      47,328
----------------------------------------------------------------------------------------------------------------------
Total                                             $238,019    $137,243    $ 97,641    $ 51,116    $ 49,681    $573,700
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Including Specific, Term, and Service Contracts, briefly defined as
      follows: "Specific Contracts" consist of work orders for construction;
      "Term Contracts" consist of maintenance contracts; and "Service Contracts"
      include consulting, educational, and professional service contracts.

(2)   Purchased electric and purchased natural gas costs for Central Hudson are
      fully recovered via their respective regulatory cost adjustment
      mechanisms.

(3)   Estimated based on pricing at January 7, 2005.


                                    - 122 -
<PAGE>

The following is a summary of the commitments for Central Hudson as of December
31, 2004:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                             Projected Payments Due By Period (In Thousands)
----------------------------------------------------------------------------------------------------------------------
                                                                Year        Year        Year        Year
                                                  Less than    Ending      Ending      Ending      Ending
                                                   1 year       2006        2007        2008        2009        Total
----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>         <C>         <C>         <C>         <C>
Operating Leases                                     2,211       2,096       1,597       1,439       1,335       8,678
----------------------------------------------------------------------------------------------------------------------
Construction/Maintenance & Other Projects(1)        22,785       6,864       3,880       2,377       1,813      37,719
----------------------------------------------------------------------------------------------------------------------
Purchased Electric Contracts(2)                     81,162      71,523      71,102      37,703      37,532     299,022
----------------------------------------------------------------------------------------------------------------------
Purchased Natural Gas Contracts(2)                  72,351      56,166      20,848       9,481       8,976     167,822
----------------------------------------------------------------------------------------------------------------------
Total                                             $178,509    $136,649    $ 97,427    $ 51,000    $ 49,656    $513,241
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Including Specific, Term, and Service Contracts.

(2)   Purchased electric and purchased natural gas costs for Central Hudson are
      fully recovered via their respective regulatory cost adjustment
      mechanisms.

CONTINGENCIES

City of Poughkeepsie

      On January 1, 2001, a fire destroyed a multi-family residence on Taylor
Avenue in the City of Poughkeepsie, New York, resulting in several deaths and
damage to nearby residences. Eight separate lawsuits arising out of this
incident have been commenced in New York State Supreme Court, County of
Dutchess, by approximately 24 plaintiffs against Central Hudson and other
defendants, each lawsuit alleging that Central Hudson supplied the Taylor Avenue
residence with natural gas service for cooking purposes at the time of the fire.
The basis for Central Hudson's alleged liability in these actions is that it was
negligent in the supply of such natural gas. The suits seek an aggregate of $528
million in compensatory damages for alleged property damage, personal injuries,
wrongful death, and loss of consortium or services. Central Hudson has notified
its insurance carrier, has denied liability, and is defending the lawsuits.
Central Hudson presently has insufficient information with which to predict the
outcome of these lawsuits.


                                    - 123 -
<PAGE>

Environmental Matters

      Central Hudson and certain of the competitive business subsidiaries are
subject to regulation by federal, state and, to some extent, local authorities
with respect to the environmental effects of their operations, including
regulations relating to air and water quality, levels of noise, hazardous
wastes, toxic substances, protection of vegetation and wildlife, and limitations
on land use. Environmental matters may expose both Central Hudson and certain of
the competitive business subsidiaries to potential liability, which in certain
instances may be imposed without regard to fault or may be premised on
historical activities that were lawful at the time they occurred. Both Central
Hudson and these competitive business subsidiaries monitor their activities in
order to determine the impact of their activities on the environment and to
comply with applicable environmental laws and regulations.

Central Hudson:

      Water

      In February 2001, Central Hudson received a letter from the New York State
Department of Environmental Conservation ("DEC") indicating that it must
terminate the discharge from an internal sump at its Neversink Hydroelectric
Facility into a regulated stream or obtain a State Pollutant Discharge
Elimination System permit for such discharge. Central Hudson filed for a draft
permit in May 2001; the DEC subsequently issued a draft permit on January 15,
2003. Central Hudson has submitted comments on that draft permit to the DEC, and
the DEC continues to review those comments.

      Air

      In October 1999, Central Hudson was informed by the New York State
Attorney General ("Attorney General") that the Danskammer Plant was included in
an investigation by the Attorney General's Office into the compliance of eight
older New York State coal-fired power plants with federal and state air
emissions rules. Specifically, the Attorney General alleged that Central Hudson
"may have constructed, and continues to operate, major modifications to the
Danskammer Plant without obtaining certain requisite preconstruction permits."
As part of this investigation, Central Hudson has received several requests for
information from the Attorney General, the DEC, and the United States
Environmental Protection Agency ("EPA") seeking information about the operation
and maintenance of the Danskammer Plant during the period from 1980 to 2000,
including specific information regarding approximately 45 projects conducted
during that period. In March 2000, the EPA assumed responsibility for the
investigation. Central Hudson has completed its production of documents in
connection with the information requests, and believes any permits required for
these projects were obtained in a timely manner. Notwithstanding Central
Hudson's sale of the Danskammer Plant on January 30, 2001, Central Hudson could
retain liability depending on the type of remedy, if any, imposed in connection
with this matter.

      Former Manufactured Gas Plant Facilities

      In 1986, the DEC added to the New York State Registry of Inactive
Hazardous Waste Disposal Sites ("Registry") six sites at which manufactured gas
plants ("MGP") owned or operated by Central Hudson or its predecessors were once
located. Two additional former MGP sites were identified by Central Hudson but
not placed on the Registry by the DEC. Three of the eight sites identified are
in Poughkeepsie, New York (at Laurel Street, North Water Street,


                                    - 124 -
<PAGE>

and North Perry Street); the remaining five sites are in Newburgh, Beacon,
Saugerties, Kingston, and Catskill, New York. Central Hudson studied all eight
sites to determine whether or not they contain any hazardous wastes which could
pose a threat to the environment or public health and, if wastes were located at
the sites, to determine whether or not remedial actions should be considered.
The DEC subsequently removed the six sites it had previously placed on the
Registry, subject to future revisions of its testing methods. As discussed
below, the Laurel Street, North Water Street, Newburgh, and Beacon sites have
been the subject of further agreements with the DEC.

      Central Hudson has also become aware of information contained in a DEC
Internet website indicating that, in addition to the eight sites referenced
above, Central Hudson is attributed with responsibility for three additional MGP
sites in New York State. The Internet website states that the additional sites
are located on Broadway in Kingston, at Vassar College in Poughkeepsie, and on
Water Street in Newburgh. No former MGP is believed to have been present at the
Broadway, Kingston location. Rather, the location is likely to have been used
for an office associated with the MGP site at East Strand Street, Kingston.
Central Hudson does not believe that it ever owned or operated the site at
Vassar College. The site identified as the Water Street, Newburgh site is, to
Central Hudson's knowledge, an MGP site that ceased operations in the 1880's.
The land upon which the plant was located was sold in 1891. The stock of the MGP
site's former operator, Consumers Gas Company of Newburgh, New York, was
acquired in 1900-01 by Newburgh Light, Heat and Power Company, which was later
consolidated with several other companies to form Central Hudson.

      City of Newburgh: In October 1995, Central Hudson and the DEC entered into
an Order on Consent regarding the development and implementation of an
investigation and remediation program for Central Hudson's former MGP site in
Newburgh, New York, the City of Newburgh's adjacent and nearby property, and the
adjoining areas of the Hudson River. The City of Newburgh subsequently filed a
lawsuit against Central Hudson in the United States District Court for the
Southern District of New York alleging violation by Central Hudson of, among
others, federal environmental laws and seeking damages of at least $70 million.

      After a 1998 jury award of $16 million in that lawsuit, reflecting the
estimated cost of environmental remediation and damages, Central Hudson and the
City of Newburgh entered into a court-approved Settlement Agreement in 1999
under which, among other things, (i) Central Hudson agreed to remediate the City
of Newburgh's property at Central Hudson's cost pursuant to the DEC's October
1995 Order on Consent and (ii) if the total cost of the remediation were less
than $16 million, Central Hudson would pay the City of Newburgh an additional
amount up to $500,000 depending on the extent to which the cost of remediation
was less than $16 million.

      Further studies by Central Hudson of the City of Newburgh's property were
provided to the DEC, which determined that the contaminants found may pose a
significant threat to human health or the environment. As a result, Central
Hudson developed a draft Feasibility Study Report ("Feasibility Report") which
was filed with the DEC and provided to the City of Newburgh in December 1999.
After review of the Feasibility Report by the DEC and the New York State
Department of Health ("DOH") and additional sampling by Central Hudson, Central
Hudson submitted revised risk assessments in June 2001, which also encompassed
additional cleanup of Hudson River sediments and property owned by the City of
Newburgh.

      The DEC and the DOH approved the revised risk assessments. The Feasibility
Report was revised based on the revised assessments and filed with the DEC on
October 29, 2003.


                                    - 125 -
<PAGE>

      After accepting the Feasibility Report, the DEC will issue a Proposed
Remedial Action Plan ("PRAP") for public review and comment. After the public
review, the DEC will issue a Record of Decision ("ROD") that will specify a
remediation plan for Central Hudson's implementation. It is presently
anticipated that the DEC will approve or modify the Feasibility Report and issue
a PRAP in the first quarter of 2005. It is also anticipated that a ROD will be
issued by the DEC in the second quarter of 2005.

      As of December 31, 2004, approximately $12.1 million has been spent on the
City of Newburgh matter, including the defense of the litigation described
above. It is not possible to predict the extent of additional remediation costs
that will be incurred in connection with this matter, but Central Hudson
believes that such costs could be in excess of $17 million. As of December 31,
2004, a $17 million estimate regarding this matter has been recorded as a
liability, and the expenses have been deferred, subject to the provisions of a
PSC Order issued on June 3, 1997, that granted permission for the deferral of
these costs subject to an annual PSC review of the specific costs being
deferred. The authority to defer these costs does not assure future rate
recovery by the PSC.

      Neither Energy Group nor Central Hudson can make any prediction as to the
full financial effect of this matter on either Energy Group or Central Hudson,
including the extent, if any, of insurance reimbursement and including
implementation of environmental cleanup under the Order on Consent. However,
Central Hudson has put its insurers on notice of this matter and intends to seek
reimbursement from its insurers for the cost of any liability. Two of the
insurers have denied coverage.

      Other MGP Sites: In February 1999, the DEC informed Central Hudson of its
intention to perform site assessments at three of the other previously
identified MGP sites: namely, the Poughkeepsie Laurel Street and North Water
Street sites and the Beacon site. Central Hudson conducted these site
assessments under Voluntary Cleanup Agreements negotiated in 2000 with the DEC
to determine if there are any significant quantities of residues from the MGP
operations on the sites and whether any such residues would require remediation.

      In October 2000, Central Hudson was notified by the DEC that it had
determined that the Poughkeepsie North Perry Street site and the Catskill site
posed little or no significant threat to the public and that no additional
investigation or action was necessary at the present time. During the fourth
quarter of 2001, Central Hudson was advised that the DEC and the DOH found that
no further remedial action is presently necessary at the Beacon site.

      In March 2002, the DEC informed Central Hudson that both it and the DOH
had approved Central Hudson's Supplemental Preliminary Site Assessment for the
North Water Street site, which had concluded that the contamination at the site
"does not appear to pose a significant threat to public health and the
environment." At that time, the DEC and Central Hudson agreed that further
investigation at the site would be given a lower priority than work at the other
Central Hudson MGP sites. In August 2002, however, an oily sheen on the Hudson
River adjacent to this site was reported to the DEC. As a result, the DEC has
reversed its priority determination with respect to the North Water Street site,
and has now given it a high priority for action. Central Hudson has provided the
DEC with a report of an investigation of subsurface conditions near the Hudson
River and is presently analyzing the results of additional investigations that
were requested by the DEC. In March 2004, Central Hudson requested that the
Voluntary Cleanup Agreement covering the North Water Street site be converted
into a Brownfield Cleanup Agreement under New York's new Brownfield Cleanup
Program. In June


                                    - 126 -
<PAGE>

2004, DEC requested, and Central Hudson provided, additional information
regarding the requested conversion to a Brownfield Cleanup Agreement. It is
anticipated that a Brownfield Cleanup Agreement will be executed with DEC in the
first quarter of 2005. If a Brownfield Cleanup Agreement is executed it is
unlikely to significantly change the amount or cost of any potential remediation
of the North Water Street site, but will permit the recovery by Central Hudson
of some of the remediation costs through tax credits. In 2004, Central Hudson
received approval from the DEC for and conducted additional investigation work
at the North Water Street site, which included field work on the site and in the
adjacent Hudson River. A report detailing the work and data gathered will be
filed with the DEC early in 2005. Neither Energy Group nor Central Hudson can
predict the outcome of the investigative work at this time.

      The DEC has requested additional investigation activities at the Laurel
Street site, which has delayed approval of Central Hudson's proposed remediation
plan. Central Hudson is currently discussing this request with the DEC and does
not expect DEC approval of a remediation plan earlier than the end of 2005.
Central Hudson's current estimate for remediation at Laurel Street is $2.5
million. Additional work at the Kingston and Saugerties sites has been deferred
pending completion of work at the other sites.

      The $2.5 million estimate for the Laurel Street site remediation was
recorded as a liability in June 2002, and the expense will be deferred, subject
to the provisions of a PSC order issued on October 25, 2002, that granted
permission for the deferral of these and other costs relating to the MGP sites.
Recovery of the deferred costs, net of any insurance recoveries, will be subject
to the following three conditions at the time the expenditures are made on an
annual basis: 1) the expenditures are incremental to current rates, 2) the
expenditures are material, and 3) Central Hudson is not earning above its
allowed ROE. Central Hudson cannot predict whether it will meet these three
conditions.

