Exhibit (10)(iii)40 CH
ENERGY GROUP, INCSHORT-TERM INCENTIVE PLAN 1.          Purpose.
The purpose of this Short-Term Incentive Plan (this
STI Plan) is to reward designated executives of CH Energy Group, Inc. (the Company)
and its Subsidiaries for the achievement of each years business plan
objectives and individual performance goals in a manner consistent with the
Companys strategy of achieving long-term shareholder value. 2.          Definitions. The
following capitalized words as used in this STI Plan shall have the following
meanings: Award
Opportunity means a cash award opportunity established under the STI Plan for
a Participant by the Committee pursuant to such terms, conditions, restrictions
and/or limitations, if any, as the Committee may establish. Board
means the Board of Directors of the Company. Chief
Executive Officer means the Chief Executive Officer of the Company. Code
means the Internal Revenue Code of 1986, as amended. Committee
means the Compensation Committee of the Board. Company
has the meaning given such
term in Section 1 of this STI Plan. Employee
means any person employed by the Company or its Subsidiaries, whether such
Employee is so employed at the time the STI Plan is adopted or becomes so
employed subsequent to the adoption of the STI Plan. Participant
means, as to any Performance Period, any Employee who is selected by the
Committee to be eligible to participate in the STI Plan for that Performance
Period, as provided herein. Payout
Formula means the formula
established by the Committee for determining Award Opportunities for a
Performance Period based on the level of achievement of the Performance
Objectives for the Performance Period. Performance
Objectives means the measurable or subjective performance objective or
objectives established pursuant to this STI Plan for Participants who have
received Award Opportunities. Performance Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or of a Subsidiary, division, business unit,
department, region or function within the Company or   Subsidiary in which the Participant is employed. The
Performance Objectives may be made relative to the performance of other
corporations or entities.

Performance
Period means the Companys fiscal year or such other period as determined by
the Committee in its discretion.

STI
Plan means this CH Energy Group, Inc. Short-Term Incentive Plan, as amended
from time to time.

Subsidiary
means a corporation, company or other entity (i) more than 50 percent of whose
outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority) are, or (ii) which does not
have outstanding shares or securities (as may be the case in a partnership,
joint venture or unincorporated association), but more than 50 percent of whose
ownership interest representing the right generally to make decisions for such
other entity is, now or hereafter, owned or controlled, directly or indirectly,
by the Company.

3.          Administration.The Committee shall be responsible for
administration of the STI Plan. The Committee, by majority action, is
authorized to interpret the STI Plan, to prescribe, amend, and rescind
regulations relating to the STI Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company and its
Subsidiaries, and to make all other determinations necessary or advisable for
the administration of the STI Plan, but only to the extent not contrary to the
express provisions of the STI Plan. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the STI
Plan shall be final, binding and conclusive for all purposes and upon all
Participants. No member of the Committee shall be liable for any such action or
determination made in good faith. The Board (acting solely by the independent
directors as identified under the applicable exchange listing standards) may
perform any function of the Committee hereunder, in which case the term Committee
shall refer to the Board.

4.          Eligibility.The
Committee, in its sole discretion, shall determine which Employees will be
eligible to participate in the STI Plan for any given Performance Period. When
making this determination, the Committee shall consider the recommendations of
the Chief Executive Officer. Eligible Participants shall be designated by the
Committee either before or within 90 days following the beginning of the
Performance Period. An Employee who is a Participant for a given Performance
Period is neither guaranteed nor assured of being selected for participation in
any subsequent Performance Period.

5.          Award
Opportunities

a.          No
later than the first 90 days following the beginning of each Performance
Period, the Committee shall establish the Award Opportunity for each
Participant, including the applicable Performance Objectives and Payout
Formula. Each Performance Objective will be weighted by the Committee to
reflect its relative importance to the Company in the applicable Performance
Period. The Payout Formulas, Performance Objectives and weighting of the
Performance Objectives need not be uniform with respect to any or all Participants.
The

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Committee shall consider the recommendations of the
Chief Executive Officer in determining the applicable Payout Formulas,
Performance Objectives or weighting of the Performance Objectives with respect
to Participants other than the Chief Executive Officer. The Committee may also
establish Award Opportunities for newly hired or newly promoted employees
without compliance with such timing and other limitations as provided herein,
which Award Opportunities may be based on performance during less than the full
Performance Period and may be pro rated in the discretion of the Committee.

b.          Participants
must achieve the Performance Objectives established by the Committee in order
to receive payment of an Award Opportunity under the STI Plan. However, the
Committee may determine that only a threshold level relating to a Performance
Objective must be achieved for Award Opportunities to be paid under the STI
Plan. Similarly, the Committee may establish a minimum threshold performance
level, a maximum performance level, and one or more intermediate performance
levels or ranges, with target award levels or ranges that will correspond to
the respective performance levels or ranges included in the Payout Formula.

c.          The
Committee may in its sole discretion modify the Payout Formulas, Performance
Objectives or the related minimum acceptable level of achievement, in whole or
in part, as the Committee deems appropriate and equitable (i) to reflect a
change in the business, operations, corporate structure or capital structure of
the Company or its Subsidiaries, the manner in which it conducts its business,
or other events or circumstances or (ii) in the event that a Participants
responsibilities materially change during a Performance Period or the Participant
is transferred to a position that is not designated or eligible to participate
in the STI Plan.

