----

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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,                        2007 |

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

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

Securities registered pursuant            to Section 12(b) of the Act:
|                                                                                              |   |                                                                                    |
|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|
| Title                        of each class                                                        |   | Name                        of each exchange                        on which registered |
|                                                                                                   |   |                                                                                         |
|                                                                                              |   |                                                                                    |
| CH Energy Group,                        Inc.                        Common Stock, $0.10 par value |   | New                        York Stock Exchange                                          |

----

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

                                Title of each class

Central Hudson Gas &            Electric Corporation Cumulative Preferred Stock

                    4.50%            Series                                4.75%            Series

          Indicate            by check mark if CH Energy Group, Inc. (“CH Energy Group”) is a well-known            seasoned issuer, as defined in Rule 405 of the Securities Act.

**                              Yes**x     **No**o

          Indicate            by check mark if Central Hudson Gas & Electric Corporation (“Central            Hudson”) is a well-known seasoned issuer, as defined in Rule 405 of the            Securities Act.

**                              Yes**o     **No**x

          Indicate            by check mark if CH Energy Group is not required to file reports pursuant to Section 13            or Section 15(d) of the Act

**                              Yes**o     **No**x

          Indicate            by check mark if Central Hudson is not required to file reports pursuant to Section 13            or Section 15(d) of the Act.

**                              Yes**o     **No**x

          Indicate            by check mark whether the Registrants (1) have filed all reports required to be filed            by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12            months (or for such shorter period that the Registrants were required to file such            reports), and (2) have been subject to such filing requirements for the past 90            days.

**                              Yes**x     **No**o

          Indicate            by check mark 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.o

        Indicate            by check mark whether CH Energy Group is a large accelerated filer, an accelerated            filer, a non-accelerated filer, or a smaller reporting company. See the definitions of            “large accelerated filer,” “accelerated filer” and            “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check            one):

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

----

        Indicate            by check mark whether Central Hudson is a large accelerated filer, an accelerated            filer, a non-accelerated filer, or a smaller reporting company. See the definitions of            “large accelerated filer,” “accelerated filer” and            “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check            one):

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

          Indicate            by check mark whether CH Energy Group is a shell company (as defined in Rule 12b-2 of            the Act).

**                              Yes**o     **No**x

          Indicate            by check mark whether Central Hudson is a shell company (as defined in Rule 12b-2 of            the Act).

**                              Yes**o     **No**x

          The            aggregate market value of the voting and non-voting common equity of CH Energy Group            held by non-affiliates as of February 1, 2008, was $620,395,353 based upon the price at            which CH Energy Group’s Common Stock was last 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 CH Energy Group            held by non-affiliates as of June 30, 2007, the last business day of CH Energy            Group’s most recently completed second fiscal quarter, was $708,817,140 computed            by reference to the price at which CH Energy Group’s Common Stock was last 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 Central Hudson            held by non-affiliates as of June 30, 2007, was zero.

          The            number of shares outstanding of CH Energy Group’s Common Stock, as of February 1,            2008, was 15,774,100.

          The            number of shares outstanding of Central Hudson’s Common Stock, as of February 1,            2008, was 16,862,087. All such shares are owned by CH 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

          CH            Energy Group’s definitive Proxy Statement to be used in connection with its            Annual Meeting of Shareholders to be held on April 22, 2008, 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 Securities Exchange Act of 1934, as amended.

----

GLOSSARY OF            TERMS

The following is a glossary of            frequently used abbreviations or acronyms used herein.

|                                                                                    |   |                                                                                                                                                                                                          |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **CH Energy                        Group Companies, Segments, and Investments**         |
|                                                                                    |   |                                                                                                                                                                                                          |
| CH-Auburn                                                                               |   | CH-Auburn Energy,                        LLC (a wholly owned subsidiary of CHEC)                                                                                                                              |
|                                                                                    |   |                                                                                                                                                                                                          |
| Central                        Hudson                                                   |   | Central Hudson Gas                        & Electric Corporation (the wholly owned regulated electric and natural                        gas subsidiary of CH Energy Group and parent company of Phoenix) |
|                                                                                    |   |                                                                                                                                                                                                          |
| CH-Community                        Wind                                                |   | CH-Community Wind                        Energy, LLC (a CHEC investee company)                                                                                                                                |
|                                                                                    |   |                                                                                                                                                                                                          |
| CHEC                                                                                    |   | Central Hudson                        Enterprises Corporation (the unregulated parent company of Griffith and                        wholly owned subsidiary of CH Energy Group)                              |
|                                                                                    |   |                                                                                                                                                                                                          |
| CH Energy                        Group                                                  |   | CH Energy Group,                        Inc. (the holding company parent corporation of Central Hudson and                        CHEC)                                                                       |
|                                                                                    |   |                                                                                                                                                                                                          |
| CH                        Resources                                                     |   | CH Resources, Inc.                        (a former CH Energy Group subsidiary, sold on May 31, 2002)                                                                                                         |
|                                                                                    |   |                                                                                                                                                                                                          |
| Cornhusker                        Holdings                                              |   | Cornhusker Energy                        Lexington Holdings, LLC (a CHEC investee company)                                                                                                                    |
|                                                                                    |   |                                                                                                                                                                                                          |
| Griffith                                                                                |   | Griffith Energy                        Services, Inc. (a wholly owned subsidiary of CHEC)                                                                                                                     |
|                                                                                    |   |                                                                                                                                                                                                          |
| JB Wind                                                                                 |   | JB Wind Holdings,                        LLC (a CH-Community Wind investee company)                                                                                                                           |
|                                                                                    |   |                                                                                                                                                                                                          |
| Lyonsdale                                                                               |   | Lyonsdale Biomass,                        LLC (a CHEC 75% owned subsidiary company)                                                                                                                           |
|                                                                                    |   |                                                                                                                                                                                                          |
| Phoenix                                                                                 |   | Phoenix Development                        Company, Inc. (a wholly owned subsidiary of Central Hudson)                                                                                                        |
|                                                                                    |   |                                                                                                                                                                                                          |
| **Regulators**                                                                          |   |                                                                                                                                                                                                          |
|                                                                                    |   |                                                                                                                                                                                                          |
| FERC                                                                                    |   | Federal Energy                        Regulatory Commission                                                                                                                                                   |
|                                                                                    |   |                                                                                                                                                                                                          |
| PSC                                                                                     |   | New York State                        Public Service Commission                                                                                                                                               |
|                                                                                    |   |                                                                                                                                                                                                          |
| PSC Staff                                                                               |   | Staff of the New                        York State Department of Public Service                                                                                                                               |
|                                                                                    |   |                                                                                                                                                                                                          |
| SEC                                                                                     |   | United States                        Securities and Exchange Commission                                                                                                                                       |
|                                                                                    |   |                                                                                                                                                                                                          |
| **Terms Related                        to Business Operations Used by CH Energy Group** |
|                                                                                    |   |                                                                                                                                                                                                          |
| 1993 PSC                        Policy                                                  |   | PSC’s 1993                        Statement of Policy regarding Central Hudson’s pension and                        OPEB                                                                          |
|                                                                                    |   |                                                                                                                                                                                                          |
| 2006 Rate                        Order                                                  |   | Order Establishing                        Rate Plan issued by the PSC to Central Hudson on July 24, 2006                                                                                                      |
|                                                                                    |   |                                                                                                                                                                                                          |
| 2000 Plan                                                                               |   | CH Energy                        Group’s Long-Term Performance-Based Incentive Plan                                                                                                                     |

(i)

----

|                                           |   |                                                                                                                                                                                               |
|------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2006 Plan                                      |   | CH Energy                        Group’s Long-Term Equity Incentive Plan (which replaced the 2000                        Plan)                                                               |
|                                           |   |                                                                                                                                                                                               |
| ABO                                            |   | Accumulated (OPEB)                        Benefit Obligation                                                                                                                                       |
|                                           |   |                                                                                                                                                                                               |
| AFUDC                                          |   | Allowance for Funds                        Used During Construction                                                                                                                                |
|                                           |   |                                                                                                                                                                                               |
| ARS                                            |   | Auction Rate                        Securities                                                                                                                                                     |
|                                           |   |                                                                                                                                                                                               |
| Borrowing                        Agreement     |   | CH Energy                        Group’s Unsecured Credit Agreement with Several Commercial Banks                        (through April 2010)                                                |
|                                           |   |                                                                                                                                                                                               |
| Customer Benefit                        Fund   |   | A Regulatory                        Liability Established Pursuant to the Settlement Agreement for the Benefit                        of Central Hudson’s Customers                          |
|                                           |   |                                                                                                                                                                                               |
| Danskammer                        Plant        |   | Danskammer Point                        Steam Electric Generating Station                                                                                                                          |
|                                           |   |                                                                                                                                                                                               |
| Distributed                        Generation  |   | An electrical                        generating facility located at a customer’s point of delivery which                        may be connected in parallel operation to the utility system |
|                                           |   |                                                                                                                                                                                               |
| kWh                                            |   | Kilowatt-hour(s)                                                                                                                                                                                   |
|                                           |   |                                                                                                                                                                                               |
| Major Generating                        Assets |   | The Roseton Plant,                        the Danskammer Plant, and the Nine Mile 2 Plant                                                                                                          |
|                                           |   |                                                                                                                                                                                               |
| Mcf                                            |   | Thousand Cubic                        Feet                                                                                                                                                         |
|                                           |   |                                                                                                                                                                                               |
| Medicare                        Act            |   | The Medicare                        Prescription Drug, Improvement and Modernization Act of 2003                                                                                                   |
|                                           |   |                                                                                                                                                                                               |
| MGP                                            |   | Manufactured Gas                        Plant                                                                                                                                                      |
|                                           |   |                                                                                                                                                                                               |
| MTBE                                           |   | Methyl Tertiary                        Butyl Ether                                                                                                                                                 |
|                                           |   |                                                                                                                                                                                               |
| MW                                             |   | Megawatt(s)                                                                                                                                                                                        |
|                                           |   |                                                                                                                                                                                               |
| MWh                                            |   | Megawatt-hour(s)                                                                                                                                                                                   |
|                                           |   |                                                                                                                                                                                               |
| Nine Mile 2                        Plant       |   | Unit No. 2 of the                        Nine Mile Point Nuclear Generating Station                                                                                                                |
|                                           |   |                                                                                                                                                                                               |
| OCI                                            |   | Other Comprehensive                        Income                                                                                                                                                  |
|                                           |   |                                                                                                                                                                                               |
| OPEB                                           |   | Other                        Post-Employment Benefits                                                                                                                                              |
|                                           |   |                                                                                                                                                                                               |
| PBO                                            |   | Projected (Pension)                        Benefit Obligation                                                                                                                                      |
|                                           |   |                                                                                                                                                                                               |
| PCBs                                           |   | Polychlorinated                        Biphenyls                                                                                                                                                   |
|                                           |   |                                                                                                                                                                                               |
| R&D                                        |   | Research and                        Development                                                                                                                                                    |
|                                           |   |                                                                                                                                                                                               |
| Rate Plan                                      |   | As Approved by the                        PSC, Formal Framework to Implement Changes in Customer Rates and Special                        Regulatory Accounting                                    |
|                                           |   |                                                                                                                                                                                               |
| Rate Year                                      |   | July 1 to June                        30                                                                                                                                                           |
|                                           |   |                                                                                                                                                                                               |
| Repurchase                        Program      |   | CH Energy Group                        Common Stock Repurchase Program, effective August 1, 2002 and amended as of                        July 31, 2007                                            |
|                                           |   |                                                                                                                                                                                               |
| Retirement                        Plan         |   | Central                        Hudson’s Non-Contributory Defined Benefit Retirement Income                        Plan                                                                       |
|                                           |   |                                                                                                                                                                                               |
| ROE                                            |   | Return on                        Equity                                                                                                                                                            |
|                                           |   |                                                                                                                                                                                               |
| Roseton                        Plant           |   | Roseton Electric                        Generating Plant                                                                                                                                           |
|                                           |   |                                                                                                                                                                                               |
| ROW                                            |   | Right-of-Way                                                                                                                                                                                       |
|                                           |   |                                                                                                                                                                                               |
| Settlement                        Agreement    |   | Amended and Restated                        Settlement Agreement dated January 2, 1998, and thereafter amended, among                        Central Hudson, PSC Staff, and Certain Other Parties  |

(ii)

----

|                                            |   |                                                                                            |
|-------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|
| Trust                        Fund               |   | The Retirement                        Plan’s Trust Fund                                   |
|                                            |   |                                                                                            |
| VRDN                                            |   | Variable Rate Demand                        Note                                                |
|                                            |   |                                                                                            |
| **Other**                                       |   |                                                                                            |
|                                            |   |                                                                                            |
| 10-K Annual                        Report       |   | Annual Report on                        Form 10-K for the Fiscal Year ended December 31, 2007   |
|                                            |   |                                                                                            |
| Attorney                        General         |   | New York State                        Attorney General                                          |
|                                            |   |                                                                                            |
| Clean Air Act                        Amendments |   | Clean Air Act                        Amendments of 1990                                         |
|                                            |   |                                                                                            |
| Constellation                                   |   | Constellation,                        Inc.                                                      |
|                                            |   |                                                                                            |
| CO                                              |   | Carbon                        Monoxide                                                          |
|                                            |   |                                                                                            |
| COSO                                            |   | Committee of                        Sponsoring Organizations of the Treadway Commission         |
|                                            |   |                                                                                            |
| DEC                                             |   | New York State                        Department of Environmental Conservation                  |
|                                            |   |                                                                                            |
| Dynegy                                          |   | Affiliates of Dynegy                        Power Corp., collectively                           |
|                                            |   |                                                                                            |
| EITF                                            |   | FASB Emerging Issues                        Task Force                                          |
|                                            |   |                                                                                            |
| Energy                        Act               |   | Energy Policy Act of                        2005                                                |
|                                            |   |                                                                                            |
| EPA                                             |   | United States                        Environmental Protection Agency                            |
|                                            |   |                                                                                            |
| Exchange                        Act             |   | Securities Exchange                        Act of 1934                                          |
|                                            |   |                                                                                            |
| FASB                                            |   | Financial Accounting                        Standards Board                                     |
|                                            |   |                                                                                            |
| FIN                                             |   | FASB Interpretation                        Number                                               |
|                                            |   |                                                                                            |
| GAAP                                            |   | Accounting                        Principles Generally Accepted in the United States of America |
|                                            |   |                                                                                            |
| NOx                                             |   | Nitrogen                        Oxide                                                           |
|                                            |   |                                                                                            |
| NYISO                                           |   | New York Independent                        System Operator                                     |
|                                            |   |                                                                                            |
| NYSERDA                                         |   | New York State                        Energy Research and Development Authority                 |
|                                            |   |                                                                                            |
| OTC                                             |   | Over-the-Counter                                                                                |
|                                            |   |                                                                                            |
| Pension Protection                        Act   |   | Pension Protection                        Act of 2006                                           |
|                                            |   |                                                                                            |
| PUHCA                        2005               |   | Public Utility                        Holding Company Act of 2005                               |
|                                            |   |                                                                                            |
| Registrants                                     |   | CH Energy Group and                        Central Hudson                                       |
|                                            |   |                                                                                            |
| SAB                                             |   | SEC Staff Accounting                        Bulletin                                            |
|                                            |   |                                                                                            |
| Sarbanes-Oxley                        Act       |   | Sarbanes-Oxley Act                        of 2002                                               |
|                                            |   |                                                                                            |
| SFAS                                            |   | Statement of                        Financial Accounting Standards                              |
|                                            |   |                                                                                            |
| SPDES                                           |   | State Pollution                        Discharge Elimination System                             |
|                                            |   |                                                                                            |
| VIE                                             |   | Variable Interest                        Entity                                                 |

(iii)

----

TABLE OF            CONTENTS

|                           |                                                                                                                                                                  |   |   |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                           |                                                                                                                                                                  |   | Page   |
|                           |                                                                                                                                                                  |   |        |
|                           |                                                                                                                                                                  |   |   |
|                           | PART                        I                                                                                                                                         |   |   |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        1  | BUSINESS                                                                                                                                                              |   | 2      |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        1A | RISK                        FACTORS                                                                                                                                   |   | 14     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        1B | UNRESOLVED                        STAFF COMMENTS                                                                                                                      |   | 17     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        2  | PROPERTIES                                                                                                                                                            |   | 17     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        3  | LEGAL                        PROCEEDINGS                                                                                                                              |   | 19     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        4  | SUBMISSION                        OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                            |   | 20     |
|                           |                                                                                                                                                                  |   |   |
|                           | PART                        II                                                                                                                                        |   |   |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        5  | MARKET                        FOR CH ENERGY GROUP’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND                        ISSUER PURCHASES OF EQUITY SECURITIES |   | 20     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        6  | SELECTED                        FINANCIAL DATA OF CH ENERGY GROUP AND ITS SUBSIDIARIES                                                                                |   | 22     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        7  | MANAGEMENT’S                        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                        OPERATIONS                             |   | 25     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        7A | QUANTITATIVE                        AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                                                                      |   | 68     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        8  | FINANCIAL                        STATEMENTS AND SUPPLEMENTARY DATA                                                                                                    |   | 70     |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        9  | CHANGES                        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                        DISCLOSURE                                    |   | 161    |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        9A | CONTROLS                        AND PROCEDURES                                                                                                                        |   | 161    |
|                           |                                                                                                                                                                  |   |   |
| ITEM                        9B | OTHER                        INFORMATION                                                                                                                              |   | 161    |
|                           |                                                                                                                                                                  |   |   |

(iv)

----

|                           |                                                                                                                                         |   |   |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                | PART                        III                                                                                                              |   |   |
|                           |                                                                                                                                         |   |   |
| ITEM                        10 | DIRECTORS                        AND EXECUTIVE OFFICERS OF CH ENERGY GROUP                                                                   |   | 162    |
|                           |                                                                                                                                         |   |   |
| ITEM                        11 | EXECUTIVE                        COMPENSATION                                                                                                |   | 164    |
|                           |                                                                                                                                         |   |   |
| ITEM                        12 | SECURITY                        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                        STOCKHOLDER MATTERS |   | 164    |
|                           |                                                                                                                                         |   |   |
| ITEM                        13 | CERTAIN                        RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR                        INDEPENDENCE                       |   | 165    |
|                           |                                                                                                                                         |   |   |
| ITEM                        14 | PRINCIPAL                        ACCOUNTANT FEES AND SERVICES                                                                                |   | 165    |
|                           |                                                                                                                                         |   |   |
|                           | PART                        IV                                                                                                               |   |   |
|                           |                                                                                                                                         |   |   |
| ITEM                        15 | EXHIBITS                        AND FINANCIAL STATEMENT SCHEDULES                                                                            |   | 166    |
|                           |                                                                                                                                         |   |   |

(v)

----

**PART            I**

**FILING FORMAT**

          This            10-K Annual Report for the fiscal year ended December 31, 2007, is a combined report            being filed by two different registrants: CH Energy Group and Central Hudson. Any            references in this 10-K Annual Report to CH Energy Group include all subsidiaries of CH            Energy Group, including Central Hudson, except where the context clearly indicates            otherwise. CH Energy Group’s subsidiaries are each directly or indirectly wholly            owned by CH Energy Group. Central Hudson makes no representation as to the information            contained in this 10-K Annual Report in relation to CH Energy Group and its            subsidiaries other than Central Hudson. When this 10-K Annual Report is incorporated by            reference into any filing with the SEC made by Central Hudson, the portions of this            10-K Annual Report that relate to CH Energy Group and its subsidiaries, other than            Central Hudson, are not incorporated by reference therein.

**FORWARD-LOOKING            STATEMENTS**

          Statements            included in this Annual Report on Form 10-K and any documents incorporated by reference            which are not historical in nature are intended to be, and are hereby identified as,            “forward-looking statements” for purposes of the safe harbor provided by            Section 21E of the Exchange Act. Forward-looking statements may be identified by words            including “anticipates,” “intends,” “estimates,”            “believes,” “projects,” “expects,”            “plans,” “assumes,” “seeks,” and similar            expressions. Forward-looking statements including, without limitation, those relating            to Registrants’ future business prospects, revenues, proceeds, working capital,            liquidity, income, and margins, are subject to certain risks and uncertainties that            could cause actual results to differ materially from those indicated in the            forward-looking statements, due to several important factors, including those            identified from time-to-time in the forward-looking statements. Those factors include,            but are not limited to: weather; fuel prices; corn and ethanol prices; plant capacity            factors; energy supply and demand; interest rates; potential future acquisitions;            legislative, regulatory, and competitive developments; 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 -

----

|                                |         |
|-------------------------------------|--------------|
| **ITEM                        1 -** | **BUSINESS** |

**CORPORATE            STRUCTURE**

          CH            Energy Group is the holding company parent corporation of two principal, wholly owned            subsidiaries, Central Hudson and CHEC. Central Hudson, the regulated electric and            natural gas subsidiary, has one wholly owned subsidiary, Phoenix. CHEC, the parent            company of CH Energy Group’s unregulated businesses and investments, has two            wholly owned subsidiaries, Griffith and CH-Auburn.

          For            a discussion of CH Energy Group’s and its subsidiaries’ capital structure            and financing program, 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” and “Financing            Program” under the caption “Capital Resources and Liquidity.” For a            discussion of short-term borrowing, capitalization, and long-term debt, see Note 7            – “Short-Term Borrowing Arrangements,” Note 8 –            “Capitalization – Common and Preferred Stock,” and Note 9 –            “Capitalization – Long-Term Debt,” respectively, 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”). For information concerning revenues, certain expenses, earnings            per share, and information regarding assets for Central Hudson’s regulated            electric and regulated natural gas segments and for Griffith, see Note 13 –            “Segments and Related Information.”

**HOLDING COMPANY            REGULATION**

                      CH Energy Group is generally exempt from regulation under PUHCA 2005 under its            intrastate exemption provisions, except for the requirement to obtain prior SEC            approvals for certain direct or indirect acquisitions of the securities of any electric            or gas utility company. CH Energy Group is a “holding company” under PUHCA            2005 because of its ownership interests in Central Hudson and CHEC and CH Energy            Group’s indirect ownership interests in Lyonsdale and JB Wind. CH Energy Group,            however, is exempt from regulation as a holding company under PUHCA 2005 because it            derives substantially all of its public utility company revenues from business            conducted within a single state, the State of New York. CH Energy Group will retain            this exemption until such time as it derives more than 13% of its public utility            revenues from businesses conducted outside of the State of New York. Under FERC’s            regulations implementing PUHCA 2005, revenues received from Lyonsdale, JB Wind and            CH-Auburn are excluded from this determination because these entities are either a            “qualifying facility” under the Public Utility Regulatory Policies Act of            1978, as amended, or an “exempt wholesale generator” under PUHCA 2005. In            addition, qualified propane revenues derived from Griffith will continue to be excluded            from this determination until such time as its qualified gross sales of propane exceed            an average annual amount of $5 million calculated on a rolling basis over the preceding            three calendar years. Griffith’s qualified gross sales of propane are expected to            exceed this threshold in 2008. Although Griffith’s propane revenues may be            considered public utility revenues in 2008, they would not cause CH Energy Group to            derive more than 13% of its public utility revenues

- 2 -

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from outside of New York State.            In 2007, CH Energy Group had no public utility revenues from outside of New York State.            At the present time, CH Energy Group cannot predict whether and when its circumstances            may change such that it no longer qualifies for exemption from PUHCA 2005 or whether            regulation under PUHCA 2005 would have a material impact on its financial            condition.

**SUBSIDIARIES OF CH ENERGY            GROUP**

**CENTRAL HUDSON**

          Central            Hudson is a New York State natural gas and electric corporation formed in 1926. Central            Hudson purchases, sells at wholesale, and distributes electricity and natural gas at            retail in portions of New York State. Central Hudson also generates a small portion of            its electricity requirements. Central Hudson sold its interests in its major generating            assets in 2001, pursuant to a PSC order.

          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 690,000. 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, 2007, was 831.

          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.

**          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 a legal obligation to deliver electricity and            natural gas within its PSC-approved franchise territory. Central Hudson has no direct            competitors in its electricity distribution business; indirect competitors may include            distributed generation systems, including net metered systems, which could bypass the            electric delivery system. To date, the primary source of penetration is solar power,            which is capped at 10 MW, but could increase. Central Hudson is made whole for lost net            revenues attributable to net metering under the 2006 Rate Order. Central Hudson’s            natural gas business competes with other fuels, especially fuel oil and            propane.

- 3 -

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          The            competitive marketplace continues to develop for electric and natural gas supply            markets, and Central Hudson’s electric and natural gas customers may purchase            energy and related services from other providers.

**          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 imposed by the            Settlement Agreement, see Note 2 – “Regulatory Matters”.

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

          Central            Hudson is not subject to the provisions of the Natural Gas Act. Central Hudson’s            hydroelectric facilities are not required to be licensed under the Federal Power            Act.

**          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.

          Central            Hudson’s 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. Retail rates for            delivery and supply were separated to allow customers to see the costs associated with            their fuel supply in order to facilitate retail competition. During 2007, the average            price of electricity for full service customers was 11.86 cents per kWh as compared to            an average of 11.15 cents per kWh for 2006. The average delivery price for 2007 was            3.26 cents per kWh and 2.93 cents per kWh for 2006. The majority of the increase in            delivery price was due to the implementation of new rates as part of the 2006 Rate            Order.

          Central            Hudson’s retail natural gas rate structure consists of various service            classifications covering transport, retail access service, and full service (which            includes natural gas supply) for residential, commercial, and industrial customers.            During 2007, the average price of natural gas for full service customers was $15.00 per            Mcf as compared to an average of $15.05 per Mcf for 2006. The average delivery price            for natural gas in 2007 was $4.19 per Mcf and $3.68 per Mcf for 2006. The increase in            delivery price was due to the implementation of new rates as part of the 2006 Rate            Order.

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                      Rate Proceedings - Electric and Natural Gas: For information regarding Central            Hudson’s most recent electric and natural gas rate proceeding approved by the PSC            in July 2006, see Note 2 – “Regulatory Matters” under the caption            “2006 Rate Order”.

                      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            “Anticipated Sources and Uses of Cash” 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 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” 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, 2007, the sources and related costs of purchased electricity and            electric generation for Central Hudson were as follows:

|                                             |   |                                                                                      |   |                                                               |   |   |   |   |    |   |   |   |
|--------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|--------|
| Sources of                        Energy         |   | Aggregate                        Percentage of                        Energy Requirements |   | Costs                        in 2007                        ($000) |   |
|                                                  |   |                                                                                           |   |                                                                    |   |
|                                             |   |                                                                                      |   |                                                               |   |   |   |   |    |   |   |   |
| Purchased                        Electricity     |   |                                                                                      | 98.6   | %                                                                  |   |   |   | $      | 387,513 |   |   |   |
| Hydroelectric and                        Other   |   |                                                                                      | 1.4    | %                                                                  |   |   |   |   | 79      |   |   |   |
|                                             |   |                                                                                      |        |                                                               |   |   |   |   |    |   |   |   |
|                                             |   |                                                                                      | 100.0  | %                                                                  |   |   |   |   |    |   |   |   |
|                                             |   |                                                                                      |        |                                                               |   |   |   |   |    |   |   |   |
|                                             |   |                                                                                      |   |                                                               |   |   |   |   |    |   |   |   |
| Deferred Electricity                        Cost |   |                                                                                      |   |                                                               |   |   |   |   | (3,786  | )      |   |   |
|                                             |   |                                                                                      |   |                                                               |   |   |   |        |         |   |   |   |
| Total                                            |   |                                                                                      |   |                                                               |   |   |   | $      | 383,806 |   |   |   |
|                                             |   |                                                                                      |   |                                                               |   |   |   |        |         |   |   |   |

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**          Research            and Development**

          Central            Hudson is engaged in the conduct and support of R&D activities, which are focused            on the improvement of existing energy technologies and the development of new            technologies, including renewable energy sources, for the delivery and use of energy.            Central Hudson’s R&D expenditures were $3.5 million in 2007, $3.2 million in            2006, and $3.3 million in 2005. These expenditures were for internal research programs            and for contributions to research administered by NYSERDA, the Electric Power Research            Institute, and other industry organizations. Recovery of expenditures for R&D is            provided for in Central Hudson’s rates charged to customers for electric and            natural gas delivery service. In addition, any differences between R&D expense and            the rate allowances covering these costs are deferred, pursuant to PSC authorization,            for future recovery from or return to customers.

**          Other            Central Hudson Matters**

                      Labor Relations: Central Hudson has an agreement with Local 320 of the            International Brotherhood of Electrical Workers for its 530 unionized employees,            representing construction and maintenance employees, customer service 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: 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.

**CHEC AND ITS SUBSIDIARIES AND            INVESTMENTS**

          CHEC,            a New York corporation, is a wholly owned subsidiary of CH Energy Group. CHEC and its            subsidiaries have been engaged in the business of marketing petroleum products and            related services to retail and wholesale customers and providing service and            maintenance of energy conservation measures and generation systems for private            businesses, institutions, and government entities. CHEC has also participated in            cogeneration, wind generation, biomass energy projects, and alternate fuel and energy            production projects in Connecticut, New Jersey, New Hampshire, New York, and            Pennsylvania, and a fuel ethanol production plant in Nebraska. For further discussion            of certain of these energy-related projects, see Note 5 – “Acquisitions and            Investments.”

          CHEC’s            subsidiaries and investments are shown below. Ownership interests are 100% unless            otherwise noted.

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          Griffith,            a New York Corporation, is an energy services company engaged in fuel distribution,            including heating oil, gasoline, diesel fuel, kerosene, and propane, and the            installation and maintenance of heating, ventilating, and air conditioning equipment in            Virginia, West Virginia, Maryland, Delaware, Pennsylvania, Rhode Island, Washington,            D.C., Connecticut, Massachusetts, New Jersey and New York.

          Since            being acquired by CHEC in November 2000, Griffith has acquired the assets of 40            regional fuel oil, propane, and related services companies.

          The            number of Griffith employees at December 31, 2007, was 728.

          CH-Auburn,            a New York limited liability company, plans to construct and operate a 3-megawatt            electric generating plant that will burn gas derived from wastewater sludge and a            landfill to supply a portion of the energy needs of the City of Auburn, NY with            renewable energy.

**          Seasonality**

          A            substantial portion of CHEC’s revenues vary seasonally, as fuel deliveries are            directly related to use for space heating and are highest during the winter            months.

**          Competition**

          CHEC            and Griffith participate in competitive industries that are subject to different risks            than those found in the businesses of the regulated utility, Central Hudson. As an            unregulated competitor in the fuel distribution business, Griffith faces competition            from other fuel distribution companies and from companies supplying other fuels for            heating, such as natural gas and propane. For a discussion of Griffith’s            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, Griffith, and Lyonsdale are subject to regulation by federal, state, and local            authorities with respect to the environmental effects of their operations.            Environmental matters may expose Central Hudson, Lyonsdale and/or Griffith            to

- 7 -

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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.

          Each            of Central Hudson, Griffith and Lyonsdale 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 relevant to these companies are described in the table            below. Each company was in compliance during 2007. Unless otherwise noted, all required            permits and certifications have been obtained by the applicable company.

|                                                                                                                                                                                                                                                                                                                                                                                                                                            |         |                                                                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------|
| ***Air                        Quality*** – The Clean Air Act Amendments address attainment                        and maintenance of national air quality standards, including control of                        particulate emissions from fossil-fueled electric generating plants and                        emissions that affect “acid rain” and ozone. The impacted                        facilities are listed below. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |         |                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |              |                                                                                             |
| **Central                        Hudson**                                                                                                                                                                                                                                                                                                                                                                                                       | **Griffith** | **Lyonsdale**                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |              |                                                                                             |
| Combustion turbines                        in South Cairo and Coxsackie, NY have Air State Facility permits regulating                        their NOx emissions                                                                                                                                                                                                                                                                               |         | Title V Permit                        regulating certain gas emissions including CO and NOx |
| (A) See footnote below.                                                                                                                                                                                                                                                                                                                                                                                                                         |         |                                                                                        |

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|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| ***Water                        Quality*** – The Clean Water Act addresses the discharge of                        pollutants into waterways and ground water.                                                                   |
|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
| **Central                        Hudson**                                                                                                                                                                                              | **Griffith**                                                                                                                               | **Lyonsdale**                                                                                                                       |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |
| SPDES Permits                        – The following locations have permits regulating pollutant                        discharges.                                                                                              |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |
| Eltings Corners,                        NY                        maintenance and warehouse facility                                                                                                                                   | Bulk storage plants in                        Frederick, Westminster, and Edgewater, MD                                                    | Lyonsdale electric                        generating plant                                                                          |
|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
| Rifton, NY Training                        and                        Recreation Center                                                                                                                                                | Cheverly, MD                        office                                                                                                 |                                                                                                                                |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |
| Other Permits and                        Certifications – Griffith and Lyonsdale have additional permits                        and certifications regulating their water usage and pollutant                        discharges. |
|                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                   | Storm Water                        Discharge Permits Bulk storage plants in Charlestown and Martinsburg,                        WV         | Great Lakes Water                        Withdrawal Certificate Allows water withdrawal from the Moose                        River |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |
|                                                                                                                                                                                                                                   | General Permit                        Allows discharge of groundwater remediation wastewater to the sanitary                        sewer. |                                                                                                                                |
|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
|                                                                                                                                                                                                                                   | Winsted, CT bulk                        storage facility                                                                                   |                                                                                                                                |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |
| Other                        Requirements – Central Hudson is subject to water monitoring and                        reporting requirements at several facilities.                                                               |
|                                                                                                                                                                                                                                        |
| Eltings Corners, NY                        maintenance and warehouse facility                                                                                                                                                          | Bulk storage plants in                        Frederick, Westminster, and Edgewater, MD                                                    | Lyonsdale electric                        generating plant                                                                          |
|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
| Rifton, NY Training                        and Recreation Center                                                                                                                                                                       | Cheverly, MD                        office                                                                                                 |                                                                                                                                |
|                                                                                                                                                                                                                                   |                                                                                                                                       |                                                                                                                                |
| Kingston, NY                        District Office                                                                                                                                                                                    |                                                                                                                                       |                                                                                                                                |
|                                                                                                                                                                                                                                        |                                                                                                                                            |                                                                                                                                     |

- 9 -

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------|
| ***Toxic                        Substances and Industrial and Hazardous Wastes*** – Central                        Hudson, Lyonsdale, and Griffith are subject to federal, state and local                        laws and regulations relating to the use, handling, storage, treatment,                        transportation, and disposal of industrial, hazardous, and toxic wastes.                        Currently there are no permit or certification requirements for Lyonsdale                        and Griffith. The Central Hudson permitted facility is shown                        below. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **Central                        Hudson**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **Griffith** | **Lyonsdale** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |              |               |
| Hazardous Waste                        Storage Facility at Eltings Corners (NYS Part 373 Permit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |         |          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
| Waste                        Transportation Permits for certain vehicles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |         |          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
| Petroleum Bulk                        Storage Certificates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |         |          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
| South Cairo and                        Coxsackie combustion turbines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
| Offices in Catskill,                        Poughkeepsie, Fishkill, Newburgh and Stanfordville, NY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |         |          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |          |
| (B) See footnote                        below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |         |          |

|                                                                                                                                                                |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ***Other Permits                        –*** Lyonsdale also has permits for the use of wood as fuel, and                        the use of ash as fertilizer. |

|                                                                                                                                                                                                                                        |                                             |                                           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|------------------------------------------------|
| ***Environmental                        Expenditures*** – 2007 actual, and 2008 estimated,                        expenditures attributable, in whole or in substantial part, to                        environmental considerations. |
|                                                                                                                                                                                                                                        |
| **Central                        Hudson**                                                                                                                                                                                                   | **Griffith**                                     | **Lyonsdale**                                  |
|                                                                                                                                                                                                                                             |                                                  |                                                |
| 2007 – $6.4                        million                                                                                                                                                                                            | 2007 – $0.3                        million | 2007 –                        immaterial |
| 2008 – $3.5                        million                                                                                                                                                                                            | 2008 – $0.3                        million | 2008 –                        immaterial |

|   |   |                                                                                                                                                                                                                                                                                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (A)    | See Note 12 –                        “Commitments and Contingencies” under the caption                        “Environmental Matters” regarding the investigation by the EPA                        into the compliance of a former major generating asset.                                          |
|   |   |                                                                                                                                                                                                                                                                                                                               |
|   | (B)    | See Note 12 –                        “Commitments and Contingencies” under the caption                        “Environmental Matters” regarding, among other things, former                        MGP facilities, Little Britain Road, and Newburgh Consolidated Iron                        Works. |

          In            addition to the above areas, Central Hudson, Griffith and Lyonsdale, are also subject            to regulation with respect to other environmental areas such as noise levels,            protection of vegetation and wildlife, and limitations on land use, and are in            compliance with regulations in these areas.

          Regarding            environmental matters, except as described in Note 12 – “Commitments and            Contingencies” under the caption “Environmental Matters,”            neither

- 10 -

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CH Energy Group, Central Hudson,            Griffith, nor Lyonsdale 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.

**AVAILABLE            INFORMATION**

          CH            Energy Group files annual, quarterly, and current reports, proxy statements, and other            information with the SEC. Central Hudson files annual, quarterly, and current 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 100 F Street N.E., Room            1580, 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            www.sec.gov.

          CH            Energy Group makes available free of charge on or through its Internet website at            www.CHEnergyGroup.com its proxy statements, 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. Central Hudson’s 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 are also            available on this site. CH 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 CH 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.

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**Executive            Officers**

          All            executive officers of CH Energy Group are elected or appointed annually by its Board of            Directors. There are no family relationships among any of the executive officers of CH            Energy Group or its subsidiaries. The names of the current executive officers of CH            Energy Group, their positions held and business experience during the past five years,            and ages (at December 31, 2007) are as follows:

|                                                                                    |    |   |   |                                                                                                                                                                     |   |                                                               |   |                                        |   |                                                               |   |
|-----------------------------------------------------------------------------------------|---------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                                    |    |   |   |                                                                                                                                                                     |   | **Date                        Commenced**                          |   |
| **Executive                        Officers of CH                        Energy Group** |    |   |   | ***Current***                        and Prior                        Positions                                                                                          |   |                                                                    |   |
|                                                                                    | **Age** |   |   | **CH                        Energy                        Group**                                                                                                        |   | **Central                        Hudson**                          |   | **CHEC**                                    |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
| Steven V.                        Lant                                                   |    | 50     |   | ***Chairman of                        the Board***                                                                                                                       |   | ***April                        2004***                            |   | ***May                        2004***       |   | ***May                        2004***                              |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Chief                        Executive Officer***                                                                                                                     |   | ***July                        2003***                             |   | ***July                        2003***      |   | ***July                        2003***                             |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***President***                                                                                                                                                          |   | ***July                        2003***                             |   |                                        |   | ***July                        2003***                             |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Director***                                                                                                                                                           |   | ***February                        2002***                         |   | ***December                        1999***  |   | ***December                        1999***                         |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Chief Operating                        Officer                                                                                                                           |   | February                        2002                               |   |                                        |   | February                        2002                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Chief Financial                        Officer                                                                                                                           |   | May                        2001                                    |   | February                        2002        |   | February                        2002                               |   |
|                                                                                    |    |   |   |                                                                                                                                                                     |   |                                                               |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
| Carl E.                        Meyer                                                    |    | 60     |   | ***President                        Director                        Chief Operating Officer***                                                                           |   |                                                               |   | ***December                        1999***  |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Executive                        Vice                        President***                                                                                             |   | ***November                        1999***                         |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   |                                                                                                                                                                     |   |                                                               |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
| Joseph J.                        DeVirgilio, Jr.                                        |    | 56     |   | ***Director***                                                                                                                                                           |   |                                                               |   | ***March                        2005***     |   | ***April                        2003***                            |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Executive                        Vice                        President – Corporate                        Services and                        Administration*** |   | ***January                        2005***                          |   | ***January                        2005***   |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Executive                        Vice                        President***                                                                                             |   |                                                               |   |                                        |   | ***January                        2003***                          |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Senior Vice                        President                                                                                                                             |   | October 2002                                                       |   |                                        |   | October 2002                                                       |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Senior Vice                        President –                        Corporate Services and                        Administration                                 |   |                                                               |   | November                        1998        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   |                                                                                                                                                                     |   |                                                               |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
| Christopher M.                        Capone                                            |    | 45     |   | ***Executive                        Vice                        President***                                                                                             |   | ***December                        2006***                         |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Director***                                                                                                                                                           |   |                                                               |   | ***March                        2005***     |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | ***Chief                        Financial Officer***                                                                                                                     |   | ***September                        2003***                        |   | ***September                        2003*** |   | ***September                        2003***                        |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Treasurer                                                                                                                                                                |   | April                        2003                        June 2001 |   | June                        2001            |   | April                        2003                        June 2001 |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |
|                                                                                    |    |   |   | Managing                        Director,                        Furman Selz/ING(i)                                                                                      |   |                                                               |   |                                        |   |                                                               |   |
|                                                                                         |         |        |        |                                                                                                                                                                          |        |                                                                    |        |                                             |        |                                                                    |        |

- 12 -

----

|                                                                                    |    |   |   |                                                                                                                                                                |   |                                       |   |                                      |   |                                      |   |
|-----------------------------------------------------------------------------------------|---------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                    |    |   |   |                                                                                                                                                                |   | **Date                        Commenced**  |   |
| **Executive                        Officers of CH                        Energy Group** |    |   |   | ***Current***                        and Prior                        Positions                                                                                     |   |                                            |   |
|                                                                                    | **Age** |   |   | **CH                        Energy                        Group**                                                                                                   |   | **Central                        Hudson**  |   | **CHEC**                                  |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
| Donna S.                        Doyle                                                   |    | 59     |   | ***Vice President                        –                        Accounting***                                                                               |   |                                       |   | ***October                        2006*** |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | ***Director***                                                                                                                                                      |   |                                       |   |                                      |   | ***June                        2002***    |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | ***Vice President                        –                        Accounting and                        Controller***                                         |   | ***November                        1999*** |   | November                        1999      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   |                                                                                                                                                                |   |                                       |   |                                      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
| Denise D.                        VanBuren                                               |    | 46     |   | ***Vice President                        – Public                        Affairs and Energy                        Efficiency***                              |   | ***August                        2007***   |   | ***August                        2007***  |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | Vice President                        –                        Corporate                        Communications and                        Community Relations |   | November                        2000       |   | November                        2000      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   |                                                                                                                                                                |   |                                       |   |                                      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
| Charles A.                        Freni, Jr.                                            |    | 48     |   | ***Senior Vice                        President –                        Customer Services***                                                                 |   |                                       |   | ***January                        2005*** |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | Vice President                        –                        Customer Services                                                                              |   |                                       |   | February                        2004      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | Vice President                        –                        Engineering and                        Environmental Affairs                                   |   |                                       |   | November                        2000      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   |                                                                                                                                                                |   |                                       |   |                                      |   |                                      |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
| W. Randolph                        Groft                                                |    | 46     |   | ***Executive                        Vice                        President***                                                                                        |   |                                       |   |                                      |   | ***January                        2003*** |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |
|                                                                                    |    |   |   | ***Director***                                                                                                                                                      |   |                                       |   |                                      |   | ***January                        2003*** |   |
|                                                                                         |         |        |        |                                                                                                                                                                     |        |                                            |        |                                           |        |                                           |        |

|   |                                                                                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (i)    | Mr. Capone was in                        this position March 2002 – March 2003 and managed fixed income                        portfolios for institutions and high net worth individuals. |

- 13 -

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|                                    |                                    |
|-----------------------------------------|-----------------------------------------|
| **ITEM                        1A****-** | **RISK                        FACTORS** |

***Storms and Other Events            Beyond Central Hudson’s and Griffith’s Control May Interfere With Their            Operations***

|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|----------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         | ***Description                        and Sources of Risk***: In order to conduct their businesses, (1)                        Central Hudson must have access to natural gas and electric supplies and be                        able to utilize its electric and natural gas infrastructure, and (2)                        Griffith needs access to petroleum supplies from storage facilities in its                        service territories. Central Hudson has designed its electric and natural                        gas and pipeline systems to serve customers under various contingencies in                        accordance with good utility practice.                                                                                                                                                                                                                       |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                         | However, any one or                        more of the following could impact either or both of the companies’                        ability to access supplies and/or utilize critical facilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | o      | Storms, natural                        disasters, wars, terrorist acts, failure of major equipment and other                        catastrophic events occurring both within and outside Central                        Hudson’s and Griffith’s service territories. |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | o      | Unfavorable                        developments in the world oil markets that could impact Griffith                                                                                                                                                                               |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | o      | Third-party facility                        owner financial distress.                                                                                                                                                                                                             |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | o      | Unfavorable                        governmental actions or judicial orders.                                                                                                                                                                                                       |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | o      | Bulk power system                        and gas transmission pipeline system capacity constraints (in the case of                        Central Hudson).                                                                                                                        |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                              |
|                                                                                                                                         | ***Potential                        Impacts***: The companies could experience service disruptions leading                        to lower earnings and/or reduced cash flows if the situation is not                        resolved in a timely manner or the financial distress is not alleviated                        through insurance policies, regulated rate recovery for Central Hudson or                        higher sales prices for Griffith.                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ***Unusual Temperatures in Central Hudson and Griffith’s Service                        Territories Could Adversely Impact Earnings*** |
|                                                                                                                                         | ***Description and Sources of Risk***: Central Hudson’s                        service territory is the Mid-Hudson Valley region of New York State.                        Griffith serves the Mid-Atlantic region and northeastern United States.                        These areas experience seasonal fluctuations in temperature. A considerable                        portion of Central Hudson’s and Griffith’s earnings is derived                        directly or indirectly from the weather-sensitive end uses of space heating                        and air conditioning. As a result, sales volumes fluctuate and vary from                        normal expected levels based on variations in weather from historically                        normal seasonal levels. Such variations could significantly reduce sales                        volumes. |
|                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                         | ***Potential                        Impacts***: The companies could experience lower delivery volumes in                        periods of mild weather, leading to lower earnings and reduced cash                        flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

- 14 -

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***Central Hudson’s            Rate Plans Limit its Ability to Recover Increased Costs from its Customers; If Central            Hudson’s Sales Are Below Rate Plan Levels or Its Rate Plans Are Modified by State            Regulatory Authorities, Central Hudson’s Earnings and Cash Flows May Be Lower            Than Expected***

|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                         | ***Description                        and Sources of Risk***: Central Hudson’s retail rates are                        regulated by the PSC. Rate plans generally may not be changed during their                        respective terms. Therefore, rates cannot be modified for lower sales                        volumes and/or higher expenses than those assumed in the Rate plan, absent                        circumstances such as an increase in expenses that meet the PSC’s                        threshold requirements for filing for approval of deferral                        accounting. |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                         | The following could                        unfavorably impact Central Hudson’s financial results:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | o      | Lower sales than                        forecasted in the current rate agreement. Lower sales can occur, for                        example, as a result of changes in usage patterns driven by customer                        responses to product prices, customer use of distributed generation,                        economic conditions, energy efficiency programs, or due to loss of major                        customers or addition of fewer new customers than projected. |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | o      | Higher expenses,                        including carrying costs on capital invested, than reflected in current                        rates. Higher expenses could result from, among other things, storm                        restoration expense or other expense components such as labor or health                        care benefits.                                                                                                                                          |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | o      | Higher electric and                        natural gas capital project costs resulting from escalation of material and                        equipment prices, as well as potential delays in the siting and legislative                        and/or regulatory approval requirements associated with these                        projects.                                                                                                                                          |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                         | ***Potential                        Impacts*:** Central Hudson could have lower earnings and/or reduced                        cash flows if cost management and/or other factors are not sufficient to                        alleviate the impact of such lower sales and/or higher costs.                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                         | ***Additional                        Information*:** See Note 2 – “Regulatory Matters” of                        this 10-K Annual Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| ***Central Hudson                        Is Subject to Risks Relating to Asbestos Litigation and Manufactured Gas                        Plant Facilities*** |
|                                                                                                                                                         |
|                                                                                                                                                         | ***Description                        and Sources of Risk***: Litigations have been commenced by third                        parties 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 MGP                        sites.                                                                                                                                                                                                  |

- 15 -

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|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                          | ***Potential                        Impacts***: To the extent not covered by insurance or recovered                        through rates, court decisions and settlements resulting from these                        litigations could reduce earnings and cash flows.                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                          | ***Additional                        Information***: See Note 12 – “Commitments and                        Contingencies” and in particular the subcaptions in Note 12 regarding                        “Asbestos Litigation” and “Former Manufactured Gas Plant                        Facilities” under the caption “Environmental                        Matters.”                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| ***Significant                        Increases In Wholesale Fuel Oil Prices May Adversely Affect                        Griffith’s Ability to Attract New Customers, Retain Existing                        Customers, Maintain Sales Volumes, and Maintain Margins*** |
|                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                          | ***Description                        and Sources of Risk***: Griffith’s management believes that high                        wholesale fuel oil prices, such as those prices experienced in recent                        years, could result in customer attrition and/or reduced usage. Unfavorable                        activity in the domestic and/or foreign markets resulting in significant                        increases in these prices could cause current and/or prospective full                        service customers to decide to purchase fuel from discount                        distributors. |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                          | ***Potential                        Impacts*:** Any one or more of the following could result from these                        events:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | o      | An adverse impact on                        Griffith’s ability to attract new full service residential customers                        and, to a lesser extent, retain existing full service residential customers                        resulting in lower earnings and reduced cash flows.                                                                                            |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | o      | Further sales volume                        reductions, and/or compressed margins resulting in lower earnings and                        reduced cash flows.                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                          | These events could                        materially reduce profitability which could, in turn, lead to an impairment                        of Griffith’s goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                          | Additionally, if                        customer attrition were to accelerate significantly, the remaining value of                        Griffith’s customer list could be impaired or subject to faster                        amortization.                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| ***Commodity                        Price Changes May Adversely Impact the Profitability of CHEC’s                        Investment in Cornhusker Holdings***                                                                                                          |
|                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                          | ***Description                        and Sources of Risk****:* CHEC’s management believes that                        increases in wholesale corn prices and/or decreases in ethanol prices are                        caused by a variety of factors, including, but not limited to the                        following:                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | o      | Actions by the                        federal government that reduce the demand for, or increase the supply of,                        ethanol. Such actions could include, but are not limited to, a reduction in                        the required level of ethanol blending, decreases in tax credits to                        refiners and/or reductions in tariffs on imported ethanol. |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | o      | Imbalances in the                        supply of and demand for corn. This could be caused by, among other things                        (1) drought or other acts of nature, (2) increased                                                                                                                                                                                                   |

- 16 -

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|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | construction of new                        ethanol production facilities, (3) governmental actions that discourage                        raising corn for use in ethanol production (such as providing tax credits                        for corn grown for human consumption) or (4) changes in agricultural                        markets, technology or regulations. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                       |
|   | o      | Volatility in                        domestic and/or foreign markets may result in increased corn prices and/or                        lower ethanol prices.                                                                                                                                                                                                               |

***Potential Impacts***:            Prolonged increases in corn prices and/or decreases in ethanol prices could have a            material adverse impact on the earnings of Cornhusker Holdings that could, in turn,            lead to an impairment of CHEC’s investment in the company.

|                                 |                                                 |
|--------------------------------------|------------------------------------------------------|
| **ITEM                        1B -** | **UNRESOLVED                        STAFF COMMENTS** |

|   |                    |
|--------|-------------------------|
|   |    None. |

|                                |           |
|-------------------------------------|----------------|
| **ITEM                        2 -** | **PROPERTIES** |

          CH            Energy Group has no significant properties other than those of Central Hudson and            CHEC.