      The DEC has also requested that Central Hudson enter into a Brownfield
Cleanup Agreement covering the Kingston site and that there be discussions with
them about the Saugerties site. In addition, a recent policy announced by the
DEC could require the reopening of one or more of Central Hudson's closed sites
should the DEC determine that testing of indoor air quality within structures
located near or on the site(s) is warranted. At this time, the DEC has not
indicated that it intends to reopen any Central Hudson site. Remedial actions
ultimately required at any of the Central Hudson sites could cause a material
adverse effect (the extent of which cannot be reasonably estimated) on the
financial condition of Energy Group and Central Hudson if Central Hudson were
unable to recover all or a substantial portion of these costs through insurance
and rates. Central Hudson has put its insurers on notice regarding this matter
and intends to seek reimbursement from its insurers for amounts, if any, for
which it may become liable.

      Orange County Landfill

      In June 2000, the DEC sent a letter to Central Hudson requesting that it
provide information about disposal of wastes at the Orange County Landfill
("Orange County Site") located in the Township of Goshen, New York. The Orange
County Site is listed on the Registry.


                                    - 127 -
<PAGE>

      The DEC stated that its records indicate that Central Hudson, or a
predecessor entity, disposed or may have disposed of wastes at the Orange County
Site or that Central Hudson transported wastes to the Orange County Site for
disposal. Central Hudson has put its insurers on notice regarding this matter
and intends to seek reimbursement from its insurers for amounts for which it may
become liable.

      Documents submitted by Central Hudson in response to the request of the
DEC indicate that at least three shipments of wastes may have been disposed of
by Central Hudson at the Orange County Site: one of construction waste, one of
office and commercial waste, and one of asbestos waste. Central Hudson entered
into a Tolling Agreement (i.e., an agreement extending the applicable statute of
limitations) dated September 7, 2001, with the DEC and other state agencies
whereby Central Hudson agreed to toll the applicable statute of limitations by
the state agencies against Central Hudson for certain alleged causes of action
until February 28, 2002. The tolling agreement has been renewed through April
30, 2005.

      Neither Energy Group nor Central Hudson can predict the outcome of this
investigation at this time.

      Newburgh Consolidated Iron Works

      By letter from the EPA, dated November 28, 2001, Central Hudson, among
others, was served with a Request For Information pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act regarding any shipments
of scrap or waste materials that Central Hudson may have made to the
Consolidated Iron and Metal Co., Inc. ("Consolidated Iron"), a Superfund site
located in Newburgh, New York. Sampling by the EPA has indicated that lead and
polychlorinated biphenyls (or "PCBs") are present at the site, and the EPA
expects to commence a remedial investigation and feasibility study at the site
in the future. Central Hudson responded to the EPA's information request on
January 30, 2002. In its response, Central Hudson stated that it had entered
into a contract with Consolidated Iron under which Central Hudson sold scrap to
Consolidated Iron. The term of the contract was from 1988 to 1989. Records of
eight and a possible ninth shipment of scrap to Consolidated Iron have been
identified. No records were found which indicate that the material sold to
Consolidated Iron contained or was a hazardous substance. Central Hudson has put
its insurers on notice regarding this matter and intends to seek reimbursement
from its insurers for amounts, if any, for which it may become liable.

      Neither Energy Group nor Central Hudson can predict the outcome of this
investigation at the present time.

      Asbestos Litigation

      Since 1987, Central Hudson, along with many other parties, has been joined
as a defendant or third-party defendant in 3,216 asbestos lawsuits commenced in
New York State and federal courts. The plaintiffs in these lawsuits have each
sought millions of dollars in compensatory and punitive damages from all
defendants. The cases were brought by or on behalf of individuals who have
allegedly suffered injury from exposure to asbestos, including exposure which
allegedly occurred at the Roseton Plant and the Danskammer Plant.


                                    - 128 -
<PAGE>

      As of January 20, 2005, of the 3,216 cases brought against Central Hudson,
1,525 remain pending. Of the 1,691 cases no longer pending against Central
Hudson, 1,550 have been dismissed or discontinued without payment by Central
Hudson, and Central Hudson has settled 141 cases. Central Hudson is presently
unable to assess the validity of the remaining asbestos lawsuits; accordingly,
it cannot determine the ultimate liability relating to these cases. Based on
information known to Central Hudson at this time, including Central Hudson's
experience in settling asbestos cases and in obtaining dismissals of asbestos
cases, Central Hudson believes that costs which may be incurred in connection
with the remaining lawsuits will not have a material adverse effect on either of
Energy Group's or Central Hudson's financial positions or results of operations.

CHEC:

      Griffith has received a demand addressed to Griffith Consumers Division
("Consumers"), the entity from which Griffith had purchased the assets of its
business, from the CITGO Petroleum Corporation ("CITGO") for defense and
indemnification of CITGO in a lawsuit commenced on or about March 13, 2001, by
James and Casey Threatte against CITGO and Gordon E. Wenner in the Circuit Court
for Loudon County, Virginia. The lawsuit seeks compensatory damages of $1.4
million plus attorneys' fees, jointly and severally from CITGO and defendant
Wenner, for the alleged contamination of the plaintiffs' property in
Lovettsville, Virginia, by gasoline containing methyl tertiary butyl ether (or
"MTBE") emanating from the neighboring Lovettsville Garage. CITGO maintains that
Consumers owes it a defense and indemnification pursuant to a February 1, 1999,
Distribution Franchise Agreement pursuant to which CITGO sold gasoline to
Consumers, which then resold the gasoline to the Lovettsville Garage. Griffith
does not believe it or Consumers is responsible to CITGO in this matter, in part
because the supply agreement with the Lovettsville Garage was transferred to
another distributor on August 1, 2001, and the transferee agreed to assume any
liabilities existing as of that date. Moreover, even if Griffith were determined
to be responsible to CITGO, Energy Group believes that CITGO itself is not a
proper party to the lawsuit and, therefore, Griffith would be liable only for
the reimbursement of defense costs.

      On May 31, 2002, CH Services sold all of its stock ownership interest in
CH Resources to WPS Power Development, Inc. In connection with the sale, CH
Services has agreed for four years following the date of this sale to retain up
to $4 million of potential environmental liabilities which may have been
incurred by CH Resources prior to the closing, although no such material
liabilities have been identified. Energy Group has agreed to guarantee the
post-closing obligations of CH Services under the sale agreement, which
guarantee now applies to CHEC.

      Griffith has a voluntary environmental program in connection with the West
Virginia Division of Environmental Protection regarding Griffith's Kable Oil
Bulk Plant, located in West Virginia. During 2004, less than $1,000 was spent on
site remediation efforts and it is anticipated that less than $50,000 will be
expended in 2005. The State of West Virginia has indicated no further
remediation of the site will be required. In addition, Griffith spent $19,000 on
remediation efforts in Maryland.

      During 2004, SCASCO spent approximately $186,000 on site remediation
efforts in Connecticut in addition to $163,000 in 2003. SCASCO is to be
reimbursed $319,000 from the State of Connecticut under an environmental
agreement and has recorded this anticipated reimbursement as a receivable.


                                    - 129 -
<PAGE>

Neversink Hydro Station

      Central Hudson's ownership in the Neversink Hydro Station ("Neversink") is
governed by an agreement between Central Hudson and the New York City Board of
Water Supply ("NYCBWS"). This agreement provides for the transfer of Central
Hudson's ownership interest in Neversink, which has a book value of zero, to the
Board of Water Supply on December 31, 2003. An interim agreement between Central
Hudson and the NYCBWS was entered into on March 3, 2004, that provided for the
continued ownership and operation of the plant by Central Hudson until December
31, 2004. The parties have entered into a second interim agreement that became
effective at the expiration of the first agreement and provides for the
continued ownership and operation of the plant by Central Hudson until the
earlier of conveyance to the NYCBWS, or August 31, 2005. As of the date of this
10-K Annual Report, Central Hudson and the NYCBWS are continuing their
negotiations as to the transfer of Central Hudson's ownership interest in the
Neversink plant to the NYCBWS. There can be no assurance that an agreement on
such transfer will be reached.

Other Central Hudson Matters

      Central Hudson is involved in various other legal and administrative
proceedings incidental to its business which are in various stages. While these
matters collectively involve substantial amounts, it is the opinion of
Management that their ultimate resolution will not have a material adverse
effect on either of Energy Group's or Central Hudson's financial positions or
results of operations.

Other CHEC Matter

      The State of Maryland issued a Notice of Assessment for Motor Fuel Tax on
September 28, 2004, to Griffith. The assessment is for $2.5 million for the
period from 2001 to 2003. Griffith has reviewed the assessment and believes the
liability to be approximately $500,000. Griffith has reserved $500,000 for this
assessment as of December 31, 2004.

NOTE 12 - SEGMENTS AND RELATED INFORMATION

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

      Beginning with the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004, Energy Group refined its basis of segmentation to separate the
Unregulated Segment into "Fuel Oil Distribution" and "Other." Management
regularly reviews the operating results of the fuel oil distribution companies
as a standalone component of the total unregulated operations and assesses their
performance as a basis for allocating resources.


                                    - 130 -
<PAGE>

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

                              CH Energy Group, Inc.
                               Segment Disclosure
                          Year Ended December 31, 2004

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                      Unregulated
                                                             ----------------------------
(In Thousands except Earnings                     Natural      Fuel Oil
         per Share)                Electric         Gas      Distribution      Other        Eliminations        Total
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>           <C>           <C>              <C>            <C>
Revenues from external
  customers                       $  430,575    $  125,230    $  234,704    $    1,003       $       --     $  791,512
Intersegment revenues                     11           259            --            --             (270)            --
----------------------------------------------------------------------------------------------------------------------

    Total revenues                   430,586       125,489       234,704         1,003             (270)       791,512
----------------------------------------------------------------------------------------------------------------------

Depreciation and amortization         22,083         6,325         6,232            --               --         34,640
Interest expense                      14,668         3,403         2,181           218           (2,303)        18,167
Interest and investment income         7,100         1,578            19         3,526           (2,303)         9,920
Income tax expense                    21,389         7,037         1,952           878               --         31,256
Earnings per share - diluted            1.85           .54           .19           .11(1)            --           2.69
Segment assets                       767,842       260,797       141,613       116,752               --      1,287,004
Goodwill                                  --            --        50,462            --               --         50,462
Capital expenditures                  44,280        13,242         5,213            --               --         62,735
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount of Unregulated EPS attributable to CHEC's other business units
      was $0.03 per share, with the balance of $0.08 per share resulting
      primarily from investment activity.

                              CH Energy Group, Inc.
                               Segment Disclosure
                          Year Ended December 31, 2003

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                      Unregulated
                                                             ----------------------------
(In Thousands except Earnings                     Natural      Fuel Oil
         per Share)                Electric         Gas      Distribution      Other        Eliminations        Total
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>           <C>           <C>              <C>            <C>
Revenues from external
  customers                       $  457,395    $  123,306    $  224,808    $    1,175       $       --     $  806,684
Intersegment revenues                      9           346            --            --             (355)            --
----------------------------------------------------------------------------------------------------------------------

    Total revenues                   457,404       123,652       224,808         1,175             (355)       806,684
----------------------------------------------------------------------------------------------------------------------

Depreciation and amortization         21,280         5,995         6,297            39               --         33,611
Interest expense                      18,974         3,282         2,202           260           (2,462)        22,256
Interest and investment income         8,547         1,427            16         4,697           (2,462)        12,225
Income tax expense                    19,418         7,563         1,887         1,567               --         30,435
Earnings per share - diluted            1.76           .60           .19           .22(1)            --           2.77
Segment assets                       811,950       240,345       139,925       117,856               --      1,310,076
Goodwill                                  --            --        50,462            --               --         50,462
Capital expenditures                  42,954        10,407         6,320            --               --         59,681
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount of Unregulated EPS attributable to CHEC's other business units
      was $0.01 per share, with the balance of $0.21 per share resulting
      primarily from investment activity.


                                    - 131 -
<PAGE>

                              CH Energy Group, Inc.
                               Segment Disclosure
                          Year Ended December 31, 2002

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                      Unregulated
                                                             ----------------------------
(In Thousands except Earnings                     Natural      Fuel Oil
         per Share)                Electric         Gas      Distribution      Other        Eliminations        Total
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>           <C>           <C>              <C>            <C>
Revenues from external
  customers                       $  427,978    $  105,343    $  158,229    $    4,291       $       --     $  695,841
Intersegment revenues                     47           490            --            --             (537)            --
----------------------------------------------------------------------------------------------------------------------

    Total revenues                   428,025       105,833    $  158,229         4,291             (537)       695,841
----------------------------------------------------------------------------------------------------------------------

Depreciation and
  amortization                        19,652         5,698         5,804            76               --         31,230
Interest expense                      21,634         3,342         1,231           213           (1,557)        24,863
Interest and investment
  Income                               7,963         1,139            31         6,204           (1,557)        13,780
Income tax expense                    16,252         5,438           449         4,017               --         26,156
Earnings per share-diluted              1.36           .48           .05           .62(1)            --           2.51
Segment assets                       802,038       216,728       131,579       132,562               --      1,282,907
Goodwill                                  --            --        46,684            --               --         46,684
Capital expenditures                  51,989        13,841         6,361            96               --         72,287
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   The amount of Unregulated EPS attributable to CHEC's other business units
      was $0.22 per share, with the balance of $0.40 per share resulting
      primarily from investment activity.