6.          Determination
of Award Opportunities.Within
the first 60 days following the end of each Performance Period, the Committee
shall determine in writing whether and to what extent the Performance
Objectives with respect to each Participant for the applicable Performance
Period have been achieved and, if such Performance Objectives have been
achieved, to approve actual payment of each Award Opportunity under the STI
Plan pursuant to the applicable Payout Formulas. The Committee shall consider
the recommendations of the Chief Executive Officer when determining whether the
Performance Objectives have been achieved with respect to Participants other
than the Chief Executive Officer. In the event a Participant terminates
employment with the Company and its Subsidiaries for any reason prior to the
last day of the Performance Period, the Participant shall not be entitled to
payment of an Award Opportunity with respect to that Performance Period;
provided that in the case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of other special
circumstances, the Committee may, in it sole discretion, pay all or any portion
of the Award Opportunity to the Participant (or to the Participants estate in
the event of his or her death) as the Committee deems appropriate and
equitable.

7.          Payment
of Award Opportunities.If earned,
an Award Opportunity of a Participant for a particular Performance Period shall
be paid in cash after the end of the Performance Period, but in no event later
than two-and-one-half months after the end of the Performance Period. Notwithstanding
the foregoing, a Participant may elect to defer receipt of

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payment of an Award Opportunity in accordance with the
terms and subject to the conditions of the Directors and Executives Deferred
Compensation Plan (or any successor plan).

8.          Tax
Withholding. The Company and its Subsidiaries shall have
the right to deduct from all payments made to any person under the STI Plan any
federal, state, local, foreign or other taxes which, in the opinion of the
Company and its Subsidiaries, are required to be withheld with respect to such
payments.

9.          No
Employment Contract.Nothing
contained in this STI Plan shall confer upon a Participant any right with
respect to continuance of employment by the Company and its Subsidiaries, nor
limit or affect in any manner the right of the Company and its Subsidiaries to
terminate the employment or adjust the compensation of a Participant. For
purposes of the STI Plan, the transfer of employment of a Participant between
the Company and any one of its Subsidiaries (or between Subsidiaries) shall not
be deemed a termination of the Participants employment.

10.        Transferability.No right or benefit under
this STI Plan will be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge such right or benefit will be void. No such
right or benefit will in any manner be liable for or subject to the debts,
liabilities, or torts of a Participant.

11.        Successors.All obligations of the Company under the STI Plan
shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business or
assets of the Company.

12.        Governing
Law.The STI Plan and all Award Opportunities
shall be construed in accordance with and governed by the laws of the State of
New York, but without regard to its conflict of law provisions.

13.        Amendment
or Termination.The Board reserves the right, at any time, to amend, suspend or terminate
the STI Plan, in whole or in part, in any manner, and for any reason, and
without the consent of any Participant, Eligible Employee or other person;
provided, that no such amendment, suspension or termination shall adversely
affect the payment of any amount for a Performance Period ending prior to the
action of the Board amending, suspending or terminating the STI Plan.

14.        Participation
by Employees of Subsidiaries.Any Subsidiary may, by action of its board of directors or equivalent
governing body and with the consent of the Board, adopt the STI Plan; provided
that the Board may waive the requirement that such board of directors or
equivalent governing body effect such adoption. By its adoption of or
participation in the STI Plan, the adopting Subsidiary shall be deemed to
appoint the Company its exclusive agent to exercise on its behalf all of the
power and authority conferred by the STI Plan upon the Company and accept the
delegation to the Committee of all the power and authority conferred upon it by
the STI Plan. The authority of the Company to act as such agent shall continue
until

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the STI Plan is terminated
as to the participating Subsidiary. An Award Opportunity of a Participant
employed by a participating Subsidiary shall be paid in accordance with the STI
Plan solely by that Subsidiary, unless the Board otherwise determines that the
Company shall be responsible for payment. Each Award Opportunity that
may become payable under the STI Plan shall be paid solely from the general
assets of the Company or the Subsidiary responsible for payment thereof. Nothing
in this STI Plan shall be construed to create a trust or to establish or
evidence any Participants claim of any right to payment of an Award
Opportunity other than as an unsecured general creditor with respect to any
payment to which he or she may be entitled.

IN
WITNESS WHEREOF, CH Energy Group, Inc. has caused this STI Plan to be executed
by its duly authorized officer on this 1st day of January, 2008.

CH ENERGY GROUP, INC.By:
 /s/ Steven V. LantSteven V. Lant,
 Chairman, President andChief Executive
 Officer ofCH Energy Group,
 Inc.5