**CENTRAL HUDSON**

Electric: Central Hudson            owns hydroelectric and gas turbine generating facilities as described below.

|                                              |                                  |                           |
|---------------------------------------------------|---------------------------------------|--------------------------------|
| Type                        of Electric           | Year                        Placed in | MW*                        Net |
| Generating                        Plant           | Service/Rehabilitated                 | Capability                     |
|                                                   |                                       |                                |
| Hydroelectric (3                        stations) | 1920-1986                             | 23.0                           |
| Gas turbine (2                        stations)   | 1969-1970                             | 46.0                           |
|                                                   |                                       |                                |
| Total                                             |                                  | 69.0                           |
|                                                   |                                       |                                |

|   |                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *      | Reflects maximum                        one-hour net capability (winter rating as of December 31, 2007) of Central                        Hudson’s electric generating plants and therefore does not include                        firm purchases or sales. |

          Central            Hudson owns substations having an aggregate transformer capacity of 4.8 million            kilovolt amps. Central Hudson’s electric transmission system consists of 629 pole            miles of line, and the electric distribution system consists of 8,009 pole miles of            overhead lines and 1,317 trench miles of underground lines.

                      Electric Load and Capacity: Central Hudson’s maximum one-hour demand for            electricity within its own territory for the year ended December 31, 2007, occurred on            August 8, 2007, and amounted to 1,185 MW. Central Hudson’s maximum one-hour            demand for electricity within its own territory for that part of the 2007-2008 winter            capability period through January 15, 2008, occurred on December 13, 2007, and amounted            to 925 MW.

- 17 -

----

          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. For more            information, see Note 12 – “Commitments and Contingencies.” Central            Hudson entered into an agreement with Constellation to purchase capacity and energy            from the Nine Mile 2 Plant for a ten-year period 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. Capacity and energy are            purchased at defined prices that escalate over the life of the contract. The capacity            and energy supplied under the agreement with Constellation in 2007 was sufficient to            supply approximately 12% of Central Hudson’s total system requirements, or            737,835 MWh. 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 March 6, 2007*,* Central            Hudson entered into new agreements with Entergy Nuclear Power Marketing, LLC to            purchase electricity (but not capacity) on a unit-contingent basis at defined prices            from January 1, 2008 through December 31, 2010. On an annual basis, the electricity            purchased through the Entergy contracts represents approximately 16% of Central            Hudson’s full-service customer requirements, or 807,026 MWh. On January 30, 2008,            Central Hudson entered into an 11-month agreement with Dynegy Power Marketing, Inc. to            purchase 589,200 MWh of electricity on a unit-contingent basis at defined prices from            February 11, 2008 through December 31, 2008.

          Purchases            under these contracts are supplemented by shorter-term contracts including contracts            for differences, and by purchases from the NYISO, which oversees the bulk electricity            transmission system and the capacity market in New York State, and other parties.            Central Hudson must also acquire sufficient peak load capacity to meet the peak load            requirements of its full service customers. This capacity is made up of its own            generating capacity, contracts with capacity providers, and purchases from the NYISO            capacity market.

                      Natural Gas: Central Hudson’s natural gas system consists of 164 miles of            transmission pipelines and 1,156 miles of distribution pipelines. For the year ended            December 31, 2007, the total amount of natural gas purchased by Central Hudson from all            sources was 12,012,599 Mcf. Central Hudson 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, 2007, and for that part of the 2007-2008 heating season through            January 18, 2008, occurred on January 3, 2008, and amounted to 110,981 Mcf. Central            Hudson’s firm peak day natural gas capability in the 2007-2008 heating season was            138,183 Mcf, which excludes approximately 7,000 Mcf of transport customer            deliveries.

- 18 -

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                      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 for certain            ROW 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 ROW 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.

          During            the three-year period ended December 31, 2007, Central Hudson made gross property            additions of $221.7 million and property retirements and adjustments of $36.8 million,            resulting in a net increase (including Construction Work in Progress) in gross utility            plant of $184.9 million, or 17%.

**CHEC**

          As            of December 31, 2007, Griffith owned or leased several office, warehouse, and bulk            petroleum storage facilities. These facilities are located throughout Connecticut,            Delaware, Maryland, Pennsylvania, Rhode Island, Virginia, and West Virginia. The bulk            petroleum storage facilities have capacities from 60,000 gallons up to in excess of 1.2            million gallons. Griffith’s corporate headquarters is located in Columbia,            Maryland.

          As            of December 31, 2007, CHEC owned a 100% interest in CH-Auburn, a 75% interest in            Lyonsdale, a minority interest in Cornhusker Holdings and a 50% ownership interest in            CH-Community Wind.

|                                |                                         |
|-------------------------------------|----------------------------------------------|
| **ITEM                        3 -** | **LEGAL                        PROCEEDINGS** |

          For            information about developments regarding certain legal proceedings, see Note 12 –            “Commitments and Contingencies” of this 10-K Annual Report.

|                                     |                                                                                     |
|------------------------------------------|------------------------------------------------------------------------------------------|
| *Central                        Hudson:* |
|                                     |
|                                     | Former Manufactured                        Gas Plant Facilities                          |
|                                     | Little Britain                        Road                                               |
|                                     | Asbestos                        Litigation                                               |
|                                     |                                                                                     |
| *CHEC:*                                  |
|                                     |
|                                     | Griffith’s                        remediation efforts at its Kable Oil bulk plant. |

- 19 -

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|                                    |                                                                           |
|-----------------------------------------|--------------------------------------------------------------------------------|
| **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, 2007.

**PART            II**

|                                    |                                                                                                                                                                      |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ITEM 5                        -****** | **MARKET FOR CH                        ENERGY GROUP’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER                        PURCHASES OF EQUITY SECURITIES** |

          For            information regarding the market for CH 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” and “Common Stock Dividends and Price Ranges” and Note 8            – “Capitalization – Common and Preferred Stock.”

          Under            applicable statutes and their respective Certificates of Incorporation, CH 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.

- 20 -

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          The            line graph set forth below provides a comparison of CH Energy Group’s cumulative            total shareholder return on its Common Stock with the Standard and Poor’s 500            Index (“S&P 500”) and as a Corporation-determined peer comparison with            the EEI Index. Shareholder return is the sum of the dividends paid and the change in            the market price of stock.

|                                         |   |                                                             |                          |                                                |                          |   |                          |   |                          |   |                          |   |   |   |
|----------------------------------------------|--------|------------------------------------------------------------------|-------------------------------|-----------------------------------------------------|-------------------------------|--------|-------------------------------|--------|-------------------------------|--------|-------------------------------|--------|--------|--------|
|                                         |   | Base                        Period                        Dec 02 |                          | INDEXED RETURNS                        Years Ending |                          |
| Company /                        Index       |   |                                                             | Dec                        03 |                                                | Dec                        04 |   | Dec                        05 |   | Dec                        06 |   | Dec                        07 |   |
|                                              |        |                                                                  |                               |                                                     |                               |        |                               |        |                               |        |                               |        |   |
| CH Energy Group,                        Inc. |   | 100                                                              |                          |                                                | 105.72                        |   | 113.57                        |   | 113.64                        |   | 136.60                        |   | 120.57 |   |
| S&P                        500           |   | 100                                                              |                          |                                                | 128.68                        |   | 142.69                        |   | 149.70                        |   | 173.34                        |   | 182.86 |   |
| EEI Index                                    |   | 100                                                              |                          |                                                | 123.48                        |   | 151.68                        |   | 176.03                        |   | 212.56                        |   | 247.76 |   |

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

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

|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
|-----------------------------------------------------------------------------------------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|
|                                                                                    |   | 2007   |   | 2006      |   | 2005   |   | 2004   |      | 2003   |   |
|                                                                                    |   |        |   |           |   |        |   |        |      |        |   |
| Operating                        Revenues                                               |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Electric                                                                                |   |   | $      | 616,839   |   |   |   | $      | 503,908   |   |   |   | $      | 520,994   |   |   |   | $      | 430,575   |   |   |   | $      | 457,395   |   |   |
| Natural gas                                                                             |   |   |   | 165,449   |   |   |   |   | 155,272   |   |   |   |   | 155,602   |   |   |   |   | 125,230   |   |   |   |   | 123,306   |   |   |
| Competitive business                        subsidiaries                                |   |   |   | 414,469   |   |   |   |   | 334,253   |   |   |   |   | 295,910   |   |   |   |   | 235,707   |   |   |   |   | 225,983   |   |   |
|                                                                                    |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Total                                                                                   |   |   |   | 1,196,757 |   |   |   |   | 993,433   |   |   |   |   | 972,506   |   |   |   |   | 791,512   |   |   |   |   | 806,684   |   |   |
|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Operating                        Income                                                 |   |   |   | 79,268    |   |   |   |   | 77,480    |   |   |   |   | 79,025    |   |   |   |   | 75,133    |   |   |   |   | 76,301    |   |   |
|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Cumulative preferred                        stock dividends of Subsidiary               |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 1,387     |   |   |
|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Income from continuing                        operations                                |   |   |   | 42,636    |   |   |   |   | 43,084    |   |   |   |   | 44,291    |   |   |   |   | 42,423    |   |   |   |   | 43,985    |   |   |
| Net Income                                                                              |   |   |   | 42,636    |   |   |   |   | 43,084    |   |   |   |   | 44,291    |   |   |   |   | 42,423    |   |   |   |   | 43,985    |   |   |
| Dividends Declared on                        Common Stock                               |   |   |   | 34,052    |   |   |   |   | 34,046    |   |   |   |   | 34,046    |   |   |   |   | 34,046    |   |   |   |   | 34,093    |   |   |
|                                                                                    |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Balance Retained in the                        Business                                 |   |   |   | 8,584     |   |   |   |   | 9,038     |   |   |   |   | 10,245    |   |   |   |   | 8,377     |   |   |   |   | 9,892     |   |   |
| Retained Earnings -                        beginning of year                            |   |   |   | 207,055   |   |   |   |   | 198,017   |   |   |   |   | 187,772   |   |   |   |   | 179,395   |   |   |   |   | 169,503   |   |   |
|                                                                                    |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Retained Earnings - end                        of year                                  |   |   | $      | 215,639   |   |   |   | $      | 207,055   |   |   |   | $      | 198,017   |   |   |   | $      | 187,772   |   |   |   | $      | 179,395   |   |   |
|                                                                                    |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Common Stock                                                                            |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Average shares                        outstanding – basic                         |   |   |   | 15,762    |   |   |   |   | 15,762    |   |   |   |   | 15,762    |   |   |   |   | 15,762    |   |   |   |   | 15,831    |   |   |
| Average shares                        outstanding – diluted                       |   |   |   | 15,779    |   |   |   |   | 15,779    |   |   |   |   | 15,767    |   |   |   |   | 15,771    |   |   |   |   | 15,835    |   |   |
| Earnings per share on                        average shares outstanding – basic   |   |   | $      | 2.70      |   |   |   | $      | 2.73      |   |   |   | $      | 2.81      |   |   |   | $      | 2.69      |   |   |   | $      | 2.78      |   |   |
| Earnings per share on                        average shares outstanding – diluted |   |   | $      | 2.70      |   |   |   | $      | 2.73      |   |   |   | $      | 2.81      |   |   |   | $      | 2.69      |   |   |   | $      | 2.77      |   |   |
| Dividends declared per                        share                                     |   |   | $      | 2.16      |   |   |   | $      | 2.16      |   |   |   | $      | 2.16      |   |   |   | $      | 2.16      |   |   |   | $      | 2.16      |   |   |
| Book value per share                        (at year-end)                               |   |   | $      | 33.19     |   |   |   | $      | 32.54     |   |   |   | $      | 31.97     |   |   |   | $      | 31.31     |   |   |   | $      | 30.80     |   |   |
|                                                                                    |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Total Assets (at                        year-end)                                       |   |   | $      | 1,494,748 |   |   |   | $      | 1,460,532 |   |   |   | $      | 1,384,280 |   |   |   | $      | 1,287,807 |   |   |   | $      | 1,310,076 |   |   |
| Long-term Debt (at                        year-end)**                                   |   |   |   | 403,892   |   |   |   |   | 337,889   |   |   |   |   | 343,886   |   |   |   |   | 319,883   |   |   |   |   | 278,880   |   |   |
| Cumulative Preferred                        Stock (at year-end)                         |   |   |   | 21,027    |   |   |   |   | 21,027    |   |   |   |   | 21,027    |   |   |   |   | 21,030    |   |   |   |   | 21,030    |   |   |
| Common                        Shareholders’ Equity (at year-end)                  |   |   |   | 523,148   |   |   |   |   | 512,862   |   |   |   |   | 503,833   |   |   |   |   | 493,465   |   |   |   |   | 485,424   |   |   |

- 22 -

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *      | 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.                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **     | Net of current                        maturities of long-term debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | 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 5 –                        “Acquisitions and Investments “ of Item 8 –                        “Financial Statements and Supplementary Data” of this 10-K                        Annual Report. |

- 23 -

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

|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|
|                                                                        |   | 2007   |   | 2006      |   | 2005   |   | 2004   |      | 2003   |   |
|                                                                        |   |        |   |           |   |        |   |        |      |        |   |
| Operating                        Revenues                                   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Electric                                                                    |   |   | $      | 616,839   |   |   |   | $      | 503,908   |   |   |   | $      | 520,994   |   |   |   | $      | 430,575   |   |   |   | $      | 457,395   |   |   |
| Natural gas                                                                 |   |   |   | 165,449   |   |   |   |   | 155,272   |   |   |   |   | 155,602   |   |   |   |   | 125,230   |   |   |   |   | 123,306   |   |   |
|                                                                        |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Total                                                                       |   |   |   | 782,288   |   |   |   |   | 659,180   |   |   |   |   | 676,596   |   |   |   |   | 555,805   |   |   |   |   | 580,701   |   |   |
|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Operating                        Income                                     |   |   |   | 71,406    |   |   |   |   | 70,956    |   |   |   |   | 70,791    |   |   |   |   | 68,293    |   |   |   |   | 69,387    |   |   |
|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Net Income                                                                  |   |   |   | 33,436    |   |   |   |   | 34,871    |   |   |   |   | 35,635    |   |   |   |   | 38,648    |   |   |   |   | 38,875    |   |   |
|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Dividends Declared on                        Cumulative Preferred Stock     |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 970       |   |   |   |   | 1,387     |   |   |
|                                                                        |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Income Available for                        Common Stock                    |   |   |   | 32,466    |   |   |   |   | 33,901    |   |   |   |   | 34,665    |   |   |   |   | 37,678    |   |   |   |   | 37,488    |   |   |
| Dividends Declared to                        Parent – CH Energy Group |   |   |   | 8,500     |   |   |   |   | 8,500     |   |   |   |   | 17,000    |   |   |   |   | 25,500    |   |   |   |   | 34,162    |   |   |
|                                                                        |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Balance Retained in the                        Business                     |   |   |   | 23,966    |   |   |   |   | 25,401    |   |   |   |   | 17,665    |   |   |   |   | 12,178    |   |   |   |   | 3,326     |   |   |
| Retained Earnings -                        beginning of year                |   |   |   | 68,710    |   |   |   |   | 43,309    |   |   |   |   | 25,644    |   |   |   |   | 13,466    |   |   |   |   | 10,140    |   |   |
|                                                                        |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
| Retained Earnings - end                        of year                      |   |   | $      | 92,676    |   |   |   | $      | 68,710    |   |   |   | $      | 43,309    |   |   |   | $      | 25,644    |   |   |   | $      | 13,466    |   |   |
|                                                                        |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |   |        |           |   |   |
|                                                                        |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |   |   |      |   |   |
| Total Assets (at                        year-end)                           |   |   | $      | 1,252,694 |   |   |   | $      | 1,215,823 |   |   |   | $      | 1,126,106 |   |   |   | $      | 1,029,442 |   |   |   | $      | 1,052,295 |   |   |
| Long-term Debt (at                        year-end)**                       |   |   |   | 403,892   |   |   |   |   | 337,889   |   |   |   |   | 343,886   |   |   |   |   | 319,883   |   |   |   |   | 278,880   |   |   |
| Cumulative Preferred                        Stock (at year-end)             |   |   |   | 21,027    |   |   |   |   | 21,027    |   |   |   |   | 21,027    |   |   |   |   | 21,030    |   |   |   |   | 21,030    |   |   |
| Common                        Shareholder’s Equity (at year-end)      |   |   |   | 347,006   |   |   |   |   | 323,040   |   |   |   |   | 297,639   |   |   |   |   | 279,974   |   |   |   |   | 267,796   |   |   |

|   |                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *      | 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. |
|   |                                                                                                                                                                                                                                                                                          |
| **     | Net of current                        maturities of long-term debt.                                                                                                                                                                                                                           |

- 24 -

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|                                |                                                                                                                                          |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| **ITEM 7                        -** | **MANAGEMENT’S                        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                        OPERATIONS** |

**INTRODUCTION**

          The            following Management’s Discussion and Analysis of Financial Condition and Results            of Operations is intended to help the reader understand CH Energy Group and Central            Hudson.

          Please            note that the Executive Summary (below) is provided as a supplement to, and should be            read together with, the remainder of this Item 7 – “Management’s            Discussion and Analysis of Financial Condition and Results of Operations,” the            Consolidated Financial Statements, including the Notes thereto, and the other            information included in this 10-K Annual Report.

**EXECUTIVE            SUMMARY**

**Business            Overview**

          CH            Energy Group is a holding company with three business segments, and renewable energy            and other investments:

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

          A            breakdown of CH Energy Group’s 2007 revenue and net income by segment is            below.

- 25 -

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          CH            Energy Group’s long-term objective is to deliver shareholder value through a            combination of quarterly dividend payments, and consistent earnings growth, which over            time is expected to result in share price appreciation.

          CH            Energy Group consists of three segments and renewable energy and other investments.            Each has growth opportunities and is expected to contribute to the overall earnings and            dividend paying capability of CH Energy Group. The strategy and opportunities of each            business unit are discussed in more detail below.

          CH            Energy Group believes managing risk is an important component of delivering shareholder            value, and emphasizes creditworthiness and liquidity as strong fundamentals of            long-term success. We also invest in a way that attempts to constrain earnings            volatility to a level we believe is acceptable to our shareholders and is consistent            with a relatively high dividend payout.

          CH            Energy Group has used the cash proceeds from its 2001 divestitures of major generating            assets, and is now seeking to judiciously raise debt capital to lever its unregulated            investments, which were 100% equity financed as of December 31, 2007.

**Central Hudson**

          Central            Hudson delivers electricity and natural gas to approximately 372,000 customers in a            defined service territory in the Mid-Hudson Valley region of New York State. With costs            consistently ranking below the average of electric utilities in New York State, Central            Hudson’s earnings are derived primarily from customer delivery charges. Central            Hudson’s rates are set by the PSC and designed to recover the cost of providing            safe and reliable service to its customers and to provide a fair and reasonable return            on the capital invested by shareholders. In addition to delivering electricity and            natural gas, Central Hudson also procures supplies of electricity and natural gas for a            majority of its customers. With authorization from the PSC, Central Hudson recovers            these supply costs from customers without deriving profits from these            activities.

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          In            2007, Central Hudson made progress on an important operational and customer initiative,            improving electric reliability. The frequency of service interruptions was 20% lower in            2007 compared to the prior three-year average. Although favorable weather played a            role, management believes that this reduction is also a result of expanded tree            trimming and capital investments to improve reliability. In addition to providing safe            and reliable service, management’s attention remains focused on managing costs,            and thus maintaining above average levels of customer satisfaction. These strategies            promote high customer satisfaction and positive regulatory relations, which should            translate into full cost recovery and reasonable returns for shareholders.

          On            July 24, 2006, the PSC issued the 2006 Rate Order authorizing increases in Central            Hudson’s electric and natural gas delivery rates over a three-year period ending            June 30, 2009. During 2007, Central Hudson experienced lower sales volumes than            reflected in the 2006 Rate Order, particularly for natural gas. Lower sales were caused            by a reduction in natural gas and electric use per customer, which management believes            was driven by energy conservation due to the price of energy and customers’            environmental concerns. As a result, Central Hudson is earning less than its allowed            ROE, despite growth in its customer base and in its rate base. Management believes that            the warmer weather experienced over the last decade is due, at least in part, to            changes in the overall climate in its service territory. Management expects this            warming trend to continue. Rate base growth and a higher earned ROE are both critical            to Central Hudson’s ability to contribute to earnings growth. If not offset,            lower sales than forecasted in the 2006 Rate Order, such as those experienced in 2006            and 2007, will continue to limit Central Hudson’s ability to increase its            earnings.

          On            September 25, 2007, Central Hudson filed a proposed energy efficiency program with the            PSC. This proposed program addresses customers’ desire to use energy more            efficiently, and also features a Revenue Decoupling Mechanism (RDM), which eliminates            the linkage of electric and natural gas profits from sales. If approved, the RDM            feature of Central Hudson’s proposed program will neutralize the earnings impact            caused by fluctuations in usage per customer and the effect of unusual variations in            weather patterns. The proposed program also includes a shareholder incentive provision            to reward the company for successfully reducing energy consumption.

          In            addition to the energy efficiency and RDM proposals, management has implemented and is            considering other potential strategies to manage costs and respond to lower sales            growth than forecasted in rates. These strategies include the December 2007 filing with            the PSC to defer certain Rate Year 1 gas costs not included in rates in the 2006 Rate            Order and the possible filing of a rate case in 2008 to recalibrate revenues and            expenses.

          Changes            in energy policy at the state level continue to provide new challenges for Central            Hudson. Several generic proceedings have been established by the PSC on important            policy questions that could impact Central Hudson. These are discussed further in the            “Regulatory Matters” section following this discussion.            Management

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cannot estimate at this time            what, if any, impact these factors may have on Central Hudson.

**Griffith**

          Griffith            provides petroleum products and services to a base of more than 110,000 customers in a            market area comprised of parts of Connecticut, Delaware, Washington, D.C., Maryland,            Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, and West            Virginia. Griffith’s revenues, cash flows, and earnings are derived from the sale            and delivery of heating oil, gasoline, diesel fuel, kerosene, and propane and from the            installation and maintenance of heating, ventilating, and air conditioning equipment.            Griffith’s 2007 gross profit by petroleum product and service and installations            is illustrated below.

          Griffith            had stronger performance results for 2007 due primarily to the continued success of its            acquisition and integration strategy, its strong marketing efforts, improved            operational efficiency, and growth in its margins. Griffith’s acquisition            strategy continued to contribute favorably to earnings. In addition to the sixteen            companies acquired in 2006 and 2005, Griffith acquired thirteen companies during the            twelve months ended December 31, 2007, which provided a 26% increase in the total            customer base and accounted for 4% of the company’s net income for 2007. Due to            the timing of the acquisitions and the seasonality of the business, it is expected that            the favorable impact of these acquisitions will be more fully realized in 2008, when            Griffith will own the acquired companies through an entire heating season.

          Griffith’s            marketing initiatives have also proven to be an integral part of the continued            expansion of its customer base. Internal efforts to promote Griffith’s brand name            and strong customer service capabilities have contributed to a 1% net account growth            for 2007. Griffith will undertake efforts to continue this trend in 2008.

          Griffith’s            earnings were also favorably impacted in 2007 by higher margins achieved in the first            half of the year. The increase in oil prices in the second half of 2007 resulted in            compression of these margins and could present continued challenges in 2008.

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          Griffith’s            strategy of acquiring quality companies, internal marketing efforts, and improving            operational efficiency will continue to be Griffith’s future focus.

          During            2008, Griffith will also focus on efforts to expand its margins. The continued growth            of the base company’s earnings will be contingent upon Griffith’s ability            to minimize costs and optimize margins. Griffith is closely monitoring the impact of            the economy on residential use per customer and analyzing potential impacts of            legislation in response to recent environmental and political emphasis on energy            efficiency initiatives. Conservation efforts by customers and federal policy that            encourages this behavior could pose challenges to the company during 2008 and beyond.            Management cannot estimate at this time what, if any, impact these factors may have on            the company.

**Other Businesses and            Investments**

          In            addition to Griffith, CHEC derives earnings through investments in the competitive            energy markets. CHEC’s investment objectives are to increase earnings and cash            flow while limiting earnings volatility to a level that management believes is            acceptable. Increasing government support for investments in renewable energy sources            has made such investments more attractive, providing opportunities to promote            environmentally friendly energy sources while providing potential earnings for            shareholders. CHEC faces strong competition for investment opportunities in the energy            industry, which may make it difficult to make investments that offer appropriate            risk-adjusted returns or may slow the rate at which such investments can be made.            CHEC’s management believes these challenges can be met effectively as it pursues            its current strategy.

          In            2007, CHEC continued to expand its investments in renewable energy sources by entering            into agreements committing a total of $14 million. The primary investment involves a            plan to build, own and operate a 3-megawatt electric generating plant in Auburn, New            York, which will use renewable energy for electric generation. The second project is a            plan to invest in a biodiesel facility in Brooklyn, New York, which is expected to            produce biodiesel fuel utilizing waste cooking oil as raw material. Also, an ethanol            investment of $3 million was made through additional subordinated debt of Cornhusker            Holdings.

                      Despite the challenges in 2007 caused by the volatile commodity prices impacting            ethanol investments, CHEC’s existing investments in ethanol production, biomass            electric generation, and wind energy contributed favorably to earnings in 2007 and are            expected to continue to do so in the future, reinforced by the new investments            discussed above. Additionally, Cornhusker Holdings is currently working on an expansion            of its plant capacity, which would increase capacity at a competitive cost per gallon            of increased ethanol production. Lyonsdale’s earnings are expected to increase            starting in 2008 as a result of a contract entered into with NYSERDA for the sale of            Renewable Energy Attributes, which are tied directly to plant output.

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          CHEC’s            other investments – in energy efficiency projects, a venture capital fund, and            other small partnerships – are not expected to play a significant role in CH            Energy Group’s strategy going forward.

          CHEC’s            ability to continue to make additional investments that provide attractive returns            within acceptable earnings volatility parameters will be one of the key factors in CH            Energy Group’s ability to achieve its goal of increasing earnings per share over            time. As planned, CH Energy Group utilized a portion of its cash reserves to make            additional investments in the competitive energy markets, and expects to continue its            strategy utilizing its remaining cash reserves and relying on its potential to raise            capital with a long-term debt offering related to the currently unlevered CHEC            businesses.

          In            December 2007, The Energy Independence and Security Act of 2007 (the “Energy            Act”) became law. The Energy Act increased the annual minimum of renewable fuels            for 2008 and 2012 by 3.6 and 7.7 billion gallons, respectively, which could raise the            demand for ethanol. Although these increases could favorably impact Cornhusker            Holdings’ earnings, any such impact is not expected to be material to CHEC or CH            Energy Group.

**2007 In Review**

          Earnings            for CH Energy Group, Inc. totaled $2.70 per share in 2007, versus $2.73 per share            during 2006. Though there was a slight year-over-year reduction in earnings, the core            businesses performed solidly during 2007 and were able to almost completely offset more            than $0.50 per share of favorable unusual items that were experienced during            2006.

          The            2007 earnings per share reflect sound business fundamentals. Central Hudson’s            sales rebounded somewhat from depressed levels in 2006, and higher rates also boosted            revenues. When combined with improved margins within Griffith and earnings from a peak            level of acquisitions, these developments largely replaced those unusual items that had            benefited earnings in 2006. The actual results by business were as follows:

*Central Hudson’s            Electric and Natural Gas Businesses*

          Central            Hudson’s contribution to annual earnings was $2.06, which was $0.09 lower than            2006. Though higher utility rates, more favorable weather, and growth in both sales and            usage per customer all contributed to strong performance, earnings results were down            from the prior year because Central Hudson benefited from certain positive regulatory            mechanisms and unusual items during 2006 that did not recur in 2007.

          In            particular, three factors that helped to bolster Central Hudson’s earnings per            share in 2007 as compared to the prior year were: reduced expenses associated with            restoring service due to fewer storms and increased tree trimming ($0.12), higher rates            ($0.18) and weather-normalized sales growth ($0.18), the last of which indicates            that

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the conservation evidenced by            lower usage per customer in 2006 in response to higher energy prices appears to have            subsided.

          Despite            those positive developments, Central Hudson’s management believes that the sales            forecast adopted in the 2006 Rate Order did not accurately reflect the level of            customer response to price increases and was therefore overstated, which has resulted            in Central Hudson failing to earn the authorized return to shareholders.

          In            September 2007, Central Hudson filed a request to implement an energy efficiency            program and adopt a revenue decoupling mechanism that would eliminate the linkage of            electric and natural gas profits from sales. The outcome of that filing is not yet            known and preparations have begun to file a request for a rate increase with the New            York State Public Service Commission in 2008.

*Griffith*

          Griffith            contributed $0.20 to earnings per share in 2007, up from $0.10 during 2006, due largely            to higher margins and profitable acquisitions. Griffith’s management foresees            opportunities to achieve still more given the successful execution in 2007 of            Griffith’s strategy to grow through both acquisitions and internal marketing, as            well as to improve operational effectiveness.

*Other            Businesses*

          CH            Energy Group (the holding company) and CHEC’s partnerships and other investments            contributed $0.44 to CH Energy Group’s earnings in 2007, down $0.04 from 2006            results. The earnings from CHEC’s investment in Cornhusker Holdings were lower            due to lower margins, but that investment along with the investment in Lyonsdale and            CH-Community Wind continued to add positively to earnings as part of a diversified            portfolio of investments within the energy industry.

**REGULATORY            MATTERS**

**Rate Proceedings - Electric            and Natural Gas**

          For            further information regarding Central Hudson’s current rate agreement, see Note 2            – “Regulatory Matters” under the caption “New Rate Proceedings            – Electric and Natural Gas.”

**Other PSC Proceedings and            Administration Initiatives**

*PSC            Proceedings*

                      CH Energy Group and Central Hudson continue to monitor a number of generic and specific            regulatory proceedings. Neither CH Energy Group nor Central Hudson can predict the            final outcome of Governor Spitzer’s energy policies, or the following PSC            proceedings.

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          On            January 21, 2008, Central Hudson filed a petition for reconsideration and rehearing on            the PSC’s Order Concerning Annual Reconciliation of Gas Costs, issued on December            21, 2007. The petition seeks reconsideration and recovery of certain adjustments,            totaling $666,000, proposed by the company in its November 1, 2007 gas cost            reconciliation filing.

          On            December 24, 2007, the PSC issued an Order Initiating Electricity Reliability and            Infrastructure Planning in Case 07-E-1507 as an outflow of the longer-term energy            planning issues initially considered in Phase II of Case 06-M-1017. The Order            institutes a collaborative process to develop the process, criteria, and standards for            the PSC to review and choose among competing regulatory backstop projects, if            necessary, in order to ensure system reliability in the near term. In addition, the            Order seeks to establish a long term electric resource plan and planning process that            incorporates various considerations and policy goals which are not adequately addressed            by the existing market structure or planning process. In the Order, the PSC reiterated            its support for competitive markets and market mechanisms, but noted regulatory            approaches, including the use of long-term contracts, may be required to address the            energy needs and policy goals of New York State. On January 23, 2008, Central Hudson            filed a petition for clarification and reconsideration in this proceeding. The petition            seeks Commission redress or consideration of several issues, including utility            ownership of generation facilities, long-term contracts, and other planning issues that            were addressed in the PSC’s December 24, 2007 Order instituting the            proceeding.

          On            November 27, 2007, Central Hudson filed a petition with the PSC seeking approval to            defer certain incremental and material non-labor gas expenses that were incurred during            Rate Year 1 but were not included in rates under the 2006 Rate Plan. The petition seeks            PSC authorization to defer $990,000 of incremental expenses and associated carrying            charges on the net of tax balances.

          On            September 25, 2007, Central Hudson filed a petition with the PSC seeking expedited            consideration and approval of interim electric, gas and low-income energy efficiency            programs, electric and gas revenue decoupling mechanisms, and deferral accounting            authorizations. The petition was accompanied by a filing providing detailed            descriptions of Central Hudson’s proposed energy efficiency programs, including            analyses demonstrating cost effectiveness. The programs are targeted at residential,            small commercial and industrial, and low-income customer segments, and consist of a            range of incentives for high efficiency measures including lighting, appliances,            heating and cooling equipment, energy audits, and weatherization. In addition, the            programs include a comprehensive customer outreach and education effort. On January 18,            2008, Central Hudson filed a comprehensive plan in the Energy Efficiency Portfolio            Standard proceeding (Case 07-M-0548) outlining its vision of a statewide plan to            achieve the 15% reduction targets. At this time, there has been no Commission action            taken in this proceeding.

          On            April 24, 2007, the PSC issued an Order in Case 07-M-0458 - Proceeding on Motion of the            Commission to Review Policies and Practices Intended to Foster the

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Development of Competitive            Retail Energy Markets. This Order encouraged interested parties to examine and submit            comments on existing programs and practices of New York State (“NYS”)            utilities that promote retail market development focusing on whether programs are still            necessary; if market participants are improperly subsidized; if risks and expenses are            properly allocated among ratepayers, utilities and market participants; and the need to            continue programs or practices to prevent the re-building of barriers to entry in the            competitive markets. The Order also calls for the review and evaluation of utility            specific programs, practices and policies in ongoing and future electric and gas rate            proceedings.

          On            April 20, 2007, the PSC issued an Order in Cases 03-E-0640 and 06-G-0746 - Proceeding            on Motion of the Commission to Investigate Potential Electric and Gas Delivery Rate            Disincentives Against the Promotion of Energy Efficiency, Renewable Technologies and            Distributed Generation. The Order directed Central Hudson and other NYS utilities to            develop proposals for delivery service revenue decoupling mechanisms for consideration            in a next rate case filing. Consistent with the Order’s intent, Central Hudson            proposed mechanisms to true up forecast and actual delivery service revenues in its            September 25, 2007 filing discussed above.

          On            April 19, 2007, the PSC issued an Order in Case 06-M-1017 - Proceeding on Motion of the            Commission as to Policies, Practices and Procedures for Utility Commodity Supply            Service to Residential and Small Commercial Customers. The Order provided guidance on            commodity supply and hedging practices and directed Central Hudson and other NYS            utilities, through a collaborative or administrative process, to develop standards and            goals for measuring and constraining the supply price volatility on certain classes of            customers. In addition, utilities will be required to report to the PSC Staff on their            strategies, aggregate supply portfolio, and the extent to which goals for measuring and            constraining energy price volatility have been met. This case continues with            collaborative meetings among the utilities, PSC Staff, and interested Parties, and a            Phase II to address long-term contracting, supply resource planning, and other public            policy issues. The Phase II matters in the case are being addressed in Case 07-E-1507            in the Order Initiating Electric Reliability and Infrastructure Planning referenced            above.

          On            April 19, 2007, Governor Eliot Spitzer delivered a speech announcing a comprehensive            energy strategy for NYS, consisting of demand side and supply side components to reduce            energy costs and achieve economic and environmental benefits. The strategy includes            goals of reducing electricity demand 15% by 2015 through new energy efficiency            programs, new appliance efficiency standards, and energy building codes. The plan also            proposes a new power plant siting law, and continued support for renewable energy            resources, as well as other proposed energy policies. On May 16, 2007, the PSC issued            an Order Instituting Proceeding in Case 07-M-0548 - Proceeding on Motion of the            Commission on an Energy Efficiency Portfolio Standard. In response to those            initiatives, Central Hudson developed the energy efficiency programs included in its            September 25, 2007 filing discussed above.

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*Non-Utility Land            Sales*

          For            further information regarding non-utility land sales, see Note 2 –            “Regulatory Matters.”

*Electric Reliability            Performance*

          For            further information regarding Central Hudson’s electric reliability performance,            see Note 2 – “Regulatory Matters.”

**RESULTS OF            OPERATIONS**

          The            following discussion and analyses include explanations of significant changes in            revenues and expenses between the twelve months ended December 31, 2007, and 2006, and            the twelve months ended December 31, 2006, and 2005, for Central Hudson’s            regulated electric and natural gas businesses, Griffith, and the other            businesses.

**Earnings**

          Earnings            per share (basic and diluted) of CH 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 CH 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:

|                                                              |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   | 2007   |   | 2006   |   | 2005   |   |
|                                                              |   |        |   |        |   |        |   |
|                                                              |
| Average shares                        outstanding (In thousands): |   |   |   |   |   |   |   |   |   |   |
| Basic                                                             |   |   | 15,762 |   |   | 15,762 |   |   | 15,762 |   |
| Diluted                                                           |   |   | 15,779 |   |   | 15,779 |   |   | 15,767 |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |
| Earnings per                        share:                        |   |   |   |   |   |   |   |   |   |   |
| Basic                                                             |   | $      | 2.70   |   | $      | 2.73   |   | $      | 2.81   |   |
| Diluted                                                           |   | $      | 2.70   |   | $      | 2.73   |   | $      | 2.81   |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |
| Return earned on common                        equity             |   |   | 8.1    | %      |   | 8.4    | %      |   | 8.8    | %      |

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|                                                             |   |
|------------------------------------------------------------------|--------|
| **2007 as                        Compared to 2006**              |   |
|                                                             |   |
| **CH Energy Group                        Consolidated Earnings** |

|                                                      |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Earnings per Share                        (Basic)         |   | 2007   |   | 2006   |   | Change |   |
|                                                      |   |        |   |        |   |        |   |
| Central Hudson                        – Electric    |   | $      | 1.66   |   | $      | 1.67   |   | $      | (0.01  | )      |
| Central Hudson                        – Natural Gas |   |   | 0.40   |   |   | 0.48   |   |   | (0.08  | )      |
| Griffith                                                  |   |   | 0.20   |   |   | 0.10   |   |   | 0.10   |   |
| Other Businesses and                        Investments   |   |   | 0.44   |   |   | 0.48   |   |   | (0.04  | )      |
|                                                      |   |        |        |   |        |        |   |        |        |   |
|                                                      |   | $      | 2.70   |   | $      | 2.73   |   | $      | (0.03  | )      |
|                                                      |   |        |        |   |        |        |   |        |        |   |

          CH            Energy Group’s decrease in earnings in 2007 was primarily the result of the            effect of unusual items that contributed to earnings favorably in 2006 but did not            recur in 2007, partially offset by the impact of Central Hudson’s rate increases            in 2006 and 2007, weather-normalized sales growth, and Griffith’s favorable            operating results.

|                                              |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **Central                        Hudson**         |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |
| Earnings per share                        (Basic) |   | 2007   |   | 2006   |   | Change |   |
|                                              |   |        |   |        |   |        |   |
| Electric                                          |   | $      | 1.66   |   | $      | 1.67   |   | $      | (0.01  | )      |
| Natural                        Gas                |   |   | 0.40   |   |   | 0.48   |   |   | (0.08  | )      |
|                                              |   |        |        |   |        |        |   |        |        |   |
| Total                                             |   | $      | 2.06   |   | $      | 2.15   |   | $      | (0.09  | )      |
|                                              |   |        |        |   |        |        |   |        |        |   |

          Earnings            from Central Hudson’s electric and natural gas operations decreased $0.09 per            share in 2007 as compared to 2006, due to the following:

|                                                                      |   |   |   |      |
|---------------------------------------------------------------------------|--------|--------|--------|-----------|
| Regulatory Mechanisms                        and Unusual Events:          |   |   |   |      |
| Release of Reserves in                        2006                        |   | $      | (0.21  | )         |
| Gain on Non-Utility                        Property Sales in 2006         |   |   | (0.08  | )         |
| Reversal of Shared                        Earnings in 2006                |   |   | (0.08  | )         |
| Revenues recorded in                        2006 per prior Rate Agreement |   |   | (0.14  | )         |
| Shared earnings                        recorded in 2007                   |   |   | (0.04  | )         |
| Gain on Non-Utility                        Property Sales in 2007         |   |   | 0.02   |      |
|                                                                      |   |        |        |      |
|                                                                      |   |   | (0.53  | )         |
|                                                                      |   |        |        |      |
| Rate                        Increases                                     |   |   | 0.18   |      |
| Weather Impact on                        Sales                            |   |   | 0.07   |  (a) |
| Weather-Normalized                        Sales Growth                    |   |   | 0.18   |      |
| Higher Tree Trimming                        Expense in 2007               |   |   | (0.03  | )         |
| Lower Storm Restoration                        Expense in 2007            |   |   | 0.15   |      |
| Interest Expense and                        Carrying Charges              |   |   | (0.11  | )         |
|                                                                      |   |        |        |      |
|                                                                      |   | $      | (0.09  | )         |
|                                                                      |   |        |        |      |

|   |                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    | Includes $0.04 and                        $0.03 per share due to higher sales volumes for electric and natural gas,                        respectively, and is net of derivatives. |

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          Central            Hudson’s decrease in earnings was primarily the result of changes in regulatory            provisions and a number of significant, favorable, unusual items that contributed $0.51            per share to 2006 earnings, but did not recur in 2007. However, the lack of such items            of that magnitude in 2007 was largely offset by an increase in rates pursuant to the            2006 Rate Order, higher energy delivery volumes and modest customer growth, and lower            storm restoration costs due to fewer and less severe storms and increased tree trimming            in 2007.

|                                              |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **Griffith**                                      |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |
| Earnings per Share                        (Basic) |   | 2007   |   | 2006   |   | Change |   |
|                                              |   |        |   |        |   |        |   |
|                                              |   | $      | 0.20   |   | $      | 0.10   |   | $      | 0.10   |   |
|                                              |   |        |        |   |        |        |   |        |        |   |

          Griffith’s            earnings increased $0.10 per share in 2007 compared to 2006, due to the            following:

|                                                                          |   |   |   |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|
| Acquisitions(1)                                                               |   | $      | 0.04   |   |
| Margin on Petroleum                        Sales and Services                 |   |   | 0.18   |   |
| Operating                        Expenses                                     |   |   | (0.13  | )      |
| Weather Impact on                        Sales                                |   |   | 0.02   |   |
| Reduction in                        Environmental Remediation Reserve in 2006 |   |   | (0.04  | )      |
| Other                                                                         |   |   | 0.03   |   |
|                                                                          |   |        |        |   |
|                                                                          |   | $      | 0.10   |   |
|                                                                          |   |        |        |   |

|   |                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | For the purposes of                        this chart, “Acquisitions” represents the incremental affect of                        acquisitions made by Griffith in 2007 and 2006. |

          The            increase in earnings at Griffith in 2007 was largely the result of higher gross margins            on petroleum products and service contracts which were partially offset by the impact            of higher operating costs resulting in a net favorable earnings per share impact of            $0.05. In addition, the incremental effect of acquisitions in 2006 and 2007 contributed            to the higher earnings.