                    Central Hudson Gas & Electric Corporation
                               Segment Disclosure
                          Year Ended December 31, 2004

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                 Natural
       (In Thousands)             Electric         Gas       Eliminations        Total
---------------------------------------------------------------------------------------
<S>                              <C>           <C>            <C>            <C>
Revenues from external
  customers                      $  430,575    $  125,230     $       --     $  555,805
Intersegment revenues                    11           259           (270)            --
---------------------------------------------------------------------------------------

    Total revenues                  430,586       125,489           (270)       555,805
---------------------------------------------------------------------------------------

Depreciation and amortization        22,083         6,325             --         28,408
Interest expense                     14,668         3,403             --         18,071
Interest income                       7,100         1,578             --          8,678
Income tax expense                   21,389         7,037             --         28,426
Income available for common
  stock                              29,158         8,520             --         37,678
Segment assets                      767,842       260,797             --      1,028,639
Capital expenditures                 44,280        13,242             --         57,522
---------------------------------------------------------------------------------------
</TABLE>


                                    - 132 -
<PAGE>

                    Central Hudson Gas & Electric Corporation
                               Segment Disclosure
                          Year Ended December 31, 2003

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                 Natural
       (In Thousands)             Electric         Gas       Eliminations        Total
---------------------------------------------------------------------------------------
<S>                              <C>           <C>            <C>            <C>
Revenues from external
  customers                      $  457,395    $  123,306     $       --     $  580,701
Intersegment revenues                     9           346           (355)            --
---------------------------------------------------------------------------------------

   Total revenues                   457,404       123,652           (355)       580,701
---------------------------------------------------------------------------------------

Depreciation and amortization        21,280         5,995             --         27,275
Interest expense                     18,974         3,282             --         22,256
Interest income                       8,547         1,427             --          9,974
Income tax expense                   19,418         7,563             --         26,981
Income available for common
  stock                              28,034         9,454             --         37,488
Segment assets                      811,950       240,345             --      1,052,295
Capital expenditures                 42,954        10,407             --         53,361
---------------------------------------------------------------------------------------
</TABLE>

                    Central Hudson Gas & Electric Corporation
                               Segment Disclosure
                          Year Ended December 31, 2002

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                 Natural
       (In Thousands)             Electric         Gas       Eliminations        Total
---------------------------------------------------------------------------------------
<S>                              <C>           <C>            <C>            <C>
Revenues from external
  customers                      $  427,978    $  105,343     $       --     $  533,321
Intersegment revenues                    47           490           (537)            --
---------------------------------------------------------------------------------------

    Total revenues                  428,025       105,833           (537)       533,321
---------------------------------------------------------------------------------------

Depreciation and amortization        19,652         5,698             --         25,350
Interest expense                     21,634         3,342             --         24,976
Interest income                       7,963         1,139             --          9,102
Income tax expense                   16,252         5,438             --         21,690
Income available for common
  stock                              22,545         7,818             --         30,363
Segment assets                      802,038       216,728             --      1,018,766
Capital expenditures                 51,989        13,841             --         65,830
---------------------------------------------------------------------------------------
</TABLE>


                                    - 133 -
<PAGE>

NOTE 13 - FINANCIAL INSTRUMENTS

      The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

      Cash and Temporary Cash Investments: The carrying amount approximates fair
value because of the short maturity of those instruments.

      Other Investments: Energy Group initiated an investment program
("Alternate Investment Program") in the third quarter of 2002. The Alternate
Investment Program involved investing approximately $100 million of Energy
Group's cash reserves made available from the sales of Central Hudson's
interests in its major generating assets with the objective of realizing higher
after-tax yields than are available through money market instruments, while
avoiding undue risk to principal and maintaining adequate liquidity.

      At December 31, 2002, the investments held by Energy Group included
marketable debt and equity securities classified as available-for-sale; debt
securities included corporate and government notes and bonds. These investments
were reported at fair value with unrealized gains and losses reported on Energy
Group's Consolidated Statement of Comprehensive Income. As of December 31, 2003,
all holdings in the Alternate Investment Program had been liquidated and the
proceeds invested in money market instruments and short-term securities with
lower principal risk.

      Proceeds from sales of available-for-sale securities during the year ended
December 31, 2003, were $111.5 million. Realized gains associated with sales of
available-for-sale securities were $2.9 million and realized losses were $3
million. The cost of these securities was determined on a specific
identification basis.

      Since its inception in mid-2002, the Alternate Investment Program produced
a return of $0.15 per share over a period of approximately one year. Money
market alternatives were estimated to have returned $0.055 per share over that
same period, resulting in a net benefit of $0.095 per share for the Alternate
Investment Program.

      Long-term Debt: The fair value is estimated based on the quoted market
prices for the same or similar issues or to current rates offered to Central
Hudson for debt of the same remaining maturities and credit quality.

      Notes Payable: The carrying amount approximates fair value because of the
short maturity of those instruments.


                                    - 134 -
<PAGE>

ENERGY GROUP / CENTRAL HUDSON
Long-term Debt Maturities and Fair Value

December 31, 2004

<TABLE>
<CAPTION>
                                                      Expected Maturity Date
                                                      ----------------------
                                                          (In Thousands)
                                         2005       2006       2007       2008       2009    Thereafter    Total     Fair Value
                                       --------   --------   --------   --------   --------  ----------   --------   ----------
<S>                                    <C>         <C>       <C>        <C>        <C>        <C>         <C>         <C>
Fixed Rate:                                  --         --   $ 33,000         --   $ 20,000   $151,033    $204,033    $213,727
   Estimated Effective
      Interest Rate                          --         --      5.920%        --      6.070%     5.240%      5.430%

Variable Rate:                               --         --         --         --         --   $115,850    $115,850    $115,850
                                                                                                                      --------
   Estimated Effective
      Interest Rate                                                                              1.290%      1.290%
                                                                                                          --------
                                                             Total Debt Outstanding                       $319,883    $329,577
                                                                                                          ========    ========

                                                             Estimated Effective Interest Rate                3.93%
                                                                                                          ========
</TABLE>

December 31, 2003

<TABLE>
<CAPTION>
                                                      Expected Maturity Date
                                                      ----------------------
                                                          (In Thousands)
                                         2004       2005       2006       2007       2008    Thereafter    Total     Fair Value
                                       --------   --------   --------   --------   --------  ----------   --------   ----------
<S>                                    <C>         <C>       <C>        <C>        <C>        <C>         <C>         <C>
Fixed Rate:                            $ 15,000         --         --   $ 33,000         --   $130,030    $178,030    $191,285
   Estimated Effective
      Interest Rate                       7.950%        --         --      5.910%        --      5.343%      5.652%

Variable Rate:                               --         --         --         --         --   $115,850    $115,850    $115,850
                                                                                                                      --------
   Estimated Effective
      Interest Rate                                                                              1.061%      1.061%
                                                                                                          --------
                                                             Total Debt Outstanding                       $293,880    $307,135
                                                                                                          ========    ========

                                                             Estimated Effective Interest Rate                3.91%
                                                                                                          ========
</TABLE>


                                    - 135 -
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - ENERGY GROUP

      Selected financial data for each quarterly period within 2004 and 2003 are
presented below:

<TABLE>
<CAPTION>
                                                                           Earnings Per
                                                                              Average
                                                                             Share of
                                                                              Common
                            Operating       Operating          Net        Stock (Diluted)
                            Revenues         Income           Income       Outstanding
                            --------         ------           ------       -----------
                                         (In Thousands)                     (Dollars)
<S>                         <C>             <C>             <C>             <C>
Quarter Ended:

      2004

  March 31 .........        $262,993        $ 39,465        $ 22,989        $   1.46
  June 30 ..........         165,354          10,740           5,496            0.35
  September 30 .....         161,872           9,342           4,451            0.28
  December 31 ......         201,293          15,586           9,487            0.60

      2003

  March 31 .........        $265,152        $ 35,982        $ 20,193        $   1.26
  June 30 ..........         183,188          12,067           7,625            0.48
  September 30 .....         169,827           8,783           4,705            0.30
  December 31 ......         188,517          19,469          11,462            0.73
</TABLE>


                                    - 136 -
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - CENTRAL HUDSON

      Selected financial data for each quarterly period within 2004 and 2003 are
presented below:

                                                                      Income
                                                                  Available for
                                  Operating        Operating          Common
                                   Revenues         Income             Stock
                                   --------         ------             -----
                                                 (In Thousands)
Quarter Ended:

       2004

  March 31 ..................      $177,973         $ 28,889         $ 16,246
  June 30 ...................       123,532           12,927            6,720
  September 30 ..............       124,548           13,741            7,325
  December 31 ...............       129,752           12,736            7,387

       2003

  March 31 ..................      $170,943         $ 26,823         $ 14,707
  June 30 ...................       143,469           13,104            6,741
  September 30 ..............       135,285           12,972            6,684
  December 31 ...............       131,004           16,488            9,356


                                    - 137 -
<PAGE>

SCHEDULE II - Reserves - Energy Group

<TABLE>
<CAPTION>
                                                                                Payments                Balance
                                       Balance at      Charged to      Charged to    Credited to or      at End
                                       Beginning        Cost and         Other       Deducted from         of
Description                            of Period        Expenses        Accounts        Reserves         Period
-----------                            ----------      ----------      ----------    --------------    ----------
<S>                                    <C>             <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 31, 2004

Operating Reserves ..............      $5,083,900      $2,050,470      $  190,559      $  809,609      $6,515,320
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $4,562,246      $5,835,056      $       --      $4,767,795      $5,629,507
                                       ==========      ==========      ==========      ==========      ==========

YEAR ENDED DECEMBER 31, 2003

Operating Reserves ..............      $4,912,084      $1,072,585      $  142,130      $1,042,899      $5,083,900
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $4,172,639      $5,864,972      $       --      $5,475,365      $4,562,246
                                       ==========      ==========      ==========      ==========      ==========

YEAR ENDED DECEMBER 31, 2002

Operating Reserves ..............      $4,852,994      $1,382,163      $  579,509      $1,902,582      $4,912,084
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $3,795,671      $3,570,677      $       --      $3,193,709      $4,172,639
                                       ==========      ==========      ==========      ==========      ==========
</TABLE>


                                    - 138 -
<PAGE>

SCHEDULE II - Reserves - Central Hudson

<TABLE>
<CAPTION>
                                                                                Payments                Balance
                                       Balance at      Charged to      Charged to    Credited to or      at End
                                       Beginning        Cost and         Other       Deducted from         of
Description                            of Period        Expenses        Accounts        Reserves         Period
-----------                            ----------      ----------      ----------    --------------    ----------
<S>                                    <C>             <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 31, 2004

Operating Reserves ..............      $5,042,980      $1,303,441      $  190,559      $  567,751      $5,969,229
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $3,000,000      $5,071,104      $       --      $3,471,104      $4,600,000
                                       ==========      ==========      ==========      ==========      ==========

YEAR ENDED DECEMBER 31, 2003

Operating Reserves ..............      $4,912,084      $  969,170      $  142,130      $  980,404      $5,042,980
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $2,700,000      $4,741,382      $       --      $4,441,382      $3,000,000
                                       ==========      ==========      ==========      ==========      ==========

YEAR ENDED DECEMBER 31, 2002

Operating Reserves ..............      $4,852,994      $1,382,163      $  579,509      $1,902,582      $4,912,084
                                       ==========      ==========      ==========      ==========      ==========

Reserve for Uncollectible
 Accounts .......................      $2,300,000      $3,061,800      $       --      $2,661,800      $2,700,000
                                       ==========      ==========      ==========      ==========      ==========
</TABLE>


                                    - 139 -
<PAGE>

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

      None.

ITEM 9A - CONTROLS AND PROCEDURES

      As of the end of the period covered by this report, Energy Group and
Central Hudson carried out an evaluation, under the supervision and with the
participation of the Chief Executive Officer and the Chief Financial Officer of
Energy Group and of Central Hudson, to evaluate the effectiveness of the
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended ("Exchange Act")). Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that Energy Group's and Central Hudson's disclosure controls and
procedures as of December 31, 2004, are effective for recording, processing,
summarizing, and reporting information that is required to be disclosed in their
reports under the Exchange Act, within the time periods specified in the
relevant SEC rules and forms.

      During Energy Group's internal control evaluation, a significant
deficiency was identified in general computer controls at the fuel oil
distribution subsidiaries. The deficiency related to access afforded to the
vendor of the software and employees who have access to software beyond the
requirements of their jobs. Compensating controls were identified and tested in
various business cycles. Remediation of the significant deficiency in general
computer controls is underway and is expected to be completed in 2005.

      There were no changes in Energy Group's or Central Hudson's internal
controls over financial reporting during the fourth quarter of 2004 that have
materially affected, or are reasonably likely to materially affect, Energy
Group's or Central Hudson's internal control over financial reporting.

      For additional discussion, see the Report of Independent Registered Public
Accounting Firm and the Report of Management on Internal Control over Financial
Reporting included in this 10-K Annual Report.

ITEM 9B - OTHER INFORMATION

      None.


                                    - 140 -
<PAGE>

                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF ENERGY GROUP

           The directors of Energy Group are as follows:

--------------------------------------------------------------------------------
                                    Age as of  Year Joined
            Name                    12/31/04    The Board      Term of Office
--------------------------------------------------------------------------------

Heinz K. Fridrich(1),(4),(5)           71         1988     Class III Director(7)
--------------------------------------------------------------------------------

Edward F. X. Gallagher(1),(3),(5)      71         1984     Class I Director(6)
--------------------------------------------------------------------------------

Paul J. Ganci(3),(5),(9)               66         1989     Class III Director(7)
--------------------------------------------------------------------------------

Stanley J. Grubel(2),(3)               62         1999     Class II Director(8)
--------------------------------------------------------------------------------

E. Michel Kruse(1),(3),(4)             60         2002     Class III Director(7)
--------------------------------------------------------------------------------

Steven M. Fetter(1),(2),(4)            52         2002     Class II Director(8)
--------------------------------------------------------------------------------

Steven V. Lant(3)                      47         2002     Class I Director(6)
--------------------------------------------------------------------------------

Jeffrey D. Tranen(2),(3)               58         2004     Class I Director(6)
--------------------------------------------------------------------------------

Margarita K. Dilley(1)                 47         2004     Unclassified(8)
--------------------------------------------------------------------------------

----------
(1)   Member, Audit Committee of the Board of Directors.