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|                                                        |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **Other Businesses                        and Investments** |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |
| Earnings per Share                        (Basic)           |   | 2007   |   | 2006   |   | Change |   |
|                                                        |   |        |   |        |   |        |   |
|                                                        |   | $      | 0.44   |   | $      | 0.48   |   | $      | (0.04  | )      |
|                                                        |   |        |        |   |        |        |   |        |        |   |

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

|                                                                      |   |   |   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|
| Unusual                        Events:                                    |   |   |   |   |
| Gain on Sale of                        Non-Strategic Property in 2006     |   | $      | (0.03  | )      |
| Release of Reserves of                        a Former Subsidiary in 2006 |   |   | (0.07  | )      |
| Release of Reserves of                        a Former Subsidiary in 2007 |   |   | 0.01   |   |
| Tax                        Adjustments                                    |   |   | 0.07   |   |
|                                                                      |   |        |        |   |
|                                                                      |   |   | (0.02  | )      |
|                                                                      |   |        |        |   |
| Cornhusker                        Holdings                                |   |   | (0.04  | )      |
| CH-Community                        Wind                                  |   |   | 0.02   |   |
| Lyonsdale                                                                 |   |   | 0.02   |   |
| Other                                                                     |   |   | (0.02  | )      |
|                                                                      |   |        |        |   |
|                                                                      |   | $      | (0.04  | )      |
|                                                                      |   |        |        |   |

          CH            Energy Group’s other unregulated businesses decreased their earnings contribution            by $0.04 per share from 2006 primarily due to the release of reserves related to a            former subsidiary and property sales in 2006, partially offset by favorable tax            adjustments. Other investments continue to contribute to earnings, but Cornhusker            Holdings’ earnings decreased in 2007 due to unfavorable markets for corn and            ethanol.

|                                                             |   |
|------------------------------------------------------------------|--------|
| **2006 as                        Compared to 2005**              |   |
|                                                             |   |
| **CH Energy Group                        Consolidated Earnings** |

|                                                      |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Earnings per Share                        (Basic)         |   | 2006   |   | 2005   |   | Change |   |
|                                                      |   |        |   |        |   |        |   |
| Central Hudson                        – Electric    |   | $      | 1.67   |   | $      | 1.63   |   | $      | 0.04   |   |
| Central Hudson                        – Natural Gas |   |   | 0.48   |   |   | 0.57   |   |   | (0.09  | )      |
| Griffith                                                  |   |   | 0.10   |   |   | 0.23   |   |   | (0.13  | )      |
| Other Businesses and                        Investments   |   |   | 0.48   |   |   | 0.38   |   |   | 0.10   |   |
|                                                      |   |        |        |   |        |        |   |        |        |   |
|                                                      |   | $      | 2.73   |   | $      | 2.81   |   | $      | (0.08  | )      |
|                                                      |   |        |        |   |        |        |   |        |        |   |

- 37 -

----

Details by segment are as            follows:

**Central Hudson**

|                                              |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Earnings per share                        (Basic) |   | 2006   |   | 2005   |   | Change |   |
|                                              |   |        |   |        |   |        |   |
| Electric                                          |   | $      | 1.67   |   | $      | 1.63   |   | $      | 0.04   |   |
| Natural                        Gas                |   |   | 0.48   |   |   | 0.57   |   |   | (0.09  | )      |
|                                              |   |        |        |   |        |        |   |        |        |   |
| Total                                             |   | $      | 2.15   |   | $      | 2.20   |   | $      | (0.05  | )      |
|                                              |   |        |        |   |        |        |   |        |        |   |

          Earnings            from Central Hudson’s electric and natural gas operations decreased $0.05 per            share in 2006 as compared to 2005, due to the following:

|                                                                |   |   |   |       |
|---------------------------------------------------------------------|--------|--------|--------|------------|
| Regulatory                        Mechanisms                        |   | $      | 0.38   |  (a)  |
| Rate                        Increases                               |   |   | 0.32   |       |
| Weather Impact on                        Sales                      |   |   | (0.25  | ) (b) |
| Line Clearance                        Expense                       |   |   | (0.15  | )          |
| Storm Restoration                        Expense                    |   |   | (0.10  | )          |
| Other Operating                        Expenses                     |   |   | (0.11  | )          |
| Interest                        Expense                             |   |   | (0.09  | )          |
| Lower Sales per                        Customer Due to Conservation |   |   | (0.12  | )          |
| Non-Utility Property                        Sales                   |   |   | 0.08   |       |
| 2005 Favorable NYISO                        Billing Adjustment      |   |   | (0.04  | )          |
| Other                                                               |   |   | 0.03   |       |
|                                                                |   |        |        |       |
|                                                                |   | $      | (0.05  | )          |
|                                                                |   |        |        |       |

|   |                                                                                                                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)    | Includes $0.16 per                        share from lower shared earnings, $0.06 per share from lower PSC                        reliability assessments, and $0.11 per share from revenue                        restoration. |
| (b)    | Includes $(0.14) and                        $(0.11) per share due to lower sales volumes for electric and natural gas,                        respectively, and is net of derivatives.                                          |

          Central            Hudson’s reduction in earnings was primarily the result of customer conservation            and unfavorable weather. Revenues set aside for customers in 2005 were reinstated in            2006 to offset some of the unfavorable results of higher operating expenses and            weather. Additionally, in 2006 Central Hudson recorded revenues to restore earnings            towards the allowed rate of return in accordance with the provisions of the            then-current Settlement Agreement. This regulatory mechanism is no longer available            under the terms of the 2006 Rate Order. Central Hudson’s rate increase was            designed to provide revenue support for the recovery of the escalating cost of            providing service to its customers and of previously deferred costs.

- 38 -

----

**Griffith**

|                                              |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Earnings per Share                        (Basic) |   | 2006   |   | 2005   |   | Change |   |
|                                              |   |        |   |        |   |        |   |
|                                              |   | $      | 0.10   |   | $      | 0.23   |   | $ | (0.13 | ) |
|                                              |   |        |        |   |        |        |   |  |  |   |

          Griffith’s            earnings decreased $0.13 per share in 2006 compared to 2005, due to the            following:

|                                                                  |   |   |   |   |
|-----------------------------------------------------------------------|--------|--------|--------|--------|
| Acquisitions(1                        )                          |   | $      | 0.03   |   |
| Reduction in                        Environmental Remediation Reserve |   |   | 0.04   |   |
| Margin on Petroleum                        Sales and Services         |   |   | 0.10   |   |
| Lower Sales per                        Customer Due to Conservation   |   |   | (0.10  | )      |
| Weather Impact on                        Sales                        |   |   | (0.13  | )      |
| Operating                        Expenses                             |   |   | (0.04  | )      |
| Other                                                                 |   |   | (0.03  | )      |
|                                                                  |   |        |        |   |
|                                                                  |   | $      | (0.13  | )      |
|                                                                  |   |        |        |   |

|   |                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | For the purposes of                        this chart, “Acquisitions” represents the incremental affect of                        acquisitions made by Griffith in 2006 and 2005. |

          The            reduction in earnings at Griffith was largely the result of customer conservation and            warmer weather in 2006. Margins on petroleum products and service contracts increased            over 2005 levels. Earnings from acquisitions of several small oil companies in 2006            were also higher than the acquisition-related earnings in 2005.

**Other Businesses and            Investments**

|                                              |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Earnings per Share                        (Basic) |   | 2006   |   | 2005   |   | Change |   |
|                                              |   |        |   |        |   |        |   |
|                                              |   | $      | 0.48   |   | $      | 0.38   |   | $      | 0.10   |   |
|                                              |   |        |        |   |        |        |   |        |        |   |

          Earnings            from CH Energy Group (the holding company) and CHEC’s partnership and other            investment interests increased $0.10 per share in 2006 as compared to 2005, due to the            following:

|                                                              |   |   |   |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|
| Tax Adjustment in                        2005                     |   | $      | (0.14  | )      |
| Sales of                        Non-Strategic Property            |   |   | 0.03   |   |
| Release of Reserves                        of a Former Subsidiary |   |   | 0.07   |   |
| Cornhusker                        Holdings                        |   |   | 0.10   |   |
| Lyonsdale                                                         |   |   | 0.03   |   |
| Other                                                             |   |   | 0.01   |   |
|                                                              |   |        |        |   |
|                                                              |   | $      | 0.10   |   |
|                                                              |   |        |        |   |

          CH            Energy Group’s other unregulated businesses increased their earnings contribution            by $0.10 per share over 2005 primarily due to the earnings of new investments including            the Cornhusker Holdings and Lyonsdale. The release of reserves related to CH Resources,            property sales, and other favorable variations largely offset the favorable tax            adjustment recorded in 2005. The 2005 tax adjustment was largely due to the completion            of the New York State income tax audit for 2001.

- 39 -

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**Central Hudson**

          The            following discussions and analyses include explanations of significant changes in            revenues and expenses between the twelve months ended December 31, 2007, and December            31, 2006, and between the twelve months ended December 31, 2006 and December 31, 2005,            for Central Hudson’s regulated electric and natural gas businesses.

|                                                                                        |   |                                                                                                  |   |    |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|
| **Central                        Hudson                        Income Statement Variances** |   | Twelve months ended                        December 31,                        2007 over/(under) 2006 |
|                                                                                        |   |                                                                                                       |        |
|                                                                                        |   | Amount                        (In Thousands)                                                          |   | Percent |
|                                                                                             |        |                                                                                                       |        |         |        |
| Operating                        Revenues                                                   |   |                                                                                                  | $      | 123,108 |   |   |   | 18.7   | %      |
|                                                                                        |   |                                                                                                  |   |    |   |   |   |   |   |
| Operating                        Expenses:                                                  |   |                                                                                                  |   |    |   |   |   |   |   |
| Purchased electric,                        fuel and natural gas                             |   |                                                                                                  |   | 92,662  |   |   |   | 23.1   | %      |
| Depreciation and                        Amortization                                        |   |                                                                                                  |   | (603    | )      |   |   | (2.1   | )%     |
| Other operating                        expenses                                             |   |                                                                                                  |   | 30,599  |   |   |   | 19.4   | %      |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Total operating                        expenses                                             |   |                                                                                                  |   | 122,658 |   |   |   | 20.9   | %      |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Operating                        Income                                                     |   |                                                                                                  |   | 450     |   |   |   | 1.0    | %      |
| Other income,                        net                                                    |   |                                                                                                  |   | (592    | )      |   |   | (10.0  | )%     |
| Interest                        charges                                                     |   |                                                                                                  |   | 2,495   |   |   |   | 12.0   | %      |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Income before income                        taxes                                           |   |                                                                                                  |   | (2,637  | )      |   |   | (5.0   | )%     |
| Income                        taxes                                                         |   |                                                                                                  |   | (1,202  | )      |   |   | (6.0   | )%     |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Net                        (loss)/income                                                    |   |                                                                                                  | $      | (1,435  | )      |   |   | (4.0   | )%     |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |

|                                                                                        |   |                                                                                                  |   |    |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|
| **Central                        Hudson                        Income Statement Variances** |   | Twelve months ended                        December 31,                        2006 over/(under) 2005 |
|                                                                                        |   |                                                                                                       |        |
|                                                                                        |   | Amount                        (In Thousands)                                                          |   | Percent |
|                                                                                             |        |                                                                                                       |        |         |        |
| Operating                        Revenues                                                   |   |                                                                                                  | $      | (17,416 | )      |   |   | (2.6   | )%     |
|                                                                                        |   |                                                                                                  |   |    |   |   |   |   |   |
| Operating                        Expenses:                                                  |   |                                                                                                  |   |    |   |   |   |   |   |
| Purchased electric,                        fuel and natural gas                             |   |                                                                                                  |   | (42,064 | )      |   |   | (9.5   | )%     |
| Depreciation and                        Amortization                                        |   |                                                                                                  |   | (872    | )      |   |   | (2.9   | )%     |
| Other operating                        expenses                                             |   |                                                                                                  |   | 25,355  |   |   |   | 19     | %      |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Total operating                        expenses                                             |   |                                                                                                  |   | (17,581 | )      |   |   | (2.9   | )%     |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Operating                        Income                                                     |   |                                                                                                  |   | 165     |   |   |   | 0      | %      |
| Other income,                        net                                                    |   |                                                                                                  |   | 30      |   |   |   | 1      | %      |
| Interest                        charges                                                     |   |                                                                                                  |   | 3,367   |   |   |   | 20     | %      |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Income before income                        taxes                                           |   |                                                                                                  |   | (3,172  | )      |   |   | (5     | )%     |
| Income                        taxes                                                         |   |                                                                                                  |   | (2,408  | )      |   |   | (10    | )%     |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |
| Net                        (loss)/income                                                    |   |                                                                                                  | $      | (764    | )      |   |   | (2     | )%     |
|                                                                                             |        |                                                                                                       |        |         |        |        |        |        |        |

- 40 -

----

***Central            Hudson***

*Delivery            Volumes*

          Delivery            volumes for Central Hudson vary in response to weather conditions and customer            behavior. Electric deliveries typically peak in the summer, and deliveries of natural            gas used for heating purposes typically peak in the winter. Sales also vary as            customers respond to the price of the particular energy product and changes in local            economic conditions.

          The            following charts reflect the change in the level of electric and natural gas deliveries            for Central Hudson in 2007, compared to 2006, and in 2006, compared to 2005. The charts            reflect the change for actual deliveries, and the change normalized to exclude the            effect of weather. Deliveries of electricity and natural gas to residential and            commercial customers contribute the most to Central Hudson’s earnings. Industrial            sales and interruptible sales have a negligible impact on earnings.

|                                                                                                                                                                                                                     |   |                                                      |   |                                                      |   |     |   |        |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------------------------------|--------|----------|--------|-------------|--------|--------|--------|--------|--------|
|                                                                                                                                                                                                                     |   | Actual                        Deliveries                  |   |
|                                                                                                                                                                                                                     |   |                                                           |   |
|                                                                                                                                                                                                                     |   | 2007                        Increase (Decrease) from 2006 |   | 2006                        Increase (Decrease) from 2005 |   |
|                                                                                                                                                                                                                     |   |                                                           |   |                                                           |   |
|                                                                                                                                                                                                                     |   | Electric                                                  |   | Natural Gas                                               |   | Electric |   | Natural Gas |   |
|                                                                                                                                                                                                                     |   |                                                           |   |                                                           |   |          |   |             |   |
| Residential                                                                                                                                                                                                              |   | 4                                                         | %      |                                                      | 12     | %        |   | (6          | )%     |   | (13    | )%     |   |
| Commercial                                                                                                                                                                                                               |   | 4                                                         | %      |                                                      | 10     | %        |   | (3          | )%     |   | (10    | )%     |   |
| Industrial and Other                        (a)                                                                                                                                                                          |   | (2                                                        | )%     |                                                      | 5      | %        |   | (3          | )%     |   | 6      | %      |   |
|                                                                                                                                                                                                                     |   |                                                           |        |                                                      |        |          |   |             |        |   |        |        |   |
| Total                        Deliveries                                                                                                                                                                                  |   | 2                                                         | %      |                                                      | 9      | %        |   | (4          | )%     |   | (7     | )%     |   |
|                                                                                                                                                                                                                     |   |                                                           |        |                                                      |        |          |   |             |        |   |        |        |   |
|                                   (a)          Includes interruptible                        natural gas deliveries. |   |                                                      |   |                                                      |   |

|                                                                                                                                                                                                                     |   |                                                      |   |                                                      |   |     |   |        |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------------------------------|--------|----------|--------|-------------|--------|--------|--------|--------|--------|
|                                                                                                                                                                                                                     |   | Weather Normalized                        Deliveries      |   |
|                                                                                                                                                                                                                     |   |                                                           |   |
|                                                                                                                                                                                                                     |   | 2007                        Increase (Decrease from 2006) |   | 2006                        Increase (Decrease from 2005) |   |
|                                                                                                                                                                                                                     |   |                                                           |   |                                                           |   |
|                                                                                                                                                                                                                     |   | Electric                                                  |   | Natural Gas                                               |   | Electric |   | Natural Gas |   |
|                                                                                                                                                                                                                     |   |                                                           |   |                                                           |   |          |   |             |   |
| Residential                                                                                                                                                                                                              |   | 3                                                         | %      |                                                      | 6      | %        |   | 0           | %      |   | (6     | )%     |   |
| Commercial                                                                                                                                                                                                               |   | 4                                                         | %      |                                                      | 4      | %        |   | (1          | )%     |   | (4     | )%     |   |
| Industrial and Other                        (a)                                                                                                                                                                          |   | (2                                                        | )%     |                                                      | 5      | %        |   | (2          | )%     |   | (19    | )%     |   |
|                                                                                                                                                                                                                     |   |                                                           |        |                                                      |        |          |   |             |        |   |        |        |   |
| Total                        Deliveries                                                                                                                                                                                  |   | 2                                                         | %      |                                                      | 5      | %        |   | (1          | )%     |   | (5     | )%     |   |
|                                                                                                                                                                                                                     |   |                                                           |        |                                                      |        |          |   |             |        |   |        |        |   |
|                                   (a)          Excludes interruptible                        natural gas deliveries. |   |                                                      |   |                                                      |   |

          Electric            deliveries to residential and commercial customers were higher in 2007 due to colder            weather (electric residential heating degree-days increased 3% for the year), an            increase in non-weather related usage per customer, and modest customer growth. This            increase was partially offset by the impact of cooler summer weather.

          Deliveries            of natural gas in 2007 also increased due to higher usage per customer, resulting from            an increase in residential natural gas heating-degree days of

- 41 -

----

2% overall for 2007, an increase            in non-weather related usage per customer, and some customer growth.

          Electric            deliveries to residential and commercial customers in 2006 decreased as a result of            less usage due to cooler summer and warmer winter weather conditions, as well as some            conservation by customers, which was partially offset by modest customer growth. As            compared to 2005, cooling degree-days decreased 31% and electric residential heating            degree-days decreased 6%.

          Natural            gas deliveries to residential and commercial customers also decreased due to weather            conditions and conservation measures on the part of customers, which was partially            offset by modest customer growth. Residential natural gas heating degree-days decreased            5% in 2006 as compared to 2005. Industrial deliveries decreased 23% due to lower usage            and the loss of a large customer due to bankruptcy.

*Revenues*

          Central            Hudson’s revenues consist of two major categories: those which offset specific            expenses in the current period (matching revenues), and those that impact earnings.            Matching revenues recover Central Hudson’s actual costs for particular expenses.            Any difference between these revenues and the actual expenses incurred is deferred for            future recovery from or refund to customers and therefore does not impact            earnings.

|                                                                                                                            |   |                                  |    |                               |   |   |   |   |    |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|--------|--------|--------|---------|--------|
|                                                                                                                            |   |                                  |    |                               |   |   |   |   |    |   |
| 2007                        Increase (Decrease) from 2006 — $123.1 million increase                        (In Thousands) |   |
|                                                                                                                            |
|                                                                                                                            |   | Central                        Hudson |    |
|                                                                                                                            |   |                                       |    |
|                                                                                                                            |   | Electric                              |    | Natural                        Gas |   | Total  |   |
|                                                                                                                            |   |                                       |    |                                    |   |        |   |
| Revenues with                        Matching Offsets: (a)                                                                      |   |                                  |    |                               |   |   |   |   |    |   |
| Energy cost                        adjustment                                                                                   |   | $                                     | 87,833  |                               | $      | 1,955  |   | $      | 89,788  |   |
| Sales to other                        utilities                                                                                 |   |                                  | 349     |                               |   | 1,086  |   |   | 1,435   |   |
| Pension, OPEB and other                        revenues                                                                         |   |                                  | 19,491  |                               |   | 5,850  |   |   | 25,341  |   |
|                                                                                                                            |   |                                       |         |                               |        |        |   |        |         |   |
| Subtotal                                                                                                                        |   |                                  | 107,673 |                               |   | 8,891  |   |   | 116,564 |   |
|                                                                                                                            |   |                                  |    |                               |   |   |   |   |    |   |
| Revenues Impacting                        Earnings:                                                                             |   |                                  |    |                               |   |   |   |   |    |   |
| Customer sales                        (b)                                                                                       |   |                                  | 9,911   |                               |   | 2,389  |   |   | 12,300  |   |
| Other regulatory                        mechanisms                                                                              |   |                                  | (5,090  | )                                  |   | (224   | )      |   | (5,314  | )      |
| Sales to other                        utilities                                                                                 |   |                                  | — |                               |   | 270    |   |   | 270     |   |
| Weather-hedging                        contracts                                                                                |   |                                  | 440     |                               |   | (150   | )      |   | 290     |   |
| Other                        revenues                                                                                           |   |                                  | (3      | )                                  |   | (999   | )      |   | (1,002  | )      |
|                                                                                                                            |   |                                       |         |                               |        |        |   |        |         |   |
| Subtotal                                                                                                                        |   |                                  | 5,258   |                               |   | 1,286  |   |   | 6,544   |   |
|                                                                                                                            |   |                                       |         |                               |        |        |   |        |         |   |
| Total                                                                                                                           |   | $                                     | 112,931 |                               | $      | 10,177 |   | $      | 123,108 |   |
|                                                                                                                            |   |                                       |         |                               |        |        |   |        |         |   |

- 42 -

----

          Electric            and natural gas revenues in 2007 increased due largely to an increase in revenues with            matching expense offsets. The increases in energy cost adjustment revenues reflect the            impact of higher delivery volumes and also higher wholesale costs for electric            revenues. Revenues for pension, OPEB and other matched costs resulted from rate changes            implemented in accordance with the 2006 Rate Order.

          Electric            and natural gas revenues from customer sales increased due to higher delivery volumes            and the impact of the 2006 Rate Order. Electric revenues from customer sales were            partially offset by a decrease in other regulatory mechanisms primarily related to            shared earnings and revenues recorded in 2006 in accordance with prior PSC            authorization.

2006 Increase            (Decrease) from 2005 — $17.4 million decrease            (In Thousands)

|                                                       |   |                                  |    |                               |   |   |   |   |    |   |
|------------------------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|--------|--------|--------|---------|--------|
|                                                       |   | Central                        Hudson |    |                               |   |   |
|                                                       |   |                                       |         |                                    |        |   |
|                                                       |   | Electric                              |    | Natural                        Gas |   | Total  |   |
|                                                       |   |                                       |    |                                    |   |        |   |
| Revenues with Matching                        Offsets: (a) |   |                                  |    |                               |   |   |   |   |    |   |
| Energy cost                        adjustment              |   | $                                     | (40,143 | )                                  | $      | (9,062 | )      | $      | (49,205 | )      |
| Sales to other                        utilities            |   |                                  | (1,060  | )                                  |   | 8,940  |   |   | 7,880   |   |
| Customer                        Sales                      |   |                                  | 14,517  |                               |   | 1,585  |   |   | 16,102  |   |
| Pension, OPEB and other                        revenues    |   |                                  | 202     |                               |   | 40     |   |   | 242     |   |
|                                                       |   |                                       |         |                               |        |        |   |        |         |   |
| Subtotal                                                   |   |                                  | (26,484 | )                                  |   | 1,503  |   |   | (24,981 | )      |
|                                                       |   |                                  |    |                               |   |   |   |   |    |   |
| Revenues Impacting                        Earnings:        |   |                                  |    |                               |   |   |   |   |    |   |
| Customer sales                        (b)                  |   |                                  | (439    | )                                  |   | (2,859 | )      |   | (3,298  | )      |
| Other regulatory                        mechanisms         |   |                                  | 8,444   |                               |   | (260   | )      |   | 8,184   |   |
| Sales to other                        utilities            |   |                                  | — |                               |   | 1,578  |   |   | 1,578   |   |
| Weather-hedging                        contracts           |   |                                  | 1,342   |                               |   | 116    |   |   | 1,458   |   |
| Other                        revenues                      |   |                                  | 51      |                               |   | (408   | )      |   | (357    | )      |
|                                                       |   |                                       |         |                               |        |        |   |        |         |   |
| Subtotal                                                   |   |                                  | 9,398   |                               |   | (1,833 | )      |   | 7,565   |   |
|                                                       |   |                                       |         |                               |        |        |   |        |         |   |
| Total                                                      |   | $                                     | (17,086 | )                                  | $      | (330   | )      | $      | (17,416 | )      |
|                                                       |   |                                       |         |                               |        |        |   |        |         |   |

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

- 43 -

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          Electric            revenues decreased $17.1 million in 2006 primarily due to a decrease of $26.5 million            in revenues with matching offsets. A decrease in energy cost adjustment revenues due to            lower deliveries and lower wholesale costs was partially offset by an increase in            revenues for pension and OPEB costs resulting from the 2006 Order. Revenues affecting            earnings increased $9.4 million primarily due to favorable changes in other regulatory            mechanisms related to shared earnings, the restoration of revenues recorded in            accordance with PSC authorization, service interruptions, and amounts collected for            uncollectible expense and working capital.

          Natural            gas revenues decreased $0.3 million in 2006. This decrease was caused by a decrease of            $1.8 million in revenues impacting earnings, primarily due to lower deliveries            resulting from milder weather and some customer conservation. This decrease was largely            offset by an increase of $1.5 million in revenues with matching offsets due to            increases in sales to other utilities and revenues for pension and OPEB costs due to            the 2006 Order, partially offset by a decrease in energy cost adjustment revenues due            to lower deliveries resulting from a milder winter.

*Incentive            Arrangements*

          Under            certain earnings incentive provisions approved by the PSC, Central Hudson 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 arrangements are currently effective for interruptible natural gas deliveries            and natural gas capacity release transactions. Performance standards apply to electric            service reliability, certain aspects of customer service, natural gas safety, and            customer satisfaction, and certain aspects of retail market participant            satisfaction.

          The            net results of these and previous earnings sharing arrangements had the effect of            increasing pre-tax earnings by $0.5 million in 2007, and $0.4 million in 2006, and            decreasing pre-tax earnings by $0.6 million in 2005.

          In            addition to the above-noted items, effective July 1, 2006, Central Hudson shared with            customers earnings over a base ROE of 10.6% on the equity portion of Central            Hudson’s rate base, which was determined in accordance with the criteria set            forth in the 2006 Rate Order. In 2007, Central Hudson recorded $1.1 million as a            regulatory liability for the customer portion of these pre-tax shared earnings. Through            June 30, 2006, Central Hudson shared earnings over a base ROE of 10.5% with customers,            which was determined in accordance with the criteria set forth in the 2001 Rate Plan.            In 2005, Central Hudson recorded $2.4 million as a regulatory liability for the            customer portion of these pre-tax shared earnings of which $1.7 million was reversed in            2006 due to lower than anticipated ratemaking operating income in the six months ended            June 30, 2006.

          See            Note 2 – “Regulatory Matters” of this 10-K Annual Report under the            caption “2006 Rate Order” for a description of earnings sharing formulas            approved by the PSC for Central Hudson.

- 44 -

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*Operating            Expenses*

          The            most significant elements of Central Hudson’s operating expenses are purchased            electricity and purchased natural gas; however, changes in these costs do not affect            earnings since they are offset by changes in related revenues recovered through Central            Hudson’s energy cost adjustment mechanisms. Additionally, there are other            significant costs that are matched by revenues, notably the cost of pensions and            OPEBs.

          Total            utility operating expenses increased 20.9% in 2007 and decreased 2.9% in            2006.

          The            following summarizes the change in operating expenses:

|                                                               |   |                                                                                                    |    |                                                                                                    |   |    |   |
|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------|--------|---------|--------|
|                                                               |   | 2007                        Increase                        (Decrease)                        from 2006 |    | 2006                        Increase                        (Decrease)                        from 2005 |   |
|                                                               |   |                                                                                                         |         |                                                                                                         |   |
|                                                               |   | (Change In                        Thousands)                                                            |    |
|                                                               |   |                                                                                                         |    |
| Expenses Currently                        Matched to Revenues (1): |   |                                                                                                    |    |                                                                                                    |   |    |   |
| Purchased                        electricity                       |   | $                                                                                                       | 88,182  |                                                                                                    | $      | (41,422 | )      |
| Purchased natural                        gas                       |   |                                                                                                    | 3,041   |                                                                                                    |   | (36     | )      |
| Pension                                                            |   |                                                                                                    | 15,102  |                                                                                                    |   | 11,575  |   |
| OPEB                                                               |   |                                                                                                    | 4,880   |                                                                                                    |   | 3,273   |   |
| New York State energy                        programs              |   |                                                                                                    | 2,003   |                                                                                                    |   | 1,275   |   |
| Stray voltage testing                        program               |   |                                                                                                    | 1,125   |                                                                                                    |   | 1,100   |   |
| Residual gas deferred                        balances              |   |                                                                                                    | 1,509   |                                                                                                    |   | — |   |
| Other matched                        expenses                      |   |                                                                                                    | 1,511   |                                                                                                    |   | 201     |   |
|                                                               |   |                                                                                                         |         |                                                                                                    |        |         |   |
| Subtotal                                                           |   | $                                                                                                       | 117,353 |                                                                                                    | $      | (24,034 | )      |
|                                                               |   |                                                                                                    |    |                                                                                                    |   |    |   |
| Other Expense                        Variations:                   |   |                                                                                                    |    |                                                                                                    |   |    |   |
| Tree                        trimming                               |   |                                                                                                    | 797     |                                                                                                    |   | 3,877   |   |
| Disposition of                        property                     |   |                                                                                                    | 1,749   |                                                                                                    |   | (2,218  | )      |
| Injuries & damages                        reserve              |   |                                                                                                    | 1,390   |                                                                                                    |   | (836    | )      |
| Purchased natural                        gas                       |   |                                                                                                    | 1,439   |                                                                                                    |   | (606    | )      |
| Storm restoration                        expenses                  |   |                                                                                                    | (3,874  | )                                                                                                       |   | 2,442   |   |
| Other                        expenses                              |   |                                                                                                    | 3,804   |                                                                                                    |   | 3,794   |   |
|                                                               |   |                                                                                                         |         |                                                                                                    |        |         |   |
| Subtotal                                                           |   | $                                                                                                       | 5,305   |                                                                                                    | $      | 6,453   |   |
|                                                               |   |                                                                                                    |    |                                                                                                    |   |    |   |
| Total Increase in                        Operating Expenses        |   | $                                                                                                       | 122,658 |                                                                                                    | $      | (17,581 | )      |
|                                                               |   |                                                                                                         |         |                                                                                                    |        |         |   |

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

- 45 -

----

          Purchased            electricity costs increased in 2007 due to higher wholesale costs and volumes            purchased, the latter resulting from an increase in usage and customer growth. Natural            gas costs increased in 2007 due primarily to an increase in volumes purchased due to            increased deliveries and customer growth. The lower storm restoration costs in 2007            resulted from fewer and less severe storms as compared to 2006. Other expenses of            operation were also impacted by fewer real property sales in 2007 compared to            2006.

          Purchased            electricity costs decreased in 2006 due to decreases in wholesale costs and volumes            purchased, the latter due primarily to a decrease in usage resulting from cooler            weather during the months of July through September 2006. The increase in other            expenses of operation was partially offset by $2.2 million in gains realized on the            sale of real property.

          The            increase in pensions and OPEBs in both periods is due to an increase in the level of            expense recorded due to a corresponding increase in revenues resulting from the 2006            Rate Order. The increase in tree trimming expenses in both periods reflects Central            Hudson’s continuing efforts to improve system reliability. These costs are            covered by the higher revenues resulting from the 2006 Rate Order. Management also            believes that the increased tree trimming contributed to the improved system            reliability during storms.

*Other            Income*

          Other            income and deductions for Central Hudson decreased $0.6 million in 2007 primarily due            to lower regulatory carrying charges due from customers related to pension costs. This            reduction was partially offset by higher interest income on trust assets and higher            other regulatory carrying charges due from customers.

Other income and deductions for            Central Hudson remained essentially unchanged in 2006 as compared to 2005. A decrease            in regulatory carrying charges due from customers related to pension costs was largely            offset by the recording of favorable regulatory adjustments for the change in interest            costs on Central Hudson’s variable rate debt. The variation related to the            variable rate debt is offset by changes in the related interest charges.

*Interest            Charges*

                      Interest charges increased in 2007 primarily due to the issuance of medium-term notes            in November 2006 and September 2007, and an increase in regulatory carrying charges due            to customers related to other postretirement benefits. The latter results from an            increase in the reserve balances upon which these carrying charges are calculated.            Additional long-term debt was issued to supplement operating cash sources for Central            Hudson’s capital expenditures, and additional short-term debt was required in            2007 for working capital needs.

- 46 -

----

          Central            Hudson’s interest charges increased in 2006 primarily due to the issuance of            medium-term notes in December 2005 and November 2006 and increased interest charges on            Central Hudson’s variable rate debt. The increase also reflects higher average            balances of outstanding short-term debt and higher interest rates. Regulatory carrying            charges on deferred balances due customers also increased.

          The            following table sets forth pertinent data on Central Hudson’s outstanding            debt.

|                                                      |   |                                          |    |   |   |    |   |   |    |   |
|-----------------------------------------------------------|--------|-----------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                      |   | 2007                                          |    | 2006   |   | 2005    |   |
|                                                      |   |                                               |    |        |   |         |   |
|                                                      |   | (Dollars In                        Thousands) |    |
| Long-Term                        Debt:                    |   |                                          |    |   |   |    |   |   |    |   |
| Debt retired                                              |   | $                                             | 33,000  |   | $      | — |   | $      | — |   |
| Debt issued                                               |   | $                                             | 66,000  |   | $      | 27,000  |   | $      | 24,000  |   |
| Outstanding at                        year-end:           |   |                                          |    |   |   |    |   |   |    |   |
| Amount (including                        current portion) |   | $                                             | 403,892 |   | $      | 370,889 |   | $      | 343,886 |   |
| Weighted average                        interest rate     |   |                                          | 5.49    | %      |   | 4.88    | %      |   | 4.47    | %      |
| Short-Term                        Debt:                   |   |                                          |    |   |   |    |   |   |    |   |
| Average daily amount                        outstanding   |   | $                                             | 32,501  |   | $      | 27,657  |   | $      | 16,559  |   |
| Weighted average                        interest rate     |   |                                          | 5.37    | %      |   | 5.24    | %      |   | 3.65    | %      |

See Note 7 –            “Short-Term Borrowing Arrangements” and Note 9 –            “Capitalization – Long-Term Debt” for additional information on            short-term and long-term debt of CH Energy Group and/or Central Hudson.

*Income            Taxes*

          Central            Hudson’s income taxes for 2007 decreased by $1.2 million compared to 2006            primarily due to a decrease in pre-tax book earnings, favorable impacts of items            related to utility plant and from the tax benefits of the Medicare Act. These favorable            items were partially offset by an unfavorable impact of flow-through items related to            reserves.

          Central            Hudson’s income taxes for 2006 decreased by $2.4 million compared to 2005            primarily due to a decrease in pre-tax book earnings and the reversal in 2005 of income            tax reserves resulting from a favorable resolution of income tax audits.

- 47 -

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***CH Energy            Group***

          In            addition to the impacts of Central Hudson discussed above, CH Energy Group’s            sales volumes, revenues and operating expenses, income taxes and other income were            impacted by Griffith and the other businesses described below.

|                                                                                                                                                 |   |                                                                                                  |   |    |   |   |    |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|
| **CH Energy                        Group                        Income Statement Variances**                                                         |   | Twelve months ended                        December 31,                        2007 over/(under) 2006 |   |
|                                                                                                                                                 |   |                                                                                                       |   |
|                                                                                                                                                 |   | Amount                        (In Thousands)                                                          |   | Percent |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |   |
| Operating                        Revenues                                                                                                            |   |                                                                                                  | $      | 203,324 |   |   | 20.5    | %      |   |
|                                                                                                                                                 |   |                                                                                                  |   |    |   |   |    |   |   |
| Operating                        Expenses:                                                                                                           |   |                                                                                                  |   |    |   |   |    |   |   |
| Purchased electric,                        fuel, natural gas and petroleum                                                                           |   |                                                                                                  |   | 155,473 |   |   | 23.5    | %      |   |
| Depreciation and                        Amortization                                                                                                 |   |                                                                                                  |   | 222     |   |   | 0.6     | %      |   |
| Other operating                        expenses                                                                                                      |   |                                                                                                  |   | 45,841  |   |   | 20.9    | %      |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |
| Total operating                        expenses                                                                                                      |   |                                                                                                  |   | 201,536 |   |   | 22.0    | %      |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |
| Operating                        Income                                                                                                              |   |                                                                                                  |   | 1,788   |   |   | 2.0     | %      |   |
| Other income,                        net                                                                                                             |   |                                                                                                  |   | (1,592  | )      |   | (15.0   | )%     |   |
| Interest                        charges                                                                                                              |   |                                                                                                  |   | 2,495   |   |   | 12.0    | %      |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |
| Income before income                        taxes, preferred dividends of subsidiary, and                           minority interest |   |                                                                                                  |   | (2,299  | )      |   | (3.0    | )%     |   |
| Income                        taxes                                                                                                                  |   |                                                                                                  |   | (1,871  | )      |   | (8.0    | )%     |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |
| Preferred dividends                        of subsidiary                                                                                             |   |                                                                                                  |   | — |   |   | — |   |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |
| Net                        (loss)/income                                                                                                             |   |                                                                                                  | $      | (448    | )      |   | (1.0    | )%     |   |
|                                                                                                                                                      |        |                                                                                                       |        |         |        |        |         |        |   |

|                                                                                                                                                   |   |                                                                                                  |   |    |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|
| **CH Energy                        Group                        Income Statement Variances**                                                           |   | Twelve months ended                        December 31,                        2006 over/(under 2005) |   |
|                                                                                                                                                   |   |                                                                                                       |   |
|                                                                                                                                                   |   | Amount                        (In Thousands)                                                          |   | Percent |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |   |
| Operating                        Revenues                                                                                                              |   |                                                                                                  | $      | 20,927  |   |   | 2.2    | %      |   |
|                                                                                                                                                   |   |                                                                                                  |   |    |   |   |   |   |   |
| Operating                        Expenses:                                                                                                             |   |                                                                                                  |   |    |   |   |   |   |   |
| Purchased electric,                        fuel, natural gas and petroleum                                                                             |   |                                                                                                  |   | (8,096  | )      |   | (1.2   | )%     |   |
| Depreciation and                        Amortization                                                                                                   |   |                                                                                                  |   | (518    | )      |   | (1.4   | )%     |   |
| Other operating                        expenses                                                                                                        |   |                                                                                                  |   | 31,086  |   |   | 16.5   | %      |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |        |        |        |        |   |
| Total operating                        expenses                                                                                                        |   |                                                                                                  |   | 22,472  |   |   | 2.5    | %      |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |        |        |        |        |   |
| Operating                        Income                                                                                                                |   |                                                                                                  |   | (1,545  | )      |   | (2.0   | )%     |   |
| Other income,                        net                                                                                                               |   |                                                                                                  |   | 1,514   |   |   | 16.6   | %      |   |
| Interest                        charges                                                                                                                |   |                                                                                                  |   | 3,367   |   |   | 20.0   | %      |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |        |        |        |        |   |
| Income before income                        taxes, preferred dividends of subsidiaries, and                           minority interest |   |                                                                                                  |   | (3,398  | )      |   | (5.0   | )%     |   |
| Income                        taxes                                                                                                                    |   |                                                                                                  |   | (2050   | )      |   | (8.0   | )%     |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |        |        |        |        |   |
| Net                        (loss)/income                                                                                                               |   |                                                                                                  | $      | (1,207  | )      |   | (3.0   | )%     |   |
|                                                                                                                                                        |        |                                                                                                       |        |         |        |        |        |        |   |

- 48 -

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*Griffith*

*Sales            Volumes*

          Sales            volumes for Griffith vary in response to weather conditions and customer behavior.            Deliveries of petroleum products used for heating purposes peak in the winter. Sales            also vary as customers respond to the price of the particular energy product and            changes in local economic conditions.

          Changes            in sales volumes of petroleum products, including the impact of acquisitions, are set            forth below. The charts reflect the change for actual deliveries, and the change            normalized to exclude the effect of weather.

|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
|------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                           |   |   Actual                        Deliveries             |   |
|                                           |   |                                                                  |        |
|                                           |   |   2007                                                 |   |   2006                                                                       |   |
|                                           |   |                                                                  |        |                                                                                        |        |
|                                           |   | %                        Change                        from 2006 |   |   Volumes as                        %                        of Total Volume |   | %                        Change                        from 2005 |   |   Volumes as                        %                        of Total Volume |   |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |
| Heating                        Oil             |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume1    |   |                                                             | 7      | %                                                                                      |   | 41                                                               | %      |                                                                                   | (16    | ) %    |   | 43     | %      |
| Acquisitions                        Volume2    |   |                                                             | 20     | %                                                                                      |   | 9                                                                | %      |                                                                                   | 4      | %      |   | 1      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Heating                        Oil       |   |                                                             | 27     | %                                                                                      |   | 50                                                               | %      |                                                                                   | (12    | ) %    |   | 44     | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Motor                        Fuels             |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | (8     | ) %                                                                                    |   | 44                                                               | %      |                                                                                   | 1      | %      |   | 54     | %      |
| Acquisitions                        Volume     |   |                                                             | 8      | %                                                                                      |   | 4                                                                | %      |                                                                                   | 5      | %      |   | 1      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Motor                        Fuels       |   |                                                             | 0      | %                                                                                      |   | 48                                                               | %      |                                                                                   | 6      | %      |   | 55     | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Propane and                        Other       |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | 35     | %                                                                                      |   | 2                                                                | %      |                                                                                   | (14    | ) %    |   | 1      | %      |
| Acquisitions                        Volume     |   |                                                             | 0      | %                                                                                      |   | 0                                                                | %      |                                                                                   | 0      | %      |   | 0      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Propane and                        Other |   |                                                             | 35     | %                                                                                      |   | 2                                                                | %      |                                                                                   | (14    | ) %    |   | 1      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Total                                          |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | (1     | ) %                                                                                    |   | 87                                                               | %      |                                                                                   | (8     | ) %    |   | 98     | %      |
| Acquisitions                        Volume     |   |                                                             | 13     | %                                                                                      |   | 13                                                               | %      |                                                                                   | 5      | %      |   | 2      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total                                          |   |                                                             | 12     | %                                                                                      |   | 100                                                              | %      |                                                                                   | (3     | ) %    |   | 100    | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |

- 49 -

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|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
|------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                           |   |   Weather                        Normalized Deliveries |   |
|                                           |   |                                                                  |        |
|                                           |   |   2007                                                 |   |   2006                                                                       |   |
|                                           |   |                                                                  |        |                                                                                        |        |
|                                           |   | %                        Change                        from 2006 |   |   Volumes as                        %                        of Total Volume |   | %                        Change                        from 2005 |   |   Volumes as                        %                        of Total Volume |   |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |
| Heating                        Oil             |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume1    |   |                                                             | (1     | ) %                                                                                    |   | 41                                                               | %      |                                                                                   | (6     | ) %    |   | 43     | %      |
| Acquisitions                        Volume2    |   |                                                             | 19     | %                                                                                      |   | 9                                                                | %      |                                                                                   | 5      | %      |   | 4      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Heating                        Oil       |   |                                                             | 18     | %                                                                                      |   | 50                                                               | %      |                                                                                   | (1     | ) %    |   | 47     | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |
| Motor                        Fuels             |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | (8     | ) %                                                                                    |   | 44                                                               | %      |                                                                                   | 1      | %      |   | 50     | %      |
| Acquisitions                        Volume     |   |                                                             | 8      | %                                                                                      |   | 4                                                                | %      |                                                                                   | 5      | %      |   | 1      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Motor                        Fuels       |   |                                                             | 0      | %                                                                                      |   | 48                                                               | %      |                                                                                   | 6      | %      |   | 51     | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Propane and                        Other       |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | 26     | %                                                                                      |   | 2                                                                | %      |                                                                                   | (1     | ) %    |   | 2      | %      |
| Acquisitions                        Volume     |   |                                                             | 0      | %                                                                                      |   | 0                                                                | %      |                                                                                   | 0      | %      |   | 0      | %      |
|                                           |   |                                                             |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total Propane and                        Other |   |                                                             | 26     | %                                                                                      |   | 2                                                                | %      |                                                                                   | (1     | ) %    |   | 2      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
|                                           |
| Total                                          |   |                                                             |   |                                                                                   |   |                                                             |   |                                                                                   |   |   |   |   |   |
| Base Company                        Volume     |   |                                                             | (4     | ) %                                                                                    |   | 87                                                               | %      |                                                                                   | (2     | ) %    |   | 95     | %      |
| Acquisitions                        Volume     |   |                                                             | 13     | %                                                                                      |   | 13                                                               | %      |                                                                                   | 5      | %      |   | 5      | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |
| Total                                          |   |                                                             | 9      | %                                                                                      |   | 100                                                              | %      |                                                                                   | 3      | %      |   | 100    | %      |
|                                           |   |                                                                  |        |                                                                                        |        |                                                                  |        |                                                                                        |        |        |        |        |        |

|   |                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1      | For the purposes of                        these charts, “Base Company” means Griffith as constituted at                        January 1, 2006 (i.e., without any impact from acquisitions made by                        Griffith in 2007 and 2006). |
| 2      | For the purposes of                        these charts, “Acquisition” represents the incremental effect                        of acquisitions made by Griffith in 2007 and 2006.                                                                     |

          Sales            of petroleum products increased 12% in 2007. This was primarily a result of an increase            in sales of heating oil, largely attributable to the acquisitions made in 2007 and            colder weather in 2007. Sales of propane increased primarily due to colder weather in            2007 and the addition of a large commercial account in 2007. There was a 9% increase in            heating degree-days in 2007 as compared to 2006. Degree-day variation is adjusted for            the delay between the time the actual weather occurs, and the time of product            delivery.

          Sales            of petroleum products decreased in 2006. This was primarily a result of a decrease in            sales of heating oil, largely attributable to warmer weather in 2006. Additionally,            sales declined due to customer conservation because of the increased cost of heating            oil. Motor fuel sales increased primarily from the impact of acquisitions made during            2005 and 2006. Sales of propane decreased, primarily due to warmer weather in 2006 and            customer conservation. There was a 15% decrease in heating degree-days in 2006 as            compared to 2005.