(2)   Member, Compensation Committee of the Board of Directors.

(3)   Member, Strategy and Finance Committee of the Board of Directors.

(4)   Member, Governance and Nominating Committee of the Board of Directors.

(5)   Years prior to 1999 reflect Directorships of Central Hudson.

(6)   Term expires at Annual Meeting of Shareholders in 2007.

(7)   Term expires at Annual Meeting of Shareholders in 2006.

(8)   Messrs. Fetter and Grubel and Ms. Dilley are standing for election at the
      Annual Meeting of Shareholders as Class II Directors.

(9)   Mr. Ganci resigned from the Board of Directors, effective January 1, 2005.


                                    - 141 -
<PAGE>

Officers of the Board:

Steven V. Lant
Chairman of the Board

Heinz K. Fridrich
Vice Chairman of the Board and Chairman of the Governance and Nominating
Committee

Stanley J. Grubel
Chairman of the Compensation Committee

Steven M. Fetter
Chairman of the Audit Committee

E. Michel Kruse
Chairman of the Strategy and Finance Committee

      The information on those directors of Energy Group standing for election
by shareholders at the Annual Meeting of Shareholders to be held on April 26,
2005, is incorporated by reference to the caption "Proposal 1 - Election of
Directors" in Energy Group's definitive proxy statement dated March 11, 2005
("Proxy Statement"), to be used in connection with its Annual Meeting of
Shareholders to be held on April 26, 2005, which Proxy Statement will be filed
with the SEC.

      The information on the executive officers of Energy Group required
hereunder is incorporated by reference to Item 1 - "Business" of this 10-K
Annual Report under the caption "Executive Officers."

      Other information required hereunder for directors and officers of Energy
Group is incorporated by reference to the Proxy Statement.

      Energy Group has adopted a Code of Business Conduct and Ethics ("Code").
Section II of the Code, in accordance with Section 406 of the Sarbanes-Oxley Act
of 2002 and Item 406 of Regulation S-K, constitutes Energy Group's Code of
Ethics for Senior Financial Officers. This section, in conjunction with the
remainder of the Code, is intended to promote honest and ethical conduct, full
and accurate reporting, and compliance with laws as well as other matters. A
copy of the Code is available on Energy Group's Internet site at
www.chenergygroup.com.

      If Energy Group's Board of Directors materially amends or grants any
waivers to Section II of the Code relating to issues concerning the need to
resolve ethically any actual or apparent conflicts of interest, and to comply
with all generally accepted accounting principles, laws and regulations designed
to produce full, fair, accurate, timely, and understandable disclosure in Energy
Group's periodic reports filed with the SEC, Energy Group will post such
information on its Internet site at www.chenergygroup.com.

      Energy Group's governance guidelines, Code of Business Conduct and Ethics,
and the charters of its Audit, Compensation, Governance and Nominating, and
Strategy and Finance Committees are available on Energy Group's Internet website
at www.chenergygroup.com. The governance guidelines, the Code of Business
Conduct and Ethics, and the charters may also be obtained by writing to the
Corporate Secretary, CH Energy Group, Inc., 284 South Avenue, Poughkeepsie, New
York 12601-4879.


                                    - 142 -
<PAGE>

ITEM 11 - EXECUTIVE COMPENSATION

      The information required hereunder for Directors and executives of Energy
Group is incorporated by reference to the Proxy Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity-Based Compensation Plan Information

      The following table sets forth information concerning Energy Group's
compensation plans (including individual compensation arrangements) under which
equity securities of Energy Group are authorized for issuance:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                                   Number of securities
                                                                                 remaining available for
                           Number of securities                                   future issuance under
                             to be issued upon           Weighted average              equity-based
                                exercise of             exercise price of           compensation plans
                           outstanding options,        outstanding option,        (excluding securities
                            warrants and rights        warrants and rights       reflected in column (a))
Plan Category                       (a)                        (b)                         (c)
---------------------------------------------------------------------------------------------------------
<S>                              <C>                          <C>                        <C>
Equity compensation
plans approved by
security holders                 91,400(1)                    $45.15                     309,968(2)
---------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved
by security holders                  --(3)                        --                          --
---------------------------------------------------------------------------------------------------------
Total                            91,400                       $45.15                     309,968
---------------------------------------------------------------------------------------------------------
</TABLE>

(1)   This includes only stock options granted under the Long-Term
      Performance-Based Incentive Plan.

(2)   This excludes 44,100 performance shares granted, 18,832 performance shares
      awarded, 2,400 performance shares forfeited, and 33,300 stock options
      exercised through 2004 under the Long-Term Performance Based Incentive
      Plan.

(3)   Energy Group also has an equity compensation plan described under the
      caption "Stock Plan for Outside Directors" in the Proxy Statement. No
      options, warrants, or rights are granted under this plan.

      The information required hereunder regarding equity ownership in Energy
Group by its Directors and executive officers is incorporated by reference to
the caption "Security Ownership of Directors and Officers" in the Proxy
Statement.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      See Note 1 - "Summary of Significant Accounting Policies" under the
caption "Related Party Transactions."


                                    - 143 -
<PAGE>

ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES

      The information required by this Item regarding Energy Group's Audit
Committee's policies and procedures and annual fees rendered to Energy Group's
principal accountants is incorporated by reference to the Report of the Audit
Committee and to the caption "Principal Accounting Fees and Services," both of
which are included in the Proxy Statement.

      The following information is provided for Central Hudson:

PRINCIPAL ACCOUNTING FEES AND SERVICES

--------------------------------------------------------------------------------
PricewaterhouseCoopers LLP                                    2004          2003
--------------------------------------------------------------------------------
Audit Fees                                                $392,100      $255,000
--------------------------------------------------------------------------------
Audit-Related Fees
   Includes SEC Comment Letter review (2004)
      and Sarbanes-Oxley Consulting (2003)                  15,200        10,000
--------------------------------------------------------------------------------
Tax Fees
   Includes review of Federal and State
   Income Tax Returns and consultation
      regarding IRS issues                                  16,755        30,130
--------------------------------------------------------------------------------
All Other Fees
   Includes software licensing fee for
      accounting research tool                               1,400         1,400
--------------------------------------------------------------------------------
TOTAL                                                     $425,455      $296,530
--------------------------------------------------------------------------------

                                     PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Documents filed as part of this 10-K Annual Report

      1. and 2. All Financial Statements and Financial Statement Schedules filed
      as part of this 10-K Annual Report are included in Item 8 - "Financial
      Statements and Supplementary Data" of this 10-K Annual Report and
      reference is made thereto.

      3. Exhibits

      Incorporated herein by reference to the Exhibit Index for this 10-K Annual
      Report. Such Exhibits include the following management contracts or
      compensatory plans or arrangements required to be filed as an Exhibit
      pursuant to Item 15(c) hereof:

      Description in the Exhibit List and Exhibit Nos. for this 10-K Annual
      Report

      Energy Group's Stock Plan for Outside Directors. (Exhibits (10) (iii) 7
      and 30)

      Energy Group's Supplementary Retirement Plan. (Exhibits (10) (iii) 11 and
      23)

      Central Hudson's Retirement Benefit Restoration Plan. (Exhibits (10) (iii)
      12 and 24)


                                    - 144 -
<PAGE>

      Form of Employment Agreement for all officers of Energy Group and its
      subsidiary companies. (Exhibit (10) (iii) 13)

      Employment Agreement between Paul J. Ganci and Energy Group. (Exhibits
      (10) (iii) 16)

      Energy Group's Change of Control Severance Policy. (Exhibits (10) (iii) 6
      and 15)

      Central Hudson's Savings Incentive Plan. (Exhibits (10) (iii) 1, 2, 3, 14,
      18, 19, 21, 27, and 31)

      Energy Group's Long-Term Performance-Based Incentive Plan. (Exhibit (10)
      (iii) 10, 17, 20, and 28)

      Energy Group's Directors and Executives Deferred Compensation Plan.
      (Exhibits (10) (iii) 8, 9, 22, 26, and 29)

      Agreement between Energy Group and Allan R. Page. (Exhibits (10) (iii) 25)

      Energy Group's Executive Annual Incentive Plan. (Exhibit (10) (iii) 32 and
      33)

(b)   Exhibits Required by Item 601 of Regulation S-K

      Incorporated herein by reference to subpart (a)-3 of Item 15, above.

(c)   Financial Statement Schedule required by Regulation S-X which is excluded
      from Energy Group's Annual Report to Shareholders for the fiscal year
      ended December 31, 2004

      Not applicable, see Item 8 - "Financial Statements and Supplementary Data"
      hereof.


                                    - 145 -
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, CH Energy Group, Inc. and Central Hudson Gas & Electric
Corporation have duly caused this 10-K Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                    CH ENERGY GROUP, INC.


                              By       /s/ Steven V. Lant
                                --------------------------------
                                       Steven V. Lant
                                   Chairman of the Board,
                                        President and
                                   Chief Executive Officer

Dated: February 17, 2005

                                CENTRAL HUDSON GAS & ELECTRIC
                                         CORPORATION


                              By       /s/ Steven V. Lant
                                --------------------------------
                                       Steven V. Lant
                                  Chairman of the Board and
                                   Chief Executive Officer

Dated: February 17, 2005


                                    - 146 -
<PAGE>

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
10-K Annual Report has been signed below by the following person on behalf of CH
Energy Group, Inc. and Central Hudson Gas & Electric Corporation and in the
capacities and on the date indicated:

        Signature                         Title                     Date
        ---------                         -----                     ----

(a) Principal Executive
    Officer or Officers:


/s/ Steven V. Lant
--------------------------
(Steven V. Lant)             Chairman of the Board,
                             President and Chief Executive
                             Officer of CH Energy Group, Inc.
                             and Chairman of the Board and
                             Chief Executive Officer
                             of Central Hudson Gas
                             & Electric Corporation            February 17, 2005

(b) Principal Accounting
          Officer:


/s/ Donna S. Doyle
--------------------------
(Donna S. Doyle)             Vice President -
                             Accounting and
                             Controller of
                             CH Energy Group, Inc.
                             and Central Hudson Gas
                             & Electric Corporation            February 17, 2005

(c) Chief Financial
       Officer:


/s/ Christopher M. Capone
--------------------------
(Christopher M. Capone)      Chief Financial Officer and
                             Treasurer of CH Energy Group,
                             Inc. and Central Hudson Gas
                             & Electric Corporation            February 17, 2005


                                    - 147 -
<PAGE>

(d) A majority of Directors of CH Energy Group, Inc.:

Steven V. Lant*, Heinz K. Fridrich*, Margarita K. Dilley*,
Edward F.X. Gallagher*, Stanley J. Grubel*,
Steven M. Fetter*, Jeffrey D. Tranen*,
and E. Michel Kruse*, Directors


By  /s/ Steven V. Lant
    -------------------------
     (Steven V. Lant)                                          February 17, 2005

(e) A majority of Directors of Central Hudson Gas &
    Electric Corporation:

Steven V. Lant*, Carl E. Meyer*, Jack Effron*,
and Arthur R. Upright*, Directors


By  /s/ Steven V. Lant
    -------------------------
     (Steven V. Lant)                                          February 17, 2005


_____________________________
* Steven V. Lant, by signing his name hereto, does thereby sign this document
for himself and on behalf of the persons named above after whose printed name an
asterisk appears, pursuant to powers of attorney duly executed by such persons
and filed with the United States Securities and Exchange Commission as Exhibit
24 hereof.


                                    - 148 -
<PAGE>

                                  EXHIBIT INDEX

      Following is the list of Exhibits, as required by Item 601 of Regulation
S-K, filed as a part of this Annual Report on Form 10-K, including Exhibits
incorporated herein by reference (1):

  Exhibit No.
(Regulation S-K
   Item 601
  Designation)                               Exhibits
----------------                             --------

(2)               Plan of Acquisition, reorganization, arrangement, liquidation
                  or succession:

                  (i)   Certificate of Exchange of Shares of Central Hudson Gas
                        & Electric Corporation, subject corporation, for shares
                        of CH Energy Group, Inc., acquiring corporation, under
                        Section 913 of the Business Corporation Law of the State
                        of New York. ((45); Exhibit 2(i))

                  (ii)  Agreement and Plan of Exchange by and between Central
                        Hudson Gas & Electric Corporation and CH Energy Group,
                        Inc. ((39; Exhibit 2.1)

(3)               Articles of Incorporation and Bylaws:

                  (i)   Restated Certificate of Incorporation of CH Energy
                        Group, Inc. under Section 807 of the Business
                        Corporation Law, filed November 12, 1998. ((37); Exhibit
                        (3)1)

                  (ii)  By-laws of CH Energy Group, Inc. in effect on the date
                        of this Report. ((50); Exhibit (3)(ii))

                  (iii) Restated Certificate of Incorporation of Central Hudson
                        Gas & Electric Corporation under Section 807 of the
                        Business Corporation Law. ((18); Exhibit (3)1)

----------
      (1) Exhibits which are incorporated by reference to other filings are
followed by information contained in parentheses, as follows: The first
reference in the parenthesis is a numeral, corresponding to a numeral set forth
in the Notes which follow this Exhibit list, which identifies the prior filing
in which the Exhibit was physically filed; and the second reference in the
parenthesis is to the specific document in that prior filing in which the
Exhibit appears.