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*Revenues*

Griffith            Revenues            Increase (Decrease) from Prior Year            (In Thousands)

|                                             |   |   |   |   |   |   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                             |   | 2007   |   | 2006   |   |
|                                             |   |        |   |        |   |
| Heating                        Oil               |   |   |   |   |   |   |   |
| Base                        Company1             |   | $      | 24,322 |   | $      | (8,619 | )      |
| Acquisitions2                                    |   |   | 32,896 |   |   | 6,939  |   |
|                                             |   |        |        |   |        |        |   |
| Total Heating                        Oil         |   | $      | 57,218 |   | $      | (1,680 | )      |
|                                             |   |        |        |   |        |        |   |
| Motor                        Fuels               |   |   |   |   |   |   |   |
| Base Company                                     |   | $      | 1,126  |   | $      | 21,946 |   |
| Acquisitions                                     |   |   | 14,086 |   |   | 8,075  |   |
|                                             |   |        |        |   |        |        |   |
| Total Motor                        Fuels         |   | $      | 15,212 |   | $      | 30,021 |   |
|                                             |   |        |        |   |        |        |   |
| Service                        Revenues          |   |   |   |   |   |   |   |
| Base Company                                     |   | $      | 1,886  |   | $      | 1,803  |   |
| Acquisitions                                     |   |   | 3,511  |   |   | 1,728  |   |
|                                             |   |        |        |   |        |        |   |
| Total Service                        Revenues    |   | $      | 5,397  |   | $      | 3,531  |   |
|                                             |   |        |        |   |        |        |   |
| Other                                            |   |   |   |   |   |   |   |
| Propane                                          |   | $      | 1,450  |   | $      | (285   | )      |
| Weather-Hedging                        Contracts |   |   | (1,626 | )      |   | 823    |   |
| Other                                            |   |   | 276    |   |   | 323    |   |
|                                             |   |        |        |   |        |        |   |
| Total Other                                      |   | $      | 100    |   | $      | 861    |   |
|                                             |   |        |        |   |        |        |   |
|                                             |   |   |   |   |   |   |   |
| Total                        Revenues            |   | $      | 77,927 |   | $      | 32,733 |   |
|                                             |   |        |        |   |        |        |   |

|   |                                                                                                                                                                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1      | For the purposes of                        this chart, “Base Company” means Griffith as constituted at                        January 1, 2006 (i.e., without any impact from acquisitions made by                        Griffith in 2007 and 2006). |
| 2      | For the purposes of                        this chart, “Acquisitions” represents the incremental effect of                        acquisitions made by Griffith in 2007 and 2006.                                                                    |

          Revenues,            net of the effect of weather hedging contracts, increased in 2007 due largely to an            increase in selling price and revenues from petroleum products resulting from an            increase in heating oil volumes, and revenues from acquisitions made in 2006 and            2007.

          Revenues,            net of the effect of weather hedging contracts, increased $32.7 million in 2006 due            largely to an increase in revenues from petroleum products. Revenues from heating oil            decreased due to a decrease in volumes, which was partially offset by an increase in            selling price. Revenues from the sale of motor fuels increased due to an increase in            selling price and an increase in sales volumes related primarily to acquisitions made            in 2006 and 2005.

*Operating            Expenses*

          Operating            expenses increased $73.6 million, or 22.8% in 2007 primarily due to higher petroleum            product expenses. These costs increased $61.0 million, or 23.8%, due to higher            wholesale market prices and an increase in sales volume primarily due to the impact of            acquisitions and colder weather in 2007. Other operating expenses increased $12.6            million in 2007 primarily due to an increase in expenses associated

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with the increased sales volumes            and additional operating and overhead expenses associated with acquisitions made during            2006 and 2007.

          Griffith’s            operating expenses for 2006 increased $35.6 million, or 12.4% primarily due to higher            wholesale prices of petroleum products. These costs increased $31.0 million, or 13.7%,            due to higher wholesale market prices. Other operating expenses increased $4.6 million            in 2006 primarily due to operating expenses of acquisitions made in 2005 and            2006.

*Other Businesses and            Investments*

*Revenues and Operating            Expenses*

          On            April 12, 2006, CHEC purchased a 75% majority interest in Lyonsdale from Catalyst            Renewables Corporation. Lyonsdale owns and operates a 19-megawatt, wood-fired electric            generating plant. The operating results of Lyonsdale have been consolidated in the            financial statements of CH Energy Group since the date of purchase. Results of            operations for 2007 reflect operating revenue of $8.6 million, operating expenses of            $9.2 million, and favorable tax benefits of $1.8 million, including production tax            credits of $1.2 million.

          Lyonsdale’s            operating results in 2006, from the date of acquisition, reflect operating revenues of            $5.6 million, operating expenses of $6.1 million, and favorable tax benefits of $1.1            million, including production tax credits of $0.8 million.

*Other            Income*

          Other            income for the balance of CH Energy Group, primarily the holding company and            CHEC’s investments in partnerships and other investments (other than Griffith)            decreased $1.0 million in 2007. The decrease is largely attributable to the sale of            non-strategic property in 2006, and decreased investment income resulting from the            redeployment of capital from short-term investments to CH Energy Group’s            subsidiaries, the use of proceeds from the sale of short-term investments to pay common            stock dividends, and a decrease in Cornhusker Holdings’ earnings. The results of            CH Energy Group’s investment in Cornhusker Holdings declined due to increasing            corn prices and declining ethanol prices, representing the primary input and product            output, respectively. This decrease was partially offset by an increase in income from            CHEC’s investments in other renewable energy and energy efficiency            projects.

          Other            Income and Deductions for CH Energy Group (the holding company) and CHEC’s            investments in partnerships and other investments (other than Griffith) increased $1.5            million in 2006. This was due primarily to a $1.6 million increase in income from            CHEC’s interest in Cornhusker Holdings and a $0.7 million pre-tax gain on the            sale of real property held by CH Energy Group. These increases were partially offset by            losses on other investments held by CHEC.

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*Income            Taxes*

          CH            Energy Group’s income taxes for 2007 decreased by $1.9 million compared to 2006            primarily due to lower taxes at Central Hudson, the favorable impact of production tax            credits at CHEC from its renewable energy portfolio and lower state income taxes. These            favorable items were partially offset by an unfavorable impact of flow-through items            related to reserves.

          CH            Energy Group’s income taxes for 2006 decreased by $2.1 million compared to 2005            primarily due to lower taxes at Central Hudson and the favorable impact of production            tax credits at CHEC from its renewable energy portfolio. These favorable items were            partially offset by increased New York State income taxes due to the capital based tax            for 2006 and the absence of a favorable income tax adjustment recorded in 2005 related            to the completion of a tax audit.

**OTHER MATTERS**

**NYISO Re-Pricing            Adjustment**

          On            July 20, 2005, Central Hudson received a payment from the NYISO for adjustments to            energy sales transactions that had occurred in May 2000, when Central Hudson owned the            Danskammer Plant and a share of the Roseton Plant. The adjustments resulted from a            decision of the United States Court of Appeals for the District of Columbia and a            subsequent Order of the FERC that directed the NYISO to increase the real-time pricing            on those transactions. Since the payment related to unresolved billing issues existing            at June 30, 2005, its impact was recorded in the financial results for that quarter.            The payment resulted in an increase to net income of $572,000, or $0.04 per share.            Additionally, as a result of PSC regulatory mechanisms in place in 2000, Central            Hudson’s customers received $2.7 million of the NYISO payments which were            returned to them through Central Hudson’s electric cost adjustment            mechanism.

**Pension Protection            Act**

          On            August 17, 2006, President Bush signed the Pension Protection Act into law. The Pension            Protection Act introduces new funding requirements for single and multi-employer            defined benefit pension plans, addresses plan design for cash balance and other hybrid            plans, and addresses contributions to defined contribution plans, deduction limits for            contributions to retirement plans, and investment advice provided to plan participants.            The new defined benefit funding rules are effective for plan years beginning after            December 31, 2007. Certain transition rules will apply for 2008 through 2010. For            additional discussion regarding the Pension Protection Act, please see the            “Retirement Plan” discussion that follows.

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**Higher Energy            Prices**

          Lower            sales than reflected in Central Hudson’s 2006 Rate Order may occur as a result of            changes in usage patterns due to factors external to Central Hudson, such as weather,            the price of energy, customer use of distributed generation, economic conditions, the            loss of major customers or additions of fewer new customers than projected. With            increasing energy prices and heightened consumer awareness of the need to conserve            energy, Central Hudson is currently experiencing and continues to be at risk of having            sales volumes that are lower than those upon which the 2006 Rate Order was based. Such            lower volumes will, absent other factors such as expense reductions, reduce the            Company’s earnings and cash flow. Implementation of a revenue decoupling            mechanism (RDM), which breaks the link between sales and profits, would eliminate this            risk. On September 25, 2007, Central Hudson filed a proposed energy efficiency program            with the PSC, which includes an RDM.

          Griffith’s            customers are also experiencing higher per unit prices. If fuel oil prices remain high            in 2008, energy efficiency efforts and a continued decease in use per customer could            reduce residential fuel delivery volumes.

          Both            Central Hudson and Griffith may also face several other challenges that could result            from continued higher prices: higher working capital needs driven by lags between            disbursements to energy suppliers and receipts from customers, higher bad debt expenses            resulting from customers who are unable to pay higher energy bills, and political and            regulatory responses to higher energy prices. Management believes that CH Energy Group            has adequate liquidity to meet the working capital demands of the current and near-term            energy price environment and is actively monitoring bad debt expense and the            political/regulatory environment.

**Changes in Accounting            Standards**

          See            Note 3 – “New Accounting Standards and Other FASB Projects” for a            discussion of the status of new accounting standards.

**Retirement            Plan**

          As            described more fully in Note 10 – “Post-Employment Benefits,” Central            Hudson has a non-contributory Retirement Income Plan (“Retirement Plan”)            covering all of its unionized employees, and managerial, professional and supervisory            employees hired before January 1, 2008. The Retirement Plan is a defined benefit plan            which provides pension benefits based on an employee’s compensation and years of            service. In 2007 Central Hudson amended the Retirement Plan to eliminate these benefits            for managerial, professional, and supervisory employees hired after January 1,            2008.

          The            significant assumptions and estimates used to account for the Retirement 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.

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          The            discount rate is determined each year as of September 30 based on the rate at which            obligations could be effectively settled. The rate is based on the Citigroup Pension            Discount Curve. Central Hudson selects the rate after consultation with its actuarial            consultant. Central Hudson’s discount rate was 6.2% as of the most recent            valuation date, September 30, 2007.

          In            determining the expected long-term rate of return on Retirement Plan assets, Central            Hudson considered the current level of expected returns on risk-free investments            (primarily United States government bonds), the historical level of risk premiums            associated with other asset classes, and the expectations of future returns over a            20-year time horizon on each asset class, based on the views of leading financial            advisors and economists. The expected return for each asset class was then weighted            based on the Retirement Plan’s target asset allocation. Central Hudson also            considered expectations of value-added by active management, net of investment            expenses.

          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 net losses are            currently $32.4 million, including losses for the years 1998 through 2007. Therefore,            the future annual amortization of these losses will increase pension expense,            determined under SFAS No. 87, titled *Employers’ Accounting for Pensions*,            as amended by SFAS No. 158, titled *Employers’ Accounting for Defined Benefit            Pension and Other Postretirement Plans*, from its current level unless there are            offsetting future gains or other offsetting components of pension expense.

          Between            September 30, 2007, the latest measurement date, and December 31, 2007, there were 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. This measurement does not take into account 2008            market activity.

          Based            on current levels of Retirement Plan assets and obligations, a change of 0.25% in the            long-term rate of return assumption would change pension expense by approximately $0.9            million and a change of 0.25% 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 and OPEB costs through customer rates with differences from rate allowances            deferred for future recovery from or return to customers. As a result, Central Hudson            expects to fully recover its net periodic pension and OPEB costs over time. The            Retirement Plan’s liquidity is primarily affected by the cash contributions made            by Central Hudson to the Retirement Plan. Central Hudson contributed $5.8

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million and $7 million to the            Retirement Plan in 2007 and 2006, respectively. Based on the requirements of the            Pension Protection Act, Central Hudson’s actuarial consultant provided estimated            annual contributions under various economic scenarios for the four-year period from            2008-2011. The estimated contributions were calculated to achieve a 100% funded ratio            by 2011 and not drop below 80% in any given year. Under economic growth assumptions of            above average to average growth, annual contributions could range from $0-$11 million.            Under a recession scenario that assumes both economic growth and inflation decline            through 2009 before a partial recovery, annual contributions could range from $30-$40            million. The actual contributions could vary significantly based upon economic growth,            corporate resources, projected investment returns, actual investment returns,            inflation, and interest rate assumptions.

          For            additional information regarding the Retirement Plan, see Note 10 –            “Post-Employment Benefits.”

**CAPITAL RESOURCES AND            LIQUIDITY**

**CH Energy Group – Cash            Flow Summary**

          Changes            in CH Energy Group’s cash and cash equivalents resulting from operating,            investing, and financing activities for the years ended December 31, 2007, 2006, and            2005 are summarized in the following chart:

|                                                   |   |   |    |   |   |    |   |   |    |   |
|--------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| **CH Energy                        Group**             |   | 2007   |    | 2006   |   | 2005    |   |
|                                                        |
| Net cash provided by                        (used in): |   |   |    |   |   |    |   |   |    |   |
| Operating                        Activities            |   | $      | 33,079  |   | $      | 87,888  |   | $      | 44,750  |   |
| Investing                        Activities            |   |   | (73,674 | )      |   | (88,673 | )      |   | (73,409 | )      |
| Financing                        Activities            |   |   | 27,787  |   |   | (24,504 | )      |   | 7,652   |   |
| Net change for the                        period       |   |   | (12,808 | )      |   | (25,289 | )      |   | (21,007 | )      |
| Balance at beginning                        of period  |   |   | 24,121  |   |   | 49,410  |   |   | 70,417  |   |
| Balance at end of                        period        |   | $      | 11,313  |   | $      | 24,121  |   | $      | 49,410  |   |

          CH            Energy Group’s cash decreased by $12.8 million, $25.3 million, and $21.0 million            for the years ended December 31, 2007, 2006, and 2005, respectively. For each year,            capital expenditures and dividends were funded by a combination of cash from operations            and debt. Short-term debt was used primarily as a financing vehicle for working capital            needs. For the years ended December 31, 2007 and 2005, cash from operations and            proceeds from the sale of short-term investments were used to fund acquisitions. For            the year ended December 31, 2006, acquisitions were funded by cash from operations. For            the year ended December 31, 2006, the large amount of cash provided by sales in excess            of working capital needs provided funds to supplement the financing of capital            expenditures and pay down short-term debt borrowings.

          Net            cash provided by operations was $33.1 million, $87.9 million, and $44.8 million for the            years ended December 31, 2007, 2006, and 2005, respectively. Cash provided by sales            exceeded the period’s working capital needs for each year, particularly in 2006.            Cash from operations was also significantly impacted by an

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overpayment of federal income            taxes in 2006 of $8.7 million, which was refunded in 2007. Other significant items that            impacted cash from operations in each of these years included:

|                                                                    |   |   |                               |   |   |                               |   |   |                               |   |
|-------------------------------------------------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------|--------|
|                                                                    |   | 2007   |                               | 2006   |   | 2005                               |   |
|                                                                         |
| Central                        Hudson’s pension plan contribution |   | $      | 6.3                        million |   | $      | 7.5                        million |   | $      | 0.5                        million |   |
| Central                        Hudson’s OPEB contribution         |   | $      | 6.5                        million |   | $      | 3.2                        million |   | $      | 6.0                        million |   |
| MGP site remediation                        costs                       |   | $      | 5.1                        million |   | $      | 1.5                        million |   | $      | 0.7                        million |   |

          Net            cash used in investing activities was $73.7 million, $88.7 million, and $73.4 million            for the years ended December 31, 2007, 2006, and 2005, respectively. Significant uses            of cash within investing activities in each of these years included:

|                                                                   |   |   |                                |   |   |                                |   |   |                                |   |
|------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                   |   | 2007   |                                | 2006   |   | 2005                                |   |
|                                                                        |
| Capital                        expenditures                            |   | $      | 84.6                        million |   | $      | 75.1                        million |   | $      | 63.9                        million |   |
| Acquisitions                                                           |   | $      | 25.6                        million |   | $      | 14.7                        million |   | $      | 8.5                        million  |   |
| Notes receivable                        from unconsolidated affiliates |   | $      | 4.2                        million  |   | $      | 2.1                        million  |   | $      | 4.6                        million  |   |

          These            uses of cash for investing were partially offset by net proceeds of $39.1 million in            2007 and $6.6 million in 2005 from the sale of short-term investments. Additionally,            proceeds from the sale of property and plant provided an additional source of cash in            the past two years due to the sale of a Griffith property for $3.6 million in 2007 and            the sale of Central Hudson non-utility real property for $3.0 million in            2006.

          Net            cash provided by (used in) financing activities was $27.8 million, $(24.5) million, and            $7.7 million for the years ended December 31, 2007, 2006, and 2005, respectively.            Financing activities have consistently included dividends paid each year and borrowings            of long-term debt to finance Central Hudson’s capital expenditures as            follows:

|                                                    |   |   |                                |   |   |                                |   |   |                                |   |
|---------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|
|                                                    |   | 2007   |                                | 2006   |   | 2005                                |   |
|                                                         |
| Dividends                        paid                   |   | $      | 34.0                        million |   | $      | 34.0                        million |   | $      | 34.0                        million |   |
| Net borrowings of                        long-term debt |   | $      | 33.0                        million |   | $      | 27.0                        million |   | $      | 24.0                        million |   |

          Short-term            debt activity consisted of net borrowings of $29.5 million in 2007 and$18.0 million in            2005 primarily used to fund Central Hudson’s working capital and to pay            dividends. Repayments of short-term debt of $17.0 million in 2006 was based on the            amount of excess of cash provided from sales over the working capital needs for the            year.

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**Central Hudson – Cash            Flow Summary**

          Changes            in Central Hudson’s cash and cash equivalents resulting from operating,            investing, and financing activities for the years ended December 31, 2007, 2006, and            2005 are summarized in the following chart:

|                                                   |   |   |    |   |   |    |   |   |    |   |
|--------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| **Central                        Hudson**              |   | 2007   |    | 2006   |   | 2005    |   |
|                                                        |
| Net cash provided by                        (used in): |   |   |    |   |   |    |   |   |    |   |
| Operating                        Activities            |   | $      | 32,798  |   | $      | 67,912  |   | $      | 34,265  |   |
| Investing                        Activities            |   |   | (83,279 | )      |   | (70,506 | )      |   | (61,988 | )      |
| Financing                        Activities            |   |   | 52,363  |   |   | 72      |   |   | 23,728  |   |
| Net change for the                        period       |   |   | 1,882   |   |   | (2,522  | )      |   | (3,995  | )      |
| Balance at beginning                        of period  |   |   | 1,710   |   |   | 4,232   |   |   | 8,227   |   |
| Balance at end of                        period        |   | $      | 3,592   |   | $      | 1,710   |   | $      | 4,232   |   |

          Central            Hudson’s cash increased by $1.9 million for the year ended December 31, 2007 and            decreased by $2.5 million and $4.0 million for the years ended December 31, 2006 and            2005, respectively. For each year, capital expenditures and dividends were funded by a            combination of cash from operations and debt. Short-term debt was used primarily as a            financing vehicle for working capital needs. For the year ended December 31, 2006, the            large amount of cash provided by sales in excess of working capital needs provided            funds to supplement the financing of capital expenditures and pay down short-term debt            borrowings.

          Net            cash provided by operations was $32.8 million, $67.9 million, and $34.3 million for the            years ended December 31, 2007, 2006, and 2005, respectively. Cash provided by sales            exceeded the period’s working capital needs each year, particularly in 2006. Cash            from operations was also significantly impacted by an overpayment of federal income            taxes in 2006 of $8.7 million, which was refunded in 2007. Other significant items that            impacted cash from operations in each of these years included:

|                                              |   |   |                               |   |   |                               |   |   |                               |   |
|---------------------------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------|--------|
|                                              |   | 2007   |                               | 2006   |   | 2005                               |   |
|                                                   |
| Pension plan                        contribution  |   | $      | 6.3                        million |   | $      | 7.5                        million |   | $      | 0.5                        million |   |
| OPEB                        contribution          |   | $      | 6.5                        million |   | $      | 3.2                        million |   | $      | 6.0                        million |   |
| MGP site remediation                        costs |   | $      | 5.1                        million |   | $      | 1.5                        million |   | $      | 0.7                        million |   |

          Net            cash used in investing activities of $83.3 million, $70.5 million, and $62.0 million            for the years ended December 31, 2007, 2006, and 2005, respectively, was primarily for            capital expenditures.

          Net            cash provided by financing activities was $52.4 million, $0.1 million, and $23.7            million for the years ended December 31, 2007, 2006, and 2005, respectively. Financing            activities have consistently included dividends paid to CH Energy Group each year and            borrowings of long-term debt to finance capital expenditures as follows:

|                                                    |   |   |                                |   |   |                                |   |   |                                |   |
|---------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|
|                                                    |   | 2007   |                                | 2006   |   | 2005                                |   |
|                                                         |
| Dividends                        paid                   |   | $      | 8.5                        million  |   | $      | 8.5                        million  |   | $      | 17.0                        million |   |
| Net borrowings of                        long-term debt |   | $      | 33.0                        million |   | $      | 27.0                        million |   | $      | 24.0                        million |   |

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          Short-term            debt activity consisted of net borrowings of $29.5 million in 2007 and $18.0 million in            2005 primarily used to fund working capital and to pay dividends. Repayments of            short-term debt of $17.0 million in 2006 was based on the amount of excess of cash            provided from sales over the working capital needs for the year.

**Capital            Structure**

          CH            Energy Group’s consolidated capital structure reflects the external debt and            preferred stock of Central Hudson. CHEC’s debt is comprised entirely of            intercompany loans from CH Energy Group that are eliminated upon            consolidation.

          As            provided in the 2006 Rate Order, Central Hudson’s rates are based on a capital            structure that reflects 45% common equity, but an equity ratio up to 47% may be used            for the purpose of determining earnings sharing. Central Hudson currently intends to            maintain an equity ratio of approximately 45%. These ratios are calculated according to            a PSC methodology, which excludes short-term debt.

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

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          Year-end            capital structures for CH Energy Group and its subsidiaries are set forth below as of            December 31, 2007, 2006, and 2005:

|                                     |   |                                              |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| CH Energy                        Group   |   | Year-end Capital                        Structure |   |
|                                          |   |                                                   |   |
|                                     |   | 2007                                              |   | 2006   |   | 2005   |   |
|                                     |   |                                                   |   |        |   |        |   |
| Long-term                        debt    |   |                                              | 40.8   | %      |   | 40.4   | %      |   | 38.3   | %      |
| Short-term                        debt** |   |                                              | 4.3    |   |   | 1.4    |   |   | 3.3    |   |
| Preferred                        stock   |   |                                              | 2.1    |   |   | 2.3    |   |   | 2.3    |   |
| Common                        equity     |   |                                              | 52.8   |   |   | 55.9   |   |   | 56.1   |   |
|                                     |   |                                                   |        |   |        |        |   |        |        |   |
|                                     |   |                                              | 100.0  | %      |   | 100.0  | %      |   | 100.0  | %      |
|                                     |   |                                                   |        |   |        |        |   |        |        |   |

|                                     |   |                                              |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Central                        Hudson    |   | Year-end Capital                        Structure |   |
|                                          |   |                                                   |   |
|                                     |   | 2007                                              |   | 2006   |   | 2005   |   |
|                                     |   |                                                   |   |        |   |        |   |
| Long-term                        debt    |   |                                              | 49.6   | %      |   | 50.9   | %      |   | 49.7   | %      |
| Short-term                        debt** |   |                                              | 5.2    |   |   | 1.8    |   |   | 4.3    |   |
| Preferred                        stock   |   |                                              | 2.6    |   |   | 2.9    |   |   | 3.0    |   |
| Common                        equity     |   |                                              | 42.6   |   |   | 44.4   |   |   | 43.0   |   |
|                                     |   |                                                   |        |   |        |        |   |        |        |   |
|                                     |   |                                              | 100.0  | %      |   | 100.0  | %      |   | 100.0  | %      |
|                                     |   |                                                   |        |   |        |        |   |        |        |   |

|                                     |   |                                               |    |   |   |    |   |   |    |   |
|------------------------------------------|--------|----------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
| CHEC                                     |   | Year-end Capital                        Structure* |    |
|                                          |   |                                                    |    |
|                                     |   | 2007                                               |    | 2006   |   | 2005    |   |
|                                     |   |                                                    |    |        |   |         |   |
| Long-term                        debt    |   |                                               | 48.9    | %      |   | 43.6    | %      |   | 46.8    | %      |
| Short-term                        debt** |   |                                               | — |   |   | — |   |   | — |   |
| Preferred                        stock   |   |                                               | — |   |   | — |   |   | — |   |
| Common                        equity     |   |                                               | 51.1    |   |   | 56.4    |   |   | 53.2    |   |
|                                     |   |                                                    |         |   |        |         |   |        |         |   |
|                                     |   |                                               | 100.0   | %      |   | 100.0   | %      |   | 100.0   | %      |
|                                     |   |                                                    |         |   |        |         |   |        |         |   |

|   |                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *      | Based on stand-alone                        financial statements and including intercompany balances which are                        eliminated upon consolidation. |
| **     | Excluded from the                        common equity ratio under the PSC’s methodology for Central Hudson                        delivery rates.             |

**Contractual            Obligations**

          A            review of capital resources and liquidity should also consider other contractual            obligations and commitments, which are further disclosed in Note 12 –            “Commitments and Contingencies.”

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          The            following is a summary of the contractual obligations for CH Energy Group and its            affiliates as of December 31, 2007:

|                                                                    |   |                                                                   |    |                                                                 |   |                                                                 |   |                                                         |    |   |   |    |   |   |      |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|--------|--------|---------|--------|--------|-----------|--------|
|                                                                    |   | Projected Payments Due                        By Period (In Thousands) |    |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |
|                                                                    |   | Less                        than                        1 year         |    | Years                        Ending                        2009-2010 |   | Years                        Ending                        2011-2012 |   | 2013                        and                        After |    | Total  |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |
| Long-Term                        Debt(1)                                |   | $                                                                      | — |                                                                 |   | $                        44,000                                      |   | $                                                            | 36,000  |   | $      | 323,950 |   | $      | 403,950   |   |
| Interest Payments                        – Long-Term Debt(1)      |   |                                                                   | 19,830  |                                                                 |   | 37,025                                                               |   |                                                         | 33,360  |   |   | 231,269 |   |   | 321,484   |   |
| Operating                        Leases                                 |   |                                                                   | 3,307   |                                                                 |   | 6,177                                                                |   |                                                         | 5,350   |   |   | 5,581   |   |   | 20,415    |   |
| Construction/Maintenance                        & Other Projects(2) |   |                                                                   | 13,872  |                                                                 |   | 7,783                                                                |   |                                                         | 2,313   |   |   | 1,084   |   |   | 25,052    |   |
| Purchased Electric                        Contracts(3)                  |   |                                                                   | 166,887 |                                                                 |   | 200,251                                                              |   |                                                         | 40,260  |   |   | 12,650  |   |   | 420,048   |   |
| Purchased Natural Gas                        Contracts(3)               |   |                                                                   | 69,204  |                                                                 |   | 85,774                                                               |   |                                                         | 33,157  |   |   | 18,232  |   |   | 206,367   |   |
| Purchased Fixed Liquid                        Petroleum Contracts       |   |                                                                   | 4,938   |                                                                 |   | —                                                              |   |                                                         | — |   |   | — |   |   | 4,938     |   |
| Purchased Variable                        Liquid Petroleum Contracts(4) |   |                                                                   | 6,572   |                                                                 |   | —                                                              |   |                                                         | — |   |   | — |   |   | 6,572     |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |         |        |        |           |        |
| Total Contractual                        Obligations(5)                 |   | $                                                                      | 284,610 |                                                                 |   | $                        381,010                                     |   | $                                                            | 150,440 |   | $      | 592,766 |   | $      | 1,408,826 |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |         |        |        |           |        |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Includes fixed rate                        obligations and variable interest rate bonds with estimated variable                        interest payments based on the actual interest paid in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (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. The operations and maintenance contract                        for Lyonsdale (which includes a base management fee included in these                        totals for the years 2008-2009) also contains provisions for additional                        performance-based compensation that are not included in the amounts                        shown. |
| (3)    | Purchased electric                        and purchased natural gas costs for Central Hudson are fully recovered via                        their respective regulatory cost adjustment mechanisms. The less than one                        year total includes a $50 million Dynegy 2008 contract executed on January                        30, 2008.                                                                                                                                                                                                                                                                                                                                                                                  |
| (4)    | Estimated based on                        pricing at December 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (5)    | The estimated                        present value of CH Energy Group’s total contractual obligations is                        $1,005 million, assuming a discount rate of 6.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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          The            following is a summary of the contractual obligations for Central Hudson as of December            31, 2007:

|                                                                    |   |                                                                   |    |                                                                 |   |                                                                 |   |                                                         |    |   |   |    |   |   |      |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|----------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|--------|--------|---------|--------|--------|-----------|--------|
|                                                                    |   | Projected Payments Due                        By Period (In Thousands) |    |
|                                                                         |        |                                                                        |         |
|                                                                    |   | Less                        than                        1 year         |    | Years                        Ending                        2009-2010 |   | Years                        Ending                        2011-2012 |   | 2013                        and                        After |    | Total  |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |         |        |        |           |        |
| Long-Term                        Debt(1)                                |   | $                                                                      | — |                                                                 | $      | 44,000                                                               |   | $                                                            | 36,000  |   | $      | 323,950 |   | $      | 403,950   |   |
| Interest Payments                        – Long-Term Debt(1)      |   |                                                                   | 19,830  |                                                                 |   | 37,025                                                               |   |                                                         | 33,360  |   |   | 231,269 |   |   | 321,484   |   |
| Operating                        Leases                                 |   |                                                                   | 2,001   |                                                                 |   | 3,895                                                                |   |                                                         | 3,857   |   |   | 3,836   |   |   | 13,589    |   |
| Construction/Maintenance                        & Other Projects(2) |   |                                                                   | 13,407  |                                                                 |   | 7,320                                                                |   |                                                         | 2,298   |   |   | 1,076   |   |   | 24,101    |   |
| Purchased Electric                        Contracts(3)                  |   |                                                                   | 166,887 |                                                                 |   | 200,251                                                              |   |                                                         | 40,260  |   |   | 12,650  |   |   | 420,048   |   |
| Purchased Natural Gas                        Contracts(3)               |   |                                                                   | 69,204  |                                                                 |   | 85,774                                                               |   |                                                         | 33,157  |   |   | 18,232  |   |   | 206,367   |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |         |        |        |           |        |
| Total Contractual                        Obligations(4)                 |   | $                                                                      | 271,329 |                                                                 | $      | 378,265                                                              |   | $                                                            | 148,932 |   | $      | 591,013 |   | $      | 1,389,539 |   |
|                                                                         |        |                                                                        |         |                                                                      |        |                                                                      |        |                                                              |         |        |        |         |        |        |           |        |

|   |                                                                                                                                                                                                                                                                                                                                                     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Includes fixed rate                        obligations and variable interest rate bonds with estimated variable                        interest payments based on the actual interest paid in 2007.                                                                                                                                                      |
| (2)    | Including Specific,                        Term, and Service Contracts, as defined in footnote (2) of the preceding                        chart.                                                                                                                                                                                                        |
| (3)    | Purchased electric                        and purchased natural gas costs for Central Hudson are fully recovered via                        their respective regulatory cost adjustment mechanisms. The less than one                        year total includes a $50 million Dynegy 2008 contract executed on January                        30, 2008. |
| (4)    | The estimated                        present value of Central Hudson’s total contractual obligations is                        $987 million, assuming a discount rate of 6.0%.                                                                                                                                                                     |

          Central            Hudson may also have an obligation to fund its Retirement Plan and OPEB. 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 Retirement Plan            assets. Based on the requirements of the Pension Protection Act, Central Hudson’s            actuarial consultant provided estimated annual contributions under various economic            scenarios for the four-year period from 2008-2011. The estimated contributions were            calculated to achieve a 100% funded ratio by 2011 and not drop below 80% in any given            year. Under economic growth assumptions of above average to average growth, annual            contributions could range from $0-$11 million. Under a recession scenario that assumes            both economic growth and inflation decline through 2009 before a partial recovery,            annual contributions could range from $30-$40 million. The actual contributions could            vary significantly based upon economic growth, projected investment returns, inflation,            and interest rate assumptions. Estimated Retirement Plan contributions in 2008 range            from $5 to $10 million.

          Employer            contributions in 2007 to fund OPEB were $1.7 million for the 2006 plan year, and $4.8            million for the 2007 plan year, with an additional estimated $1.9 million for the 2007            plan year to be funded in the first quarter of 2008. Obligations for future funding            depend on a number of factors, including the discount rate, expected return,

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and medical claims assumptions            used. If these factors remain stable, annual funding for the next few years is expected            to approximate the 2007 amount.

          Under            the policy of the PSC regarding pension and OPEB costs, Central Hudson recovers these            costs through customer rates with differences from rate allowances deferred for future            recovery from or return to customers. Based on the current policy, Central Hudson            expects to fully recover its net periodic pension and OPEB costs over time.

**Anticipated Sources and Uses            of Cash**

          CH            Energy Group’s cash flow is primarily generated by the operations of its direct            subsidiaries, Central Hudson and CHEC. Generally, the subsidiaries do not accumulate            cash but rather provide cash to CH Energy Group in the form of dividends and, in the            case of CHEC, repayments on its intercompany loan.

          Central            Hudson’s planned capital expenditures for construction and removal during 2008            are expected to total approximately $85 million. For 2009, planned capital expenditures            are expected to range from $90 million to $100 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 its            business needs require.

          In            2008 Central Hudson intends to pay dividends to CH Energy Group that will total less            than its net income. Central Hudson intends to retain a portion of its earnings to fund            a portion of its growth in long-lived assets while using long-term debt to fund the            remainder and to manage its capital structure. Central Hudson anticipates issuing            approximately $20 million of its Series F medium-term notes to meet its long-term debt            needs in 2008. Additionally, Central Hudson will remarket $16.7 million of its Series A            notes, which are nearing the end of their five-year interest rate mode. Short-term debt            is expected to be used to fund seasonal and temporary variations in working capital            requirements. If wholesale energy prices increase, Central Hudson would expect a            corresponding increase in its current level of working capital.

          CHEC’s            capital expenditures are driven primarily by Griffith and are expected to be            approximately $3.5 million during 2008, excluding acquisitions. In January 2008,            Griffith closed on two acquisitions totaling $8.6 million. For 2009, capital            expenditures, excluding acquisitions, are expected to range from $3 million to $4            million. Griffith continues to explore opportunities to expand through both internal            growth and acquisitions, depending on financial performance and opportunities            available. As announced in November 2007, CHEC plans to build a landfill gas energy            facility in Auburn, NY during 2008, and expects to invest approximately $10 million for            that purpose. CHEC may alter its plan for capital expenditures and acquisitions as its            business needs require.

          Assuming            normal weather and a stable wholesale fuel price environment, Griffith is expected to            generate sufficient cash flow to fund normal annual capital expenditures

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for facilities, equipment, and            vehicles as well as partially fund acquisitions or return capital to CH Energy Group.            Wholesale fuel prices, which are volatile and difficult to predict, remain the largest            driver of potential variations in Griffith’s cash flow and financing needs. If            the wholesale fuel price environment in 2008 is one of falling prices, management            expects an additional return of working capital. In an environment of rising prices,            increased working capital requirements would reduce cash flow and, depending on the            magnitude of price increases, could require additional financing from CH Energy Group            or expansion of short-term credit facilities.

          CH            Energy Group believes its principal sources of liquidity from cash and short-term            investments, cash generated from operations, and funds obtained from its financing            program will be sufficient in 2008 and the foreseeable future to meet working capital            needs, pay dividends on its common stock, and fund investments and acquisitions to            fulfill the Company’s growth objectives. CH Energy Group’s primary source            of funds is the cash it generates from the operations of Central Hudson and CHEC, which            could be affected by volatility in energy markets that affects their working capital            needs and profitability. CH Energy Group’s secondary source of funds is its            credit facility and its potential to raise capital with a long-term debt offering            related to the unleveraged CHEC businesses. CH Energy Group’s ability to use its            credit facility is contingent upon maintaining certain financial covenants. The Company            does not anticipate those covenants restricting its access to funds in 2008 or the            foreseeable future.

**Financing            Program**

          CH            Energy Group maintains a $75 million revolving credit agreement with several commercial            banks to provide committed liquidity beyond its cash balance. That agreement, which            expires in April 2010, is currently earmarked primarily for acquisitions and            investments. At December 31, 2007, CH Energy Group had no outstanding borrowings under            its credit agreement and had no long-term debt at the holding company level.

          Central            Hudson, as a regulated electric and natural gas utility company, requires authorization            from the PSC to issue securities with maturities greater than 12 months. In July 2006,            Central Hudson filed a petition seeking approval of its financing program. The PSC            issued an Order approving that petition in September 2006, authorizing Central Hudson            to issue medium-term notes of up to $140 million over the three-year period ending            December 31, 2009, and to enter into committed credit agreements up to $125 million for            a period not to exceed five years.

          In            2006, Central Hudson had a $75 million committed credit agreement with several            commercial banks. Effective January 2, 2007, that agreement was amended, pursuant to            PSC authorization, increasing the committed credit to $125 million and extending the            term of the agreement to January 2, 2012. In addition to this credit agreement, Central            Hudson maintains several uncommitted lines of credit with various banks. These            arrangements give Central Hudson competitive options to minimize the

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cost of its short-term            borrowings. At December 31, 2007, Central Hudson had a $42.5 million outstanding            balance under its uncommitted credit agreements.

          Central            Hudson meets its need for long-term debt financing through a medium-term notes program.            A summary of 2007 Series F issuances follows:

|                                      |   |                                      |   |                                   |   |                                                                                      |   |
|-------------------------------------------|--------|-------------------------------------------|--------|----------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
| Date                                      |   | Amount of                        Issuance |   | Term,                        Rate      |   | Proceeds Used                        for:                                                 |   |
|                                           |   |                                           |   |                                        |   |                                                                                           |   |
| March 23,                        2007     |   | $33,000,000                               |   | 30-year,                        5.80%  |   | Redemption at                        maturity of $33,000,000 5-year, 5.87% Series D Notes |   |
|                                      |   |                                      |   |                                   |   |                                                                                      |   |
| September 14,                        2007 |   | $33,000,000                               |   | 10-year,                        6.028% |   | Financing ongoing                        investments in capital improvements              |   |

          Central            Hudson has $74 million of Series F notes remaining, which it expects to issue over the            next two years to finance capital improvements and to refinance $20 million of 10-year            6.00% Series C notes, which mature in January 2009.

          In            2007, CHEC maintained an uncommitted line of credit in the amount of $15 million. At            December 31, 2007, CHEC’s borrowing needs were funded by CH Energy Group and            there was no outstanding balance on its uncommitted line.

          In            January 2008, Griffith established an uncommitted line of credit of up to $25 million            with a commercial bank for the purpose of funding seasonal working capital. At December            31, 2007, Griffith’s borrowing needs were funded by CH Energy Group.

          In            July 2007, CH Energy Group’s Board of Directors extended and amended the Common            Stock Repurchase Program of the Company, which was originally authorized in 2002. As            amended, the Program authorizes the repurchase of up to 2,000,000 shares (excluding            shares repurchased before July 31, 2007) or approximately 13% of the Company’s            outstanding common stock, from time to time, during the next five years, i.e., through            July 31, 2012. No shares were purchased under the Repurchase Program in 2005, 2006, or            2007. CH Energy Group intends to set repurchase targets, if any, based on circumstances            then prevailing.

          For            more information on CH Energy Group’s and Central Hudson’s financing            program, see Note 7 - “Short-Term Borrowing Arrangements,” Note 8 -            “Capitalization - Common and Preferred Stock,” and Note 9 -            “Capitalization - Long-Term Debt.”

**Parental            Guarantees**

          For            information on parental guarantees issued by CH Energy Group and CHEC, see Note 1            – “Summary of Significant Accounting Policies” under the caption            “Parental Guarantees.”

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**Product            Warranties**

          For            information on product warranties issued by Griffith, see Note 1 – “Summary            of Significant Accounting Policies” under the caption “Product            Warranties.”

**Environmental            Matters**

          For            information on environmental matters related to CH Energy Group, Central Hudson, CHEC,            and Griffith, see subcaption “Environmental Matters” in Note 12 –            “Commitments and Contingencies” under the caption            “Contingencies.”

**Related            Parties**

          For            information on related parties to CH Energy Group and Central Hudson, see Note 1            – “Summary of Significant Accounting Policies” under the caption            “Related Party Transactions.”

**COMMON STOCK DIVIDENDS AND            PRICE RANGES**

          CH            Energy Group and its principal predecessors (including Central Hudson) have paid            dividends on their respective common stock in each year commencing in 1903, and the            common stock has been listed on the New York Stock Exchange since 1945. The closing            price as of December 31, 2007, and 2006, was $44.54, and $52.80, respectively. The            price ranges and the dividends paid for each quarterly period during the last two            fiscal years are as follows:

|                               |   |   |   |   |   |     |   |                          |   |   |   |     |   |   |   |   |                          |   |   |
|------------------------------------|--------|--------|--------|--------|--------|----------|--------|-------------------------------|--------|--------|--------|----------|--------|--------|--------|--------|-------------------------------|--------|--------|
|                               |   | 2007   |   | 2006   |   |
|                               |   |        |   |        |   |
|                               |   | High   |   | Low    |   | Dividend |   | High                          |   | Low    |   | Dividend |   |
|                               |   |        |   |        |   |          |   |                               |   |        |   |          |   |
|                               |   |   |   |   |   |     |   |                          |   |   |   |     |   |
| 1st                        Quarter |   | $      | 53.79  |   | $      | 45.93    |   | $                        0.54 |   |   | $      | 49.41    |   | $      | 45.54  |   | $                        0.54 |   |   |
| 2nd                        Quarter |   |   | 50.78  |   |   | 43.49    |   | 0.54                          |   |   |   | 48.70    |   |   | 44.63  |   | 0.54                          |   |   |
| 3rd                        Quarter |   |   | 50.22  |   |   | 42.85    |   | 0.54                          |   |   |   | 52.41    |   |   | 46.68  |   | 0.54                          |   |   |
| 4th                        Quarter |   |   | 50.29  |   |   | 41.37    |   | 0.54                          |   |   |   | 54.92    |   |   | 50.25  |   | 0.54                          |   |   |

          In            2007, CH Energy Group maintained its quarterly dividend rate at $0.54 per share. In            making future dividend decisions, CH Energy Group will evaluate all circumstances at            the time of making such decisions, including business, financial, and regulatory            considerations.

          From            December 31, 2007 through the end of January 2008, CH Energy Group’s share price            has experienced significant volatility, and has declined from approximately $44.00 per            share, trading as low as $35.00 per share. Subsequently, CH Energy Group’s share            price has traded in the $37.00 to $40.00 range. Average daily volume has also increased            since December 31, 2007, to 120,000 shares per day from approximately 80,000 shares per            day. CH Energy Group’s share price movement has been generally mirroring that of            the S&P 600 index, a small cap index that includes CH Energy Group. As speculation            about a recession has increased over the last three

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months, it appears investors            have rotated out of small cap stocks generally in favor of larger, more liquid and            resilient stocks. Management cannot predict how long this trend will            continue.

          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 CH Energy Group or any CH            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 limitations survived            the June 30, 2001, expiration of the Settlement Agreement. Central Hudson is currently            rated “A” or the equivalent and therefore the limitations noted above do            not apply.

          The            number of registered holders of common stock of CH Energy Group as of December 31,            2007, was 15,825.

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

**CRITICAL ACCOUNTING            POLICIES**

          For            a summary of all significant accounting policies, see Note 1 – “Summary of            Significant Accounting Policies.” The following accounting policies have been            identified that could result in material changes to the financial condition, results of            operations, or cash flows of CH Energy Group and its subsidiaries under different            conditions or using different assumptions:

*          Accounting            for Regulated Operations*: Central Hudson follows GAAP, including the provisions of            SFAS No. 71, titled *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 10 – “Post-Employment Benefits” for additional            discussion.

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*          Use            of Estimates*: Preparation of the Consolidated Financial Statements in accordance            with GAAP 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*: CH Energy Group and its subsidiaries use derivatives to manage            their commodity and financial market risks. 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 14 – “Accounting for Derivative Instruments and            Hedging Activities”.

*          Goodwill            and Other Intangible Assets*: As required by SFAS No. 142, titled *Goodwill and            Other 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 as required for impairment. Impairment testing compares the fair value of            the reporting units to the carrying amount of assets. Fair value of goodwill is            estimated using a discounted cash flow measurement. For information on CH Energy            Group’s determination of an impairment, see Note 6 – “Goodwill and            Other Intangible Assets.”

*          Accounting            for Deferred Taxes*: CH Energy Group provides for income taxes based on the asset            and liability method required by SFAS No. 109, titled *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            4 – “Income Tax” for additional discussion.

|                                     |                                                                                 |
|------------------------------------------|--------------------------------------------------------------------------------------|
| **ITEM 7A                        -****** | **QUANTITATIVE                        AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK** |

          The            primary market risks for CH Energy Group and its subsidiaries and investments are            commodity price risk and interest rate risk. Commodity price risk, related primarily to            purchases of natural gas, electricity, petroleum products for resale to retail            customers, is mitigated in several different ways. Central Hudson, as authorized by the            PSC in the 2006 Rate Order, collects its actual purchased electricity and purchased            natural gas costs from its customers through cost adjustment clauses in its rates.            These adjustment clauses provide for the collection of costs, including risk management            and working capital 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 may increase the prices            charged for the commodities it sells in response to changes in costs; however, its            ability to raise prices is limited by what the competitive market in which it            participates will bear.

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Depending on market conditions,            Central Hudson may 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. CH Energy Group also bears            commodity price risk for the purchase of corn and the sale of ethanol by Cornhusker            Energy Lexington Holdings.

          Central            Hudson and Griffith have in place an energy risk management program within their            operations. This risk management program permits the use of derivative financial            instruments for hedging purposes but does not permit their use for trading or            speculative purposes. Central Hudson and Griffith have entered into either            exchange-traded futures contracts or 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 variations in            weather conditions from historical patterns. The types of derivative instruments            typically used include natural gas futures and swaps to hedge natural gas purchases,            contracts for differences to hedge electricity purchases, put and call options to hedge            oil purchases, and degree-day based weather derivatives to hedge weather variations. In            this latter case, Central Hudson and Griffith use such derivative instruments to dampen            the impact of weather variations on delivery revenues. 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. Commodity price risk related to both corn and ethanol is            managed by Cornhusker Energy Lexington Holdings, LLC at the entity level, not by CHEC            or CH Energy Group directly.

          The            use of derivative instruments for hedging purposes is discussed in more detail in Note            14 –“Accounting for Derivative Instruments and Hedging            Activities”.

          Interest            rate risk affects Central Hudson but is managed through the issuance of fixed-rate debt            with varying maturities and of variable rate debt for which interest is reset on a            periodic basis to reflect current market conditions. In the case of Central            Hudson’s variable rate debt, the difference between costs associated with actual            variable interest rates 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. On April 1, 2006, Central Hudson replaced            its expiring interest rate cap agreement with a new two-year agreement through April 1,            2008, with similar terms as the expired agreement. Please refer to Note 9 –            “Capitalization – Long-Term Debt” and Note 15 –            “Financial Instruments” for additional disclosure related to long-term            debt.