<PAGE>

                  (iv)  Certificate of Amendment to the Certificate of
                        Incorporation of Central Hudson Gas & Electric
                        Corporation under Section 805 of the Business
                        Corporation Law. ((18) Exhibit (3)2)

                  (v)   Certificate of Amendment to the Certificate of
                        Incorporation of Central Hudson Gas & Electric
                        Corporation under Section 805 of the Business
                        Corporation Law. ((18); Exhibit (3)3)

                  (vi)  By-laws of Central Hudson Gas & Electric Corporation in
                        effect on the date of this Report. ((49); 3(vi))

(4)               Instruments defining the rights of security holders, including
                  indentures (see also Exhibits (3)(i)and (ii) above):

                  (ii)  1--   Indenture dated January 1, 1927 between
                              Central Hudson Gas & Electric Corporation
                              ("Central Hudson") and American Exchange Irving
                              Trust Company, as Trustee. ((2); Exhibit (4)(ii)1)

                  (ii)  2--   Fourth Supplemental Indenture dated March 1,
                              1941 between Central Hudson and Irving Trust
                              Company, as Trustee. ((2); Exhibit (4)(ii)5)

                  (ii)  3--   Fifth Supplemental Indenture dated December 1,
                              1950 between Central Hudson and Irving Trust
                              Company, as Trustee. ((2); Exhibit (4)(ii)6)

                  (ii)  4--   Ninth Supplemental Indenture dated December 1,
                              1967 between Central Hudson and Irving Trust
                              Company, as Trustee. ((2); Exhibit (4)(ii)10)

                  (ii)  5--   Twenty-Seventh Supplemental Indenture dated as
                              of May 15, 1992 between Central Hudson and The
                              Bank of New York, as Trustee. ((2); Exhibit
                              (4)(ii)28); and

                              Prospectus Supplement Dated May 28, 1992 (To
                              Prospectus Dated April 13, 1992) relating to
                              $125,000,000 principal amount

<PAGE>

                              of First Mortgage Bonds, designated Secured
                              Medium-Term Notes, Series A, and the Prospectus
                              Dated April 13, 1992, relating to $125,000,000
                              principal amount of Central Hudson's debt
                              securities attached thereto, as filed pursuant to
                              Rule 424(b) in connection with Registration
                              Statement No. 33-46624. ((6)(a)), and, as
                              applicable to a tranche of such Secured
                              Medium-Term Notes, one of the following:

                              (a)   Pricing Supplement No. 2, Dated June 4, 1992
                                    (To Prospectus Dated April 13, 1992, as
                                    supplemented by a Prospectus Supplement
                                    Dated May 28, 1992) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 33-46624. ((6)(b))

                              (b)   Pricing Supplement No. 3, Dated June 4, 1992
                                    (To Prospectus Dated April 13, 1992, as
                                    supplemented by a Prospectus Supplement
                                    Dated May 28, 1992) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 33-46624. ((6)(c))

                              (c)   Pricing Supplement No. 4, Dated August 20,
                                    1992 (To Prospectus Dated April 13, 1992, as
                                    supplemented by a Prospectus Supplement
                                    Dated May 28, 1992) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 33-46624. ((6)(d)

                              (d)   Pricing Supplement No. 5, Dated August 20,
                                    1992 (To Prospectus Dated April 13, 1992, as
                                    supplemented by a Prospectus Supplement
                                    Dated May 28, 1992) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 33-46624. ((6)(e)

                              (e)   Pricing Supplement No. 7, Dated July 26,
                                    1993 (To Prospectus Dated April 13, 1992, as
                                    supplemented by a Prospectus Supplement
                                    Dated May 28, 1992) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 33-46624. ((6)(f)

<PAGE>

                  (ii)  6--   Discharge, release and cancellation of
                              Indenture of Mortgage, dated November 6, 2001,
                              from the Bank of New York, as Trustee. ((47));
                              Exhibit (4) (ii) (6))

                  (ii)  7--   Indenture, dated as of April 1, 1992, between
                              Central Hudson and Morgan Guaranty Trust Company
                              of New York, as Trustee related to unsecured
                              Medium-Term Notes. ((7); Exhibit (4)(ii)29)

                  (ii)  8--   Prospectus Supplement Dated May 28, 1992 (To
                              Prospectus Dated April 13, 1992) relating to
                              $125,000,000 principal amount of Medium-Term
                              Notes, Series A, and the Prospectus Dated April
                              13, 1992, relating to $125,000,000 principal
                              amount of Central Hudson's debt securities
                              attached thereto, as filed pursuant to Rule 424(b)
                              in connection with Registration Statement No.
                              33-46624. ((8)(a)), and, as applicable to a
                              tranche of such Medium-Term Notes, set forth in
                              Pricing Supplement No. 1, Dated June 26, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992)
                              filed pursuant to Rule 424(b) in connection with
                              Registration Statement No. 33-46624. ((8)(b)).

                  (ii)  9--   Prospectus Supplement Dated January 8, 1999
                              (To Prospectus Dated January 7, 1999) relating to
                              $110,000,000 principal amount of Medium-Term
                              Notes, Series C, and the Prospectus Dated January
                              7, 1999, relating to $110,000,000 principal amount
                              of Central Hudson's debt securities attached
                              thereto, as filed pursuant to Rule 424(b) in
                              connection with Registration Statement Nos.
                              333-65597 and 33-56349. ((36)(a)), and, as
                              applicable to a tranche of such Medium-Term Notes,
                              set forth in Pricing Supplement No. 1, Dated
                              January 12, 1999 (To Prospectus Dated January 7,
                              1999, as supplemented by a Prospectus Supplement
                              Dated January 8, 1999) filed pursuant to Rule
                              424(b) in connection with Registration Statement
                              Nos. 333-65597 and 33-56349. ((36)(b)).

<PAGE>

                  (ii)  10--  Prospectus Supplement Dated March 20, 2002
                              (To Prospectus dated March 14, 2002) relating to
                              $100,000,000 principal amount of Medium-Term
                              Notes, Series D, and the Prospectus Dated March
                              14, 2002, relating to $100,000,000 principal
                              amount of Central Hudson's debt securities
                              attached hereto, as filed pursuant to Rule 424 (b)
                              in connection with Registration Statement No.
                              33-83542 ((13)(a)), and, as applicable to a
                              tranche of such Medium-Term Notes, each of the
                              following:

                              (a)   Pricing Supplement No. 1, Dated March 25,
                                    2002 (to said Prospectus dated March 14,
                                    2002, as supplemented by said Prospectus
                                    Supplement Dated March 20, 2002) filed
                                    pursuant to Rule 424 (b) in connection with
                                    Registration Statement No. 333-83542.
                                    ((13)(b))

                              (b)   Pricing Supplement No. 2, Dated March 25,
                                    2002 (to said Prospectus Dated March 14,
                                    2002, as supplemented by said Prospectus
                                    Supplement Dated March 20, 2002) filed
                                    pursuant to Rule 424 (b) in connection with
                                    Registration Statement No. 333-83542.
                                    ((13)(c))

                              (c)   Pricing Supplement No. 3, Dated September
                                    17, 2003 (to said Prospectus Dated March 14,
                                    2002, as supplemented by said Prospectus
                                    Supplement Dated March 20, 2002 and March
                                    25, 2002) filed pursuant to Rule 424 (b) in
                                    connection with Registration Statement No.
                                    333-83542. ((13)(d))

                              (d)   Pricing Supplement No. 4, Dated February 24,
                                    2004 (to said Prospectus dated March 20,
                                    2002 as supplemented by said Prospectus
                                    Supplement Dated March 20, 2002 and

<PAGE>

                                    March 25, 2002) filed pursuant to Rule
                                    424(b) in connection with Registration
                                    Statement No. 333-83542. ((13)(e))

                  (ii)  11--  Central Hudson and another subsidiary of
                              Energy Group have entered into certain other
                              instruments with respect to long-term debt. No
                              such instrument relates to securities authorized
                              thereunder which exceed 10% of the total assets of
                              Energy Group and its other subsidiaries or Central
                              Hudson, as the case may be, each on a consolidated
                              basis. Energy Group and Central Hudson agree to
                              provide the Commission, upon request, copies of
                              any instruments defining the rights of holders of
                              long-term debt of Central Hudson and such other
                              subsidiary.

                  (ii)  12--  Distribution Agreement, by and among Central
                              Hudson Gas & Electric Corporation and various
                              agents, dated October 28, 2004. ((57); Exhibit
                              (1))

                  (ii)  10--  Prospectus Supplement Dated October 28, 2004
                              (To Prospectus dated October 22, 2004) relating to
                              $85,000,000 principal amount of Medium-Term Notes,
                              Series E, and the Prospectus Dated October 22,
                              2004, relating to $85,000,000 principal amount of
                              Central Hudson's debt securities attached hereto,
                              as filed pursuant to Rule 424 (b) in connection
                              with Registration Statement No. No. 333-116286
                              ((56)(a)), and, as applicable to a tranche of such
                              Medium-Term Notes, each of the following:

                              (a)   Pricing Supplement No. 1, Dated October 29,
                                    2004 (to said Prospectus dated October 22,
                                    2004, as supplemented by said Prospectus
                                    Supplement Dated October 28, 2004) filed
                                    pursuant to Rule 424 (b)(3) in connection
                                    with Registration Statement No. 333-1162862.
                                    ((56)(b))

                              (b)   Pricing Supplement No. 2, Dated November 2,
                                    2004 (to said Prospectus

<PAGE>

                                    dated October 22, 2004, as supplemented by
                                    said Prospectus Supplement Dated October 28,
                                    2004) filed pursuant to Rule 424 (b)(3) in
                                    connection with Registration Statement No.
                                    333-1162862. ((56)(c))

(10)              Material contracts:

                  (i)   1--   Agreement dated April 27, 1973 between Central
                              Hudson and the Power Authority of the State of New
                              York. ((11); Exhibit 5.19)

                  (i)   2--   Assignment and Assumption dated as of October
                              24, 1975 between Central Hudson and New York State
                              Electric & Gas Corporation. ((12); Exhibit 5.25)

                  (i)   3--   Amendment to Assignment and Assumption dated
                              October 30, 1978 between Central Hudson and New
                              York State Electric & Gas Corporation. ((3);
                              Exhibit 5.34)

                  (i)   4--   Agreement dated April 2, 1980 by and between
                              Central Hudson and the Power Authority of the
                              State of New York. ((2); Exhibit (10)(i)24)

                  (i)   5--   Transmission Agreement, dated October 25,
                              1983, between Central Hudson and Niagara Mohawk
                              Power Corporation. ((2); Exhibit (10)(i)30)

                  (i)   6--   Underground Storage Service Agreement, dated
                              June 30, 1982, between Central Hudson and
                              Penn-York Energy Corporation. ((2); Exhibit
                              (10)(i)32)

                  (i)   7--   Interruptible Transmission Service Agreement,
                              dated December 20, 1983, between Central Hudson
                              and Power Authority of the State of New York.
                              ((2); Exhibit (10)(i)33)

                  (i)   8--   Agreement, dated December 7, 1983, between
                              Central Hudson and the Power Authority of the
                              State of New York. ((2); Exhibit (10)(i)34)

<PAGE>

                  (i)   9--   General Joint Use Pole Agreement between
                              Central Hudson and the New York Telephone Company
                              effective January 1, 1986 (not including the
                              Administrative and Operating Practices provisions
                              thereof). ((2); Exhibit (10)(i)37)

                  (i)   10--  Agreement, dated June 3, 1985, between
                              Central Hudson, Consolidated Edison Company of New
                              York, Inc. and the Power Authority of the State of
                              New York relating to Marcy South Real Estate -
                              East Fishkill, New York. ((2); Exhibit (10)(i)38)

                  (i)   11--  Agreement, dated June 11, 1985, between
                              Central Hudson and the Power Authority of the
                              State of New York relating to Marcy South
                              Substation - East Fishkill, New York. ((2);
                              Exhibit (10)(i)39)

                  (i)   12--  Memorandum of Understanding, dated as of
                              March 22, 1988, by and among Central Hudson,
                              Alberta Northeast Gas, Limited, the Brooklyn Union
                              Gas Company, New Jersey Natural Gas Company and
                              Connecticut Natural Gas Corporation. ((17);
                              Exhibit (10)(i)98)

                  (i)   13--  Agreement, effective as of November 1, 1989,
                              between Columbia Gas Transmission Corporation and
                              Central Hudson. ((19); Exhibit (10)(i)75)

                  (i)   14--  Agreement, dated as of November 1, 1989,
                              between Columbia Gas Transmission Corporation and
                              Central Hudson. ((19); Exhibit (10)(i)77)

                  (i)   15--  Agreement, dated as of November 1, 1989,
                              between Columbia Gas Transmission Corporation and
                              Central Hudson. ((19); Exhibit (10)(i)78)

                  (i)   16--  Agreement, dated as of November 1, 1989,
                              between Columbia Gulf Transmission Company and
                              Central Hudson. ((19); Exhibit (10)(i)79)

<PAGE>

                  (i)   17--  Agreement, dated October 9, 1990, between
                              Texas Eastern Transmission Corporation and Central
                              Hudson. ((19); Exhibit (10)(i)80)

                  (i)   18--  Agreement, dated July 2, 1990, between Texas
                              Eastern Transmission Corporation and Central
                              Hudson. ((19); Exhibit (10)(i)81)

                  (i)   19--  Agreement, dated December 28, 1989, between
                              Texas Eastern Transmission Corporation and Central
                              Hudson. ((19); Exhibit (10)(i)82)

                  (i)   20--  Agreement, dated December 28, 1989, between
                              Texas Eastern Transmission Corporation and Central
                              Hudson. ((19); Exhibit (10)(i)83)