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|                                |                                                                   |
|-------------------------------------|------------------------------------------------------------------------|
| **ITEM 8                        -** | **FINANCIAL                        STATEMENTS AND SUPPLEMENTARY DATA** |

|                                                          |                                       |                                                                                                                                                                  |                                                                                |     |   |
|---------------------------------------------------------------|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|----------|--------|
|                                                          |                                       |                                                                                                                                                                  |                                                                                | **Page** |
|                                                          |                                       |                                                                                                                                                                  |                                                                                |          |
| **I - Index to                        Financial Statements:** |                                       |                                                                                                                                                                  |
|                                                          |                                       |                                                                                                                                                                  |
|                                                          |                                       | Report of                        Independent Registered Public Accounting Firm                                                                                        |                                                                                | 72       |
|                                                          |                                       | Report of                        Management on Internal Control Over Financial Reporting                                                                              |                                                                                | 76       |
|                                                          |                                       |                                                                                                                                                                  |                                                                                |     |
|                                                          | **CH ENERGY                        GROUP** |                                                                                                                                                                  |                                                                                |
|                                                          |                                       | CH Energy                        Group Consolidated Statement of Income for the three years ended December                        31, 2007                            |                                                                                | 80       |
|                                                          |                                       | CH Energy                        Group Consolidated Statement of Comprehensive Income for the three years                        ended December 31, 2007              |                                                                                | 82       |
|                                                          |                                       | CH Energy                        Group Consolidated Statement of Cash Flows for the three years ended                        December 31, 2007                        |                                                                                | 83       |
|                                                          |                                       | CH Energy                        Group Consolidated Balance Sheet at December 31, 2007, and                        2006                                               |                                                                                | 85       |
|                                                          |                                       | CH Energy                        Group Consolidated Statement of Common Shareholders’ Equity for the                        three years ended December 31, 2007 |                                                                                | 87       |
|                                                          |                                       |                                                                                                                                                                  |                                                                                |     |
|                                                          | **CENTRAL                        HUDSON**  |                                                                                                                                                                  |                                                                                |
|                                                          |                                       | Central                        Hudson Consolidated Statement of Income for the three years ended December                        31, 2007                             |                                                                                | 89       |
|                                                          |                                       | Central                        Hudson Consolidated Statement of Comprehensive Income for the three years                        ended December 31, 2007               |                                                                                | 90       |
|                                                          |                                       | Central                        Hudson Consolidated Statement of Cash Flows for the three years ended                        December 31, 2007                         |                                                                                | 91       |
|                                                          |                                       | Central                        Hudson Consolidated Balance Sheet at December 31, 2007, and                        2006                                                |                                                                                | 93       |
|                                                          |                                       | Central                        Hudson Consolidated Statement of Common Shareholder’s Equity for the                        three years ended December 31, 2007  |                                                                                | 95       |
|                                                          |                                       |                                                                                                                                                                  |                                                                                |     |
|                                                          |                                       | Notes to                        Consolidated Financial Statements                                                                                                     |                                                                                |     |
|                                                          |                                       |                                                                                                                                                                  |                                                                                |     |
|                                                          |                                       | NOTE                        1                                                                                                                                         | Summary                        of Significant Accounting Policies                   |     | 97     |
|                                                          |                                       | NOTE                        2                                                                                                                                         | Regulatory                        Matters                                           |     | 106    |
|                                                          |                                       | NOTE                        3                                                                                                                                         | New                        Accounting Standards And Other FASB Projects             |     | 112    |
|                                                          |                                       | NOTE                        4                                                                                                                                         | Income                        Tax                                                   |     | 114    |
|                                                          |                                       | NOTE                        5                                                                                                                                         | Acquisitions                        and Investments                                 |     | 119    |
|                                                          |                                       | NOTE                        6                                                                                                                                         | Goodwill                        and Other Intangible Assets                         |     | 121    |
|                                                          |                                       | NOTE                        7                                                                                                                                         | Short-Term                        Borrowing Arrangements                            |     | 122    |
|                                                          |                                       | NOTE                        8                                                                                                                                         | Capitalization                        – Common and Preferred Stock            |     | 123    |
|                                                          |                                       | NOTE                        9                                                                                                                                         | Capitalization                        – Long-Term Debt                        |     | 125    |
|                                                          |                                       | NOTE                        10                                                                                                                                        | Post-Employment                        Benefits                                     |     | 127    |
|                                                          |                                       | NOTE                        11                                                                                                                                        | Equity-Based                        Compensation                                    |     | 136    |
|                                                          |                                       | NOTE                        12                                                                                                                                        | Commitments                        And Contingencies                                |     | 141    |
|                                                          |                                       | NOTE                        13                                                                                                                                        | Segments                        And Related Information                             |     | 149    |
|                                                          |                                       | NOTE                        14                                                                                                                                        | Accounting                        For Derivative Instruments and Hedging Activities |     | 152    |

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|   |                                                     |                                                                        |                                         |   |   |
|--------|----------------------------------------------------------|-----------------------------------------------------------------------------|----------------------------------------------|--------|--------|
|   |                                                     | NOTE                        15                                              | Financial                        Instruments |   | 155    |
|   |                                                     | Selected Quarterly                        Financial Data (Unaudited)        |                                         | 157    |
|   |                                                     |                                                                        |                                         |   |
|   | **FINANCIAL STATEMENT                        SCHEDULES** |                                                                        |                                         |
|   |                                                     | Schedule                        II – Reserves – CH Energy Group |                                         | 159    |
|   |                                                     | Schedule                        II – Reserves – Central Hudson  |                                         | 160    |

          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.

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**REPORT OF            INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

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

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            (collectively, the “Company”) at December 31, 2007 and 2006, and the            results of their operations and their cash flows for each of the three years in the            period ended December 31, 2007 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. Also in our opinion, the Company maintained, in all            material respects, effective internal control over financial reporting as of December            31, 2007, based on criteria established in *Internal Control - Integrated            Framework* issued by the Committee of Sponsoring Organizations of the Treadway            Commission (COSO). The Company’s management is responsible for these financial            statements and financial statement schedule, for maintaining effective internal control            over financial reporting and for its assessment of the effectiveness of internal            control over financial reporting, included in the accompanying CH Energy Group Report            of Management on Internal Control Over Financial Reporting. Our responsibility is to            express opinions on these financial statements, on the financial statement schedule,            and on the Company’s internal control over financial reporting based on our            integrated audits. We conducted our audits in accordance with the standards of the            Public Company Accounting Oversight Board (United States). Those standards require that            we plan and perform the audits to obtain reasonable assurance about whether the            financial statements are free of material misstatement and whether effective internal            control over financial reporting was maintained in all material respects. Our audits of            the financial statements included 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. Our audit of internal control over financial            reporting included obtaining an understanding of internal control over financial            reporting, assessing the risk that a material weakness exists, and testing and            evaluating the design and operating effectiveness of internal control based on the            assessed risk. Our audits also included performing such other procedures as we            considered necessary in the circumstances. We believe that our audits provide a            reasonable basis for our opinions.

As discussed in Notes 10 and 11            to the consolidated financial statements, the Company changed the manner in which it            accounts for defined benefit pension and other postretirement plans and share based            compensation in 2006.

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

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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

Buffalo, New York            February 12, 2008

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**REPORT OF INDEPENDENT            REGISTERED PUBLIC ACCOUNTING FIRM**

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

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 (collectively, the “Company”) at December 31, 2007 and 2006,            and the results of their operations and their cash flows for each of the three years in            the period ended December 31, 2007 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. Also in our opinion, the Company maintained, in all            material respects, effective internal control over financial reporting as of December            31, 2007, based on criteria established in *Internal Control - Integrated            Framework* issued by the Committee of Sponsoring Organizations of the Treadway            Commission (COSO). The Company’s management is responsible for these financial            statements and financial statement schedule, for maintaining effective internal control            over financial reporting and for its assessment of the effectiveness of internal            control over financial reporting, included in the accompanying Central Hudson Report of            Management on Internal Control Over Financial Reporting. Our responsibility is to            express opinions on these financial statements, on the financial statement schedule,            and on the Company’s internal control over financial reporting based on our            integrated audits. We conducted our audits in accordance with the standards of the            Public Company Accounting Oversight Board (United States). Those standards require that            we plan and perform the audits to obtain reasonable assurance about whether the            financial statements are free of material misstatement and whether effective internal            control over financial reporting was maintained in all material respects. Our audits of            the financial statements included 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. Our audit of internal control over financial            reporting included obtaining an understanding of internal control over financial            reporting, assessing the risk that a material weakness exists, and testing and            evaluating the design and operating effectiveness of internal control based on the            assessed risk. Our audits also included performing such other procedures as we            considered necessary in the circumstances. We believe that our audits provide a            reasonable basis for our opinions.

As discussed in Notes 10 and 11            to the consolidated financial statements, the Company changed the manner in which it            accounts for defined benefit pension and other postretirement plans and share based            compensation in 2006.

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

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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

Buffalo, New York            February 12, 2008

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**CH ENERGY GROUPREPORT 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. (the “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:

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | pertain to the                        maintenance of records that, in reasonable detail, accurately and fairly                        reflect the transactions and dispositions of the assets of the                        Corporation;                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • | 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 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • | 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, 2007. 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, 2007, the Corporation maintained effective internal            control over financial reporting.

          The            effectiveness of the Corporation’s internal control over financial reporting as            of December 31, 2007, has been audited by PricewaterhouseCoopers LLP, an

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independent registered public            accounting firm, as stated in their report which appears herein.

|                                           |   |                                               |
|------------------------------------------------|--------|----------------------------------------------------|
| STEVEN V.                        LANT          |   | CHRISTOPHER M.                        CAPONE       |
| Chairman of the                        Board,  |   | Executive Vice                        President    |
| President,                        and          |   | and Chief Financial                        Officer |
| Chief Executive                        Officer |   |                                               |
|                                           |   |                                               |
| February 12,                        2008       |   |                                               |

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**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 (the            “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:

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | pertain to the                        maintenance of records that, in reasonable detail, accurately and fairly                        reflect the transactions and dispositions of the assets of the                        Corporation;                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • | 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 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| • | 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, 2007. 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, 2007, the Corporation maintained effective internal            control over financial reporting.

          The            effectiveness of the Corporation’s internal control over financial reporting as            of December 31, 2007, has been audited by PricewaterhouseCoopers LLP, an

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independent registered public            accounting firm, as stated in their report which appears herein.

|                                               |                                               |
|----------------------------------------------------|----------------------------------------------------|
| STEVEN V.                        LANT              | CHRISTOPHER M.                        CAPONE       |
| Chairman of the                        Board       | Executive Vice                        President    |
| and Chief Executive                        Officer | and Chief Financial                        Officer |
|                                               |                                               |
| February 12,                        2008           |                                               |

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**CH ENERGY            GROUP CONSOLIDATED STATEMENT OF INCOME**            (In Thousands)

|                                                                                         |   |                                           |      |   |   |    |   |   |    |   |
|----------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                         |   | Year                        ended December 31, |      |
|                                                                                         |   |                                           |      |   |   |    |   |   |    |   |
|                                                                                         |   | 2007                                           |      | 2006   |   | 2005    |   |
|                                                                                         |   |                                                |      |        |   |         |   |
| Operating                        Revenues                                                    |   |                                           |      |   |   |    |   |   |    |   |
| Electric                                                                                     |   | $                                              | 616,839   |   | $      | 503,908 |   | $      | 520,994 |   |
| Natural gas                                                                                  |   |                                           | 165,449   |   |   | 155,272 |   |   | 155,602 |   |
| Competitive business                        subsidiaries                                     |   |                                           | 414,469   |   |   | 334,253 |   |   | 295,910 |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
| Total Operating                        Revenues                                              |   |                                           | 1,196,757 |   |   | 993,433 |   |   | 972,506 |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
|                                                                                         |   |                                           |      |   |   |    |   |   |    |   |
| Operating                        Expenses                                                    |   |                                           |      |   |   |    |   |   |    |   |
| Operation:                                                                                   |   |                                           |      |   |   |    |   |   |    |   |
| Purchased electricity                        and fuel used in electric generation            |   |                                           | 388,569   |   |   | 298,621 |   |   | 337,046 |   |
| Purchased natural                        gas                                                 |   |                                           | 110,123   |   |   | 105,643 |   |   | 106,285 |   |
| Purchased                        petroleum                                                   |   |                                           | 318,020   |   |   | 256,975 |   |   | 226,004 |   |
| Other expenses of                        operation – regulated activities              |   |                                           | 153,978   |   |   | 124,820 |   |   | 99,439  |   |
| Other expenses of                        operation – competitive business subsidiaries |   |                                           | 75,740    |   |   | 60,702  |   |   | 55,003  |   |
| Depreciation and                        amortization                                         |   |                                           | 35,923    |   |   | 35,701  |   |   | 36,219  |   |
| Taxes, other than                        income tax                                          |   |                                           | 35,136    |   |   | 33,491  |   |   | 33,485  |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
| Total Operating                        Expenses                                              |   |                                           | 1,117,489 |   |   | 915,953 |   |   | 893,481 |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
|                                                                                         |   |                                           |      |   |   |    |   |   |    |   |
| Operating                        Income                                                      |   |                                           | 79,268    |   |   | 77,480  |   |   | 79,025  |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
|                                                                                         |   |                                           |      |   |   |    |   |   |    |   |
| Other Income and                        Deductions                                           |   |                                           |      |   |   |    |   |   |    |   |
| Income from                        unconsolidated affiliates                                 |   |                                           | 1,895     |   |   | 1,810   |   |   | 1,456   |   |
| Interest on regulatory                        assets and investment income                   |   |                                           | 8,406     |   |   | 9,867   |   |   | 10,360  |   |
| Other –                        net                                                     |   |                                           | (1,279    | )      |   | (1,063  | )      |   | (2,716  | )      |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |
| Total Other                        Income                                                    |   | $                                              | 9,022     |   | $      | 10,614  |   | $      | 9,100   |   |
|                                                                                         |   |                                                |           |   |        |         |   |        |         |   |

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

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

|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
|------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                                                                                       |   | Year                        ended December 31, |   |
|                                                                                                       |   | 2007                                           |   | 2006   |   | 2005   |   |
|                                                                                                       |   |                                                |   |        |   |        |   |
| Interest                        Charges                                                                    |   |                                           |   |   |   |   |   |   |    |   |
| Interest on long-term                        debt                                                          |   | $                                              | 18,653 |   | $      | 16,425 |   | $      | 13,826  |   |
| Interest on regulatory                        liabilities and other interest                               |   |                                           | 4,254  |   |   | 3,987  |   |   | 3,219   |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
| Total Interest                        Charges                                                              |   |                                           | 22,907 |   |   | 20,412 |   |   | 17,045  |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Income before income                        taxes, preferred dividends of subsidiary and minority interest |   |                                           | 65,383 |   |   | 67,682 |   |   | 71,080  |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Income taxes (Note                        4)                                                               |   |                                           | 21,898 |   |   | 23,769 |   |   | 25,819  |   |
| Minority                        Interest                                                                   |   |                                           | (121   | )      |   | (141   | )      |   | — |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Income before preferred                        dividends of subsidiary                                     |   |                                           | 43,606 |   |   | 44,054 |   |   | 45,261  |   |
| Cumulative preferred                        stock dividends of subsidiary                                  |   |                                           | 970    |   |   | 970    |   |   | 970     |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
| Net Income                                                                                                 |   |                                           | 42,636 |   |   | 43,084 |   |   | 44,291  |   |
| Dividends Declared on                        Common Stock                                                  |   |                                           | 34,052 |   |   | 34,046 |   |   | 34,046  |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
| Balance Retained in the                        Business                                                    |   | $                                              | 8,584  |   | $      | 9,038  |   | $      | 10,245  |   |
|                                                                                                       |   |                                                |        |   |        |        |   |        |         |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Common                        Stock:                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Average shares                        outstanding                                                          |   |                                           |   |   |   |   |   |   |    |   |
| Basic                                                                                                      |   |                                           | 15,762 |   |   | 15,762 |   |   | 15,762  |   |
| Diluted                                                                                                    |   |                                           | 15,779 |   |   | 15,779 |   |   | 15,767  |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Earnings per                        share:                                                                 |   |                                           |   |   |   |   |   |   |    |   |
| Basic                                                                                                      |   | $                                              | 2.70   |   | $      | 2.73   |   | $      | 2.81    |   |
| Diluted                                                                                                    |   | $                                              | 2.70   |   | $      | 2.73   |   | $      | 2.81    |   |
|                                                                                                       |   |                                           |   |   |   |   |   |   |    |   |
| Dividends Declared Per                        Share                                                        |   | $                                              | 2.16   |   | $      | 2.16   |   | $      | 2.16    |   |

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

- 81 -

----

**CH ENERGY            GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE            INCOME**            (In Thousands)

|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                                        |   | Year                        ended December 31, |   |
|                                                                                                                                                        |   | 2007                                           |   | 2006   |   | 2005   |   |
|                                                                                                                                                        |   |                                                |   |        |   |        |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Net Income                                                                                                                                                  |   | $                                              | 42,636 |   | $      | 43,084 |   | $      | 44,291 |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Other Comprehensive                        Income:                                                                                                          |   |                                           |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Fair value of cash flow                        hedges – FAS 133:                                                                                      |   |                                           |   |   |   |   |   |   |   |   |
| Unrealized gains                        (losses) - net of tax of $(687), $353, and $(55)                                                                    |   |                                           | 1,031  |   |   | (529   | )      |   | 83     |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Reclassification for                        losses (gains) realized in net income - net of tax of $(44), $(116), and                        $64             |   |                                           | 67     |   |   | 174    |   |   | (96    | )      |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Net unrealized gains on                        investments held by Equity method investees - net of tax of $(402), $(231),                        and $(90) |   |                                           | 604    |   |   | 346    |   |   | 136    |   |
|                                                                                                                                                        |   |                                                |        |   |        |        |   |        |        |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Other comprehensive                        income                                                                                                           |   |                                           | 1,702  |   |   | (9     | )      |   | 123    |   |
|                                                                                                                                                        |   |                                                |        |   |        |        |   |        |        |   |
|                                                                                                                                                        |   |                                           |   |   |   |   |   |   |   |   |
| Comprehensive                        Income                                                                                                                 |   | $                                              | 44,338 |   | $      | 43,075 |   | $      | 44,414 |   |
|                                                                                                                                                        |   |                                                |        |   |        |        |   |        |        |   |

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

- 82 -

----

**CH ENERGY            GROUP CONSOLIDATED STATEMENT OF CASH FLOWS**            (In Thousands)

|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                                            |   | Year                        ended December 31, |    |
|                                                                                                                            |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                                                                                                            |   |                                                |    |        |   |         |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Operating                        Activities:                                                                                    |   |                                           |    |   |   |    |   |   |    |   |
| Net Income                                                                                                                      |   | $                                              | 42,636  |   | $      | 43,084  |   | $      | 44,291  |   |
| Adjustments to                        reconcile net income to net cash provided by operating                        activities: |   |                                           |    |   |   |    |   |   |    |   |
| Depreciation and                        amortization                                                                            |   |                                           | 35,923  |   |   | 35,701  |   |   | 36,219  |   |
| Deferred income taxes                        – net                                                                        |   |                                           | 5,349   |   |   | 23,224  |   |   | 14,555  |   |
| Provision for                        uncollectibles                                                                             |   |                                           | 5,853   |   |   | 5,675   |   |   | 4,375   |   |
| Undistributed equity in                        earnings of unconsolidated affiliates                                            |   |                                           | (18     | )      |   | (726    | )      |   | (586    | )      |
| Pension                        expense                                                                                          |   |                                           | 12,697  |   |   | (2,405  | )      |   | (13,980 | )      |
| OPEB expense                                                                                                                    |   |                                           | 10,097  |   |   | 5,217   |   |   | 1,944   |   |
| Regulatory                        liability-rate moderation                                                                     |   |                                           | (18,425 | )      |   | (13,977 | )      |   | — |   |
| Regulatory asset                        amortization                                                                            |   |                                           | 1,509   |   |   | — |   |   | — |   |
| Minority                        interest                                                                                        |   |                                           | (121    | )      |   | (141    | )      |   | — |   |
| Gain on sale of                        property and plant                                                                       |   |                                           | (627    | )      |   | (3,421  | )      |   | — |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Changes in operating                        assets and liabilities – net of business acquisitions:                        |   |                                           |    |   |   |    |   |   |    |   |
| Accounts receivable,                        unbilled revenues and other receivables                                             |   |                                           | (65,210 | )      |   | 15,385  |   |   | (34,425 | )      |
| Fuel and materials and                        supplies                                                                          |   |                                           | (3,764  | )      |   | 515     |   |   | (6,763  | )      |
| Special deposits and                        prepayments                                                                         |   |                                           | (4,390  | )      |   | (4,303  | )      |   | (1,403  | )      |
| Prepaid income                        taxes                                                                                     |   |                                           | 11,244  |   |   | (10,074 | )      |   | 2,069   |   |
| Accounts                        payable                                                                                         |   |                                           | 1,576   |   |   | (13,265 | )      |   | 11,508  |   |
| Accrued taxes and                        interest                                                                               |   |                                           | 1,316   |   |   | 489     |   |   | 527     |   |
| Customer                        advances                                                                                        |   |                                           | (2,687  | )      |   | 15,955  |   |   | (4,135  | )      |
| Pension plan                        contribution                                                                                |   |                                           | (6,347  | )      |   | (7,513  | )      |   | (524    | )      |
| OPEB                        contribution                                                                                        |   |                                           | (6,547  | )      |   | (3,193  | )      |   | (5,984  | )      |
| Regulatory                        liability-MGP site remediations                                                               |   |                                           | (5,050  | )      |   | (1,485  | )      |   | (711    | )      |
| Deferred natural gas                        and electric costs                                                                  |   |                                           | (3,310  | )      |   | 3,561   |   |   | (14,513 | )      |
| Customer benefit                        fund                                                                                    |   |                                           | (893    | )      |   | (3,205  | )      |   | (4,146  | )      |
| Other –                        net                                                                                        |   |                                           | 22,268  |   |   | 2,790   |   |   | 16,432  |   |
|                                                                                                                            |   |                                                |         |   |        |         |   |        |         |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Net cash provided by                        operating activities                                                                |   |                                           | 33,079  |   |   | 87,888  |   |   | 44,750  |   |
|                                                                                                                            |   |                                                |         |   |        |         |   |        |         |   |

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

- 83 -

----

**CH ENERGY GROUP CONSOLIDATED            STATEMENT OF CASH FLOWS (CONT’D)**(In Thousands)

|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
|-------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                          |   | Year                        ended December 31, |    |
|                                                                          |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                                                          |   |                                                |    |        |   |         |   |
| Investing                        Activities:                                  |   |                                           |    |   |   |    |   |   |    |   |
| Purchase of short-term                        investments                     |   | $                                              | (69,293 | )      | $      | (36,206 | )      | $      | (43,625 | )      |
| Proceeds from sale of                        short-term investments           |   |                                           | 108,359 |   |   | 35,695  |   |   | 50,225  |   |
| Proceeds from sale of                        property and plant               |   |                                           | 4,574   |   |   | 3,776   |   |   | — |   |
| Additions to utility                        and other property and plant      |   |                                           | (84,601 | )      |   | (75,070 | )      |   | (63,879 | )      |
| Issuance of notes                        receivable                           |   |                                           | (4,200  | )      |   | (2,144  | )      |   | (4,595  | )      |
| Proceeds from repayment                        of notes receivable            |   |                                           | — |   |   | 1,750   |   |   | — |   |
| Acquisitions made by                        competitive business subsidiaries |   |                                           | (25,614 | )      |   | (14,732 | )      |   | (8,499  | )      |
| Other –                        net                                      |   |                                           | (2,899  | )      |   | (1,742  | )      |   | (3,036  | )      |
|                                                                          |   |                                                |         |        |        |         |        |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Net cash used in                        investing activities                  |   |                                           | (73,674 | )      |   | (88,673 | )      |   | (73,409 | )      |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Financing                        Activities:                                  |   |                                           |    |   |   |    |   |   |    |   |
| Redemption of long-term                        debt                           |   |                                           | (33,000 | )      |   | — |   |   | — |   |
| Proceeds from issuance                        of long-term debt               |   |                                           | 66,000  |   |   | 27,000  |   |   | 24,000  |   |
| Redemption of preferred                        stock                          |   |                                           | — |   |   | — |   |   | (3      | )      |
| Borrowings (repayments)                        of short-term debt – net |   |                                           | 29,500  |   |   | (17,000 | )      |   | 18,000  |   |
| Dividends paid on                        common stock                         |   |                                           | (34,046 | )      |   | (34,046 | )      |   | (34,046 | )      |
| Debt issuance                        costs                                    |   |                                           | (667    | )      |   | (458    | )      |   | (299    | )      |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
| Net cash provided by                        (used in) financing activities    |   |                                           | 27,787  |   |   | (24,504 | )      |   | 7,652   |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Net Change in Cash and                        Cash Equivalents                |   |                                           | (12,808 | )      |   | (25,289 | )      |   | (21,007 | )      |
| Cash and Cash                        Equivalents at Beginning of Year         |   |                                           | 24,121  |   |   | 49,410  |   |   | 70,417  |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
| Cash and Cash                        Equivalents at End of Year               |   | $                                              | 11,313  |   | $      | 24,121  |   | $      | 49,410  |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Supplemental Disclosure                        of Cash Flow Information:      |   |                                           |    |   |   |    |   |   |    |   |
| Interest                        paid                                          |   | $                                              | 20,001  |   | $      | 21,251  |   | $      | 16,797  |   |
| Federal and state                        income tax paid                      |   | $                                              | 13,096  |   | $      | 10,807  |   | $      | 13,028  |   |
| Additions to plant                        included in liabilities             |   | $                                              | 12,304  |   | $      | 4,169   |   | $      | 3,171   |   |

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

- 84 -

----

**CH ENERGY GROUP            CONSOLIDATED BALANCE SHEET**(In Thousands)

|                                                                                                                                                                     |   |         |      |   |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------|-----------|--------|
|                                                                                                                                                                     |   | December 31, |      |
| **ASSETS**                                                                                                                                                               |   | 2007         |      | 2006   |   |
|                                                                                                                                                                     |   |              |      |        |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Utility                        Plant                                                                                                                                     |   |         |      |   |   |      |   |
| Electric                                                                                                                                                                 |   | $            | 807,412   |   | $      | 768,808   |   |
| Natural gas                                                                                                                                                              |   |         | 248,894   |   |   | 239,317   |   |
| Common                                                                                                                                                                   |   |         | 113,494   |   |   | 112,426   |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         | 1,169,800 |   |   | 1,120,551 |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Less: Accumulated                        depreciation                                                                                                                    |   |         | 354,353   |   |   | 344,540   |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         | 815,447   |   |   | 776,011   |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Construction work in                        progress                                                                                                                     |   |         | 75,866    |   |   | 51,041    |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
| Net Utility                        Plant                                                                                                                                 |   |         | 891,313   |   |   | 827,052   |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Other Property and                        Plant – net                                                                                                              |   |         | 31,236    |   |   | 33,822    |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Current                        Assets                                                                                                                                    |   |         |      |   |   |      |   |
| Cash and cash                        equivalents                                                                                                                         |   |         | 11,313    |   |   | 24,121    |   |
| Short-term investments                        – available-for-sale securities                                                                                      |   |         | 3,545     |   |   | 42,611    |   |
| Accounts receivable                        from customers - net of allowance for doubtful accounts; $4.8 million in                        2007 and $5.8 million in 2006 |   |         | 139,107   |   |   | 80,862    |   |
| Accrued unbilled                        utility revenues                                                                                                                 |   |         | 12,022    |   |   | 9,772     |   |
| Other                        receivables                                                                                                                                 |   |         | 6,568     |   |   | 7,706     |   |
| Fuel and materials and                        supplies                                                                                                                   |   |         | 33,321    |   |   | 27,930    |   |
| Regulatory assets (Note                        2)                                                                                                                        |   |         | 35,012    |   |   | 31,332    |   |
| Prepaid income                        taxes                                                                                                                              |   |         | —   |   |   | 11,244    |   |
| Fair value of                        derivative instruments                                                                                                              |   |         | 1,218     |   |   | —   |   |
| Special deposits and                        prepayments                                                                                                                  |   |         | 28,108    |   |   | 23,655    |   |
| Accumulated deferred                        income tax (Note 4)                                                                                                          |   |         | 7,378     |   |   | 5,875     |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
| Total Current                        Assets                                                                                                                              |   |         | 277,592   |   |   | 265,108   |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| Deferred Charges and                        Other Assets                                                                                                                 |   |         |      |   |   |      |   |
| Regulatory assets                        – pension plan (Notes 2 and 10)                                                                                           |   |         | 51,393    |   |   | 99,281    |   |
| Regulatory assets                        – OPEB (Notes 2 and 10)                                                                                                   |   |         | 15,967    |   |   | 36,392    |   |
| Regulatory assets (Note                        2)                                                                                                                        |   |         | 86,821    |   |   | 83,102    |   |
| Goodwill                                                                                                                                                                 |   |         | 63,433    |   |   | 52,828    |   |
| Other intangible assets                        – net                                                                                                               |   |         | 35,720    |   |   | 27,550    |   |
| Unamortized debt                        expense                                                                                                                          |   |         | 4,345     |   |   | 4,041     |   |
| Investments in                        unconsolidated affiliates                                                                                                          |   |         | 12,226    |   |   | 12,651    |   |
| Other                        Investments                                                                                                                                 |   |         | 8,613     |   |   | 7,553     |   |
| Other                                                                                                                                                                    |   |         | 16,089    |   |   | 11,152    |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
| Total Deferred Charges                        and Other Assets                                                                                                           |   |         | 294,607   |   |   | 334,550   |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |
|                                                                                                                                                                     |   |         |      |   |   |      |   |
| **Total                        Assets**                                                                                                                                  |   | $            | 1,494,748 |   | $      | 1,460,532 |   |
|                                                                                                                                                                     |   |              |           |   |        |           |   |

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

- 85 -

----

**CH ENERGY GROUP CONSOLIDATED            BALANCE SHEET (CONT’D)**(In Thousands)

|                                                                                            |   |         |      |   |   |      |   |
|-------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------|-----------|--------|
|                                                                                            |   | December 31, |      |
| **CAPITALIZATION AND                        LIABILITIES**                                       |   | 2007         |      | 2006   |   |
|                                                                                            |   |              |           |   |        |           |   |
| Capitalization                                                                                  |   |         |      |   |   |      |   |
| 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                                                        |   |         | 215,639   |   |   | 207,055   |   |
| Treasury stock                        (1,100,087 shares)                                        |   |         | (46,252   | )      |   | (46,252   | )      |
| Accumulated other                        comprehensive income (loss)                            |   |         | 1,173     |   |   | (529      | )      |
| Capital stock                        expense                                                    |   |         | (328      | )      |   | (328      | )      |
|                                                                                            |   |              |           |   |        |           |   |
| Total Common                        Shareholders’ Equity                                  |   |         | 523,148   |   |   | 512,862   |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Cumulative Preferred                        Stock                                               |   |         |      |   |   |      |   |
| Not subject to                        mandatory redemption (Note 8)                             |   |         | 21,027    |   |   | 21,027    |   |
|                                                                                            |   |         |      |   |   |      |   |
|                                                                                            |   |         |      |   |   |      |   |
| Long-term debt (Note                        9)                                                  |   |         | 403,892   |   |   | 337,889   |   |
|                                                                                            |   |              |           |   |        |           |   |
| Total                        Capitalization                                                     |   |         | 948,067   |   |   | 871,778   |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Current                        Liabilities                                                      |   |         |      |   |   |      |   |
| Current maturities of                        long-term debt                                     |   |         | —   |   |   | 33,000    |   |
| Notes                        payable                                                            |   |         | 42,500    |   |   | 13,000    |   |
| Accounts                        payable                                                         |   |         | 44,880    |   |   | 41,840    |   |
| Accrued                        interest                                                         |   |         | 6,127     |   |   | 5,645     |   |
| Dividends                        payable                                                        |   |         | 8,760     |   |   | 8,754     |   |
| Accrued vacation and                        payroll                                             |   |         | 7,640     |   |   | 5,963     |   |
| Customer                        advances                                                        |   |         | 23,045    |   |   | 25,732    |   |
| Customer                        deposits                                                        |   |         | 8,126     |   |   | 7,954     |   |
| Regulatory liabilities                        (Note 2)                                          |   |         | 9,392     |   |   | 21,651    |   |
| Fair value of                        derivative instruments                                     |   |         | 1,235     |   |   | 3,582     |   |
| Accrued environmental                        remediation costs                                  |   |         | 2,703     |   |   | 3,400     |   |
| Accrued income                        taxes                                                     |   |         | 834       |   |   | —   |   |
| Deferred                        revenues                                                        |   |         | 7,437     |   |   | 5,455     |   |
| Other                                                                                           |   |         | 16,820    |   |   | 14,112    |   |
|                                                                                            |   |              |           |   |        |           |   |
| Total Current                        Liabilities                                                |   |         | 179,499   |   |   | 190,088   |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Deferred Credits and                        Other Liabilities                                   |   |         |      |   |   |      |   |
| Regulatory liabilities                        (Note 2)                                          |   |         | 111,663   |   |   | 107,796   |   |
| Operating                        reserves                                                       |   |         | 5,212     |   |   | 4,906     |   |
| Accrued environmental                        remediation costs                                  |   |         | 15,027    |   |   | 17,354    |   |
| Accrued OPEB                        costs                                                       |   |         | 55,560    |   |   | 68,818    |   |
| Accrued pension                        costs                                                    |   |         | 11,202    |   |   | 47,299    |   |
| Other                                                                                           |   |         | 19,805    |   |   | 12,566    |   |
|                                                                                            |   |              |           |   |        |           |   |
| Total Deferred Credits                        and Other Liabilities                             |   |         | 218,469   |   |   | 258,739   |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Minority                        interest                                                        |   |         | 1,345     |   |   | 1,481     |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Accumulated Deferred                        Income Tax (Note 4)                                 |   |         | 147,368   |   |   | 138,446   |   |
|                                                                                            |   |              |           |   |        |           |   |
|                                                                                            |   |         |      |   |   |      |   |
| Commitments and                        Contingencies (Note 12)                                  |   |         |      |   |   |      |   |
|                                                                                            |   |         |      |   |   |      |   |
| **Total Capitalization                        and Liabilities**                                 |   | $            | 1,494,748 |   | $      | 1,460,532 |   |
|                                                                                            |   |              |           |   |        |           |   |

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

- 86 -

----

**CH ENERGY GROUP            CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS’ EQUITY**

|                                                                                    |   |                                                                               |       |                                  |   |                                      |   |                                 |       |                                                                 |   |    |   |   |    |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|------------|---------------------------------------|--------|-------------------------------------------|--------|--------------------------------------|------------|----------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
|                                                                                    |   | Common Stock, $0.10 par                        value; 30,000,000 shares authorized |       |
|                                                                                    |   | Common Stock                                                                       |       | Treasury                        Stock |   |                                      |   |                                 |
|                                                                                    |   |                                                                                    |       |                                       |   |                                      |   |                                 |
|                                                                                    |   | Shares                        Issued                                               |       | Amount                        ($000)  |   | Shares                        Repurchased |   | Amount                        ($000) |       | Paid-In                        Capital                        ($000) |   |
|                                                                                    |   |                                                                                    |       |                                       |   |                                           |   |                                      |       |                                                                      |   |
| **Balance at                        January 1, 2005**                                   |   |                                                                               | 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, 2005**                                 |   |                                                                               | 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 losses recognized in net income |   |                                                                               |       |                                  |   |                                      |   |                                 |       |                                                                 |   |    |   |   |    |   |
|                                                                                    |   |                                                                                    |            |                                  |        |                                           |   |                                      |            |                                                                 |        |         |   |        |         |   |
| **Balance at                        December 31, 2006**                                 |   |                                                                               | 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 losses recognized in net income |   |                                                                               |       |                                  |   |                                      |   |                                 |       |                                                                 |   |    |   |   |    |   |
|                                                                                    |   |                                                                                    |            |                                  |        |                                           |   |                                      |            |                                                                 |        |         |   |        |         |   |
| **Balance at                        December 31, 2007**                                 |   |                                                                               | 16,862,087 |                                  | $      | 1,686                                     |   |                                 | (1,100,087 | )                                                                    | $      | (46,252 | )      | $      | 351,230 |   |
|                                                                                    |   |                                                                                    |            |                                  |        |                                           |   |                                      |            |                                                                 |        |         |   |        |         |   |

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

- 87 -

----

**CH ENERGY GROUP CONSOLIDATED            STATEMENT OF COMMON SHAREHOLDERS’            EQUITY**

|                                                                                    |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   |   |   |   |   |   |    |   |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                                                                                    |   | Capital                        Stock                        Expense |   | Retained                        Earnings |   | Accumulated                        Other                        Comprehensive                        Income / (Loss) |   | Total                        Common                        Shareholders’                        Equity |   |
|                                                                                    |   |                                                                     |   |                                          |   |                                                                                                                      |   |                                                                                                              |   |
| *(In                        Thousands)*                                                 |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |
| **Balance at January                        1, 2005**                                   |   |                                                                | $      | (328                                     | )      |                                                                                                                 | $      | 187,772                                                                                                      |   |   | $      | (643   | )      |   |   | $      | 493,465 |   |   |
| Net income                                                                              |   |                                                                |   |                                     |   |                                                                                                                 |   | 44,291                                                                                                       |   |   |   |   |   |   |   |   | 44,291  |   |   |
| Dividends declared                        ($2.16 per share)                             |   |                                                                |   |                                     |   |                                                                                                                 |   | (34,046                                                                                                      | )      |   |   |   |   |   |   |   | (34,046 | )      |   |
| Change in fair                        value:                                            |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   |   |   |   |   |   |    |   |   |
| Derivative                        instruments                                           |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 83     |   |   |   |   | 83      |   |   |
| Investments                                                                             |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 136    |   |   |   |   | 136     |   |   |
| Reclassification                        adjustments for gains recognized in net income  |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | (96    | )      |   |   |   | (96     | )      |   |
|                                                                                    |   |                                                                |        |                                          |   |                                                                                                                 |        |                                                                                                              |   |   |        |        |   |   |   |        |         |   |   |
| **Balance at December                        31, 2005**                                 |   |                                                                | $      | (328                                     | )      |                                                                                                                 | $      | 198,017                                                                                                      |   |   | $      | (520   | )      |   |   | $      | 503,833 |   |   |
| Net income                                                                              |   |                                                                |   |                                     |   |                                                                                                                 |   | 43,084                                                                                                       |   |   |   |   |   |   |   |   | 43,084  |   |   |
| Dividends declared                        ($2.16 per share)                             |   |                                                                |   |                                     |   |                                                                                                                 |   | (34,046                                                                                                      | )      |   |   |   |   |   |   |   | (34,046 | )      |   |
| Change in fair                        value:                                            |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   |   |   |   |   |   |    |   |   |
| Derivative                        instruments                                           |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | (529   | )      |   |   |   | (529    | )      |   |
| Investments                                                                             |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 346    |   |   |   |   | 346     |   |   |
| Reclassification                        adjustments for losses recognized in net income |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 174    |   |   |   |   | 174     |   |   |
|                                                                                    |   |                                                                |        |                                          |   |                                                                                                                 |        |                                                                                                              |   |   |        |        |   |   |   |        |         |   |   |
| **Balance at December                        31, 2006**                                 |   |                                                                | $      | (328                                     | )      |                                                                                                                 | $      | 207,055                                                                                                      |   |   | $      | (529   | )      |   |   | $      | 512,862 |   |   |
| Net income                                                                              |   |                                                                |   |                                     |   |                                                                                                                 |   | 42,636                                                                                                       |   |   |   |   |   |   |   |   | 42,636  |   |   |
| Dividends declared                        ($2.16 per share)                             |   |                                                                |   |                                     |   |                                                                                                                 |   | (34,052                                                                                                      | )      |   |   |   |   |   |   |   | (34,052 | )      |   |
| Change in fair                        value:                                            |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   |   |   |   |   |   |    |   |   |
| Derivative                        instruments                                           |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 1,031  |   |   |   |   | 1,031   |   |   |
| Investments                                                                             |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 604    |   |   |   |   | 604     |   |   |
| Reclassification                        adjustments for losses recognized in net income |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |   | 67     |   |   |   |   | 67      |   |   |
|                                                                                    |   |                                                                |        |                                          |   |                                                                                                                 |        |                                                                                                              |   |   |        |        |   |   |   |        |         |   |   |
| **Balance at December                        31, 2007**                                 |   |                                                                | $      | (328                                     | )      |                                                                                                                 | $      | 215,639                                                                                                      |   |   | $      | 1,173  |   |   |   | $      | 523,148 |   |   |
|                                                                                    |   |                                                                |        |                                          |   |                                                                                                                 |        |                                                                                                              |   |   |        |        |   |   |   |        |         |   |   |

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

- 88 -

----

**CENTRAL            HUDSON CONSOLIDATED STATEMENT OF INCOME**(In Thousands)

|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
|-----------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                              |   | Year                        ended December 31, |    |
|                                                                              |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                                                              |   |                                                |    |        |   |         |   |
| Operating                        Revenues                                         |   |                                           |    |   |   |    |   |   |    |   |
| Electric                                                                          |   | $                                              | 616,839 |   | $      | 503,908 |   | $      | 520,994 |   |
| Natural gas                                                                       |   |                                           | 165,449 |   |   | 155,272 |   |   | 155,602 |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
| Total Operating                        Revenues                                   |   |                                           | 782,288 |   |   | 659,180 |   |   | 676,596 |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Operating                        Expenses                                         |   |                                           |    |   |   |    |   |   |    |   |
| Operation:                                                                        |   |                                           |    |   |   |    |   |   |    |   |
| Purchased electricity                        and fuel used in electric generation |   |                                           | 383,806 |   |   | 295,624 |   |   | 337,046 |   |
| Purchased natural                        gas                                      |   |                                           | 110,123 |   |   | 105,643 |   |   | 106,285 |   |
| Other expenses of                        operation                                |   |                                           | 153,978 |   |   | 124,820 |   |   | 99,439  |   |
| Depreciation and                        amortization                              |   |                                           | 28,399  |   |   | 29,002  |   |   | 29,874  |   |
| Taxes, other than                        income tax                               |   |                                           | 34,576  |   |   | 33,135  |   |   | 33,161  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
| Total Operating                        Expenses                                   |   |                                           | 710,882 |   |   | 588,224 |   |   | 605,805 |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Operating                        Income                                           |   |                                           | 71,406  |   |   | 70,956  |   |   | 70,791  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Other Income and                        Deductions                                |   |                                           |    |   |   |    |   |   |    |   |
| Interest on regulatory                        assets and other interest income    |   |                                           | 5,743   |   |   | 6,516   |   |   | 7,316   |   |
| Other –                        net                                          |   |                                           | (480    | )      |   | (661    | )      |   | (1,491  | )      |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
| Total Other                        Income                                         |   |                                           | 5,263   |   |   | 5,855   |   |   | 5,825   |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Interest                        Charges                                           |   |                                           |    |   |   |    |   |   |    |   |
| Interest on other                        long-term debt                           |   |                                           | 18,653  |   |   | 16,425  |   |   | 13,826  |   |
| Interest on regulatory                        liabilities and other interest      |   |                                           | 4,254   |   |   | 3,987   |   |   | 3,219   |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
| Total Interest                        Charges                                     |   |                                           | 22,907  |   |   | 20,412  |   |   | 17,045  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Income before income                        taxes                                 |   |                                           | 53,762  |   |   | 56,399  |   |   | 59,571  |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Income taxes (Note                        4)                                      |   |                                           | 20,326  |   |   | 21,528  |   |   | 23,936  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Net Income                                                                        |   | $                                              | 33,436  |   | $      | 34,871  |   | $      | 35,635  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
| Dividends Declared on                        Cumulative Preferred Stock           |   |                                           | 970     |   |   | 970     |   |   | 970     |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                                                              |   |                                           |    |   |   |    |   |   |    |   |
| Income Available for                        Common Stock                          |   | $                                              | 32,466  |   | $      | 33,901  |   | $      | 34,665  |   |
|                                                                              |   |                                                |         |   |        |         |   |        |         |   |

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

- 89 -

----

**CENTRAL            HUDSON CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME**(In Thousands)

|                                              |   |                                           |    |   |   |    |   |   |    |   |
|---------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                              |   | Year                        ended December 31, |    |
|                                              |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                              |   |                                                |    |        |   |         |   |
|                                              |   |                                           |    |   |   |    |   |
| Net                        Income                 |   | $                                              | 33,436  |   | $      | 34,871  |   | $      | 35,635  |   |
| Other Comprehensive                        Income |   |                                           | — |   |   | — |   |   | — |   |
|                                              |   |                                                |         |   |        |         |   |        |         |   |
|                                              |   |                                           |    |   |   |    |   |   |    |   |
| Comprehensive                        Income       |   | $                                              | 33,436  |   | $      | 34,871  |   | $      | 35,635  |   |
|                                              |   |                                                |         |   |        |         |   |        |         |   |

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

- 90 -

----

**CENTRAL            HUDSON CONSOLIDATED STATEMENT OF CASH FLOWS**(In Thousands)

|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                                            |   | Year                        ended December 31, |    |
|                                                                                                                            |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                                                                                                            |   |                                                |    |        |   |         |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Operating                        Activities:                                                                                    |   |                                           |    |   |   |    |   |   |    |   |
| Net Income                                                                                                                      |   | $                                              | 33,436  |   | $      | 34,871  |   | $      | 35,635  |   |
| Adjustments to                        reconcile net income to net cash provided by operating                        activities: |   |                                           |    |   |   |    |   |   |    |   |
| Depreciation and                        amortization                                                                            |   |                                           | 28,399  |   |   | 29,002  |   |   | 29,874  |   |
| Deferred income taxes                        – net                                                                        |   |                                           | 3,105   |   |   | 21,256  |   |   | 12,811  |   |
| Provision for                        uncollectibles                                                                             |   |                                           | 4,850   |   |   | 4,435   |   |   | 3,592   |   |
| Pension                        expense                                                                                          |   |                                           | 12,697  |   |   | (2,405  | )      |   | (13,980 | )      |
| OPEB expense                                                                                                                    |   |                                           | 10,097  |   |   | 5,217   |   |   | 1,944   |   |
| Regulatory liability                        – rate moderation                                                             |   |                                           | (18,425 | )      |   | (13,977 | )      |   | — |   |
| Regulatory asset                        amortization                                                                            |   |                                           | 1,509   |   |   | — |   |   | — |   |
| Gain on sale of                        property and plant                                                                       |   |                                           | (468    | )      |   | (2,724  | )      |   | — |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Changes in operating                        assets and liabilities – net:                                                 |   |                                           |    |   |   |    |   |   |    |   |
| Accounts receivable,                        unbilled revenues and other receivables                                             |   |                                           | (39,577 | )      |   | 12,179  |   |   | (23,829 | )      |
| Fuel and materials and                        supplies                                                                          |   |                                           | (1,466  | )      |   | 607     |   |   | (6,204  | )      |
| Special deposits and                        prepayments                                                                         |   |                                           | (3,409  | )      |   | (4,841  | )      |   | (187    | )      |
| Prepaid income                        taxes                                                                                     |   |                                           | 10,477  |   |   | (10,477 | )      |   | 4,373   |   |
| Accounts                        payable                                                                                         |   |                                           | (4,111  | )      |   | (8,466  | )      |   | 7,933   |   |
| Accrued taxes and                        interest                                                                               |   |                                           | 3,771   |   |   | 165     |   |   | 851     |   |
| Customer                        advances                                                                                        |   |                                           | (5,065  | )      |   | 11,133  |   |   | (4,138  | )      |
| Pension plan                        contribution                                                                                |   |                                           | (6,347  | )      |   | (7,513  | )      |   | (524    | )      |
| OPEB                        contribution                                                                                        |   |                                           | (6,547  | )      |   | (3,193  | )      |   | (5,984  | )      |
| Regulatory liability                        – MGP site remediations                                                       |   |                                           | (5,050  | )      |   | (1,485  | )      |   | (711    | )      |
| Deferred natural gas                        and electric costs                                                                  |   |                                           | (3,310  | )      |   | 3,561   |   |   | (14,513 | )      |
| Customer benefit                        fund                                                                                    |   |                                           | (893    | )      |   | (3,205  | )      |   | (4,146  | )      |
| Other –                        net                                                                                        |   |                                           | 19,125  |   |   | 3,772   |   |   | 11,468  |   |
|                                                                                                                            |   |                                                |         |   |        |         |   |        |         |   |
|                                                                                                                            |   |                                           |    |   |   |    |   |   |    |   |
| Net cash provided by                        operating activities                                                                |   |                                           | 32,798  |   |   | 67,912  |   |   | 34,265  |   |
|                                                                                                                            |   |                                                |         |   |        |         |   |        |         |   |