                  (i)   21--  Agreement, dated November 3, 1989, between
                              Texas Eastern Transmission Corporation and Central
                              Hudson. ((19); Exhibit (10)(i)84)

                  (i)   22--  Agreement, dated September 4, 1990, between
                              Algonquin Gas Transmission Company and Central
                              Hudson. ((19); Exhibit (10)(i)87)

                  (i)   23--  Storage Service Agreement, dated July 1,
                              1989, between CNG Transmission Corporation and
                              Central Hudson. ((19); Exhibit (10)(i)91)

                  (i)   24--  Agreement dated as of February 7, 1991
                              between Central Hudson and Alberta Northeast Gas,
                              Limited for the purchase of Canadian natural gas
                              from ATCOR Ltd. to be delivered on the Iroquois
                              Gas Transmission System. ((19); Exhibit (10)(i)92)

                  (i)   25--  Agreement dated as of February 7, 1991
                              between Central Hudson and Alberta Northeast Gas,
                              Limited for the purchase of Canadian natural gas
                              from AEC Oil and Gas Company, a Division of
                              Alberta Energy Company, Ltd. to be delivered on
                              the Iroquois Gas Transmission System. ((19);
                              Exhibit (10)(i)93)

                  (i)   26--  Agreement dated as of February 7, 1991
                              between Central Hudson and Alberta Northeast Gas,
                              Limited for the purchase of

<PAGE>

                              Canadian natural gas from ProGas Limited to be
                              delivered on the Iroquois Gas Transmission System.
                              ((19); Exhibit (10)(i)94)

                  (i)   27--  Agreement No. 2 dated as of February 7, 1991
                              between Central Hudson and Alberta Northeast Gas,
                              Limited for the purchase of Canadian natural gas
                              from TransCanada Pipelines Limited under Precedent
                              Agreement No. 2 to be delivered on the Iroquois
                              Gas Transmission System. ((19); Exhibit (10)(i)95)

                  (i)   28--  Agreement No. 1 dated as of February 7, 1991
                              between Central Hudson and Alberta Northeast Gas,
                              Limited for the purchase of Canadian natural gas
                              from TransCanada Pipelines Limited under Precedent
                              Agreement No. 1 to be delivered on the Iroquois
                              Gas Transmission System. ((19); Exhibit (10)(i)96)

                  (i)   29--  Agreement dated as of February 7, 1991
                              between Central Hudson and Iroquois Gas
                              Transmission System to transport gas imported by
                              Alberta Northeast Gas, Limited to Central Hudson.
                              ((19); Exhibit (10)(i)97)

                  (i)   30--  Service Agreement, dated September 30, 1986,
                              between Central Hudson and Algonquin Gas
                              Transmission Company, for firm storage
                              transportation under Rate Schedule SS-III. ((20);
                              Exhibit (10)(i)95)

                  (i)   31--  Service Agreement, dated March 12, 1991,
                              between Central Hudson and Algonquin Gas
                              Transmission Company, for firm transportation of
                              5,056 dth. of Texas Eastern Transmission
                              Corporation incremental volume. ((20); Exhibit
                              (10)(i)99)

                  (i)   32--  Agreement, dated December 28, 1990 and
                              effective February 5, 1991, between Central Hudson
                              and National Fuel Gas Supply Corporation for
                              interruptible transportation. ((20); Exhibit
                              (10)(i)100)

<PAGE>

                  (i)   33--  Utility Services Contract, effective October
                              1, 1991, between Central Hudson and the U.S.
                              Department of the Army, for the provision of
                              natural gas service to the U.S. Military Academy
                              at West Point and Stewart Army Subpost, together
                              with an Amendment thereto, effective October 10,
                              1991. ((20); Exhibit (10)(i)101)

                  (i)   34--  Service Agreement, effective December 1,
                              1990, between Central Hudson and Texas Eastern
                              Transmission Corporation, for firm transportation
                              service under Rate Schedule FT-1. ((20); Exhibit
                              (10)(i)103)

                  (i)   35--  Service Agreement, dated February 25, 1991,
                              between Central Hudson and Texas Eastern
                              Transmission Corporation, for incremental 5,056
                              dth. under Rate Schedule CD-1. ((20); Exhibit
                              (10)(i)104)

                  (i)   36--  Service Agreement, dated January 7, 1992,
                              between Central Hudson and Texas Eastern
                              Transmission Corporation, for the firm
                              transportation of 6,000 dth./day under Rate
                              Schedule FTS-5. ((20); Exhibit (10)(i)106)

                  (i)   37--  Agreement dated as of July 1, 1992 between
                              Central Hudson and Tennessee Gas Pipeline Company
                              for storage of natural gas. ((21); Exhibit
                              (10)(i)114)

                  (i)   38--  Agreement dated as of July 1, 1992 between
                              Central Hudson and Tennessee Gas Pipeline Company
                              for firm transportation periods. ((21); Exhibit
                              (10)(i)115)

                  (i)   39--  Agreement, dated November 1, 1990, between
                              Tennessee Gas Pipeline and Central Hudson for
                              transportation of third-party gas for injection
                              into and withdrawal from Penn York storage. ((2);
                              Exhibit (10)(i)100)

                  (i)   40--  Agreement, dated December 1, 1991, between
                              Central Hudson and Iroquois Gas Transmission
                              System for interruptible gas transportation
                              service. ((2); Exhibit (10)(i)101)

<PAGE>

                  (i)   41--  Letter Agreement, dated August 24, 1992,
                              between Central Hudson and Iroquois Gas
                              Transmission System amending that certain
                              Agreement, dated December 1, 1991 between said
                              parties for interruptible gas transportation
                              service. ((19); Exhibit (10)(i)102)

                  (i)   42--  Gas Transportation Agreement, dated as of
                              September 1, 1993, by and between Tennessee Gas
                              Pipeline Company and Central Hudson. ((1);
                              Exhibit(10)(i)108)

                  (i)   43--  Agreement, dated as of May 20, 1993, between
                              Central Hudson and New York State Electric & Gas
                              Corporation. ((24); Exhibit (10)(i)93)

                  (i)   44--  Agreement for the Sale and Purchase of Coal,
                              dated as of December 1, 1996, among Central
                              Hudson, Inter-American Coal N.V. and
                              Inter-American Coal, Inc. [Certain portions of the
                              agreement setting forth or relating to pricing
                              provisions are omitted and filed separately with
                              the Securities and Exchange Commission pursuant to
                              a request for confidential treatment under the
                              rules of said Commission.] ((30); Exhibit
                              (10)(i)107)

                  (i)   45--  Amended and Restated Settlement Agreement,
                              dated January 2, 1998, among Central Hudson, the
                              Staff of the Public Service Commission of the
                              State of New York and the New York State
                              Department of Economic Development. ((32); Exhibit
                              (10)(i)112)

                  (i)   46--  Amendment, dated as of November 1, 1997, to
                              the Agreement for the Sale and Purchase of Coal,
                              dated December 1, 1996, among Central Hudson,
                              Inter-American Coal N.V. and Inter-American Coal,
                              Inc. [Certain portions of said Amendment set forth
                              and relate to pricing provisions and will be filed
                              separately with the Securities and Exchange
                              Commission pursuant to a request for confidential
                              treatment under the rules of said Commission.]
                              ((33); Exhibit (10)(i)113)

<PAGE>

                  (i)   47--  Modification to the Amended and Restated
                              Settlement Agreement, dated February 26, 1998,
                              signed by Central Hudson, the Staff of the Public
                              Service Commission of the State of New York, the
                              New York State Consumer Protection Board and Pace
                              Energy Project. ((34); Exhibit (10)(i)115)

                  (i)   48--  Amendment II, dated as of November 1, 1998,
                              to the Agreement for the Sale and Purchase of
                              Coal, dated December 1, 1996, among Central
                              Hudson, Inter-American Coal N.V. and
                              Inter-American Coal, Inc. [Certain portions of
                              said Amendment setting forth or relating to
                              pricing provisions are omitted and filed
                              separately with the Securities and Exchange
                              Commission pursuant to a request for confidential
                              treatment under the rules of said Commission.]
                              ((40); Exhibit (10)(i)80)

                  (i)   49--  Participation Agreement, dated as of June 1,
                              1977 by and between New York State Energy Research
                              and Development Authority and Central Hudson.
                              ((45); Exhibit (10)(i)67)

                  (i)   50--  Agreement, dated as of November 1, 1998,
                              between Central Hudson and Glencore Ltd., for the
                              Sale and Purchase of Coal. [Certain portions of
                              said Agreement setting forth or relating to
                              pricing provisions are omitted and filed
                              separately with the Securities and Exchange
                              Commission pursuant to a request for confidential
                              treatment under the rules of said Commission.]
                              ((40); Exhibit (10)(i)81)

                  (i)   51--  Participation Agreement, dated as of December
                              1, 1998, by and between New York State Energy
                              Research and Development Authority and Central
                              Hudson. ((40); Exhibit (10)(i)82)

                  (i)   52--  Participation Agreement, dated as of July 15,
                              1999, by and between New York State

<PAGE>

                              Energy Research and Development Authority and
                              Central Hudson. ((45); Exhibit (10)(i)66)

                  (i)   53--  Participation Agreement, dated as of August
                              1, 1999, by and between New York State Energy
                              Research and Development Authority and Central
                              Hudson. ((45); Exhibit (10)(i)67)

                  (i)   54--  Agreement, dated April 1, 1999, between
                              Central Hudson and Arch Coal Sales Company, Inc.
                              for the Sale and Purchase of Coal. [Certain
                              portions of the Agreement setting forth or
                              relating to pricing provisions are omitted and
                              filed separately with the Securities and Exchange
                              Commission pursuant to a request for confidential
                              treatment under the rules of said Commission.]
                              ((38); Exhibit (10)(i)89)

                  (i)   55--  Amendment No. 3, dated as of November 1,
                              1999, to the Agreement for the Sale and Purchase
                              of Coal, dated December 1, 1996, between Central
                              Hudson and Inter-American Coal, Inc. [Certain
                              portions of said Amendment set forth and relate to
                              pricing provisions and will be filed separately
                              with the Securities and Exchange Commission
                              pursuant to a request for confidential treatment
                              under the rules of said Commission.] ((41);
                              Exhibit (10)(i)88)

                  (i)   56--  Amendment No. 1, dated as of November 1,
                              1999, to the Agreement for the Sale and Purchase
                              of Coal, dated November 1, 1998, between Central
                              Hudson and Glencore, Ltd. [Certain portions of
                              said Amendment set forth and relate to pricing
                              provisions and will be filed separately with the
                              Securities and Exchange Commission pursuant to a
                              request for confidential treatment under the rules
                              of said Commission.] ((41); Exhibit (10)(i)89)

                  (i)   57--  Amendment No. 1, dated as of November 1,
                              1999, to the Agreement for the Sale and Purchase
                              of Coal, dated April 1, 1999 between Central
                              Hudson and Arch Coal.

<PAGE>

                              [Certain portions of said Amendment set forth and
                              relate to pricing provisions and will be filed
                              separately with the Securities and Exchange
                              Commission pursuant to a request for confidential
                              treatment under the rules of said Commission.]
                              ((41); Exhibit (10)(i)90)

                  (i)   58--  Asset Purchase and Sale Agreement, dated
                              August 7, 2000, by and among Central Hudson,
                              Consolidated Edison Company of New York, Inc.,
                              Niagara Mohawk Power Corporation and Dynegy Power
                              Corp. ((44); Exhibit (10)(i)93)

                  (i)   59--  Asset Purchase and Sale Agreement, dated
                              August 7, 2000, by and between Central Hudson and
                              Dynegy Power Corp. ((44); Exhibit (10)(i)94)

                  (i)   60--  Purchase Price Agreement, dated August 7,
                              2000, among Central Hudson, Consolidated Edison
                              Company of New York, Inc., Niagara Mohawk Power
                              Corporation and Dynegy Power Corp. ((44); Exhibit
                              (10)(i)95)

                  (i)   61--  Guarantee Agreement, dated August 7, 2000,
                              among Central Hudson, Consolidated Edison Company
                              of New York, Inc., Niagara Mohawk Power
                              Corporation and Dynegy Holdings, Inc. ((44);
                              Exhibit (10)(i)96)

                  (i)   62--  Nine Mile Point Unit 2 Nuclear Generating
                              Facility Asset Purchase Agreement, dated as of
                              December 11, 2000, by and among Central Hudson,
                              Niagara Mohawk Power Corporation, New York State
                              Electric & Gas Corporation, Rochester Gas and
                              Electric Corporation, Constellation Energy Group,
                              Inc. and Constellation Nuclear LLC. ((45); Exhibit
                              (10)(i)(79))

                  (i)   63--  Power Purchase Agreement, dated as of
                              December 11, 2000, by and between Constellation
                              Nuclear, LLC and Central Hudson. ((45); Exhibit
                              (10)(i)(80))

                  (i)   64--  Revenue Sharing Agreement, dated as of

<PAGE>

                              December 11, 2000, by and between Constellation
                              Nuclear LLC and Central Hudson. ((45); Exhibit
                              (10)(i)(84))

                  (i)   65--  Transition Power Agreement, dated January 30,
                              2001, by and between Central Hudson and Dynegy
                              Power Marketing, Inc. ((45); Exhibit (10)(i)(82))

                  (i)   66--  Amended and Restated Credit Agreement, dated
                              July 10, 2000, among CH Energy Group, Inc.,
                              ("Energy Group") certain lenders described therein
                              and Banc One, N.A., as administrative Agent.
                              ((43); Exhibit (10)(i)92)

                  (i)   67--  Amendment II, dated as of December 22, 2000,
                              to the Agreement for the Sale and Purchase of
                              Coal, dated April 1, 1999, between Central Hudson
                              and Arch Coal Sales Company, Inc. [Certain
                              portions of said Amendment set forth and relate to
                              pricing provisions and will be filed separately
                              with the Securities and Exchange Commission
                              pursuant to a request for confidential treatment
                              under the rules of said Commission.] ((45);
                              Exhibit (10)(i)(84))

                  (i)   68--  Amendment IV, dated as of December 29, 2000,
                              to the Agreement for the Sale and Purchase of Coal
                              made as of December 1, 1996, between Central
                              Hudson and Inter-American Coal N.V. and
                              Inter-American Coal, Inc. [Certain portions of
                              said Amendment set forth and relate to pricing
                              provisions and will be filed separately with the
                              Securities and Exchange Commission pursuant to a
                              request for confidential treatment under the rules
                              of said Commission.] ((45); Exhibit (10)(i)(85))

                  (i)   69--  Stock Purchase Agreement, dated December 21,
                              2001 between Central Hudson Energy Services, Inc.
                              and WPS Power Development, Inc. ((47); Exhibit
                              (10) (i) (69))

                  (i)   70--  Letter Agreement, dated December 21, 2001,
                              between Central Hudson Enterprises Corporation and
                              WPS Power Development, Inc. ((47); Exhibit (10)
                              (i) (70))

<PAGE>

                  (i)   71--  [Reserved]

                  (i)   72--  Letter Agreement, dated July 3, 2001 between
                              Central Hudson and Dynegy. ((47); Exhibit (10) (i)
                              (72))

                  (i)   73--  Credit Agreement dated as of June 30, 2004,
                              among Central Hudson, the Lenders party thereto
                              and J. P. Morgan Chase Bank, as administrative
                              arranger. ((55); Exhibit 10.1)

                  (iii) 1--   Agreement, made March 14, 1994, by and between
                              Central Hudson and Mellon Bank, N.A., amending and
                              restating, effective April 1, 1994, Central
                              Hudson's Savings Incentive Plan and related Trust
                              Agreement with The Bank of New York. ((25);
                              Exhibit (10)(iii)18)

                  (iii) 2--   Amendment 1, dated July 22, 1994 (effective
                              April 1, 1994) to the Amended and Restated Savings
                              Incentive Plan of Central Hudson. ((26); Exhibit
                              (10)(iii)19)

                  (iii) 3--   Amendment 2, dated December 16, 1994
                              (effective January 1, 1995) to the Amended and
                              Restated Savings Incentive Plan of Central Hudson,
                              as amended. ((26); Exhibit (10)(iii)20)

                  (iii) 4--   Management Incentive Program of Central
                              Hudson, effective April 1, 1994. ((30); Exhibit
                              (10)(iii)23)

                  (iii) 5--   Amendment, dated July 25, 1997, to the
                              Management Incentive Program of Central Hudson,
                              effective August 1, 1997. ((33); Exhibit
                              (10)(iii)24)

                  (iii) 6--   CH Energy Group, Inc. Change-of-Control
                              Severance Policy, effective December 1, 1998.
                              ((40); Exhibit (10)(iii)14)

                  (iii) 7--   Amended and Restated Stock Plan for Outside
                              Directors of CH Energy Group, Inc. effective
                              December 15, 1999. ((41); Exhibit (10)(iii)21)

<PAGE>

                  (iii) 8--   CH Energy Group, Inc. Directors and Executives
                              Deferred Compensation Plan effective January 1,
                              2000. ((41); Exhibit (10)(iii)25)

                  (iii) 9--   Trust and Agency Agreement, dated December 15,
                              1999 and effective January 1, 2000, between the
                              Corporation and First America Trust Company for
                              the Corporation's Directors and Executives
                              Deferred Compensation Plan.((41); Exhibit
                              (10)(iii)26)

                  (iii) 10--  Long-Term Performance-Based Incentive Plan of
                              CH Energy Group, Inc. effective January 1, 2000.
                              ((41); Exhibit (10)(iii)27)

                  (iii) 11--  CH Energy Group, Inc. Supplementary
                              Retirement Plan, effective December 15, 1999,
                              being an amendment and restatement of the Central
                              Hudson Executive Deferred Compensation Plan as
                              assigned to CH Energy Group, Inc. ((43); Exhibit
                              (10)(ii)29)

                  (iii) 12--  Amendment to and Restatement of Central
                              Hudson's Retirement Benefit Restoration Plan,
                              effective as of January 1, 2000. ((43); Exhibit
                              (10)(iii)30)

                  (iii) 13--  Form of Employment Agreement, for all
                              officers of CH Energy Group, Inc. and its
                              subsidiary companies. ((47); Exhibit (10) (iii)
                              (13))

                  (iii) 14--  Amendment Number Three to the Central Hudson
                              Savings Incentive Plan, effective January 1, 2001.
                              ((45); Exhibit (10)(iii)32)

                  (iii) 15--  Amendment to the CH Energy Group, Inc.
                              Change-of-Control Severance Policy, effective
                              August 1, 2000. ((45); Exhibit (10)(iii)33)

<PAGE>

                  (iii) 16--  Employment Agreement, dated September 28,
                              2001, between CH Energy Group, Inc. and Paul J.
                              Ganci. ((47); Exhibit (10) (iii) (16))

                  (iii) 17--  Amendment, effective January 1, 2001, to
                              Energy Group's Long-Term Performance-Based
                              Incentive Plan. ((46); Exhibit (10)(iii)1)

                  (iii) 18--  Amendment and Restatement, dated October 1,
                              2001, of the Central Hudson Savings Incentive
                              Plan.((47); Exhibit (10) (iii) (18))

                  (iii) 19--  Form of Trust Agreement, effective as of
                              October 1, 2001, between Central Hudson and ING
                              National Trust, as successor Trustee under the
                              Central Hudson Savings Incentive Plan. ((47);
                              Exhibit (10) (iii) (19))

                  (iii) 20--  Amendment No. 2, effective January 1, 2002,
                              to Energy Group's Long-Term Performance-Based
                              Incentive Plan. ((47); Exhibit (10) (iii) (20))

                  (iii) 21--  Form of Supplemental Participation Agreement,
                              dated October 21, 2001, among Central Hudson
                              Enterprises Corporation, Central Hudson and ING
                              National Trust re: Central Hudson Savings
                              Incentive Plan. ((47); Exhibit (10) (iii) (21))

                  (iii) 22--  Amendment to CH Energy Group, Inc. Directors
                              and Executives Deferred Compensation Plan
                              effective July 1, 2002. ((47); Exhibit (10) (iii)
                              (22))

                  (iii) 23--  Amendment and restatement of CH Energy Group,
                              Inc. Supplementary Retirement Plan, effective July
                              1, 2001. ((47); Exhibit (10) (iii) (23))

                  (iii) 24--  Amendment and restatement of Central Hudson
                              Gas & Electric Corporation Retirement Benefit
                              Restoration Plan effective June 22, 2001. ((47);
                              Exhibit (10) (iii) (24))

<PAGE>

                  (iii) 25--  Agreement, dated May 10, 2002, between CH
                              Energy Group, Inc. and Allan R. Page.((51);
                              Exhibit (10)(iii)(25))

                  (iii) 26--  Amendment and restatement of CH Energy Group,
                              Inc. Directors and Executives Deferred
                              Compensation Plan, effective September 26, 2003
                              ((52); Exhibit (10)(iii)(26)).

                  (iii) 27--  Central Hudson Gas & Electric Corporation
                              Savings Incentive Plan, January 1, 2004
                              Restatement((53); Exhibit 99(a)).

                  (iii) 28--  Amendment to CH Energy Group, Inc. Long-Term
                              Performance-Based Incentive Plan, dated October
                              24, 2003, effective as of September 26, 2003
                              ((51);Exhibit (10)(iii)(28))

                  (iii) 29--  Amendment to CH Energy Group, Inc. Directors
                              and Executives Deferred Compensation Plan Trust
                              Agreement, dated October 24, 2003, effective as of
                              September 26, 2003 ((51); Exhibit (10)(iii)(29))

                  (iii) 30--  CH Energy Group, Inc. Amended and Restated
                              Stock Plan for Outside Directors, dated October
                              24, 2003, effective as of September 26, 2003
                              ((51);Exhibit (10)(iii)(30))

                  (iii) 31--  First Amendment to the Central Hudson Gas &
                              Electric Corporation Savings Incentive Plan (54;
                              Exhibit 10(iii)(31)).

                  (iii) 32--  CH Energy Group, Inc. 2004 Executive Annual
                              Incentive Plan, dated March 16, 2004.

                  (iii) 33--  CH Energy Group, Inc. 2005 Executive Annual
                              Incentive Plan, dated February 11, 2005.

(12)(i)--         CH Energy Group Statement showing the computation of the ratio
                  of earnings to fixed charges.

(12)(ii)--        Central Hudson Statement showing the computation of the ratio
                  of earnings to fixed charges and ratio of earnings to fixed
                  charges and preferred dividends.

<PAGE>

(14) --           CH Energy Group, Inc. Code of Business Conduct and Ethics
                  ((51); Exhibit (14))

(21) --           Subsidiaries of Energy Group and Central Hudson as of December
                  31, 2004.

                               State or other       Name under which
                               Jurisdiction of      Subsidiary conducts
Name of Subsidiary             Incorporation        Business
------------------             -------------        --------

Central Hudson Gas             New York             Central Hudson Gas
& Electric Corporation                              Electric Corporation

Phoenix Development            New York             Phoenix Development
Company, Inc.                                       Company, Inc.

Central Hudson                 New York             Central Hudson
Enterprises Corporation                             Enterprises Corporation

SCASCO, Inc.                   Connecticut          SCASCO, Inc.

Griffith Energy                New York             Griffith Energy
Services, Inc.                                      Services, Inc.

(23) --           Consents of Independent Registered Public Accounting Firm.

(24) --           Powers of Attorney:

                  (i)   1--   Powers of Attorney for each of the directors
                              comprising a majority of the Board of Directors of
                              Energy Group authorizing execution and filing of
                              this Annual Report on Form 10-K by Steven V. Lant.

                  (i)   2--   Powers of Attorney for each of the directors
                              comprising a majority of the Board of Directors of
                              Central Hudson authorizing execution and filing of
                              this Annual Report on Form 10-K by Steven V. Lant.

(31) --           Rule 13a-14(a)/15d-14(a) Certifications.

(32) --           Section 1350 Certifications.

(99) --           Additional Exhibits:

<PAGE>

                  (i)   1--   Order on Consent signed on behalf of the New
                              York State Department of Environmental
                              Conservation and Central Hudson relating to
                              Central Hudson's former manufactured gas site
                              located in Newburgh, New York. ((28); Exhibit
                              (99)(i)5)

                  (i)   2--   Summary of principal terms of the Amended and
                              Restated Settlement Agreement, dated January 2,
                              1998, among Central Hudson, the Staff of the
                              Public Service Commission of the State of New York
                              and the New York State Department of Economic
                              Development. ((32); Exhibit 99(1))

                  (i)   3--   Order of the Public Service Commission of the
                              State of New York, issued and effective February
                              19, 1998, adopting the terms of Central Hudson's
                              Amended Settlement Agreement, subject to certain
                              modifications and conditions. ((34); Exhibit
                              (10)(1))

                  (i)   4--   Order of the Public Service Commission of the
                              State of New York, issued and effective June 30,
                              1998, explaining in greater detail and reaffirming
                              its Abbreviated Order, issued and effective
                              February 19, 1998, which February 19, 1998 Order
                              modified, and as modified, approved the Amended
                              and Restated Settlement Agreement, dated January
                              2, 1998, entered into among Central Hudson, the
                              PSC Staff and others as part of the PSC's
                              "Competitive Opportunities" proceeding (ii) the
                              Order, dated June 24, 1998, of the Federal Energy
                              Regulatory Commission conditionally authorizing
                              the establishment of an Independent System
                              Operator by the member systems of the New York
                              Power Pool and (iii) disclosing, effective August
                              1, 1998, Paul J. Ganci's appointment by Central
                              Hudson's Board of Directors as President and Chief
                              Executive Officer and John E. Mack III's (formerly
                              Chairman of the Board and Chief Executive Officer)
                              continuation as Chairman of the Board. (35)

                  (i)   5--   Order of the Public Service Commission of the
                              State of New York, issued and effective December
                              20, 2000, authorizing the transfer of the
                              Danskammer Plant and the Roseton Plant. ((45);
                              Exhibit (99)(i)8)

<PAGE>

                  (i)   6--   Order of the Public Service Commission of the
                              State of New York, issued and effective January
                              25, 2001, clarifying prior Order relating to the
                              approval of the transfer of the Danskammer Plant
                              and the Roseton Plant. ((45); Exhibit (99)(i)9)

                  (i)   7--   Order of the Public Service Commission of the
                              State of New York, issued and effective, October
                              26, 2001, authorizing asset transfers of the Nine
                              Mile 2 Plant. ((47); Exhibit (99)(i)(7))

                  (i)   8--   Order of the Public Service Commission of the
                              State of New York, issued and effective, September
                              27, 2001, authorizing new revolving credit
                              facilities and a New Medium Term Note Program for
                              Central Hudson. ((47); Exhibit (99)(i)(8))

                  (i)   9--   Order of the Public Service Commission of the
                              State of New York, issued and effective October
                              25, 2001, establishing new rates for Central
                              Hudson. ((47); Exhibit (99)(i)(9))

                  (i)   10--  Order of the Public Service Commission of the
                              State of New York, issued and effective October 3,
                              2002, authorizing the implementation of the
                              Economic Development Program. ((51); Exhibit
                              (99)(i)(10))

                  (i)   11--  Order of the Public Service Commission of the
                              State of New York, issued and effective October
                              25, 2002, authorizing the establishment of a
                              deferred accounting plan for site identification
                              and remediation costs relating to Central Hudson's
                              seven former manufactured gas plants. ((51);
                              Exhibit (99)(i)(11))

                  (i)   12--  Order of the Public Service Commission of the
                              State of New York, issued and effective October
                              29, 2003, directing the continuation of certain
                              non-price features of the rate plan. ((51);
                              Exhibit (99)(i)(12))

                  (i)   13--  Order of the Public Service Commission of the
                              State of New York, issued and effective April 6,
                              2004, authorizing new revolving credit facilities
                              and a new Medium Term Note Program for Central
                              Hudson. ((55); Exhibit 99(i)(13))

<PAGE>

                  (i)   14--  Order of the Public Service Commission of the
                              State of New York, issued and effective June 14,
                              2004, modifying the rate plan. (55); Exhibit
                              99(i)14)

The following are notes to the Exhibits listed above:

                  (1)         Incorporated herein by reference to Central
                              Hudson's Quarterly report on Form 10-Q for fiscal
                              quarter ended September 30, 1993 (File No.
                              1-3268).