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

- 91 -

----

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

|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
|-------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                          |   | Year                        ended December 31, |    |
|                                                                          |   | 2007                                           |    | 2006   |   | 2005    |   |
|                                                                          |   |                                                |    |        |   |         |   |
| Investing                        Activities:                                  |   |                                           |    |   |   |    |   |   |    |   |
| Proceeds from sale of                        property and plant               |   |                                           | 862     |   |   | 3,011   |   |   | — |   |
| Additions to utility                        plant                             |   |                                           | (81,288 | )      |   | (71,411 | )      |   | (60,142 | )      |
| Other –                        net                                      |   |                                           | (2,853  | )      |   | (2,106  | )      |   | (1,846  | )      |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Net cash used in                        investing activities                  |   |                                           | (83,279 | )      |   | (70,506 | )      |   | (61,988 | )      |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Financing                        Activities:                                  |   |                                           |    |   |   |    |   |   |    |   |
| Redemption of long-term                        debt                           |   |                                           | (33,000 | )      |   | — |   |   | — |   |
| Proceeds from issuance                        of long-term debt               |   |                                           | 66,000  |   |   | 27,000  |   |   | 24,000  |   |
| Redemption of preferred                        stock                          |   |                                           | — |   |   | — |   |   | (3      | )      |
| Borrowings (repayments)                        of short-term debt – net |   |                                           | 29,500  |   |   | (17,000 | )      |   | 18,000  |   |
| Dividends paid to                        parent – CH Energy Group       |   |                                           | (8,500  | )      |   | (8,500  | )      |   | (17,000 | )      |
| Dividends paid on                        cumulative preferred stock           |   |                                           | (970    | )      |   | (970    | )      |   | (970    | )      |
| Debt issuance                        costs                                    |   |                                           | (667    | )      |   | (458    | )      |   | (299    | )      |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
| Net cash provided by                        financing activities              |   |                                           | 52,363  |   |   | 72      |   |   | 23,728  |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Net Change in Cash and                        Cash Equivalents                |   |                                           | 1,882   |   |   | (2,522  | )      |   | (3,995  | )      |
| Cash and Cash                        Equivalents at Beginning of Year         |   |                                           | 1,710   |   |   | 4,232   |   |   | 8,227   |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
| Cash and Cash                        Equivalents at End of Year               |   | $                                              | 3,592   |   | $      | 1,710   |   | $      | 4,232   |   |
|                                                                          |   |                                                |         |   |        |         |   |        |         |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |
| Supplemental                        Disclosure of Cash Flow Information:      |   |                                           |    |   |   |    |   |   |    |   |
| Interest                        paid                                          |   | $                                              | 20,001  |   | $      | 17,649  |   | $      | 13,814  |   |
| Federal and state                        income tax paid                      |   | $                                              | 13,619  |   | $      | 10,766  |   | $      | 11,875  |   |
| Additions to plant                        included in liabilities             |   | $                                              | 12,304  |   | $      | 4,169   |   | $      | 3,171   |   |
|                                                                          |   |                                           |    |   |   |    |   |   |    |   |

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

- 92 -

----

**CENTRAL            HUDSON CONSOLIDATED BALANCE SHEET**            (In Thousands)

|                                                                                                                                                                           |   |         |      |   |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------|-----------|--------|
|                                                                                                                                                                           |   | December 31, |      |
| **ASSETS**                                                                                                                                                                     |   | 2007         |      | 2006   |   |
|                                                                                                                                                                           |   |              |      |        |   |
| Utility                        Plant                                                                                                                                           |   |         |      |   |   |      |   |
| Electric                                                                                                                                                                       |   | $            | 807,412   |   | $      | 768,808   |   |
| Natural Gas                                                                                                                                                                    |   |         | 248,894   |   |   | 239,317   |   |
| Common                                                                                                                                                                         |   |         | 113,494   |   |   | 112,426   |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         | 1,169,800 |   |   | 1,120,551 |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| Less: Accumulated                        depreciation                                                                                                                          |   |         | 354,353   |   |   | 344,540   |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         | 815,447   |   |   | 776,011   |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| Construction work in                        progress                                                                                                                           |   |         | 75,866    |   |   | 51,041    |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
| Net Utility                        Plant                                                                                                                                       |   |         | 891,313   |   |   | 827,052   |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| Other Property and                        Plant – net                                                                                                                    |   |         | 415       |   |   | 434       |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| Current                        Assets                                                                                                                                          |   |         |      |   |   |      |   |
| Cash and cash                        equivalents                                                                                                                               |   |         | 3,592     |   |   | 1,710     |   |
| Accounts receivable                        from customers – net of allowance for doubtful accounts; $2.8 million                        in 2007 and $3.8 million in 2006 |   |         | 81,264    |   |   | 48,611    |   |
| Accrued unbilled                        utility revenues                                                                                                                       |   |         | 12,022    |   |   | 9,772     |   |
| Other                        receivables                                                                                                                                       |   |         | 2,858     |   |   | 3,034     |   |
| Fuel and materials and                        supplies – at average cost                                                                                                 |   |         | 24,270    |   |   | 22,804    |   |
| Regulatory assets (Note                        2)                                                                                                                              |   |         | 35,012    |   |   | 31,332    |   |
| Prepaid income                        taxes                                                                                                                                    |   |         | —   |   |   | 10,477    |   |
| Special deposits and                        prepayments                                                                                                                        |   |         | 24,481    |   |   | 21,009    |   |
| Accumulated deferred                        income tax (Note 4)                                                                                                                |   |         | 6,676     |   |   | 4,600     |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
| Total Current                        Assets                                                                                                                                    |   |         | 190,175   |   |   | 153,349   |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| Deferred Charges and                        Other Assets                                                                                                                       |   |         |      |   |   |      |   |
| Regulatory assets                        – pension plan (Notes 2 and 10)                                                                                                 |   |         | 51,393    |   |   | 99,281    |   |
| Regulatory assets                        – OPEB (Notes 2 and 10)                                                                                                         |   |         | 15,967    |   |   | 36,392    |   |
| Regulatory assets (Note                        2)                                                                                                                              |   |         | 86,821    |   |   | 83,102    |   |
| Unamortized debt                        expense                                                                                                                                |   |         | 4,345     |   |   | 4,041     |   |
| Other                        Investments                                                                                                                                       |   |         | 8,570     |   |   | 7,553     |   |
| Other                                                                                                                                                                          |   |         | 3,695     |   |   | 4,619     |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
| Total Deferred Charges                        and Other Assets                                                                                                                 |   |         | 170,791   |   |   | 234,988   |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |
|                                                                                                                                                                           |   |         |      |   |   |      |   |
| **Total                        Assets**                                                                                                                                        |   | $            | 1,252,694 |   | $      | 1,215,823 |   |
|                                                                                                                                                                           |   |              |           |   |        |           |   |

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

- 93 -

----

**CENTRAL HUDSON CONSOLIDATED            BALANCE SHEET (CONT’D)**            (In Thousands)

|                                                                                                                                             |   |         |      |   |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------|-----------|--------|
|                                                                                                                                             |   | December 31, |      |
| **CAPITALIZATION AND                        LIABILITIES**                                                                                        |   | 2007         |      | 2006   |   |
|                                                                                                                                             |   |              |      |        |   |
|                                                                                                                                             |
| Capitalization                                                                                                                                   |   |         |      |   |   |      |   |
| Common Stock,                        30,000,000 shares authorized; 16,862,087 shares issued and outstanding, $5                        par value |   | $            | 84,311    |   | $      | 84,311    |   |
| Paid-in                        capital                                                                                                           |   |         | 174,980   |   |   | 174,980   |   |
| Retained                        earnings                                                                                                         |   |         | 92,676    |   |   | 68,710    |   |
| Capital stock                        expense                                                                                                     |   |         | (4,961    | )      |   | (4,961    | )      |
|                                                                                                                                             |   |              |           |   |        |           |   |
| Total Common                        Shareholder’s Equity                                                                                   |   |         | 347,006   |   |   | 323,040   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Cumulative Preferred                        Stock                                                                                                |   |         |      |   |   |      |   |
| Not subject to                        mandatory redemption (Note 8)                                                                              |   |         | 21,027    |   |   | 21,027    |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Long-term debt (Note                        9)                                                                                                   |   |         | 403,892   |   |   | 337,889   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
| Total                        Capitalization                                                                                                      |   |         | 771,925   |   |   | 681,956   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Current                        Liabilities                                                                                                       |   |         |      |   |   |      |   |
| Current maturities of                        long-term debt                                                                                      |   |         | —   |   |   | 33,000    |   |
| Notes                        payable                                                                                                             |   |         | 42,500    |   |   | 13,000    |   |
| Accounts                        payable                                                                                                          |   |         | 29,771    |   |   | 32,418    |   |
| Accrued                        interest                                                                                                          |   |         | 6,127     |   |   | 5,645     |   |
| Dividends payable                        – preferred stock                                                                                 |   |         | 242       |   |   | 242       |   |
| Accrued vacation and                        payroll                                                                                              |   |         | 5,235     |   |   | 4,682     |   |
| Customer                        advances                                                                                                         |   |         | 10,842    |   |   | 15,907    |   |
| Customer                        deposits                                                                                                         |   |         | 7,990     |   |   | 7,811     |   |
| Regulatory liabilities                        (Note 2)                                                                                           |   |         | 9,392     |   |   | 21,651    |   |
| Fair value of                        derivative instruments                                                                                      |   |         | 1,235     |   |   | 2,971     |   |
| Accrued income                        taxes                                                                                                      |   |         | 3,289     |   |   | —   |   |
| Accrued environmental                        remediation costs                                                                                   |   |         | 2,450     |   |   | 3,400     |   |
| Other                                                                                                                                            |   |         | 10,695    |   |   | 8,884     |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
| Total Current                        Liabilities                                                                                                 |   |         | 129,768   |   |   | 149,611   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Deferred Credits and                        Other Liabilities                                                                                    |   |         |      |   |   |      |   |
| Regulatory liabilities                        (Note 2)                                                                                           |   |         | 111,663   |   |   | 107,796   |   |
| Operating                        reserves                                                                                                        |   |         | 4,243     |   |   | 3,936     |   |
| Accrued environmental                        remediation costs                                                                                   |   |         | 13,679    |   |   | 15,457    |   |
| Accrued OPEB                        costs                                                                                                        |   |         | 55,560    |   |   | 68,818    |   |
| Accrued pension                        costs                                                                                                     |   |         | 11,202    |   |   | 47,299    |   |
| Other                                                                                                                                            |   |         | 19,390    |   |   | 11,802    |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
| Total Deferred Credits                        and Other Liabilities.                                                                             |   |         | 215,737   |   |   | 255,108   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Accumulated Deferred                        Income Tax (Note 4)                                                                                  |   |         | 135,264   |   |   | 129,148   |   |
|                                                                                                                                             |   |              |           |   |        |           |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| Commitments and                        Contingencies (Note 12)                                                                                   |   |         |      |   |   |      |   |
|                                                                                                                                             |   |         |      |   |   |      |   |
| **Total Capitalization                        and Liabilities**                                                                                  |   | $            | 1,252,694 |   | $      | 1,215,823 |   |
|                                                                                                                                             |   |              |           |   |        |           |   |

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

- 94 -

----

**CENTRAL            HUDSON CONSOLIDATED STATEMENT OF COMMON SHAREHOLDER’S EQUITY**

|                                                                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|------------|---------------------------------------|--------|-----------------------------------------------|--------|--------------------------------------|---------|--------|----------------------|--------|--------|---------|--------|--------|
|                                                                     |   | Common Stock, $5.00 par                        value; 30,000,000 shares authorized |       |                                  |   |                                          |
|                                                                     |   |                                                                                    |       |                                  |   |                                          |
|                                                                     |   | Common Stock                                                                       |       | Treasury                        Stock |   |                                          |   |                                 |
|                                                                     |   |                                                                                    |       |                                       |   | Paid-In Capital                        ($000) |   |
|                                                                     |   | Shares                        Issued                                               |       | Amount                        ($000)  |   | Shares                        Repurchased     |   | Amount                        ($000) |    |   |
|                                                                     |   |                                                                                    |       |                                       |   |                                               |   |                                      |    |        |                 |
| **Balance at January                        1, 2005**                    |   |                                                                               | 16,862,087 |                                  | $      | 84,311                                        |   |                                 | — |   | $  — |   | $      | 174,980 |   |
|                                                                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Net income                                                               |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Dividends                        declared                                |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On cumulative preferred                        stock                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On common stock to                        parent – CH Energy Group |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
|                                                                     |   |                                                                                    |            |                                  |        |                                               |   |                                      |         |   |                      |   |        |         |   |
| **Balance at December                        31, 2005**                  |   |                                                                               | 16,862,087 |                                  | $      | 84,311                                        |   |                                 | — |   | $  — |   | $      | 174,980 |   |
|                                                                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Net income                                                               |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Dividends                        declared                                |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On cumulative preferred                        stock                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On common stock to                        parent – CH Energy Group |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
|                                                                     |   |                                                                                    |            |                                  |        |                                               |   |                                      |         |   |                      |   |        |         |   |
| **Balance at December                        31, 2006**                  |   |                                                                               | 16,862,087 |                                  | $      | 84,311                                        |   |                                 | — |   | $  — |   | $      | 174,980 |   |
|                                                                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Net income                                                               |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| Dividends                        declared                                |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On cumulative preferred                        stock                     |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
| On common stock to                        parent – CH Energy Group |   |                                                                               |       |                                  |   |                                          |   |                                 |    |   |                 |   |   |    |   |   |
|                                                                     |   |                                                                                    |            |                                  |        |                                               |   |                                      |         |   |                      |   |        |         |   |
| **Balance at December                        31, 2007**                  |   |                                                                               | 16,862,087 |                                  | $      | 84,311                                        |   |                                 | — |   | $  — |   | $      | 174,980 |   |
|                                                                     |   |                                                                                    |            |                                  |        |                                               |   |                                      |         |   |                      |   |        |         |   |

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

- 95 -

----

**CENTRAL HUDSON CONSOLIDATED            STATEMENT OF COMMON SHAREHOLDER’S EQUITY (CONT’D)**

|                                                                     |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
|--------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|---------|--------|
| *(In                        Thousands)*                                  |   | Capital                        Stock                        Expense |   | Retained                        Earnings |   | Accumulated                        Other                        Comprehensive                        Income / (Loss) |   | Total                        Common                        Shareholder’s                        Equity |
|                                                                          |   |                                                                     |   |                                          |   |                                                                                                                      |   |                                                                                                              |
| **Balance at January                        1, 2005**                    |   | ($                                                                  | 4,961  | )                                        | $      | 25,644                                                                                                               |   | $  —                                                                                         |   | $      | 279,974 |    |
|                                                                     |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| Net income                                                               |   |                                                                |   |                                     |   | 35,635                                                                                                               |   |                                                                                                         |   |   |    | 35,635  |   |
| Dividends                        declared                                |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| On cumulative preferred                        stock                     |   |                                                                |   |                                     |   | (970                                                                                                                 | )      |                                                                                                         |   |   |    | (970    | )      |
| On common stock to                        parent – CH Energy Group |   |                                                                |   |                                     |   | (17,000                                                                                                              | )      |                                                                                                         |   |   |    | (17,000 | )      |
|                                                                     |   |                                                                     |        |                                     |        |                                                                                                                      |   |                                                                                                              |   |        |         |    |
| **Balance at December                        31, 2005**                  |   | ($                                                                  | 4,961  | )                                        | $      | 43,309                                                                                                               |   | $  —                                                                                         |   | $      | 297,639 |    |
|                                                                     |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| Net income                                                               |   |                                                                |   |                                     |   | 34,871                                                                                                               |   |                                                                                                         |   |   |    | 34,871  |   |
| Dividends                        declared                                |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| On cumulative preferred                        stock                     |   |                                                                |   |                                     |   | (970                                                                                                                 | )      |                                                                                                         |   |   |    | (970    | )      |
| On common stock to                        parent – CH Energy Group |   |                                                                |   |                                     |   | (8,500                                                                                                               | )      |                                                                                                         |   |   |    | (8,500  | )      |
|                                                                     |   |                                                                     |        |                                     |        |                                                                                                                      |   |                                                                                                              |   |        |         |    |
| **Balance at December                        31, 2006**                  |   | ($                                                                  | 4,961  | )                                        | $      | 68,710                                                                                                               |   | $  —                                                                                         |   | $      | 323,040 |    |
|                                                                     |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| Net income                                                               |   |                                                                |   |                                     |   | 33,436                                                                                                               |   |                                                                                                         |   |   |    | 33,436  |   |
| Dividends                        declared                                |   |                                                                |   |                                     |   |                                                                                                                 |   |                                                                                                         |   |   |    |    |   |
| On cumulative preferred                        stock                     |   |                                                                |   |                                     |   | (970                                                                                                                 | )      |                                                                                                         |   |   |    | (970    | )      |
| On common stock to                        parent – CH Energy Group |   |                                                                |   |                                     |   | (8,500                                                                                                               | )      |                                                                                                         |   |   |    | (8,500  | )      |
|                                                                     |   |                                                                     |        |                                     |        |                                                                                                                      |   |                                                                                                              |   |        |         |    |
| **Balance at December                        31, 2007**                  |   | ($                                                                  | 4,961  | )                                        | $      | 92,676                                                                                                               |   | $  —                                                                                         |   | $      | 347,006 |    |
|                                                                     |   |                                                                     |        |                                     |        |                                                                                                                      |   |                                                                                                              |   |        |         |    |

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

- 96 -

----

**NOTES TO            CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1-            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Organization**

          CH            Energy Group, Inc. (“CH Energy Group”) is the holding company parent            corporation of Central Hudson Gas & Electric Corporation (“Central            Hudson”) and Central Hudson Enterprises Corporation (“CHEC”). Central            Hudson and CHEC are each wholly owned by CH Energy Group. Their businesses are            comprised of a regulated electric utility and regulated natural gas utility, fuel            distribution, cogeneration, energy management, and investments in energy-related            assets.

          Central            Hudson has one wholly owned subsidiary: Phoenix Development Company, Inc.            (“Phoenix”). CHEC has two wholly owned subsidiaries: Griffith Energy            Services, Inc. (“Griffith”) and CH-Auburn Energy, LLC            (“CH-Auburn”).

          On            April 12, 2006, CHEC purchased a 75% interest in Lyonsdale Biomass, LLC            (“Lyonsdale”). The operating results of Lyonsdale are consolidated in the            financial statements of CH Energy Group. The minority interest shown on CH Energy            Group’s Consolidated Financial Statements represents the minority owner’s            proportionate share of the income and equity of Lyonsdale.

          CHEC’s            investments in limited partnerships (“Partnerships”) and limited liability            companies are accounted for under the equity method. CH Energy Group’s            proportionate share of the change in fair value of available for sale securities held            by the Partnerships is recorded in CH Energy Group’s Consolidated Statement of            Comprehensive Income. For more information, see Note 5 – “Acquisitions and            Investments.”

**Basis of            Presentation**

          This            Annual Report on Form 10-K for the period ended December 31, 2007 (“10-K Annual            Report”), is a combined report of CH Energy Group and Central Hudson. The Notes            to the Consolidated Financial Statements apply to the Consolidated Financial Statements            of both CH Energy Group and Central Hudson. CH Energy Group’s Consolidated            Financial Statements include the accounts of CH Energy Group and its wholly owned            subsidiaries, which include Central Hudson and CHEC. Intercompany balances and            transactions have been eliminated in consolidation.

          The            Consolidated Financial Statements were prepared in conformity with accounting            principles generally accepted in the United States of America (“GAAP”),            which for regulated public utilities, includes the Financial Accounting Standards            Board’s (“FASB”) Statement of Financial Accounting Standards            (“SFAS”) No. 71, *Accounting for the Effects of Certain Types of            Regulation* (“SFAS 71”). For additional information regarding regulatory            accounting see Note 2 – “Regulatory Matters.”

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**Reclassification**

          Certain            amounts in the 2005 and 2006 Consolidated Financial Statements have been reclassified            to conform to the 2007 presentation.

**Use of            Estimates**

          Preparation            of the financial statements in accordance with GAAP 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, but the methods used by CH Energy Group            to prepare estimates have historically produced reliable results. Expense items most            affected by the use of estimates are depreciation and amortization (including            amortization of intangible assets), reserves for uncollectible accounts receivable,            other operating reserves, unbilled revenues, and pension and other post-retirement            benefits. 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            customer relationships related to Griffith, which are amortized based on an assessment            of customer turnover as described in Note 6 – “Goodwill and Other            Intangible Assets.” Depreciation and amortization amounts charged to CH Energy            Group’s operations for years 2007, 2006, and 2005, are $35.9 million, $35.7            million, and $36.2 million, respectively. Depreciation and amortization amounts charged            to Central Hudson’s operations for years 2007, 2006, and 2005 are $28.4 million,            $29.0 million, and $29.9 million, respectively.

          Estimates            for uncollectible accounts are based on customer accounts receivable aging data as well            as consideration of various quantitative and qualitative factors, including 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 bimonthly 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. Estimated unbilled revenues are reported            as current assets, and include amounts recorded both in revenues and as a regulatory            liability. Revenues for 2007 include an estimate of $7.8 million for unbilled revenues,            revenues for 2006 include an estimate of $6.6 million for unbilled revenues, and            revenues for 2005 include an estimate of $6.3 million. Pursuant to regulatory            requirements, a portion of unbilled revenue is offset by a regulatory liability and is            not included in revenues. The portion of unbilled revenues offset by a regulatory            liability at December 31, 2007 and 2006, respectively was $4.2 million and $3.2            million, respectively.

          The            significant assumptions and estimates used to account for the pension plan and other            post-retirement benefit expenses and liabilities are the discount rate, the expected            long-term rate of return on the retirement plan and post-retirement plan

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assets, the rate of compensation            increase, and the method of amortizing gains and losses.

          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            and contingencies are included in Note 12 – “Commitments and            Contingencies.”

**Rates, Revenues, and Cost            Adjustment Clauses**

          Central            Hudson’s electric and natural gas retail rates are regulated by the New York            State Public Service Commission (“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 the 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. As of December 31, 2007, and 2006, the unrecognized estimated electric            unbilled revenues were $10.2 million and $8.5 million, respectively. The full amount of            estimated natural gas unbilled revenues are recognized on the Consolidated Balance            Sheet.

          Griffith            records revenue when products are delivered to customers or services have been            rendered. Deferred revenues include unamortized payments from fuel oil burner            maintenance and tank service agreements. These agreements require a onetime payment            from the customer at inception of the agreements.

          For            Central Hudson and Griffith, payments received from customers who participate in budget            billing, whose balance represents the amount paid in excess of deliveries received at            December 31, are included in customer advances. At the conclusion of the heating            season, each such customer’s budget billings are reconciled with their actual            purchases and the accounts are settled.

**Cash and Cash            Equivalents**

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

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**Short-Term            Investments**

          CH            Energy Group’s short-term investments consist of auction rate securities            (“ARS”) and variable rate demand notes (“VRDN”), which have            been classified as current available-for-sale securities pursuant to the provisions of            SFAS No. 115, titled Accounting for Certain Investments in Debt and Equity Securities.            ARS and VRDN are debt instruments with a long-term nominal maturity and a mechanism            that resets the interest rate at regular intervals.

**Fuel and Materials and            Supplies**

          Fuel            and materials and supplies for CH Energy Group are valued using the following            accounting methods:

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

The following is a summary of CH            Energy Group’s and Central Hudson’s inventories:

|                                                    |   |                                   |   |                                  |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                    |   | CH                        Energy Group |   | Central                        Hudson |   |
|                                                    |   |                                        |   |                                       |   |
| As of December 31,                                      |   | 2007                                   |   | 2006                                  |   | 2007   |   | 2006   |   |
|                                                         |   |                                        |   |                                       |   |        |   |        |   |
|                                                    |   | (In                        Thousands)  |   |
| Natural                        Gas                      |   | $                                      | 16,250 |                                  | $      | 15,640 |   | $      | 16,250 |   | $      | 15,640 |   |
| Petroleum Products                        and Propane   |   |                                   | 6,794  |                                  |   | 3,680  |   |   | 554    |   |   | 493    |   |
| Fuel Used In                        Electric Generation |   |                                   | 696    |                                  |   | 393    |   |   | 371    |   |   | 233    |   |
| Materials and                        Supplies           |   |                                   | 9,581  |                                  |   | 8,217  |   |   | 7,095  |   |   | 6,438  |   |
|                                                    |   |                                        |        |                                  |        |        |   |        |        |   |        |        |   |
|                                                    |   |                                   |   |                                  |   |   |   |   |   |   |   |   |   |
| Total                                                   |   | $                                      | 33,321 |                                  | $      | 27,930 |   | $      | 24,270 |   | $      | 22,804 |   |
|                                                    |   |                                        |        |                                  |        |        |   |        |        |   |        |        |   |

**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 allowances for funds used during construction            (“AFUDC”), as further discussed below. The 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.

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          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, 2007, and 2006:

|                                                                 |   |                                                                              |   |                                                |    |   |   |    |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|--------|--------|---------|--------|
|                                                                 |   | Estimated                        Depreciable                        Life in Years |   | Utility Plant                        (In Thousands) |    |
|                                                                 |   |                                                                              | 2007   |                                                | 2006    |   |
|                                                                 |   |                                                                                   |   |                                                     |    |        |   |
|                                                                 |   |                                                                              |   |                                                |    |   |   |    |   |
| Electric                                                             |   |                                                                              |   |                                                |    |   |   |    |   |
| Production                                                           |   | 27-75                                                                             |   | $                                                   | 23,786  |   | $      | 23,842  |   |
| Transmission                                                         |   | 28-85                                                                             |   |                                                | 179,387 |   |   | 174,665 |   |
| Distribution                                                         |   | 11-80                                                                             |   |                                                | 603,373 |   |   | 569,435 |   |
| Other                                                                |   | 40                                                                                |   |                                                | 866     |   |   | 866     |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |
| Total                                                                |   |                                                                              |   | $                                                   | 807,412 |   | $      | 768,808 |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |
|                                                                 |   |                                                                              |   |                                                |    |   |   |    |   |
| Natural Gas                                                          |   |                                                                              |   |                                                |    |   |   |    |   |
| Production                                                           |   | 25-75                                                                             |   | $                                                   | 5,245   |   | $      | 5,147   |   |
| Transmission                                                         |   | 18-70                                                                             |   |                                                | 42,202  |   |   | 41,931  |   |
| Distribution                                                         |   | 30-85                                                                             |   |                                                | 200,954 |   |   | 191,746 |   |
| Other                                                                |   | N/A                                                                               |   |                                                | 493     |   |   | 493     |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |
| Total                                                                |   |                                                                              |   | $                                                   | 248,894 |   | $      | 239,317 |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |
|                                                                 |   |                                                                              |   |                                                |    |   |   |    |   |
| Common                                                               |   |                                                                              |   |                                                |    |   |   |    |   |
| Land and                        Structures                           |   | 50                                                                                |   | $                                                   | 37,022  |   | $      | 36,991  |   |
| Office and Other                        Equipment, Radios, and Tools |   | 8-35                                                                              |   |                                                | 35,486  |   |   | 36,115  |   |
| Transportation                        Equipment                      |   | 8-12                                                                              |   |                                                | 38,989  |   |   | 38,426  |   |
| Other                                                                |   | 5                                                                                 |   |                                                | 1,997   |   |   | 894     |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |
| Total                                                                |   |                                                                              |   | $                                                   | 113,494 |   | $      | 112,426 |   |
|                                                                 |   |                                                                              |   |                                                     |         |   |        |         |   |

**Allowance For Funds Used            During Construction**

          Central            Hudson’s regulated utility plant includes AFUDC, 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 AFUDC            rate was 5.25% in 2007, 5.25% in 2006, and 3.75% in 2005. The amounts recorded for            years 2007, 2006, and 2005 are $1.1 million, $0.6 million, and $0.4 million,            respectively.

**Depreciation and            Amortization**

          The            regulated assets of Central Hudson include electric, natural gas, and common assets and            are listed under the heading “Utility Plant” on Central Hudson’s            and

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CH Energy Group’s            Consolidated Balance Sheets. The accumulated depreciation associated with these            regulated assets is also reported on the Consolidated Balance Sheets.

          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, titled *Accounting for Asset Retirement            Obligations* (“SFAS 143”), precludes the recognition of expected future            retirement obligations as a component of depreciation expense or accumulated            depreciation. Central Hudson, however, is required to use depreciation methods and            rates approved by the PSC under regulatory accounting. In accordance with SFAS No. 71,            titled *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 accordance with SFAS 143,            Central Hudson has classified $47.8 million and $44.6 million of net cost of removal as            a regulatory liability as of December 31, 2007 and 2006, respectively.

          Central            Hudson performs depreciation studies periodically 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 2.78% in 2007,            2.95% in 2006, and 3.15% in 2005 of the original average cost of depreciable property.            The ratio of the amount of accumulated depreciation to the original cost of depreciable            property at December 31 was 30.4% in 2007, 30.9% in 2006, and 31.1% in 2005.

          The            property and plant assets of Griffith and Lyonsdale are reported net of accumulated            depreciation on CH Energy Group’s Consolidated Balance Sheet as “Other            Property and Plant - net.” Accumulated depreciation for Griffith was $20.5            million and $17.3 million at December 31, 2007 and 2006, respectively. Accumulated            depreciation for Lyonsdale was $1.3 million and $0.6 million at December 31, 2007 and            2006, respectively.

          For            financial statement purposes, Griffith’s and Lyonsdale’s 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.

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          CH            Energy Group’s depreciation expense, which includes Central Hudson, Griffith, and            Lyonsdale, was $32.2 million, $32.6 million, and $33.4 million in the years ended            December 31, 2007, 2006, and 2005, respectively.

          Amortization            of intangibles (other than goodwill) is computed on the straight-line method over the            assets’ expected useful lives. See Note 6 – “Goodwill and Other            Intangible Assets” for further discussion.

**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 $3.5 million            in 2007, $3.2 million in 2006, and $3.3 million in 2005. These expenditures were for            internal research programs and for contributions to research administered by New York            State Energy Research and Development Authority (“NYSERDA”), the Electric            Power Research Institute, and other industry organizations. R&D expenditures are            provided for in Central Hudson’s rates charged to customers 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 be deferred for            future recovery from or return to customers.

**Income Tax**

          CH            Energy Group and its subsidiaries file consolidated federal and state income tax            returns. Income taxes are deferred under the asset and liability method in accordance            with SFAS No. 109, titled *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, CH Energy Group and its subsidiaries use an accelerated method of            depreciation and generally use the shortest life permitted for each class of assets.            Deferred 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. Griffith and            Lyonsdale file state income tax returns in those states in which they conduct business.            For more information, see Note 4 – “Income Tax.”

**Equity–Based            Compensation**

          CH            Energy Group has an equity-based employee compensation plan that is described more            fully in Note 11 – “Equity-Based Compensation.”

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**Earnings Per            Share**

The following table presents CH            Energy Group’s basic and diluted earnings per share included on the Consolidated            Statement of Income:

|                                                                                     |   |                                                                 |   |                              |    |    |   |                               |    |                              |   |    |   |                               |    |                              |   |    |    |   |   |   |   |   |    |   |   |   |    |   |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|-----------------------------------|---------|---------|--------|------------------------------------|---------|-----------------------------------|--------|---------|--------|------------------------------------|---------|-----------------------------------|--------|---------|---------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                     |   | Year                        ended December 31,                       |   |
|                                                                                     |   | 2007                                                                 |   | 2006                              |    | 2005    |   |
|                                                                                     |   |                                                                      |   |                                   |    |         |   |
|                                                                                     |   | (In                        Thousands, except for Earnings Per Share) |   |
|                                                                                     |   | Avg.                        Shares                                   |   | Net                        Income |    | $/Share |   | Avg.                        Shares |    | Net                        Income |   | $/Share |   | Avg.                        Shares |    | Net                        Income |   | $/Share |    |
|                                                                                     |   |                                                                      |   |                                   |    |         |   |                                    |    |                                   |   |         |   |                                    |    |                                   |   |         |    |
| Earnings applicable to                        common stock – continuing operations |   |                                                                 |   | $                                 | 42,636  |    |   |                               |    |                              |   |    |   | $                                  | 43,084  |                              |   |    |    |   |   |   |   | $      | 44,291  |   |   |   |    |   |   |
| Average number of                        common shares outstanding – basic         |   | 15,762                                                               |   |                              |    |    |   | $                                  | 2.70    |                              |   | 15,762  |   |                               |    |                              |   | $       | 2.73    |   |   | 15,762 |   |   |    |   |   | $      | 2.81    |   |   |
| Average dilutive effect                        of:                                       |   |                                                                 |   |                              |    |    |   |                               |    |                              |   |    |   |                               |    |                              |   |    |    |   |   |   |   |   |    |   |   |   |    |   |   |
| Stock options (1)                        (2)                                             |   | 1                                                                    |   |                              | (31     | )       |   |                               | — |                              |   | 3       |   |                               | (18     | )                                 |   |    | — |   |   | 2      |   |   | (43     | )      |   |   | — |   |   |
| Performance shares                        (2)                                            |   | 16                                                                   |   |                              | — |    |   |                               | — |                              |   | 14      |   |                               | — |                              |   |    | — |   |   | 3      |   |   | — |   |   |   | — |   |   |
|                                                                                     |   |                                                                      |   |
| Average number of                        common shares outstanding – diluted       |   | 15,779                                                               |   | $                                 | 42,605  |    |   | $                                  | 2.70    |                              |   | 15,779  |   | $                                  | 43,066  |                              |   | $       | 2.73    |   |   | 15,767 |   | $      | 44,248  |   |   | $      | 2.81    |   |   |
|                                                                                     |   |                                                                      |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | For 2007 and 2005,                        certain stock options have been 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 18,420 for 2007 and 36,900 shares                        for 2005. For 2006, there are no stock options excluded from the above                        calculation. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (2)    | See Note 11 –                        “Equity-Based Compensation” for additional information                        regarding stock options and performance shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

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**Related Party            Transactions**

          Thompson            Hine LLP serves as general counsel to CH Energy Group and Central Hudson. Two partners            in that firm serve as Secretary and Assistant Secretary of each corporation. The            Secretary and Assistant Secretary appointments serve to assist in the closure of            specified transactions in the ordinary course of business. While neither partner            receives additional compensation for these appointments, time spent performing these            duties is charged to CH Energy Group and Central Hudson on an hourly basis. The            combined total fees paid and accrued by CH Energy Group and Central Hudson to Thompson            Hine LLP were $3.4 million in 2007, $2.6 million in 2006, and $2.9 million in            2005.

**Parental            Guarantees**

          CH            Energy Group and CHEC have issued guarantees in conjunction with certain commodity and            derivative contracts and borrowing agreements 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.

          The            guarantees described above have been issued to counter-parties to assure the payment,            when due, of certain obligations incurred by the CH Energy Group subsidiaries in            physical and financial transactions related to heating oil, propane, other petroleum            products, and weather and commodity hedges. At December 31, 2007, the aggregate amount            of subsidiary obligations covered by these guarantees was $11.1 million. Where            liabilities exist under the commodity-related contracts subject to these guarantees,            these liabilities are included in CH Energy Group’s Consolidated Balance            Sheet.

**Product            Warranties**

          Griffith            offers a multi-year warranty on heating system installations and has recorded            liabilities for the estimated costs of fulfilling its obligations under these warranty            and service contracts. CH Energy Group’s approximate aggregate potential            liability for product warranties at December 31, 2007 and 2006 was not material. CH            Energy Group’s liabilities for these product warranties were determined by            accruing the present value of future warranty expense based on the number and type of            contracts outstanding and historical costs for these contracts.

**FIN 46R –            *Consolidation of Variable Interest Entities***

          FASB            Interpretation No. 46, titled *Consolidation of Variable Interest Entities*            (“FIN 46R”), clarifies the application of Accounting Research Bulletin No.            51, titled *Consolidated Financial Statements*, as it relates to the consolidation            of a variable interest entity (“VIE”). FIN 46R provides guidance on the            identification of a variable interest and a VIE to determine when the assets,            liabilities, and results of operations

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should be consolidated in a            company’s financial statements. 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. 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.

          CH            Energy Group and its subsidiaries do not have any interests in special purpose entities            and do not have material affiliations with any VIEs that require consolidation under            the provisions of FIN 46R.

**NOTE 2 -            REGULATORY MATTERS**

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

          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, CH Energy Group, and any other subsidiaries of CH Energy Group (such as            CHEC and Griffith); (iii) prohibitions against Central Hudson making loans to CH Energy            Group or any other subsidiary of CH Energy Group and against Central Hudson            guaranteeing debt of CH Energy Group or any other subsidiary of CH Energy Group; (iv)            limitations on the transfer of Central Hudson employees to CH Energy Group or other CH            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 GAAP, which for regulated public utilities includes SFAS 71. Under SFAS            71, regulated companies such as Central Hudson apply AFUDC 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) 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. For Central Hudson, 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 consolidated statement of income 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, as the case may be.

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**Summary of Regulatory Assets            and Liabilities**

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

|                                                                                |   |                                  |    |   |   |    |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------|---------|--------|
| At December                        31,                                              |   | 2007                                  |    | 2006   |   |
|                                                                                     |
|                                                                                |   | (In                        Thousands) |    |
| Regulatory Assets                        (Debits):                                  |   |                                  |    |   |   |    |   |
|                                                                                |   |                                  |    |   |   |    |   |
| Current:                                                                            |   |                                  |    |   |   |    |   |
| Deferred purchased                        electric and natural gas costs (Note 1)   |   | $                                     | 29,477  |   | $      | 26,167  |   |
| FAS 133 –                        deferred unrealized losses (Note 14)         |   |                                  | 1,235   |   |   | 2,971   |   |
| Residual natural gas                        deferred balances                       |   |                                  | 4,300   |   |   | 2,194   |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  | 35,012  |   |   | 31,332  |   |
|                                                                                |   |                                       |         |   |        |         |   |
| Long-term:                                                                          |   |                                  |    |   |   |    |   |
| Deferred pension                        costs                                       |   | $                                     | 51,393  |   | $      | 99,281  |   |
| Carrying charges                        – pension reserve                     |   |                                  | 6,477   |   |   | 2,134   |   |
| Deferred costs –                        manufactured gas sites (Note 12)      |   |                                  | 17,386  |   |   | 15,106  |   |
| Deferred OPEB costs                        (Note 10)                                |   |                                  | 15,967  |   |   | 36,392  |   |
| Deferred debt expense                        on re-acquired debt (Note 8)           |   |                                  | 6,032   |   |   | 6,626   |   |
| Residual natural gas                        deferred balances                       |   |                                  | 25,298  |   |   | 28,525  |   |
| Income taxes                        recoverable through future rates                |   |                                  | 22,399  |   |   | 22,847  |   |
| Other                                                                               |   |                                  | 9,229   |   |   | 7,864   |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  | 154,181 |   |   | 218,775 |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  |    |   |   |    |   |
| Total Regulatory                        Assets                                      |   | $                                     | 189,193 |   | $      | 250,107 |   |
|                                                                                |   |                                       |         |   |        |         |   |
| Regulatory                        Liabilities (Credits):                            |   |                                  |    |   |   |    |   |
|                                                                                |   |                                  |    |   |   |    |   |
| Current:                                                                            |   |                                  |    |   |   |    |   |
| Rate moderation –                        excess electric depreciation reserve |   | $                                     | 5,930   |   | $      | 17,396  |   |
| Income taxes refundable                        through future rates                 |   |                                  | 3,462   |   |   | 4,255   |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  | 9,392   |   |   | 21,651  |   |
| Long-term:                                                                          |   |                                  |    |   |   |    |   |
| Customer benefit                        fund                                        |   | $                                     | 4,865   |   | $      | 5,758   |   |
| Deferred cost of                        removal (Note 1)                            |   |                                  | 47,819  |   |   | 44,602  |   |
| Excess electric                        depreciation reserve                         |   |                                  | 32,371  |   |   | 39,956  |   |
| Income taxes refundable                        through future rates                 |   |                                  | 9,488   |   |   | 9,349   |   |
| Other                                                                               |   |                                  | 17,120  |   |   | 8,131   |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  | 111,663 |   |   | 107,796 |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  |    |   |   |    |   |
| Total Regulatory                        Liabilities                                 |   | $                                     | 121,055 |   | $      | 129,447 |   |
|                                                                                |   |                                       |         |   |        |         |   |
|                                                                                |   |                                  |    |   |   |    |   |
| Net Regulatory                        Assets                                        |   | $                                     | 68,138  |   | $      | 120,660 |   |
|                                                                                |   |                                       |         |   |        |         |   |

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          The            significant regulatory assets and liabilities include:

                      Deferred Pension Costs: As discussed further in Note 10 –            “Post-Employment Benefits,” the amount of deferred pension cost            undercollected as of December 31, 2007, and December 31, 2006, includes $48.4 million            and $97.2 million, respectively, related to the accounting required under SFAS 158 for            recording the funded status. The remaining $3.0 million and $2.1 million are the            cumulative undercollected pension costs to be recovered from Central Hudson’s            customers.

                      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 Central Hudson’s defined benefit pension plan. For            further discussion regarding this plan, see Note 10 – “Post-Employment            Benefits.”

                      Residual Natural Gas Deferred Balances: The net regulatory asset balance to be            amortized over a seven-year period beginning July 1, 2007, as prescribed by the 2006            Rate Order.

                      Income Taxes Recoverable: Regulatory asset balance established to offset deferred            tax liabilities determined under the provisions of SFAS 109 and for which it is            probable that they will be recoverable from customers.

                      Excess Electric Depreciation Reserve: The 2006 Rate Order prescribes the use of            excess depreciation reserves to offset regulatory assets and to apply the remainder for            rate moderation.

                      Income Taxes Refundable: Central Hudson adopted SFAS 109 in 1993, with the effect            of increasing Central Hudson’s net deferred taxes. As it is probable that the            related balances will be refundable to customers, Central Hudson established a net            regulatory liability for these balances.

                      Customer Benefit Fund: The 2006 Order prescribes the use of the residual balance to            fund economic development and competitive metering initiative programs.

          In            terms of recoverability, regulatory asset balances at December 31, 2007, reflect the            following (in millions):

          Balances            with offsetting accrued liability balances recoverable when future costs are actually            incurred:

|    |                                                                 |   |   |   |   |
|---------|----------------------------------------------------------------------|--------|--------|--------|--------|
| ¡ | Deferred Pension and                        OPEB Costs               |   | $      | 64.0   |   |
| ¡ | Income Taxes                        Recoverable Through Future Rates |   |   | 22.4   |   |
| ¡ | Deferred Costs                        – Manufactured Gas Sites |   |   | 16.1   |   |
| ¡ | Other                                                                |   |   | 4.6    |   |
|    |                                                                 |   |        |        |   |
|    |                                                                 |   |   | 107.1  |   |
|    |                                                                 |   |        |        |   |

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          Balances            earning a return via inclusion in rates and/or the application of carrying            charges:

|    |                                                          |   |   |   |   |
|---------|---------------------------------------------------------------|--------|--------|--------|--------|
| ¡ | Residual Natural Gas                        Deferred Balances |   |   | 24.7   |   |
| ¡ | Deferred Pension and                        OPEB Costs*       |   |   | 3.3    |   |
| ¡ | Other*                                                        |   |   | 12.1   |   |
|    |                                                          |   |        |        |   |
|    |                                                          |   |   | 40.1   |   |
|    |                                                          |   |        |        |   |

          Subject            to current recovery:

|    |                                                                     |   |   |   |   |
|---------|--------------------------------------------------------------------------|--------|--------|--------|--------|
| ¡ | Deferred Purchased                        Electric and Natural Gas Costs |   |   | 30.7   |   |
| ¡ | Residual Natural Gas                        Deferred Balances            |   |   | 4.3    |   |
|    |                                                                     |   |        |        |   |
|    |                                                                     |   |   | 35.0   |   |
|    |                                                                     |   |        |        |   |

          Accumulated            carrying charges*:

|    |                                           |   |   |   |   |
|---------|------------------------------------------------|--------|--------|--------|--------|
| ¡ | Pension                        Reserve         |   |   | 6.5    |   |
| ¡ | Other                                          |   |   | .5     |   |
|    |                                           |   |        |        |   |
|    |                                           |   |   | 7.0    |   |
|    |                                           |   |        |        |   |
|    |                                           |   |   |   |   |
|    | Total                        Regulatory Assets |   | $      | 189.2  |   |
|    |                                           |   |        |        |   |

          *            Subject to recovery in Central Hudson’s next rate proceeding.

**2001 Rate            Order**

          Central            Hudson continued to operate, through June 30, 2006, under the terms of a Rate Plan            approved by the PSC on October 25, 2001, and further modified by the PSC on June 14,            2004 (“2001 Rate Order”).

          Two            initiatives survived the expiration of the 2001 Rate Order: 1) Economic Development and            2) Competitive Metering Initiative. These programs are funded by the Customer Benefit            Fund, established to benefit customers as a result of proceeds retained from Central            Hudson’s sale of generating assets in 2001.