                  (2)         Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K/A for the
                              fiscal year ended December 31, 1992 (File No.
                              1-3268).

                  (3)         Incorporated herein by reference to Central
                              Hudson's Registration Statement No. 2-65127.

                  (4)         [Reserved]

                  (5)         [Reserved]

                  (6)   (a)   Incorporated herein by reference to Prospectus
                              Supplement Dated May 28, 1992 (To Prospectus Dated
                              April 13, 1992) relating to $125,000,000 principal
                              amount of First Mortgage Bonds, designated Secured
                              Medium-Term Notes, Series A, and to the Prospectus
                              Dated April 13, 1992 relating to $125,000,000
                              principal amount of Central Hudson's debt
                              securities attached thereto, as filed with the
                              Securities and Exchange Commission pursuant to
                              Rule 424(b)(5) under the Securities Act of 1933,
                              in connection with Registration Statement No.
                              33-46624.

                        (b)   Incorporated herein by reference to Pricing
                              Supplement No. 2, Dated June 4, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

<PAGE>

                        (c)   Incorporated herein by reference to Pricing
                              Supplement No. 3, Dated June 4, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

                        (d)   Incorporated herein by reference to Pricing
                              Supplement No. 4, Dated August 20, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

                        (e)   Incorporated herein by reference to Pricing
                              Supplement No. 5, Dated August 20, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

                        (f)   Incorporated herein by reference to Pricing
                              Supplement No. 7, Dated July 26, 1993 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

                  (7)         Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K, dated May 27,
                              1992 (File No. 1-3268).

                  (8)   (a)   Incorporated herein by reference to Prospectus
                              Supplement Dated May 28, 1992 (To Prospectus Dated
                              April 13, 1992) relating to $125,000,000 principal
                              amount of Medium-Term Notes, Series A, and to the
                              Prospectus Dated April 13, 1992, relating to
                              $125,000,000 principal amount of Central Hudson's
                              debt securities attached thereto, as filed with
                              the Securities and Exchange Commission pursuant to
                              Rule 424(b)(5) under the Securities Act of 1933,
                              in connection with Registration Statement No.
                              33-46624.

<PAGE>

                        (b)   Incorporated herein by reference to Pricing
                              Supplement No. 1, Dated June 26, 1992 (To
                              Prospectus Dated April 13, 1992, as supplemented
                              by a Prospectus Supplement Dated May 28, 1992), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(3) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-46624.

                  (9)         [Reserved]

                  (10)  (a)   Incorporated herein by reference to Prospectus
                              Supplement Dated August 24, 1998 (To Prospectus
                              Dated April 4, 1995) relating to $80,000,000
                              principal amount of Medium-Term Notes, Series B,
                              and the Prospectus Dated April 4, 1995, relating
                              to (i) $80,000,000 of Central Hudson's Debt
                              Securities and Common Stock, $5.00 par value, but
                              not in excess of $40 million aggregate initial
                              offering price of such Common Stock and (ii)
                              250,000 shares of Central Hudson's Cumulative
                              Preferred Stock, par value $100 per share, which
                              may be issued as 1,000,000 shares of Depositary
                              Preferred Shares each representing 1/4 of a share
                              of such Cumulative Preferred Stock attached
                              thereto, as filed pursuant to Rule 424(b) in
                              connection with Registration Statement No.
                              33-56349.

                        (b)   Incorporated herein by reference to Pricing
                              Supplement No. 1, Dated September 2, 1998 (To
                              Prospectus Dated April 4, 1995, as supplemented by
                              a Prospectus Supplement Dated August 24, 1998), as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424(b)(2) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 33-56349.

                  (11)        Incorporated herein by reference to Central
                              Hudson's Registration Statement No. 2-50276.

                  (12)        Incorporated herein by reference to Central
                              Hudson's Registration Statement No. 2-54690.

                  (13)        (a) Incorporated herein by reference to Prospectus
                              Supplement, dated March 20, 2002 (to

<PAGE>

                              Prospectus dated March 14, 2002), relating to
                              $100,000,000 principal amount Medium-Term Notes,
                              Series D, of Central Hudson, and the Prospectus,
                              dated 14, 2002, relating to said $100,000,000
                              principal amount of debt securities, attached
                              thereto, as filed with the Securities and Exchange
                              Commission pursuant to Rule 424 (b) under the
                              Securities Act of 1933 in connection with
                              Registration Statement No. 333-83542.

                              (b) Incorporated herein by reference to Pricing
                              Supplement No. 1, dated March 25, 2002 (to
                              Prospectus dated March 14, 2002, as supplemented
                              by a Prospectus Supplement dated March 20, 2002)
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424 (b) (2) under Securities Act
                              of 1933 in connection with Registration Statement
                              No. 333-83542.

                              (c) Incorporated herein by reference to Pricing
                              Supplement No. 2 dated March 25, 2002 (to
                              Prospectus dated March 14, 2002, as supplemented
                              by a Prospectus Supplement dated March 20, 2002)
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424 (b) (2) under the Securities
                              Act of 1933 in connection with Registration
                              Statement No. 333-83542.

                              (d) Incorporated herein by reference to Pricing
                              Supplement No. 3 dated September 17, 2003 (to
                              Prospectus dated March 14, 2002, as supplemented
                              by a Prospectus Supplement dated March 20, 2002
                              and March 25, 2002) filed with the Securities and
                              Exchange Commission pursuant to Rule 424 (b) (2)
                              under the Securities Act of 1933 in connection
                              with Registration Statement No. 333-83542.

                              (e) Incorporated herein by reference to Pricing
                              Supplement No. 4 dated February 24, 2004 (to
                              Prospectus dated March 14, 2002, as supplemented
                              by a Prospectus Supplement dated March 20, 2002
                              and March 25, 2002) filed with the Securities and
                              Exchange Commission pursuant to Rule 424 (b) (2)
                              under the Securities Act of 1933 in connection
                              with Registration Statement No. 333-83542.

<PAGE>

                  (14)        [Reserved]

                  (15)        [Reserved]

                  (16)        [Reserved]

                  (17)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1987 (File No. 1-3268).

                  (18)        Incorporated herein by reference to Central
                              Hudson's Quarterly Report on Form 10-Q for the
                              fiscal quarter ended September 30, 1993 (File No.
                              1-3268).

                  (19)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1990 (File No. 1-3268).

                  (20)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1991 (File No. 1-3268).

                  (21)        Incorporated herein by reference to Central
                              Hudson's Quarterly Report on Form 10-Q for the
                              fiscal quarter ended September 30, 1992 (File No.
                              1-3268).

                  (22)        [Reserved]

                  (23)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K, dated May 15,
                              1987 (File No. 1-3268).

                  (24)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1993 (File No. 1-3268).

                  (25)        Incorporated herein by reference to Central
                              Hudson's Quarterly Report on Form 10-Q for the
                              fiscal quarter ended June 30, 1994 (File No.
                              1-3268).

                  (26)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1994 (File No. 1-3268).

<PAGE>

                  (27)        [Reserved]

                  (28)        Incorporated herein by reference to Central
                              Hudson's Quarterly Report on Form 10-Q for the
                              fiscal quarter ended September 30, 1995 (File No.
                              1-3268).

                  (29)        [Reserved]

                  (30)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1996 (File No. 1-3268).

                  (31)        [Reserved]

                  (32)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K, dated January
                              7, 1998 (File No. 1-3268).

                  (33)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1997, as amended December
                              8, 1998 (File No. 1-3268).

                  (34)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K, dated
                              February 10, 1998 (File No. 1-3268).

                  (35)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K, dated July
                              24, 1998 (File No. 1-3268).

                  (36)  (a)   Incorporated herein by reference to Prospectus
                              Supplement Dated January 8, 1999 (To Prospectus
                              Dated January 7, 1999) relating to $110,000,000
                              principal amount of Medium-Term Notes, Series C,
                              and to the Prospectus Dated January 7, 1999,
                              relating to $110,000,000 principal amount of
                              Central Hudson's debt securities attached thereto,
                              as filed with the Securities and Exchange
                              Commission pursuant to Rule 424(b)(2) under the
                              Securities Act of 1933, in connection with
                              Registration Statement Nos. 333-65597 and
                              33-56349.

<PAGE>

                        (b)   Incorporated herein by reference to Pricing
                              Supplement No. 1, Dated January 12, 1999 (To
                              Prospectus Dated January 7, 1999, as supplemented
                              by a Prospectus Supplement Dated January 8, 1999),
                              as filed with the Securities and Exchange
                              Commission pursuant to Rule 424(b)(3) under the
                              Securities Act of 1933 in connection with
                              Registration Statement Nos. 333-65597 and
                              33-56349.

                  (37)        Incorporated herein by reference to Energy Group's
                              Annual Report on Form 10-K for the fiscal year
                              ended December 31, 1998 (File No. 333-52797).

                  (38)        Incorporation herein by reference to Central
                              Hudson's Quarterly Report on Form 10-Q for the
                              fiscal quarter ended June 30, 1999 (File No.
                              1-3268).

                  (39)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K dated December
                              15, 1999 (File No. 1-3268)

                  (40)        Incorporated herein by reference to Central
                              Hudson's Annual Report on Form 10-K for the fiscal
                              year ended December 31, 1998 (File No. 1-3268).

                  (41)        Incorporated herein by reference to Energy Group's
                              Annual Report on Form 10-K for the fiscal year
                              ended December 31, 1999 (File No. 333-52797).

                  (42)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the fiscal
                              quarter ended March 31, 2000 (File No. 333-52797).

                  (43)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the fiscal
                              quarter ended June 30, 2000 (File No. 333-52797).

                  (44)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the fiscal
                              quarter ended September 30, 2000 (File No.
                              333-52797).

<PAGE>

                  (45)        Incorporated herein by reference to Energy Group's
                              Annual Report, on Form 10-K, for the fiscal year
                              ended December 31, 2000 (File No. 333-52797).

                  (46)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the fiscal
                              quarter ended March 31, 2001 (File No. 333-52797).

                  (47)        Incorporated herein by reference to Energy Group's
                              Annual Report on Form 10-K, for the fiscal year
                              ended December 31, 2001 (File No. 333-52797)

                  (48)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the fiscal
                              quarter ended September 30, 2002 (File No.
                              333-52797).

                  (49)        Incorporated herein by reference to Energy Group's
                              Annual Report on Form 10-K, for the fiscal year
                              ended December 31, 2002 (File No. 333-52797)

                  (50)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q, for the fiscal
                              quarter ended June 30, 2003 (File No. 333-52797)

                  (51)        Incorporated herein by reference to Energy Group's
                              Annual Report on Form 10-K, for the fiscal year
                              ended December 31, 2003 (File No. 333-52797)

                  (52)        Incorporated herein by reference to Energy Group's
                              Registration Statement on Form S-8, filed on
                              October 30, 2003 (File No. 333-110086)

                  (53)        Incorporated herein by reference to Energy Group's
                              Registration Statement on Form S-8, filed on
                              January 16, 2004 (File No. 333-111984)

<PAGE>

                  (54)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the quarter
                              ended March 31, 2004 (File No. 333-52797).

                  (55)        Incorporated herein by reference to Energy Group's
                              Quarterly Report on Form 10-Q for the quarter
                              ended June 30, 2004 (File No. 333-52797).

                  (56)        (2) Incorporated herein by reference to Prospectus
                              Supplement, dated October 28, 2004 (to Prospectus
                              dated October 22, 2004), relating to $85,000,000
                              principal amount Medium-Term Notes, Series E, of
                              Central Hudson, and the Prospectus, dated October
                              22, 2004, relating to said $85,000,000 principal
                              amount of debt securities, attached thereto, as
                              filed with the Securities and Exchange Commission
                              pursuant to Rule 424 (b) under the Securities Act
                              of 1933 in connection with Registration Statement
                              No. 333-116286.

                              (b) Incorporated herein by reference to Pricing
                              Supplement No. 1, Dated October 29, 2004 (to said
                              Prospectus dated October 22, 2004, as supplemented
                              by said Prospectus Supplement Dated October 28,
                              2004) filed pursuant to Rule 424 (b)(3) in
                              connection with Registration Statement No.
                              333-1162862.

                              (c) Incorporated herein by reference to Pricing
                              Supplement No. 2, Dated November 2, 2004 (to said
                              Prospectus dated October 22, 2004, as supplemented
                              by said Prospectus Supplement Dated October 28,
                              2004) filed pursuant to Rule 424 (b)(3) in
                              connection with Registration Statement No.
                              333-1162862.

                  (57)        Incorporated herein by reference to Central
                              Hudson's Current Report on Form 8-K filed on
                              November 9, 2004 (File No. 001-03268).