**2006 Rate            Order**

          From            July 1, 2006 through June 30, 2009, Central Hudson operates under the terms of the 2006            Rate Order, which provides for the following:

|   |                                                                                                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Electric delivery                        revenues increase of $53.7 million over the three-year term with annual                        rate increases of approximately $17.9 million on July 1, 2006, July 1,                        2007, and July 1, 2008. |
|   |                                                                                                                                                                                                                                                          |
| • | Natural gas delivery                        revenues increase by $14.1 million with rate increases of $8 million on                        July 1, 2006, and $6.1 million on July 1, 2007.                                                                    |
|   |                                                                                                                                                                                                                                                          |
| • | Delivery rates based                        on a ROE of 9.6% with an earnings sharing threshold of 10.6%, above which                        Central Hudson is to share 50% with its customers.                                                               |

- 109            -

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Earnings above 11.6%                        are shared 65% with customers and earnings above 14.0% are allocated                        entirely to customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Limits on Central                        Hudson’s ability to defer certain costs if earnings exceed an 11.0%                        ROE, however, these deferral limitations will not cause earnings to be                        reduced below 11.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Rates based on a                        capital structure that includes 45% common equity, however the actual                        proportion of common equity, up to a limit of 47%, is used to determine the                        ROE for the purpose of earnings sharing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Continued full                        recovery of all purchased natural gas and electricity costs through                        existing monthly supply cost recovery mechanisms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Established targets                        for electric, natural gas, and common plant expenditures, and increased                        allowances for the recovery of operating costs, including transmission and                        distribution Right-of-Way (“ROW”) maintenance expenses. The                        capital expenditure targets are subject to true-up provisions, requiring                        deferral of 150% of the revenue requirement of any shortfalls in spending                        over the 2006 Rate Order’s three-year term, if such shortfall is                        expected to exist at June 30, 2009. Commencing on July 1, 2009, should such                        shortfall exist, it will be subject to carrying charges. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Transmission and                        distribution ROW maintenance expenses are also subject to true-up                        provisions over the 2006 Rate Order’s three-year term, requiring the                        deferral of shortfalls in actual expenditures, if such shortfall is                        expected to exist at June 30, 2009. Commencing on July 1, 2009, should such                        shortfall exist, it will be subject to carrying charges.                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Increased rate                        allowances and continued deferral accounting authorization for the recovery                        of expenses for pensions, OPEB, stray voltage testing, manufactured gas                        plant (“MGP”) site remediation, and certain other expense                        items.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Additional funding                        to assist low-income customers in paying their energy bills as well as                        continued funding of programs to encourage customers to explore new                        opportunities available through the competitive retail supply                        markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | Penalty-only                        performance mechanisms with established targets for specified levels of                        performance related to customer service quality, natural gas safety, and                        electric reliability measures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

          As            a result of failing to meet electric reliability targets, Central Hudson recorded            penalties of $0.7 million, and $0.8 million for the years 2006 and 2005, respectively.            As prescribed by the 2006 Rate Order, the 2005 penalty was reversed. The 2006 penalty            has been deferred for future pass back to customers. No penalties were recorded in            2007.

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**Other PSC            Proceedings**

          On            October 19, 2007, the PSC issued an Order in Case 07-E-0437 – New York Solar            Energy Industries Association and Sustainable Hudson Valley – Joint Petition to            Expand the Ceiling on the Photovoltaic Net Metering Load for Central Hudson Gas and            Electric Corporation from 1.2 MW to 3.0 MW. Under Public Service Law (PSL) § 66-j,            electric utilities are required to provide net metering to residential Photovoltaic            (PV) generation systems sized at 10 kW or less. PSL § 66-j also allows the PSC to            set a ceiling on the amount of PV capacity a utility must net meter. This Order raised            the PV net metering ceiling for Central Hudson from 1.8 MW, the level set in a June 21,            2007 Order issued by the PSC in this proceeding, to 10 MW. This Order also authorizes            Central Hudson to defer delivery revenue losses attributable to PV penetration in            excess of the 0.8 MW level assumed in the 2006 Rate Order for the period July 1, 2007            through June 30, 2009. The amount deferred in 2007 was not material.

**Other Regulatory            Matters**

Non-Utility Land            Sales

*Central Hudson*

          On            June 23, 2006, the PSC issued an Order approving the proposed transfers of ownership            interests in 48 parcels of non-utility property and the recognition of any gains            realized upon the transfers for the benefit of shareholders.

          Central            Hudson sold a total of four and thirty seven parcels of non-utility real property for            $0.5 million and $2.2 million, respectively, in excess of book value and transaction            costs, during the years ended December 31, 2007 and 2006. This excess is recorded as a            reduction to Other Expenses of Operation.

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**NOTE 3 -            NEW ACCOUNTING STANDARDS AND OTHER FASB PROJECTS**

          New            accounting standards are summarized below, and explanations of the underlying            information for all standards (except those not currently applicable to CH Energy Group            and its subsidiaries) follow the chart.

|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
|------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------------|--------|-------------|--------|
| **Reference**                                  |   | **Title**                                                                                                                                                                  |   | **Issued                        Date** |   | **Effective                        Date** |   | **Status**                                      |   | **Impact*** |   |
|                                                |        |                                                                                                                                                                            |        |                                        |        |                                           |        |                                                 |        |             |        |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 159                                       |   | Establishing the                        Fair Value Option for Financial Assets and Liabilities                                                                             |   | Feb-07                                 |   | Jan-08                                    |   | Under                        Assessment         |   | 1           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 157                                       |   | Fair Value                        Measurement                                                                                                                              |   | Sep-06                                 |   | Jan-08                                    |   | Under                        Assessment         |   | 1           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| FIN 39-1                                       |   | Amendment of FASB                        Interpretation No. 39, Offsetting of Amounts Related to Certain                        Contracts                                  |   | Apr-07                                 |   | Jan-08                                    |   | Under                        Assessment         |   | 1           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 141R                                      |   | Business                        Combinations – Revised                                                                                                               |   | Dec-07                                 |   | Jan-09                                    |   | Under                        Assessment         |   | 1           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 160                                       |   | Noncontrolling                        Interest in Consolidated Financial Statements                                                                                        |   | Dec-07                                 |   | Jan-09                                    |   | Under                        Assessment         |   | 1           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 158                                       |   | Employers’                        Accounting for Defined Benefit Pension and Other Postretirement                        Plans                                       |   | Sep-06                                 |   | Dec-06                                    |   | Implemented                                     |   | 2           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| FIN 48                                         |   | Accounting for                        Uncertainty in Income Taxes - an Interpretation of FASB Statement No.                        109                                     |   | Jul-06                                 |   | Jan-07                                    |   | Implemented                                     |   | 2           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| FIN 48-1                                       |   | Definition of                        Settlement in FASB Interpretation No. 48                                                                                              |   | May-07                                 |   | Jan-07                                    |   | Implemented                                     |   | 2           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| Statement 133                        Issue B40 |   | Embedded                        Derivatives: Application of Paragraph 13 (b) to Securitized Interests in                        Prepayable Financial Assets                |   | Dec-06                                 |   | Jan-07                                    |   | Not Currently                        Applicable |   | 3           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 156                                       |   | Accounting for                        Servicing of Financial Assets                                                                                                        |   | Mar-06                                 |   | Jan-07                                    |   | Not Currently                        Applicable |   | 3           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| SFAS 155                                       |   | Accounting for                        Certain Hybrid Financial Instruments, an Amendment of FASB Statements No.                        133 and 140                         |   | Feb-06                                 |   | Jan-07                                    |   | Not Currently                        Applicable |   | 3           |   |
|                                           |   |                                                                                                                                                                       |   |                                   |   |                                      |   |                                            |   |        |   |
| Statement 133                        Issue G26 |   | Cash Flow Hedges:                        Hedging Interest Cash Flows on Variable-Rate Assets and Liabilities that                        are not Based on a Benchmark Rate |   | Dec-06                                 |   | Apr-07                                    |   | Not Currently                        Applicable |   | 3           |   |

*Impact Key:

1 - No significant impact on the            financial condition, results of operations and cash flows of CH Energy Group and its            subsidiaries expected.

2 - Following the chart, the            impacts are separately disclosed as of standard effective dates.

3 - No current impact on the            financial condition, results of operations and cash flows of CH Energy Group and its            subsidiaries.

- 112            -

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STANDARDS UNDER            ASSESSMENT

          SFAS            159 permits entities to choose to elect, at specified election dates, to measure            eligible financial instruments at fair value. The election is made on an            instrument-by-instrument basis, and once made is irrevocable. Eligible instruments            include written loan commitments, rights and obligations under insurance contracts and            warranties that are not financial instruments, and firm commitments that would            otherwise not be recognized at inception and that involve only financial instruments.            The statement requires that entities report in earnings unrealized gains and losses on            items for which the fair value option has been elected, and recognize upfront costs and            fees related to those items in earnings as incurred.

          SFAS            157 will change the definition of fair value, establish a framework for measuring it in            accordance with General Accepted Accounting Principles, and expand disclosures about            fair value measurements.

          FSP            No. FIN 39-1 permits a reporting entity to offset fair value amounts recognized for the            rights to reclaim cash collateral (a receivable) or the obligation to return cash            collateral (a payable) against fair value amounts recognized for derivative agreements            if the receivable or payable arises from the same master netting arrangement as the            derivative instrument. This FSP also replaces the terms “conditional            contracts” and “exchange contracts” with the term “derivative            contracts” (as defined by Statement 133). For more information regarding CH            Energy Group’s derivative contracts, see Note 14 – “Accounting for            Derivative Instruments and Hedging Activities.”

          SFAS            141R applies to all business combinations, defined as a transaction or event in which            an acquirer obtains control of one or more businesses. The objective of SFAS 141R is to            improve the relevance, representational faithfulness, and comparability of the            information that an entity provides in its financial reports about a business            combination and its effects.

          SFAS            160 amends ARB 51 to establish accounting and reporting standards for the            noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It            clarifies that a noncontrolling interest in a subsidiary is an ownership interest in            the consolidated entity that should be reported as equity in the consolidated financial            statements. The objective of SFAS 160 is to improve the relevance, comparability and            transparency of the financial information that an entity provides in its consolidated            financial statements.

STANDARDS IMPLEMENTED

          SFAS            158 requires an employer that sponsors a defined benefit pension or other            post-retirement plans to report the current economic status (i.e., the overfunded or            underfunded status) of each such plan in its statement of financial position by            measuring plan assets and benefit obligations on the same date as the employer’s            assets and liabilities. SFAS 158 became effective for fiscal years ending            after

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December 15, 2006, with an            exception for the provision to change the measurement date, which is effective and will            be implemented for fiscal years ending after December 15, 2008. The impact of the            measurement date change on CH Energy Group’s financial condition, results of            operations, and cash flows cannot be determined at this time. For additional            information regarding CH Energy Group’s post-employment benefits, see Note 10            – “Post-Employment Benefits.”

          FIN            48 clarifies the accounting for uncertainty in income taxes recognized in an            entity’s financial statements in accordance with SFAS 109, *Accounting for            Income Taxes*. FIN 48 also prescribes a recognition threshold and measurement            methodology for tax positions taken or expected to be taken in a tax return, and            provides guidance on derecognition, classification, interest and penalties, accounting            for interim periods, and disclosure and transition issues. Only tax positions that are            more likely than not to be successful may be recognized. CH Energy Group has reviewed            material tax positions taken on federal and state income tax returns for all years open            for audit and has concluded that these positions are more likely than not to be            successful. Therefore, no adjustment to the opening balance of retained earnings was            recorded upon CH Energy Group’s adoption of FIN 48 in January 2007 and, no            interest or penalties have been recorded in the financial statements. If CH Energy            Group and its subsidiaries incur any interest or penalties on underpayment of income            taxes, the amounts would be included on the line “Other liabilities” on the            Consolidated Balance Sheet and on the line “Other – net” on the            Consolidated Statement of Income. CH Energy Group and its subsidiaries file a            consolidated Federal and New York State income tax return, which represents the major            tax jurisdictions of CH Energy Group. The statute of limitations for federal tax years            2004 through 2006 are still open for audit. The New York State income tax return is            currently open for audit for tax years 2002 through 2006, and tax years 2002 through            2004 are currently under audit. Although these tax years are still open for audit, CH            Energy Group does not believe it has exposure resulting from uncertain tax            positions.

          FIN            48-1 clarifies the rules regarding settled tax positions. Under the approach prescribed            by FIN 48-1, an enterprise must evaluate all of the following conditions when            determining effective settlement: whether a tax authority has examined the tax year;            whether or not the enterprise intends to appeal or litigate any aspects of the tax            position; and, based on a taxing authority’s widely understood policy, whether            the enterprise considers it remote that the taxing authority would subsequently examine            or reexamine any of the positions once the examination process is completed. CH Energy            Group’s determination of settled positions is consistent with these            rules.

**NOTE 4 -            INCOME TAX**

          CH            Energy Group and its subsidiaries file a consolidated Federal and New York State income            tax return. CHEC, Griffith, and Lyonsdale also file state income tax returns in those            states in which they conduct business.

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          In            2000, New York State law was changed such that Central Hudson and other New York State            utilities became subject to 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. Therefore, CH Energy Group filed a combined Article            9-A tax return which included all of its subsidiaries. The completion of the audit,            concluded in the second quarter of 2005, of the 2000 and 2001 combined filings of the            Article 9-A tax resulted in a favorable adjustment of $2.3 million of New York State            income tax, including the Metropolitan Transit Authority tax, and was the primary            factor for the lower effective state tax rate in 2005 for CH Energy Group. Management            does not expect adjustments relating to similar audits of subsequent years to be of            this magnitude.

          The            Article 9-A state income tax obligation was recovered from Central Hudson customers as            a revenue tax through June 30, 2006, the expiration date of the 2001 Rate Plan.            Effective July 1, 2006, and in accordance with the 2006 Rate Order, the state income            tax obligation in accordance with Article 9-A is included in base rates of Central            Hudson, in the same manner as Central Hudson’s federal income tax obligation is            already included.

          As            a result of CHEC’s ownership in Cornhusker Energy Lexington Holdings, LLC            (“Cornhusker Holdings”) and Lyonsdale Biomass, LLC            (“Lyonsdale”), a $1.4 and $1.0 million benefit for federal production tax            credits, for 2007 and 2006, respectively, is included in CH Energy Group’s            federal income tax expense. CHEC investments in Cornhusker Holdings and Lyonsdale are            discussed further in Note 5 – “Acquisitions and            Investments.”

          See            Note 2 – “Regulatory Matters” under the caption “Summary of            Regulatory Assets and Liabilities” for additional information regarding CH 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 CH            Energy Group as reported in its Consolidated Statement of Income:

|                                               |   |                                  |   |   |   |   |   |   |   |   |
|----------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                               |   | 2007                                  |   | 2006   |   | 2005   |   |
|                                               |   |                                       |   |        |   |        |   |
|                                               |   | (In                        Thousands) |   |
| Federal income                        tax          |   | $                                     | 14,630 |   | $      | 482    |   | $      | 12,021 |   |
| State income                        tax            |   |                                  | 1,919  |   |   | 63     |   |   | (757   | )      |
| Deferred federal                        income tax |   |                                  | 4,636  |   |   | 20,108 |   |   | 12,245 |   |
| Deferred state                        income tax   |   |                                  | 713    |   |   | 3,116  |   |   | 2,310  |   |
|                                               |   |                                       |        |   |        |        |   |        |        |   |
| Total income                        tax            |   | $                                     | 21,898 |   | $      | 23,769 |   | $      | 25,819 |   |
|                                               |   |                                       |        |   |        |        |   |        |        |   |

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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 CH Energy            Group’s Consolidated Statement of Income:

|                                                               |   |                                  |   |   |   |   |   |   |    |   |
|--------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                                               |   | 2007                                  |   | 2006   |   | 2005   |   |
|                                                               |   |                                       |   |        |   |        |   |
|                                                               |   | (In                        Thousands) |   |
| Net income                                                         |   | $                                     | 42,636 |   | $      | 43,084 |   | $      | 44,291  |   |
| Preferred stock                        dividends of Central Hudson |   |                                  | 970    |   |   | 970    |   |   | 970     |   |
| Minority                        interest                           |   |                                  | (121   | )      |   | (141   | )      |   | — |   |
| Federal income                        tax                          |   |                                  | 14,630 |   |   | 482    |   |   | 12,021  |   |
| State income                        tax                            |   |                                  | 1,919  |   |   | 63     |   |   | (757    | )      |
| Deferred federal income                        tax                 |   |                                  | 4,636  |   |   | 20,108 |   |   | 12,245  |   |
| Deferred state income                        tax                   |   |                                  | 713    |   |   | 3,116  |   |   | 2,310   |   |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |
| Income before                        taxes                         |   | $                                     | 65,383 |   | $      | 67,682 |   | $      | 71,080  |   |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |
|                                                               |   |                                  |   |   |   |   |   |   |    |   |
| Computed federal tax at                        35% statutory rate  |   | $                                     | 22,884 |   | $      | 23,689 |   | $      | 24,878  |   |
| State income tax net of                        federal tax benefit |   |                                  | 1,812  |   |   | 2,985  |   |   | 1,695   |   |
| Depreciation                        flow-through                   |   |                                  | 2,437  |   |   | 2,870  |   |   | 3,464   |   |
| Cost of                        Removal                             |   |                                  | (1,185 | )      |   | (1,139 | )      |   | (1,136  | )      |
| Production tax                        credits                      |   |                                  | (1,366 | )      |   | (1,011 | )      |   | — |   |
| Other                                                              |   |                                  | (2,684 | )      |   | (3,625 | )      |   | (3,082  | )      |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |
| Total income                        tax                            |   | $                                     | 21,898 |   | $      | 23,769 |   | $      | 25,819  |   |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |
|                                                               |   |                                  |   |   |   |   |   |   |    |   |
| Effective tax rate                        – federal          |   |                                  | 29.5   | %      |   | 30.4   | %      |   | 34.1    | %      |
| Effective tax rate                        – state            |   |                                  | 4.0    | %      |   | 4.7    | %      |   | 2.2     | %      |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |
| Effective tax rate                        – combined         |   |                                  | 33.5   | %      |   | 35.1   | %      |   | 36.3    | %      |
|                                                               |   |                                       |        |   |        |        |   |        |         |   |

          In            2007, the effective federal income tax rate decrease was due to favorable impacts of            the Medicare Prescription Drug, Improvement and Modernization Act of 2003            (“Medicare Act”), increased production tax credits and depreciation            flow-through partially offset by tax reserve reversals in 2006 that did not occur in            2007.

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          The            following is a summary of the components of deferred taxes at December 31, 2007, and            December 31, 2006, as reported in CH Energy Group’s Consolidated Balance            Sheet:

|                                                                 |   |   |    |   |   |    |   |
|----------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                 |   | 2007   |    | 2006   |   |
|                                                                 |   |        |    |        |   |
| Accumulated Deferred                        Income Tax Asset:        |   |   |    |   |   |    |   |
| Excess depreciation                        reserve                   |   | $      | 15,173  |   | $      | 22,870  |   |
| Unbilled                        revenues                             |   |   | 15,163  |   |   | 10,670  |   |
| Plant-related                                                        |   |   | 24,846  |   |   | 32,010  |   |
| OPEB expense                                                         |   |   | 19,721  |   |   | 15,998  |   |
| Other                                                                |   |   | 13,097  |   |   | 4,359   |   |
|                                                                 |   |        |         |   |        |         |   |
| Accumulated Deferred                        Income Tax Asset         |   |   | 88,000  |   |   | 85,907  |   |
|                                                                 |   |   |    |   |   |    |   |
| Accumulated Deferred                        Income Tax Liability:    |   |   |    |   |   |    |   |
| Plant-related                                                        |   |   | 152,245 |   |   | 144,351 |   |
| Pension                        expense                               |   |   | 15,024  |   |   | 19,830  |   |
| Residual deferred gas                        balance                 |   |   | 11,835  |   |   | 12,531  |   |
| Other                                                                |   |   | 48,886  |   |   | 41,766  |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Accumulated Deferred                        Income Tax Liability     |   |   | 227,990 |   |   | 218,478 |   |
|                                                                 |   |        |         |   |        |         |   |
| Net Deferred Income                        Tax Liability             |   |   | 139,990 |   |   | 132,571 |   |
|                                                                 |   |   |    |   |   |    |   |
| Net Current Deferred                        Income Tax Asset         |   |   | 7,378   |   |   | 5,875   |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Net Long-term                        Deferred Income Tax Liabilities |   | $      | 147,368 |   | $      | 138,446 |   |
|                                                                 |   |        |         |   |        |         |   |

          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:

|                                               |   |                                  |   |   |   |   |   |   |   |   |
|----------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                               |   | 2007                                  |   | 2006   |   | 2005   |   |
|                                               |   |                                       |   |        |   |        |   |
|                                               |   | (In                        Thousands) |   |
| Federal income                        tax          |   | $                                     | 13,944 |   | $      | 562    |   | $      | 9,675  |   |
| State income                        tax            |   |                                  | 3,277  |   |   | (290   | )      |   | 1,450  |   |
| Deferred federal                        income tax |   |                                  | 2,814  |   |   | 18,632 |   |   | 10,852 |   |
| Deferred state                        income tax   |   |                                  | 291    |   |   | 2,624  |   |   | 1,959  |   |
|                                               |   |                                       |        |   |        |        |   |        |        |   |
| Total income                        tax            |   | $                                     | 20,326 |   | $      | 21,528 |   | $      | 23,936 |   |
|                                               |   |                                       |        |   |        |        |   |        |        |   |

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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:

|                                                               |   |                                  |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   | 2007                                  |   | 2006   |   | 2005   |   |
|                                                               |   |                                       |   |        |   |        |   |
|                                                               |   | (In                        Thousands) |   |
| Net income                                                         |   | $                                     | 33,436 |   | $      | 34,871 |   | $      | 35,635 |   |
| Federal income                        tax                          |   |                                  | 13,944 |   |   | 562    |   |   | 9,675  |   |
| State income                        tax                            |   |                                  | 3,277  |   |   | (290   | )      |   | 1,450  |   |
| Deferred federal income                        tax                 |   |                                  | 2,814  |   |   | 18,632 |   |   | 10,852 |   |
| Deferred state income                        tax                   |   |                                  | 291    |   |   | 2,624  |   |   | 1,959  |   |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |
| Income before                        taxes                         |   | $                                     | 53,762 |   | $      | 56,399 |   | $      | 59,571 |   |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |
|                                                               |   |                                  |   |   |   |   |   |   |   |   |
| Computed federal tax at                        35% statutory rate  |   | $                                     | 18,817 |   | $      | 19,740 |   | $      | 20,850 |   |
| State income tax net of                        federal tax benefit |   |                                  | 2,421  |   |   | 2,436  |   |   | 2,902  |   |
| Depreciation                        flow-through                   |   |                                  | 2,437  |   |   | 2,870  |   |   | 3,464  |   |
| Cost of                        Removal                             |   |                                  | (1,185 | )      |   | (1,139 | )      |   | (1,136 | )      |
| Other                                                              |   |                                  | (2,164 | )      |   | (2,379 | )      |   | (2,144 | )      |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |
| Total income                        tax                            |   | $                                     | 20,326 |   | $      | 21,528 |   | $      | 23,936 |   |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |
|                                                               |   |                                  |   |   |   |   |   |   |   |   |
| Effective tax rate                        – federal          |   |                                  | 31.2   | %      |   | 34.0   | %      |   | 34.5   | %      |
| Effective tax rate                        – state            |   |                                  | 6.6    | %      |   | 4.2    | %      |   | 5.7    | %      |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |
| Effective tax rate                        – combined         |   |                                  | 37.8   | %      |   | 38.2   | %      |   | 40.2   | %      |
|                                                               |   |                                       |        |   |        |        |   |        |        |   |

          In            2007, the effective federal income tax rate decrease was due to favorable impacts of            the Medicare Act, flow-through benefits from depreciation, and the federal benefits            from higher current period state taxes offset partially by tax reserve reversals in            2006 that did not occur in 2007.

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          The            following is a summary of the components of deferred taxes at December 31, 2007, and            December 31, 2006, as reported in Central Hudson’s Consolidated Balance            Sheet:

|                                                                 |   |   |    |   |   |    |   |
|----------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                 |   | 2007   |    | 2006   |   |
|                                                                 |   |        |    |        |   |
| Accumulated Deferred                        Income Tax Asset:        |   |   |    |   |   |    |   |
| Unbilled                        revenues                             |   | $      | 15,163  |   | $      | 10,670  |   |
| Plant-related                                                        |   |   | 24,846  |   |   | 32,010  |   |
| OPEB expense                                                         |   |   | 19,721  |   |   | 15,998  |   |
| Excess depreciation                        reserve                   |   |   | 15,173  |   |   | 22,870  |   |
| Other                                                                |   |   | 12,394  |   |   | 2,904   |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Accumulated Deferred                        Income Tax Asset         |   |   | 87,297  |   |   | 84,452  |   |
|                                                                 |   |   |    |   |   |    |   |
| Accumulated Deferred                        Income Tax Liability:    |   |   |    |   |   |    |   |
| Plant-related                                                        |   | $      | 150,035 |   | $      | 141,794 |   |
| Pension                        expense                               |   |   | 15,024  |   |   | 19,830  |   |
| Residual deferred gas                        balance                 |   |   | 11,835  |   |   | 12,531  |   |
| Other                                                                |   |   | 38,991  |   |   | 34,845  |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Accumulated Deferred                        Income Tax Liability     |   |   | 215,885 |   |   | 209,000 |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Net Deferred Income Tax                        Liability             |   |   | 128,588 |   |   | 124,548 |   |
|                                                                 |   |   |    |   |   |    |   |
| Net Current Deferred                        Income Tax Asset         |   |   | 6,676   |   |   | 4,600   |   |
|                                                                 |   |   |    |   |   |    |   |
|                                                                 |   |        |         |   |        |         |   |
| Net Long-term Deferred                        Income Tax Liabilities |   | $      | 135,264 |   | $      | 129,148 |   |
|                                                                 |   |        |         |   |        |         |   |

**NOTE 5 -            ACQUISITIONS AND INVESTMENTS**

ACQUISITIONS

          In            2007, 2006 and 2005, Griffith acquired fuel distribution companies as follows (in            Millions):

|                                     |   |                                                                                         |   |                                  |   |                                                                     |   |     |   |                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------------------------------------------|--------|----------|--------|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Year                        Ended        |   | #                        of                        Acquired                        Companies |   | Purchase                        Price |   | Total                        Intangible                        Assets(1) |   | Goodwill |   | Total                        Tangible                        Assets(2) |   |
|                                          |        |                                                                                              |        |                                       |        |                                                                          |        |          |        |                                                                        |   |
| December 31,                        2005 |   | 7                                                                                            |   |                                  |   | $                                                                        | 3.6    |     |   |                                                                   | $      | 2.9    |   |   |   | $      | 0.8    |   |   |   | $      | 0.7    |   |   |
| December 31,                        2006 |   | 9                                                                                            |   |                                  |   | $                                                                        | 3.6    |     |   |                                                                   | $      | 3.4    |   |   |   | $      | 1.3    |   |   |   | $      | 0.2    |   |   |
| December 31,                        2007 |   | 13                                                                                           |   |                                  |   | $                                                                        | 25.6   |     |   |                                                                   | $      | 22.1   |   |   |   | $      | 10.6   |   |   |   | $      | 3.5    |   |   |
|                                          |        |                                                                                              |        |                                       |        |                                                                          |        |          |        |                                                                        |        |        |        |        |        |        |        |        |        |        |        |        |        |   |
| Total                                    |   | 29                                                                                           |   |                                  |   | $                                                                        | 32.8   |     |   |                                                                   | $      | 28.4   |   |   |   | $      | 12.7   |   |   |   | $      | 4.4    |   |   |
|                                          |        |                                                                                              |        |                                       |        |                                                                          |        |          |        |                                                                        |        |        |        |        |        |        |        |        |        |        |        |        |        |   |

|   |                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Including                        goodwill.                                                                                                                            |
|   |                                                                                                                                                                  |
| (2)    | Total tangible assets                        include $1.6 million in liquid petroleum and spare parts inventory, and                        $1.8 million in vehicles. |

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          Fifteen            of the above noted acquisition transactions have agreements containing clauses (known            as “earn out provisions”) for a possible additional payment provided            certain conditions are met. These provisions increase the purchase price if certain            sales volumes are attained. An additional $129,700 was paid in 2006 as a result of            these provisions. The amount of this additional payment was added to goodwill.2007            payments were not material.

          In            January 2008, Griffith acquired two fuel distribution and service companies in            Pennsylvania and Connecticut for a total of $8.6 million.

          On            April 12, 2006, CHEC purchased a 75% interest in Lyonsdale from Catalyst Renewables            Corporation (“Catalyst”) for $10.8 million, including a working capital            adjustment of $1.0 million. CHEC allocated the total purchase price based on the fair            value of assets acquired and liabilities assumed as follows: Current Assets of $1.3            million, Other Property and Plant of $9.6 million, and Current Liabilities of $0.1            million. Catalyst remains the owner of a minority share of Lyonsdale and will provide            asset management services to Lyonsdale under a contract expiring April 12, 2009.            Lyonsdale owns and operates a 19-megawatt, wood-fired, biomass electric generating            plant, which began operation in 1992. The plant is located in Lyonsdale, New York. The            energy and capacity of the plant is being sold at a fixed price to an investment grade            rated counter-party pursuant to a contract beginning May 1, 2006, and ending December            31, 2014. For the period April 12, 2006 through December 31, 2007, the operating            results of Lyonsdale have been consolidated in the financial statements of CH Energy            Group.

**Investments**

          In            the fourth quarter of 2004, CHEC acquired a 12% interest in preferred units issued by            Cornhusker Holdings for $2.7 million and also agreed to acquire $8.0 million of            subordinated notes issued by Cornhusker Holdings. As of December 31, 2007, CHEC had            acquired all of these subordinated notes. Cornhusker Holdings is the owner of            Cornhusker Energy Lexington, LLC, a fuel ethanol production facility located in            Nebraska that began operation as of the end of January 2006. This investment is            accounted for under the equity method.

          On            March 10, 2006, CHEC closed on a $4.9 million investment in CH-Community Wind Energy,            LLC, a joint venture between CHEC and Community Energy, Inc. that owns an 18% interest            in two wind farm projects in the Mid-Atlantic region. Located near Wilkes-Barre,            Pennsylvania, the 24 MW Bear Creek wind project, and the 7.5 MW Jersey Atlantic            project, built at a wastewater treatment plant in Atlantic City, New Jersey, both are            commercially operational. CHEC’s ownership represents a minority interest in each            project. This investment is accounted for under the equity method.

          In            the fourth quarter of 2007, CHEC’s subsidiary, CH-Auburn Energy LLC            (“CH-Auburn”), entered into a 15-year contract to supply the City of            Auburn, NY (the “City”) with a portion of its electricity needs by            constructing and operating a 3-megawatt electric generating plant in Auburn that will            burn gas derived from wastewater sludge and a

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landfill to generate renewable            power. As of December 31, 2007, $0.5 million of the estimated $9.75 million investment            was completed. CH-Auburn is consolidated in the financial statements of CH Energy            Group.

          Under            its agreement with the City, CH-Auburn will sell electricity and hot water to the City            at a rate that is a function of the project’s actual capital costs and operating            costs. The rate charged to the City is capped at a budgeted maximum value. If the rate            cap will be exceeded and the City does not increase the cap, or if certain            schedule-related criteria are not met, CH-Auburn may terminate the agreement and            recover its full investment in the project.

**NOTE 6 -            GOODWILL AND OTHER INTANGIBLE ASSETS**

          Goodwill,            customer relationships, and covenants not to compete associated with acquisitions are            included in intangible assets. 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. The balances reflected on CH Energy Group’s            Consolidated Balance Sheet at December 31, 2007, and 2006, for “Goodwill”            and “Other intangible assets – net” relate to Griffith. In July 2001,            the FASB issued SFAS No. 142, titled *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 to expense, but instead be            periodically reviewed for impairment. Annually, Griffith tests the goodwill and            intangible assets remaining on the balance sheet for impairment and for all periods            presented no impairment existed. Impairment testing compares the fair value of Griffith            to its carrying amount. Fair value of the reporting unit is estimated using a            discounted cash flow measurement. The carrying amount for goodwill was $63.4 million as            of December 31, 2007, and $52.8 million as of December 31, 2006. For tax purposes,            goodwill is amortized ratably over a 15-year period, beginning in the month of            acquisition.

          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            relationships is fifteen years, which is believed to be appropriate in view of average            historical customer turnover. However, if customer turnover were to substantially            increase, a shorter amortization period would be used, resulting in an increase in            amortization expense. For example, if a ten-year amortization period were initially            used, annual amortization expense would increase by approximately $1.6 million. The            estimated useful lives of trademarks range from five to fifteen years and are based            upon management’s assessment of several variables such as brand recognition,            management’s plan for the use of the trademark, and other factors which will            affect the duration of the trademark’s life. The useful life of a covenant not to            compete is based on the expiration date of the covenant, generally between two and five            years. The weighted average amortization periods for customer relationships, trademarks            and covenants not to compete are 15 years, 11.2 years, and 8.4 years, respectively. The            weighted average amortization period for all amortizable intangible assets is 14.7            years.

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          The            components of amortizable intangible assets of CH Energy Group are summarized as            follows (in Thousands):

|                                                 |   |                                                                |   |                                            |   |                                                                |   |                                            |   |   |   |   |   |    |   |   |   |   |    |   |   |
|------------------------------------------------------|--------|---------------------------------------------------------------------|--------|-------------------------------------------------|--------|---------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|
|                                                 |   | December 31,                        2007                            |   | December 31,                        2006        |   |
|                                                      |        |                                                                     |        |                                                 |   |
|                                                 |   | Gross                        Carrying                        Amount |   | Accumulated                        Amortization |   | Gross                        Carrying                        Amount |   | Accumulated                        Amortization |   |
|                                                      |        |                                                                     |        |                                                 |   |
| Customer                        Relationships        |   |                                                                | $      | 51,451                                          |   |                                                                |   | $                                               | 18,593 |   |   |   | $      | 42,479  |   |   |   | $      | 15,508  |   |   |
| Trademarks                                           |   |                                                                |   | 2,490                                           |   |                                                                |   |                                            | 101    |   |   |   |   | — |   |   |   |   | — |   |   |
| Covenants Not to                        Compete      |   |                                                                |   | 1,420                                           |   |                                                                |   |                                            | 947    |   |   |   |   | 1,350   |   |   |   |   | 771     |   |   |
|                                                      |        |                                                                     |        |                                                 |        |                                                                     |        |                                                 |        |        |        |        |        |         |        |        |        |        |         |        |   |
| Total Amortizable                        Intangibles |   |                                                                | $      | 55,361                                          |   |                                                                |   | $                                               | 19,641 |   |   |   | $      | 43,829  |   |   |   | $      | 16,279  |   |   |
|                                                      |        |                                                                     |        |                                                 |        |                                                                     |        |                                                 |        |        |        |        |        |         |        |        |        |        |         |        |   |

          Amortization            expense was $3.4 million, $2.9 million, and $2.7 million for the years ended December            31, 2007, 2006, and 2005, respectively. The estimated amortization expense for each of            the next five years, assuming no new acquisitions, will be approximately $3.8            million.

**NOTE 7 -            SHORT-TERM BORROWING ARRANGEMENTS**

          CH            Energy Group maintains a $75 million revolving credit agreement to provide committed            liquidity beyond its cash reserves. In April 2005, CH Energy Group amended its            revolving credit agreement with several commercial banks, extending its term to April            2010. At December 31, 2007 and 2006, there was no outstanding loan under the            agreement.

          For            the year ended December 31, 2006, Central Hudson maintained a $75 million revolving            credit facility to provide committed liquidity for its operations. Effective January 2,            2007, Central Hudson amended its revolving credit agreement with several commercial            banks, pursuant to PSC authorization, increasing the available committed credit to $125            million for a five-year term ending January 2, 2012. At December 31, 2007, and 2006,            there was no outstanding loan under Central Hudson’s revolving credit            agreement.

          Central            Hudson also maintains certain uncommitted lines of credit that diversify its sources            and provide competitive options to minimize its cost of short-term debt. At December            31, 2007, Central Hudson had $42.5 million of short-term debt outstanding under these            credit lines.

          For            the years ended December 31, 2007, 2006, and 2005, Central Hudson had an average daily            amount of short-term debt outstanding of $32.5 million, $27.7 million, and $16.6            million, respectively. The weighted-average interest rate for short-term borrowing was            5.37% for 2007, 5.24% for 2006, and 3.65% for 2005.

          As            of December 31, 2007, CHEC had an uncommitted line of credit totaling $15 million.            There were no borrowings against this line of credit.

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          At            December 31, 2007, CH Energy Group, on a consolidated basis, had no short-term debt            outstanding other than the above-referenced $42.5 million in short-term debt of Central            Hudson. CH Energy Group had $11.3 million of cash and cash equivalents and $3.5 million            of short-term investments as of December 31, 2007.

          On            January 18, 2008, Griffith established an uncommitted line of credit of up to $25            million with a commercial bank for the purpose of funding seasonal working capital, and            for general corporate purposes. The obligations of Griffith under the line of credit            are guaranteed by CH Energy Group and by CHEC.

**Debt Covenants**

          CH            Energy Group’s $75 million credit facility and Central Hudson’s $125            million credit facility both require the satisfaction of certain restrictive covenants,            including a ratio of total debt-to-total capitalization of no more than 0.65 to 1.00.            Currently, both CH Energy Group and Central Hudson are in compliance with all of these            debt covenants.

          The            only debt outstanding at CHEC is amounts borrowed from CH Energy Group. As of December            31, 2007, there were no amounts outstanding on CHEC’s line of credit with its            commercial bank and there were no applicable debt covenants.

**NOTE 8 -            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 CH Energy Group and            Central Hudson.

                      Cumulative Preferred Stock: Central Hudson, $100 par value; 210,300 shares            authorized, not subject to mandatory redemption:

|   |   |       |   |                                      |   |    |   |   |    |   |
|--------|--------|------------|--------|-------------------------------------------|--------|---------|--------|--------|---------|--------|
|   |   |       |   | Shares                        Outstanding |   |
|   |   | Redemption |   |                                           |   |
|   |   | Price      |   | December 31,                              |   |
| Series |   | 12/31/07   |   | 2007                                      |   | 2006    |   |
|        |   |            |   |                                           |   |         |   |
| 4.50%  |   | 107.00     |   |                                      |   | 70,285  |   |   | 70,285  |   |
| 4.75%  |   | 106.75     |   |                                      |   | 19,980  |   |   | 19,980  |   |
| 4.35%  |   | 102.00     |   |                                      |   | 60,000  |   |   | 60,000  |   |
| 4.96%  |   | 101.00     |   |                                      |   | 60,000  |   |   | 60,000  |   |
|   |   |       |   |                                      |        |         |   |        |         |   |
|   |   |       |   |                                      |   | 210,265 |   |   | 210,265 |   |
|   |   |       |   |                                      |        |         |   |        |         |   |

          A            nominal number of these preferred shares were repurchased during the year ended            December 31, 2005. There were no repurchases in 2006 and 2007.

                      Capital Stock Expense: Expenses incurred on issuance of capital stock are            accumulated and reported as a reduction in common equity.

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                      Repurchase Program: On July 25, 2002, the Board of Directors of CH 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. 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 years ended            December 31, 2007, 2006, and 2005. On July 27, 2007, the Board of Directors of CH            Energy Group extended and amended the Common Stock Repurchase Program (the            “Program”) of the Company, which was originally authorized on July 25,            2002. As amended, the Program authorizes the repurchase of up to 2,000,000 shares            (excluding shares purchased before July 31, 2007) or approximately 13% of the            Company’s outstanding common stock, from time to time, during the next five            years, i.e., through July 31, 2012. The extended and amended Program is effective as of            July 31, 2007. CH Energy Group reserves the right to modify, suspend, renew, or            terminate the Program at any time without notice.

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**NOTE 9 -            CAPITALIZATION - LONG-TERM DEBT**

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

|                                                |   |                                 |   |   |                                  |    |   |   |   |   |    |   |   |
|-----------------------------------------------------|--------|--------------------------------------|--------|--------|---------------------------------------|---------|--------|--------|--------|--------|---------|--------|--------|
| Series                                              |   | Maturity                        Date |   |   | December 31,                          |    |   |
|                                                     |   |                                      |   |   |                                       |    |   |
|                                                |   |                                 |   |   | 2007                                  |    |   |   | 2006   |   |    |
|                                                |   |                                 |   |   |                                       |    |   |   |        |   |    |
|                                                |   |                                 |   |   | (In                        Thousands) |    |   |
|                                                |
| Promissory                        Notes:            |   |                                 |   |   |                                  |
|                                                |   |                                 |   |   |                                  |
| 2002 Series D                        (5.87%)(d)     |   | Mar.                        28, 2007 |   |   | $                                     | — |   |   |   | $      | 33,000  |   |   |
| 1999 Series C                        (6.00%)        |   | Jan.                        15, 2009 |   |   |                                  | 20,000  |   |   |   |   | 20,000  |   |   |
| 2003 Series D                        (4.33%)(d)     |   | Sep.                        23, 2010 |   |   |                                  | 24,000  |   |   |   |   | 24,000  |   |   |
| 2002 Series D                        (6.64%)(d)     |   | Mar.                        28, 2012 |   |   |                                  | 36,000  |   |   |   |   | 36,000  |   |   |
| 2004 Series D                        (4.73%)(d)     |   | Feb.                        27, 2014 |   |   |                                  | 7,000   |   |   |   |   | 7,000   |   |   |
| 2004 Series E                        (4.80%)(b)     |   | Nov.                        05, 2014 |   |   |                                  | 7,000   |   |   |   |   | 7,000   |   |   |
| 2007 Series F                        (6.028%) (b)   |   | Sep.                        01, 2017 |   |   |                                  | 33,000  |   |   |   |   | — |   |   |
| 2004 Series E                        (5.05%)(b)     |   | Nov.                        04, 2019 |   |   |                                  | 27,000  |   |   |   |   | 27,000  |   |   |
| 1999 Series A                        (5.45%)(a)     |   | Aug.                        01, 2027 |   |   |                                  | 33,400  |   |   |   |   | 33,400  |   |   |
| 1999 Series C                        (a)(c)         |   | Aug.                        01, 2028 |   |   |                                  | 41,150  |   |   |   |   | 41,150  |   |   |
| 1999 Series D                        (a)(c)         |   | Aug.                        01, 2028 |   |   |                                  | 41,000  |   |   |   |   | 41,000  |   |   |
| 1998 Series A                        (3.00%)(a)     |   | Dec.                        01, 2028 |   |   |                                  | 16,700  |   |   |   |   | 16,700  |   |   |
| 2006 Series E                        (5.76%)(b)     |   | Nov.                        17, 2031 |   |   |                                  | 27,000  |   |   |   |   | 27,000  |   |   |
| 1999 Series B                        (a)(c)         |   | July                        01, 2034 |   |   |                                  | 33,700  |   |   |   |   | 33,700  |   |   |
| 2005 Series E                        (5.84%)(b)     |   | Dec.                        05, 2035 |   |   |                                  | 24,000  |   |   |   |   | 24,000  |   |   |
| 2007 Series F                        (5.80%) (b)    |   | Mar.                        23, 2037 |   |   |                                  | 33,000  |   |   |   |   | — |   |   |
|                                                |   |                                 |   |   |                                       |         |   |   |   |        |         |   |   |
|                                                |   |                                 |   |   |                                  | 403,950 |   |   |   |   | 370,950 |   |   |
|                                                |   |                                 |   |   |                                  |    |   |   |   |   |    |   |   |
| Unamortized Discount                        on Debt |   |                                 |   |   |                                  | (58     | )      |   |   |   | (61     | )      |   |
|                                                |   |                                 |   |   |                                       |         |   |   |   |        |         |   |   |
| Total Long-term                        debt         |   |                                 |   |   | $                                     | 403,892 |   |   |   | $      | 370,889 |   |   |
|                                                |   |                                 |   |   |                                  |    |   |   |   |   |    |   |   |
| Less: Current                        Portion        |   |                                 |   |   |                                  | — |   |   |   |   | (33,000 | )      |   |
|                                                |   |                                 |   |   |                                       |         |   |   |   |        |         |   |   |
|                                                |   |                                 |   |   |                                  |    |   |   |   |   |    |   |   |
| Net Long-term                        debt           |   |                                 |   |   | $                                     | 403,892 |   |   |   | $      | 337,889 |   |   |
|                                                |   |                                 |   |   |                                       |         |   |   |   |        |         |   |   |

|   |                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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)    | Variable rate                        notes.                                                                                                                                                            |
| (d)    | Issued pursuant to                        the 2001 Order approving the issuance by Central Hudson prior to June 30,                        2004, of up to $100 million of unsecured medium-term notes. |

          On            September 21, 2006, the PSC issued an Order authorizing issuance of securities, in            response to a financing petition Central Hudson filed on July 3, 2006. The Order            authorizes Central Hudson to issue and sell up to $140 million of medium-term notes            through December 31, 2009, and to enter into revolving credit agreements in an amount            not to exceed $125 million and for periods not to exceed five years. On March 23, 2007,            Central Hudson issued $33 million of 30-year, 5.80% Series F notes. The

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proceeds were used to redeem at            maturity $33 million of 5-year, 5.87% Series D Notes, on March 28, 2007. On September            14, 2007, Central Hudson issued an additional $33 million of 10-year 6.028% Series F            Notes. The proceeds were used to finance ongoing investments in capital            improvements.

          Griffith            had no third-party long-term debt outstanding as of December 31, 2007, or 2006. The            only debt outstanding at CHEC is amounts borrowed from CH Energy Group.

**Long-Term Debt            Maturities**

          All            of CH Energy Group’s outstanding long-term debt has been issued by Central            Hudson. See Note 15 - “Financial Instruments” for a schedule of long-term            debt maturing or to be redeemed during the next five years and thereafter.

**NYSERDA**

          Central            Hudson’s 1998 Series A promissory notes were issued in conjunction with the sale            of tax-exempt pollution control revenue bonds by NYSERDA. The current applicable            interest rate of 3.0% is scheduled to end on December 1, 2008, at which time the notes            will be remarketed at then-current interest rates under the terms of the applicable            indenture.

          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            (“AMBAC”). In its 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, which represent approximately 94%            of the total costs. The deferred balance under this accounting was $0.7 million and            $0.2 million at December 31, 2007 and 2006, respectively, and is included in Regulatory            Assets in CH Energy Group’s and Central Hudson’s Consolidated Balance            Sheets. The deferred balances at June 30, 2006, were eliminated in accordance with the            2006 Rate Order. Management expects to address the ongoing deferred balances in future            rate filings. 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. On April 1, 2006, Central Hudson replaced its interest rate cap agreement with a            new two-year agreement through April 1, 2008, with similar terms as the expired            agreement.

          Central            Hudson has five debt issues totaling $166 million that are insured by AMBAC. On January            18, 2008, Fitch Ratings took rating actions on 137,504 AMBAC-insured issues, which            included the downgrade of Central Hudson’s five issues from AAA to AA. Concurrent            with its announced outlook for AMBAC, Fitch classified the issues as “on Rating            Watch Negative” to reflect significant uncertainty with AMBAC’s financial            situation. Central Hudson is not able to predict the impact that the downgrade of AMBAC            and other bond insurers will have on the market for municipal debt, but does

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not currently believe this            situation will have a significant impact on the Company’s earnings or its ability            to obtain debt financing.

**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.

**NOTE 10 -            POST-EMPLOYMENT BENEFITS**

**Pension            Benefits**

          Central            Hudson has a non-contributory Retirement Income Plan (“Retirement Plan”)            covering all of its unionized employees and all managerial, professional and            supervisory employees hired before January 1, 2008. The Retirement Plan is a defined            benefit plan, which provides pension benefits based on an employee’s compensation            and years of service. In 2007, Central Hudson amended the Retirement Plan to eliminate            these benefits for managerial, professional, and supervisory employees hired after            January 1, 2008. The Retirement Plan’s assets are held in a trust fund            (“Trust Fund”). Central Hudson has provided periodic updates to the benefit            formulas stated in the Retirement Plan.

          Decisions            to fund the Retirement Plan are based on several factors including the value of plan            assets relative to plan liabilities, legislative requirements, and available corporate            resources. The liabilities are affected by the interest rate used to determine benefit            obligations. Central Hudson is currently reviewing the provisions of the Pension            Protection Act of 2006 (“Pension Protection Act”) to determine funding            requirements for the near-term and future periods.

          Central            Hudson contributed $5.8 million and $7 million to the Retirement Plan in 2007 and 2006,            respectively. The estimated contributions in 2008 range from $5-$10 million. The actual            contributions could vary significantly based upon economic growth, corporate resources,            projected investment returns, actual investment returns, inflation, and interest rate            assumptions.

          In            accordance with the provisions of SFAS 158, which was effective for the year ended            December 31, 2006, Central Hudson’s pension liability balance (i.e., the funded            status) at December 31, 2007 was $11.7 million and at December 31, 2006, was $47.8            million, including recognition for the difference between the projected benefit            obligation (“PBO”) for pensions and the market value of the pension assets.            These balances include consideration for non-qualified executive plans.

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          The            following reflects the impact of the recording of SFAS 158 adjustments on the December            31, 2007, and 2006 Consolidated Balance Sheets of CH Energy Group and Central            Hudson:

|                                                                                                          |   |         |                            |    |   |   |                            |   |    |   |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------|---------------------------------|---------|--------|--------|---------------------------------|--------|---------|--------|--------|
|                                                                                                          |   | December 31, |                            |
| (In                        Thousands)                                                                         |   | 2007         |                            | 2006    |   |
|                                                                                                          |   |         |                                 |    |   |   |                                 |   |    |
|                                                                                                          |   |         | SFAS                        158 |    |   |   | SFAS                        158 |   |    |
|                                                                                                          |   |         |                            |    |   |
| Prefunded (accrued)                        pension costs prior to SFAS 158 adjustment                         |   |         | $                               | 36,697  |   |   |                            | $      | 49,325  |   |   |
| Additional liability                        required                                                          |   |         |                            | (48,426 | )      |   |                            |   | (97,172 | )      |   |
|                                                                                                          |   |         |                                 |         |   |   |                            |        |         |   |   |
| Accrued pension                        liability per SFAS 158                                                 |   |         | $                               | (11,729 | )      |   |                            | $      | (47,847 | )      |   |
|                                                                                                          |   |         |                                 |         |   |   |                            |        |         |   |   |
| Total offset to additional liability –                        Regulatory assets – Retirement Plan |   |         | $                               | 48,426  |   |   |                            | $      | 97,172  |   |   |
|                                                                                                          |   |         |                                 |         |   |   |                            |        |         |   |   |

          The            recording of regulatory assets to offset the additional SFAS 158 liability is            consistent with the PSC’s 1993 Statement of Policy regarding pensions and OPEB            (“1993 PSC Policy”). Under the 1993 PSC Policy, differences between pension            expense and rate allowances covering these costs are deferred for future recovery from            or return to customers with carrying charges accrued on cash differences.

          It            should be noted that the valuation of the PBO was determined as of the measurement date            of September 30, 2007, using a 6.2% discount rate (as determined using the Citigroup            Pension Discount Curve reflecting projected pension cash flows) and that a 0.25% change            in the discount rate would affect the projection of PBO by approximately $1.3 million.            The discount rate on the prior measurement date of September 30, 2006, was 5.80%.            Declines in the market value of the Trust Fund’s investment portfolio, which            occurred from 2000 through 2002, and a reduction in the discount rate used to determine            the benefit obligation for pensions have resulted in a significant increase in pension            costs since 2001. The 2006 Rate Order includes an increase in the rate allowances for            pension expense and OPEB expense which more closely approximate the cost of providing            these benefits. However, due to the volatility of these costs, authorization remains in            effect for the deferral of any differences between rate allowances and actual costs            under the 1993 PSC Policy. The 2006 Rate Order also authorized Central Hudson to offset            significant deferred balances for pension expense and OPEB expense for the electric            department with available deferred credit balances due to customers. Deferred pension            and OPEB balances accumulated through June 30, 2006, for the natural gas department are            being recovered via a seven-year amortization beginning July 1, 2007.

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

          In            addition to the Retirement Plan, CH Energy Group’s and Central Hudson’s            executives are covered under a non-qualified Supplemental Executive Retirement            Plan.

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**Estimates of Long-Term Rates            of Return**

          The            expected long-term rate of return on Retirement Plan assets is 8.0%, net of investment            expense. In determining the expected long-term rate of return on these assets, Central            Hudson considered the current level of expected returns on risk-free investments            (primarily United States government bonds), the historical level of risk premiums            associated with other asset classes, and the expectations of future returns over a            20-year time horizon on each asset class, based on the views of leading financial            advisors and economists. The expected return for each asset class was then weighted            based on the Retirement Plan’s target asset allocation. Central Hudson also            considered expectations of value-added by active management, net of investment            expenses.

**Retirement Plan Policy and            Strategy**

          The            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            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:

|                                                               |   |    |   |                                  |   |    |   |   |   |   |
|--------------------------------------------------------------------|--------|---------|--------|---------------------------------------|--------|---------|--------|--------|--------|--------|
| Asset                        Class                                 |   | Minimum |   | Target                        Average |   | Maximum |   |
|                                                                    |   |
| Domestic                        Large/Medium Capitalization Stocks |   | 31      | %      |                                  | 33     | %       |   | 35     | %      |   |
| Domestic                        Small/Medium Capitalization Stocks |   | 9       | %      |                                  | 12     | %       |   | 14     | %      |   |
| International Equity                        Securities             |   | 13      | %      |                                  | 15     | %       |   | 17     | %      |   |
| Alternate                        Investments                       |   | 0       | %      |                                  | 5      | %       |   | 10     | %      |   |
| Other                        Investments                           |   | 0       | %      |                                  | 0      | %       |   | 10     | %      |   |
| Fixed Income                        Securities                     |   | 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 seeks to earn a return commensurate with the risk of its underlying            assets. The benchmark index is currently comprised of 33% Russell 1000 Stock Index; 12%            Russell 2500 Stock Index; 15% Morgan Stanley Capital International

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Europe, Australasia and Far East            (MSCI EAFE) International Stock Index (Net); 5% Russell Open-End Real Estate Mean; and            35% LB Aggregate Bond Index. The Retirement Plan seeks to exceed the average annual            return of this benchmark 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            Retirement Plan utilizes two asset managers.

**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            unionized employees and managerial, professional and supervisory employees            (“non-union”) hired prior to January 1, 2008, may become eligible for these            benefits if they reach retirement age while employed by Central Hudson. In order to            reduce the total costs of these benefits, Central Hudson amended its OPEB programs for            existing non-union, and certain retired employees effective January 1, 2008. Benefit            plans for non-union active employees were similarly amended. Programs were also amended            to eliminate post-retirement benefits for non-union employees hired after January 1,            2008. Benefits for retirees and active employees are provided through insurance            companies whose premiums are based on the benefits paid during the year.

          The            significant assumptions used to account for these benefits are the discount rate, the            expected long-term rate of return on plan assets and the health care cost trend rate.            Central Hudson selects the discount rate using the Citigroup Pension Discount Curve            reflecting projected cash flows. The estimates of long-term rates of return and the            investment policy and strategy for these plan assets are the same as used for pension            benefits previously discussed in this Note. The estimates of health care cost trend            rates are based on a review of actual recent trends and projected future            trends.

          Central            Hudson fully recovers its net periodic post-retirement benefit costs in accordance with            the 1993 PSC Policy. 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 No. 106, titled *Employers            Accounting for Post-retirement Benefits Other Than Pensions*, as amended by SFAS No.            158, is deferred as either a regulatory asset or a regulatory liability, as            appropriate.

          The            effect of the Medicare Act was reflected in 2007 and 2006 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.

          In            accordance with the provisions of SFAS 158, Central Hudson’s liability (i.e. the            funded status) for OPEB at December 31, 2007 was $55.6 million and $68.8 million at            December 31, 2006 including recognition for the difference between the Accumulated            Benefit Obligation (“ABO”) and the market value of other post-retirement            assets. The

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additional liability for the            difference between the ABO and the market value of other post-retirement assets at            December 31, 2007 and 2006 of $15.6 million and $36.1 million, respectively, was offset            by recording a regulatory asset in accordance with the 1993 PSC Policy. Central Hudson            and Griffith each participate in a 401(k) retirement plan for their employees. Griffith            also provides a discretionary profit-sharing benefit for their employees. The 401(k)            plans provide 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 $1.6 million for 2007, $1.5 million for 2006,            and $1.4 million for 2005. For Griffith, the cost of its matching contributions was            $783,000 in 2007, $605,000 in 2006, and $557,000 in 2005. Profit sharing contributions            made by Griffith were $665,000, $591,000, and $452,000, for 2007, 2006, and 2005,            respectively.

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          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 Griffith employees not            covered by these plans) are reported on the following chart.

|                                                                  |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|-----------------------------------------------------------------------|--------|-----------------------------------------|---------|---------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                  |   | Pension                        Benefits |    | Other                        Benefits |   |
|                                                                       |        |                                         |         |                                       |        |
|                                                                  |   | 2007                                    |    | 2006                                  |   | 2007    |   | 2006   |    |
|                                                                       |        |                                         |         |                                       |        |         |        |        |         |
|                                                                  |   | (In                        Thousands)   |    | (In                        Thousands) |   |
|                                                                       |        |                                         |         |                                       |        |
| Change in Benefit                        Obligation:                  |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Benefit obligation at                        beginning of year        |   | $                                       | 414,474 |                                  | $      | 409,907 |   | $      | 156,520 |   | $      | 168,890 |   |
| Service cost                                                          |   |                                    | 7,908   |                                  |   | 7,939   |   |   | 3,788   |   |   | 3,323   |   |
| Interest                        cost                                  |   |                                    | 23,711  |                                  |   | 22,307  |   |   | 9,806   |   |   | 8,020   |   |
| Participant                        contributions                      |   |                                    | — |                                  |   | — |   |   | 391     |   |   | 401     |   |
| Plan                        amendments                                |   |                                    | — |                                  |   | (45     | )      |   | (27,392 | )      |   | — |   |
| Benefits                        paid                                  |   |                                    | (23,103 | )                                     |   | (22,072 | )      |   | (6,482  | )      |   | (6,309  | )      |
| Actuarial (gain)                        loss                          |   |                                    | (14,104 | )                                     |   | (3,562  | )      |   | 11,584  |   |   | (17,805 | )      |
|                                                                       |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Benefit Obligation at                        End of Plan Year         |   | $                                       | 408,886 |                                  | $      | 414,474 |   | $      | 148,215 |   | $      | 156,520 |   |
|                                                                       |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Change in Plan                        Assets:                         |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Fair Value of plan                        assets at beginning of year |   | $                                       | 359,627 |                                  | $      | 349,813 |   | $      | 87,702  |   | $      | 80,632  |   |
| Adjustment/other                                                      |   |                                    | — |                                  |   | — |   |   | 221     |   |   | — |   |
| Actual return on plan                        assets                   |   |                                    | 49,552  |                                  |   | 33,114  |   |   | 4,201   |   |   | 9,855   |   |
| Employer                        contributions                         |   |                                    | 13,347  |                                  |   | 513     |   |   | 6,547   |   |   | 3,193   |   |
| Participant                        contributions                      |   |                                    | — |                                  |   | — |   |   | 391     |   |   | 401     |   |
| Net transfer                        in/(out)                          |   |                                    | — |                                  |   | — |   |   | 186     |   |   | — |   |
| Benefits                        paid                                  |   |                                    | (23,103 | )                                     |   | (22,072 | )      |   | (6,482  | )      |   | (6,309  | )      |
| Administrative                        expenses                        |   |                                    | (2,266  | )                                     |   | (1,741  | )      |   | (111    | )      |   | (70     | )      |
|                                                                       |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Fair Value of Plan                        Assets at End of Plan Year  |   | $                                       | 397,157 |                                  | $      | 359,627 |   | $      | 92,655  |   | $      | 87,702  |   |
|                                                                       |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |

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|                                                                                        |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|---------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                        |   | Pension                        Benefits |    | Other                        Benefits |   |
|                                                                                             |        |                                         |         |                                       |        |
| (In                        Thousands)                                                       |   | 2007                                    |    | 2006                                  |   | 2007    |   | 2006   |    |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |
| Reconciliation of                        Funded Status:                                     |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Funded Status at end of                        year                                         |   | $                                       | (11,729 | )                                     | $      | (54,847 | )      | $      | (55,560 | )      | $      | (68,818 | )      |
| Employer Contributions                        between measurement date and fiscal year-end  |   |                                    | — |                                  |   | 7,000   |   |   | — |   |   | — |   |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
|                                                                                        |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Amounts Recognized on                        Consolidated Balance Sheet:                    |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Noncurrent                        assets                                                    |   | $                                       | — |                                  | $      | — |   | $      | — |   | $      | — |   |
| Current                        liabilities                                                  |   |                                    | (527    | )                                     |   | (548    | )      |   | — |   |   | — |   |
| Noncurrent                        liabilities                                               |   |                                    | (11,202 | )                                     |   | (47,299 | )      |   | (55,560 | )      |   | (68,818 | )      |
| Net amount recognized                        on Consolidated Balance Sheet (after SFAS 158) |   |                                    | (11,729 | )                                     |   | (47,847 | )      |   | (55,560 | )      |   | (68,818 | )      |
| Regulatory                        asset:                                                    |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| - Net (loss)                        gain                                                    |   |                                    | 32,397  |                                  |   | 79,167  |   |   | 39,338  |   |   | 32,122  |   |
| - Prior service costs                        (credit)                                       |   |                                    | 16,029  |                                  |   | 18,005  |   |   | (36,569 | )      |   | (11,394 | )      |
| - Transition                        obligation                                              |   |                                    | — |                                  |   | — |   |   | 12,816  |   |   | 15,381  |   |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Components of Net                        Periodic Benefit Cost:                             |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Service cost                                                                                |   | $                                       | 7,908   |                                  | $      | 7,939   |   | $      | 3,788   |   | $      | 3,323   |   |
| Interest                        cost                                                        |   |                                    | 23,711  |                                  |   | 22,307  |   |   | 9,806   |   |   | 8,020   |   |
| Expected return on plan                        assets                                       |   |                                    | (27,997 | )                                     |   | (26,836 | )      |   | (6,778  | )      |   | (5,985  | )      |
| Amortization of prior                        service cost (credit)                          |   |                                    | 1,976   |                                  |   | 2,167   |   |   | (2,217  | )      |   | (1,256  | )      |
| Amortization of                        transitional obligation                              |   |                                    | — |                                  |   | — |   |   | 2,566   |   |   | 2,566   |   |
| Amortization of net                        (gain) loss                                      |   |                                    | 13,377  |                                  |   | 12,961  |   |   | 6,521   |   |   | 4,306   |   |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Net Periodic Benefit                        Cost                                            |   | $                                       | 18,975  |                                  | $      | 18,538  |   | $      | 13,686  |   | $      | 10,974  |   |
|                                                                                             |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |

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|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|---------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Other Changes in Plan                        Assets and Benefit Obligation Recognized in Regulatory Assets:                                                                               |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Net loss                        (gain)                                                                                                                                                    |   | $                                       | (33,393 | )                                     | $      | — |   | $      | 13,737  |   | $      | — |   |
| Amortization of net                        (loss) gain                                                                                                                                    |   |                                    | (13,377 | )                                     |   | — |   |   | (6,521  | )      |   | — |   |
| Prior service cost                        (credit)                                                                                                                                        |   |                                    | — |                                  |   | — |   |   | (27,392 | )      |   | — |   |
| Amortization of prior                        service cost                                                                                                                                 |   |                                    | (1,976  | )                                     |   | — |   |   | 2,217   |   |   | — |   |
| Transitional                        obligation                                                                                                                                            |   |                                    | — |                                  |   | — |   |   | — |   |   | — |   |
| Amortization of                        transitional obligation                                                                                                                            |   |                                    | — |                                  |   | — |   |   | (2,565  | )      |   | — |   |
| Regulatory asset                        attributable to change from prior year                                                                                                            |   |                                    | — |                                  |   | 38,233  |   |   | — |   |   | 36,109  |   |
| Total recognized in                        regulatory asset                                                                                                                               |   |                                    | (48,746 | )                                     |   | 38,233  |   |   | (20,524 | )      |   | 36,109  |   |
|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Total recognized in net                        periodic benefit cost and regulatory asset                                                                                                 |   | $                                       | (29,771 | )                                     | $      | 56,771  |   | $      | (6,838  | )      | $      | 47,083  |   |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Weighted-average                        assumptions used to determine benefit obligations at September 30 for                        Pension Benefits and December 31 for Other Benefits: |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Discount                        rate                                                                                                                                                      |   |                                    | 6.20    | %                                     |   | 5.80    | %      |   | 6.40    | %      |   | 5.90    | %      |
| Rate of compensation                        increase                                                                                                                                      |   |                                    | 5.00    | %                                     |   | 4.50    | %      |   | 5.00    | %      |   | 4.50    | %      |
| Weighted-average                        assumptions used to determine net periodic benefit cost for years ended                        December 31:                                       |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Discount                        rate                                                                                                                                                      |   |                                    | 5.80    | %                                     |   | 5.50    | %      |   | 5.90    | %      |   | 5.50    | %      |
| Expected long-term rate                        of return on plan assets                                                                                                                   |   |                                    | 8.00    | %                                     |   | 8.00    | %      |   | 8.00    | %      |   | 7.80    | %      |
| Rate of compensation                        increase                                                                                                                                      |   |                                    | 4.50    | %                                     |   | 4.50    | %      |   | 4.50    | %      |   | 4.50    | %      |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
|                                                                                                                                                                                      |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
|                                                                                                                                                                                      |   | Pension                        Benefits |    | Other                        Benefits |   |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| (In                        Thousands)                                                                                                                                                     |   | 2007                                    |    | 2006                                  |   | 2007    |   | 2006   |    |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Assumed health care                        cost trend rates at December 31:                                                                                                               |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Health care cost trend                        rate assumed for next year                                                                                                                  |   |                                    | N/A     |                                  |   | N/A     |   |   | 9.50    | %      |   | 9.50    | %      |
| Rate to which the cost                        trend rate is assumed to decline (the ultimate trend rate)                                                                                  |   |                                    | N/A     |                                  |   | N/A     |   |   | 5.00    | %      |   | 5.00    | %      |
| Year that the rate                        reaches the ultimate trend rate                                                                                                                 |   |                                    | N/A     |                                  |   | N/A     |   |   | 2015    |   |   | 2014    |   |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |
| Pension plans with                        accumulated benefit obligations in excess of plan assets:                                                                                       |   |                                    |    |                                  |   |    |   |   |    |   |   |    |   |
| Projected benefit                        obligation                                                                                                                                       |   | $                                       | 9,106   |                                  | $      | 414,474 |   |   | N/A     |   |   | N/A     |   |
| Accumulated benefit                        obligation                                                                                                                                     |   |                                    | 7,582   |                                  |   | 380,873 |   |   | N/A     |   |   | N/A     |   |
| Fair Value of plan                        assets                                                                                                                                          |   |                                    | — |                                  |   | 359,627 |   |   | N/A     |   |   | N/A     |   |
|                                                                                                                                                                                           |        |                                         |         |                                       |        |         |        |        |         |        |        |         |        |

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          The            ABO for defined benefit pension plans was $375.4 million and $380.9 million at December            31, 2007, and 2006, respectively.

          The            estimated net loss and prior service cost for the defined benefit pension plans that            will be amortized from regulatory assets into net periodic benefit cost over the next            fiscal year are $12.4 million and $2.1 million, respectively. The estimated net loss,            prior service cost (credit) and transitional obligation for the other defined benefit            post-retirement plans that will be amortized from regulatory assets into net periodic            benefit cost over the next fiscal year is $6.6 million, $(3.6) million, and $2.6            million, respectively.

          Central            Hudson’s pension and other post-retirement plans’ weighted average asset            allocations at December 31, 2007, and 2006, by asset category are as            follows:

|                                        |   |         |   |                               |   |   |   |    |   |   |    |   |   |
|---------------------------------------------|--------|--------------|--------|------------------------------------|--------|--------|--------|---------|--------|--------|---------|--------|--------|
|                                        |   | Pension Plan |   | Other                        Plans |   |
|                                             |        |              |        |                                    |        |
|                                        |   | 2007         |   | 2006                               |   | 2007   |   | 2006    |   |
|                                             |        |              |        |                                    |        |        |        |         |        |
| Equity                        Securities    |   | 57.3         | %      |                               | 58.4   | %      |   | 64.5    | %      |   | 65.3    | %      |   |
| Debt                        Securities      |   | 34.6         | %      |                               | 34.4   | %      |   | 32.4    | %      |   | 33.3    | %      |   |
| Alternate                        Investment |   | 7.6          | %      |                               | 6.7    | %      |   | — |   |   | — |   |   |
| Other                                       |   | 0.5          | %      |                               | 0.5    | %      |   | 3.1     | %      |   | 1.4     | %      |   |
|                                             |        |              |        |                                    |        |        |        |         |        |        |         |        |        |
| Total                                       |   | 100          | %      |                               | 100    | %      |   | 100     | %      |   | 100     | %      |   |
|                                             |        |              |        |                                    |        |        |        |         |        |        |         |        |        |

For the pension plan and other            benefit plans (other than the 401(k) retirement plans), equity securities include no CH            Energy Group common stock at December 31, 2007, and 2006, respectively. Effective            January 20, 2004, a CH Energy Group common stock investment fund was added as an            investment option under the 401(k) retirement plans. This investment option was            discontinued effective December 31, 2005.

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          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                        Point Increase |   | One                        Percentage                        Point Decrease |   |
|                                                                                    |   |                                                                             |   |                                                                             |   |
|                                                                                    |   | (In                        Thousands)                                       |   |
| Effect on total of                        service and interest cost components for 2007 |   |                                                                        | $      | 1,854                                                                       |   |   |   | $      | (1,500  | )      |   |
|                                                                                    |   |                                                                        |   |                                                                        |   |   |   |   |    |   |   |
| Effect on year-end 2007                        post-retirement benefit obligation       |   |                                                                        | $      | 14,991                                                                      |   |   |   | $      | (12,522 | )      |   |

          Employer            contributions in 2007 to fund OPEB were $1.7 million for the 2006 plan year, and $4.8            million for the 2007 plan year, with an additional estimated $1.9 million for the 2007            plan year to be funded in the first quarter of 2008. Determinations of 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 2007 amount.

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

|                                     |   |                                            |   |                                          |   |                                                 |   |   |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|-------------------------------------------------|--------|-----------------------------------------------|--------|------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Year                                     |   | Pension Benefits -                        Gross |   | Other                        Benefits - Gross |   | Other                        Benefits – Net(1) |   |
|                                          |   |                                                 |   |                                               |   |                                                      |   |
|                                     |   | (In                        Thousands)           |   | (In                        Thousands)         |   | (In                        Thousands)                |   |
|                                          |        |                                                 |        |                                               |        |                                                      |   |
| 2008                                     |   |                                            | $      | 25,965                                        |   |                                                 |   | $      | 7,669  |   |   |   | $      | 7,130  |   |   |
| 2009                                     |   |                                            |   | 26,534                                        |   |                                                 |   |   | 8,409  |   |   |   |   | 7,836  |   |   |
| 2010                                     |   |                                            |   | 27,188                                        |   |                                                 |   |   | 9,031  |   |   |   |   | 8,417  |   |   |
| 2011                                     |   |                                            |   | 27,806                                        |   |                                                 |   |   | 9,753  |   |   |   |   | 9,104  |   |   |
| 2012                                     |   |                                            |   | 28,559                                        |   |                                                 |   |   | 10,233 |   |   |   |   | 9,538  |   |   |
| 2013                        – 2017 |   |                                            |   | 150,551                                       |   |                                                 |   |   | 56,989 |   |   |   |   | 53,541 |   |   |

|   |                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Estimated benefit                        payments reduced by estimated gross amount of Medicare Act subsidy receipts                        expected. |

**NOTE 11 -            EQUITY-BASED COMPENSATION**

          CH            Energy Group’s Long-Term Performance-Based Incentive Plan (“2000            Plan”), adopted in 2000 and amended in 2001 and 2003, reserves 500,000 shares of            CH Energy Group’s common stock for awards to be granted under the 2000 Plan. The            2000 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 2000 Plan.            Stock options granted to officers of CH 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

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options vesting each year            thereafter for the following three years. Stock options granted to non-employee            Directors are immediately exercisable.

          The            2000 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 CH Energy Group’s Directors and Executives Deferred Compensation Plan. Also,            an amendment to the previously effective Stock Plan for Outside Directors provided 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 CH Energy Group’s Directors and Executives Deferred            Compensation Plan. In addition, the amendment freezes future participation and future            accruals under the 2000 Plan.

          In            2006, CH Energy Group adopted a Long-Term Equity Incentive Plan (the “2006            Plan”) to replace the 2000 Plan. The 2006 Plan was approved by CH Energy            Group’s shareholders on April 25, 2006. The 2000 Plan has been terminated, with            no new awards to be granted under such plan. Outstanding awards granted under the 2000            Plan will continue in accordance with their terms and the provisions of the 2000            Plan.

          The            2006 Plan reserves up to a maximum of 300,000 shares of CH Energy Group’s common            stock for awards to be granted under the 2006 Plan. Awards may consist of stock option            rights, stock appreciation rights, performance shares, performance units, restricted            shares, restricted stock units, and other awards that CH Energy Group’s            Compensation Committee of its Board of Directors (“Compensation Committee”)            may authorize. The Compensation Committee may also, from time-to-time and upon such            terms and conditions as it may determine, authorize the granting to non-employee            Directors of stock option rights, stock appreciation rights, restricted shares, and            restricted stock units.

          In            addition to the aggregate limit in the awards described above, the 2006 Plan imposes            various sub-limits on the number of shares of CH Energy Group’s common stock that            may be issued or transferred under the 2006 Plan. The aggregate number of shares of            common stock actually issued or transferred by CH Energy Group upon the exercise of            incentive stock options shall not exceed 300,000 shares. No participant shall be            granted stock option rights and stock appreciation rights, in aggregate, for more than            15,000 shares of common stock during any calendar year. No participant in any calendar            year shall receive an award of performance shares or restricted shares that specify            management objectives, in the aggregate, for more than 20,000 shares of common stock,            or performance units having an aggregate maximum value as of their respective date of            grant in excess of $1 million. The number of shares of common stock issued as stock            appreciation rights, restricted shares, and restricted stock units (after taking            forfeitures into account) shall not exceed, in the aggregate, 100,000 shares of common            stock.

          CH            Energy Group adopted SFAS 123(R) effective January 1, 2006, using the modified            prospective application with no significant impact on its financial condition, results            of operations, or cash flows. Under this new application, all new awards as            of

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January 1, 2006, and any            outstanding awards that may be modified, repurchased, or cancelled will be accounted            for under SFAS 123(R).

          The            following table summarizes information concerning stock options granted through            December 31, 2007:

|                                   |   |                                  |   |                                                                    |   |                                                                        |   |                                                                                                          |   |                                                                        |   |   |   |   |   |
|----------------------------------------|--------|---------------------------------------|--------|-------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Date                        of Grant   |   | Exercise                        Price |   | Number of                        Options                        Granted |   | Number of                        Options                        Outstanding |   | Weighted                        Average                        Remaining Life in                        Years |   | Number of                        Options                        Exercisable |   |
|                                        |        |                                       |        |                                                                         |        |                                                                             |        |                                                                                                               |        |                                                                             |        |
| January 1,                        2000 |   | $ 31.94                          |   | 30,300                                                                  |   |                                                                        | 320    |                                                                                                          |   | 2.00                                                                        |   |   | 320    |   |   |
| January 1,                        2001 |   | $ 44.06                          |   | 59,900                                                                  |   |                                                                        | 21,560 |                                                                                                          |   | 3.00                                                                        |   |   | 21,560 |   |   |
| January 1,                        2003 |   | $ 48.62                          |   | 36,900                                                                  |   |                                                                        | 18,420 |                                                                                                          |   | 5.00                                                                        |   |   | 18,420 |   |   |
|                                   |   |                                  |   |                                                                         |   |                                                                        |        |                                                                                                          |   |                                                                             |   |   |        |   |   |
|                                   |   |                                  |   | 127,100                                                                 |   |                                                                        | 40,300 |                                                                                                          |   | 3.91                                                                        |   |   | 40,300 |   |   |

          All            options are fully vested as of December 31, 2007. The fair market values per option of            CH Energy Group stock options granted in 2003, 2001, and 2000 are $6.51, $4.41, and            $4.46, respectively. 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   |   | 2001   |   | 2000   |   |
|   |                                                  |   |        |   |        |   |        |   |
|   | Risk-free interest                        rate        |   | 4.40   | %      |   | 4.78   | %      |   | 6.36   | %      |   |
|   |                                                  |   |   |   |   |   |   |   |   |   |   |
|   | Expected life                        – in years |   | 10     |   |   | 5      |   |   | 5      |   |   |
|   |                                                  |   |   |   |   |   |   |   |   |   |   |
|   | Expected stock                        volatility      |   | 17.50  | %      |   | 20.06  | %      |   | 15.59  | %      |   |
|   |                                                  |   |   |   |   |   |   |   |   |   |   |
|   | Dividend                        yield                 |   | 4.4    | %      |   | 5.4    | %      |   | 5.4    | %      |   |

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          A            summary of the status of stock options awarded to executives and non-employee Directors            of CH Energy Group under the 2000 Plan as of December 31, 2007, and changes are as            follows:

|                                                 |                                  |                                 |   |                                                                                                 |   |                                                                                                          |   |    |   |                              |    |   |   |
|------------------------------------------------------|---------------------------------------|--------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|---------|--------|-----------------------------------|---------|--------|--------|
|                                                 |                                  | Stock                        Options |   | Weighted                        Average                        Exercise                        Price |   | Weighted                        Average                        Remaining                        Life in Years |   |
|                                                      |                                       |                                      |        |                                                                                                      |        |                                                                                                               |        |
| Outstanding at                        12/31/04       |                                  |                                 | 91,400 |                                                                                                 |   | $                                                                                                             | 45.15  |    |   | 6.75                        years |    |   |
|                                                 | Granted                        1/1/05 |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              | — |   |   |
|                                                 | Exercised                             |                                 |   | (18,100                                                                                              | )      |                                                                                                          | $      | 40.98   |   |                              |    |   |   |
|                                                 | Forfeited                             |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              |    |   |   |
|                                                 | Expired/Cancelled                     |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              |    |   |   |
|                                                      |                                       |                                      |        |                                                                                                      |        |                                                                                                               |        |         |        |                                   |         |        |        |
| Outstanding at                        12/31/05       |                                  |                                 | 73,300 |                                                                                                 |   | $                                                                                                             | 46.18  |    |   | 5.99                        years |    |   |
|                                                 | Granted                        1/1/06 |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              | — |   |   |
|                                                 | Exercised                             |                                 |   | (28,040                                                                                              | )      |                                                                                                          | $      | 46.70   |   |                              |    |   |   |
|                                                 | Forfeited                             |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              |    |   |   |
|                                                 | Expired/Cancelled                     |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              |    |   |   |
|                                                      |                                       |                                      |        |                                                                                                      |        |                                                                                                               |        |         |        |                                   |         |        |        |
| Outstanding at                        12/31/06       |                                  |                                 | 45,260 |                                                                                                 |   | $                                                                                                             | 45.87  |    |   | 4.82                        years |    |   |
|                                                 | Granted                        1/1/07 |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              | — |   |   |
|                                                 | Exercised                             |                                 |   | (4,780                                                                                               | )      |                                                                                                          | $      | 44.23   |   |                              |    |   |   |
|                                                 | Forfeited                             |                                 |   | (180                                                                                                 | )      |                                                                                                          | $      | 48.62   |   |                              |    |   |   |
|                                                 | Expired/Cancelled                     |                                 |   | —                                                                                              |   |                                                                                                          |   | — |   |                              |    |   |   |
|                                                      |                                       |                                      |        |                                                                                                      |        |                                                                                                               |        |         |        |                                   |         |        |        |
| Total Outstanding at                        12/31/07 |                                  |                                 | 40,300 |                                                                                                 |   | $                                                                                                             | 46.05  |    |   | 3.91                        years |    |   |
|                                                      |                                       |                                      |        |                                                                                                      |        |                                                                                                               |        |         |        |                                   |         |        |

|                                                         |       |   |
|--------------------------------------------------------------|------------|--------|
| Total Common Stock                        Shares Outstanding | 15,762,000 |   |
| Potential                        Dilution               | 0.3%       |   |

          A            total of 4,780 non-qualified stock options with exercise prices of $44.06 and $48.62            were exercised during the year ended December 31, 2007. Total intrinsic value of            options exercised was not material.

          Compensation            expense related to stock options recorded for the years ended December 31, 2007, 2006,            and 2005, was not material. The balance accrued at December 31, 2007 for outstanding            stock options was $134,000. The intrinsic value of options outstanding was not            material.

          A            summary of the status of performance shares granted to executives under the 2000 Plan            and 2006 Plan as of December 31, 2007 is as follows:

|                             |   |   |                                    |   |                               |   |                                                                     |   |                                                                                     |   |   |   |
|----------------------------------|--------|--------|-----------------------------------------|--------|------------------------------------|--------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|--------|--------|
| Plan                             |   |   | Grant                        Date       |   | Grant                        Price |   | Performance                        Shares                        Granted |   | Performance                        Shares Outstanding                        at 12/31/07 |   |
|                                  |        |        |                                         |        |                                    |        |                                                                          |        |                                                                                          |
| 2000                        Plan |   |   | March                        24, 2005   |   | $ 47.45                       |   | 23,000                                                                   |   |                                                                                     | 20,900 |   |   |
| 2006                        Plan |   |   | April                        25, 2006   |   | $ 46.15                       |   | 20,710                                                                   |   |                                                                                     | 18,990 |   |   |
| 2006                        Plan |   |   | January 25,                        2007 |   | $ 51.09                       |   | 20,920                                                                   |   |                                                                                     | 20,480 |   |   |

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          Performance            shares from the 2005 grant have completed the required performance period, with an            estimated 88% payout earned. The ultimate number of shares earned under the awards is            based on metrics established by the Compensation Committee at the beginning of the            award cycle. Compensation expense is recorded as performance shares are earned over the            relevant three-year life of the performance share grant prior to its award. Due to the            retirement of one of CH Energy Group’s executive officers on January 1, 2007, a            pro-rated number of shares under the 2005 and 2006 grants were paid out in April 2007.            Additionally, outstanding performance shares for all grants were reduced in the second            quarter of 2007 for forfeitures. Compensation expense recorded in 2007 and 2006 related            to performance shares was $495,000 and $713,000, respectively. Compensation expense            recorded in 2005 related to performance shares was not material.

          The            determination of compensation expense for performance shares is based on the use of the            binomial method, which reflects the following assumptions:

|                                                 |   |                                               |   |   |   |   |   |   |   |   |
|------------------------------------------------------|--------|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                 |   | For                        year ended December 31, |   |
|                                                 |   | 2007                                               |   | 2006   |   | 2005   |   |
|                                                 |   |                                                    |   |        |   |        |   |
|                                                 |
| Stock                        price                   |   | $                                                  | 44.54  |   | $      | 52.80  |   | $      | 45.90  |   |
| Dividend                        yield                |   |                                               | 4.8    | %      |   | 4.2    | %      |   | 4.7    | %      |
| Performance period                        (in years) |   |                                               | 3      |   |   | 3      |   |   | 3      |   |
| Risk-free rates of                        return:    |   |                                               |   |   |   |   |   |   |   |   |
| One year                                             |   |                                               | 3.34   | %      |   | 5.00   | %      |   | 4.38   | %      |
| Two year                                             |   |                                               | 3.05   | %      |   | 4.82   | %      |   | 4.41   | %      |
| Three year                                           |   |                                               | 3.07   | %      |   | 4.74   | %      |   | 4.37   | %      |

          Other            considerations in the determination of compensation expense for performance shares            include the grant price for each individual grant, estimated forfeitures, and            historical percentile performance rank.

          CH            Energy Group has equity compensation for non-employee Directors. The equity component            of annual compensation for each non-employee Director is fixed at a number of phantom            shares of CH Energy Group common stock. CH Energy Group is recognizing compensation            expense and accruing a liability for these phantom shares. Each Director receives the            current equivalent of $55,000 in phantom shares per year for each year of service as a            Director. These phantom shares are deferred until the Director’s termination of            service. The compensation expense recognized by CH Energy Group in relation to these            phantom shares was $387,000 in 2007, $433,000 in 2006, and $380,000 in 2005.

          Effective            January 1, 2008, CH Energy Group adopted new director stock ownership guidelines, which            require each Director to accumulate within 5 years, and to hold during his or her            service on the board, at least 6,000 shares of CH Energy Group’s common stock (in            phantom shares and/or common stock). This amendment to the plan provides that if a            Director satisfies this required level of stock ownership, he or she will receive the            cash value of equity compensation in lieu of additional phantom shares.

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This value will either be paid            in cash or deferred under CH Energy Group’s Directors and Executives Deferred            Compensation Plan at the election of the Director.

          Effective            January 2, 2008, restricted shares were granted under the 2006 Plan to certain officers            and key employees of Griffith and an officer of CHEC. The shares granted were issued            from CH Energy Group’s treasury stock on January 2, 2008. These shares were            issued at fair market value on the date of grant, and for Griffith, are subject to a            three-year vesting period contingent upon continued employment of each individual.            Shares granted to the officer of CHEC vest ratably over the three-year vesting period            contingent upon continued employment. Dividends paid on restricted shares owned by            Griffith officers and key employees will be automatically deferred and re-invested in            additional restricted shares.

          For            additional discussion regarding the dilutive effects of equity-based compensation, see            Note 1 – “Summary of Significant Accounting Policies” under the            caption “Earnings Per Share.”

**NOTE 12 -            COMMITMENTS AND CONTINGENCIES**

**Electricity Purchase            Commitments**

          Notwithstanding            the sale of its major generating assets, Central Hudson remains obligated 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. As part of its efforts to supply            customers who continue to rely on Central Hudson for their energy supply, Central            Hudson 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            during the ten-year period beginning on the sale of Central Hudson’s interest in            the Nine Mile 2Plant 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            will begin, 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 Constellation agreements, electricity is purchased at defined prices that            escalate over the life of the contract. The capacity and energy supplied under the            agreement with Constellation in 2007 was sufficient to supply approximately 12% of            Central Hudson’s total system requirements or 737,835 MWh.

          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 unit-contingent basis at defined prices from January 1, 2005, to and            including December 31, 2007. On March 6, 2007*,* Central Hudson entered into new            agreements with Entergy Nuclear Power Marketing, LLC to purchase electricity (but not            capacity) on a unit-contingent basis at defined prices from January 1, 2008 through            December 31, 2010. On an annual basis, the electricity purchased through the

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Entergy contracts represents            approximately 16% of Central Hudson’s full-service customer requirements, or            807,026 MWh. Purchases under these contracts are supplemented by shorter-term            contracts, such as the Dynegy contract discussed below, contracts for differences, and            by purchases from the NYISO, which oversees the bulk electricity transmission system,            and the capacity market in New York State, and other parties. On January 30, 2008,            Central Hudson entered into an 11-month agreement with Dynegy Power Marketing, Inc. to            purchase 589,200 MWh of electricity on a unit-contingent basis at defined prices from            February 1, 2008 to December 31, 2008.

**Operating            Leases**

          CH            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 CH Energy Group and its subsidiaries            were $3.5 million in 2007, $3.1 million in 2006, and $3.1 million in 2005. Included in            these amounts are payments for contingent rentals, which amounted to $555,000 in 2007,            $541,000 in 2006, and $575,000 in 2005. Contingent rentals are those operating lease            agreements that contain provisions for a change in lease payments subsequent to the            inception of the lease.

          Operating            lease rental payment amounts charged to expense by Central Hudson were $2.4 million in            2007, $2.2 million in 2006, and $2.3 million in 2005. Included in these amounts are            payments for contingent rentals, which amounted to $555,000 in 2007, $541,000 in 2006,            and $513,000 in 2005.

          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.

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**Other            Commitments**

          The            following is a summary of commitments for CH Energy Group and its affiliates as of            December 31, 2007:

|                                                                    |   |                                                                   |    |                                                           |   |                                                           |   |                                                           |    |                                                           |   |    |   |   |    |   |   |    |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|----------------------------------------------------------------|--------|----------------------------------------------------------------|--------|----------------------------------------------------------------|---------|----------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                                    |   | Projected Payments Due                        By Period (In Thousands) |    |
|                                                                         |
|                                                                    |   | Less                        than 1                        year         |    | Year                        Ending                        2009 |   | Year                        Ending                        2010 |   | Year                        Ending                        2011 |    | Year                        Ending                        2012 |   | Total   |   |
|                                                                         |
| Operating                        Leases                                 |   | $                                                                      | 3,307   |                                                           | $      | 3,108                                                          |   | $                                                              | 3,070   |                                                           | $      | 2,833   |   | $      | 2,517   |   | $      | 14,835  |   |
| Construction/Maintenance                        & Other Projects(1) |   |                                                                   | 13,872  |                                                           |   | 5,429                                                          |   |                                                           | 2,354   |                                                           |   | 1,397   |   |   | 917     |   |   | 23,969  |   |
| Purchased Electric                        Contracts(2)                  |   |                                                                   | 166,887 |                                                           |   | 102,026                                                        |   |                                                           | 98,225  |                                                           |   | 36,080  |   |   | 4,180   |   |   | 407,398 |   |
| Purchased Natural Gas                        Contracts(2)               |   |                                                                   | 69,204  |                                                           |   | 46,003                                                         |   |                                                           | 39,771  |                                                           |   | 22,968  |   |   | 10,189  |   |   | 188,135 |   |
| Purchased Fixed Liquid                        Petroleum Contracts       |   |                                                                   | 4,938   |                                                           |   | —                                                        |   |                                                           | — |                                                           |   | — |   |   | — |   |   | 4,938   |   |
| Purchased Variable                        Liquid Petroleum Contracts(3) |   |                                                                   | 6,572   |                                                           |   | —                                                        |   |                                                           | — |                                                           |   | — |   |   | — |   |   | 6,572   |   |
|                                                                         |        |                                                                        |         |                                                                |        |                                                                |        |                                                                |         |                                                                |        |         |        |        |         |        |        |         |        |
| Total                                                                   |   | $                                                                      | 264,780 |                                                           | $      | 156,566                                                        |   | $                                                              | 143,420 |                                                           | $      | 63,278  |   | $      | 17,803  |   | $      | 645,847 |   |
|                                                                         |        |                                                                        |         |                                                                |        |                                                                |        |                                                                |         |                                                                |        |         |        |        |         |        |        |         |        |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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. The operations and                        maintenance contract for Lyonsdale (which includes a base management fee                        included in these totals for years 2008-2009) also contains provisions for                        additional performance-based compensation that are not included in the                        amounts shown. |
| (2)    | Purchased electric                        and purchased natural gas costs for Central Hudson are fully recovered via                        their respective regulatory cost adjustment mechanisms. The less than one                        year total includes a $50 million Dynegy 2008 contract executed on January                        30, 2008.                                                                                                                                                                                                                                                                                                                                                                                  |
| (3)    | Estimated based on                        pricing at December 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

          The            following is a summary of commitments for Central Hudson as of December 31,            2007:

|                                                                    |   |                                                                   |    |                                                           |   |                                                           |   |                                                           |    |                                                           |   |   |   |   |   |   |   |    |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|----------------------------------------------------------------|--------|----------------------------------------------------------------|--------|----------------------------------------------------------------|---------|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                                                    |   | Projected Payments Due                        By Period (In Thousands) |    |
|                                                                         |
|                                                                    |   | Less                        than 1                        year         |    | Year                        Ending                        2009 |   | Year                        Ending                        2010 |   | Year                        Ending                        2011 |    | Year                        Ending                        2012 |   | Total  |   |
|                                                                         |        |                                                                        |         |                                                                |        |                                                                |        |                                                                |         |                                                                |        |        |        |
| Operating                        Leases                                 |   | $                                                                      | 2,001   |                                                           | $      | 1,951                                                          |   | $                                                              | 1,944   |                                                           | $      | 1,939  |   | $      | 1,918  |   | $      | 9,753   |   |
| Construction/Maintenance                        & Other Projects(1) |   |                                                                   | 13,407  |                                                           |   | 5,101                                                          |   |                                                           | 2,219   |                                                           |   | 1,389  |   |   | 909    |   |   | 23,025  |   |
| Purchased Electric                        Contracts(2)                  |   |                                                                   | 166,887 |                                                           |   | 102,026                                                        |   |                                                           | 98,225  |                                                           |   | 36,080 |   |   | 4,180  |   |   | 407,398 |   |
| Purchased Natural Gas                        Contracts(2)               |   |                                                                   | 69,204  |                                                           |   | 46,003                                                         |   |                                                           | 39,771  |                                                           |   | 22,968 |   |   | 10,189 |   |   | 188,135 |   |
|                                                                         |        |                                                                        |         |                                                                |        |                                                                |        |                                                                |         |                                                                |        |        |        |        |        |        |        |         |        |
| Total                                                                   |   | $                                                                      | 251,499 |                                                           | $      | 155,081                                                        |   | $                                                              | 142,159 |                                                           | $      | 62,376 |   | $      | 17,196 |   | $      | 628,311 |   |
|                                                                         |        |                                                                        |         |                                                                |        |                                                                |        |                                                                |         |                                                                |        |        |        |        |        |        |        |         |        |

|   |                                                                                                                                                                                                                                                                                                                                                     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Including Specific,                        Term, and Service Contracts, as defined in footnote (1) of the preceding                        chart.                                                                                                                                                                                                        |
| (2)    | Purchased electric and                        purchased natural gas costs for Central Hudson are fully recovered via                        their respective regulatory cost adjustment mechanisms. The less than one                        year total includes a $50 million Dynegy 2008 contract executed on January                        30, 2008. |

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**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 against            Central Hudson and other defendants. The basis for the claimed liability of Central            Hudson in these actions is that it was allegedly negligent in the supply of natural            gas. The suits seek an aggregate of $528 million in compensatory damages. Central            Hudson has notified its insurance carrier, has denied liability, and is defending the            lawsuits. Based on information known to Central Hudson at this time, including            information from ongoing discovery proceedings in the lawsuits, Central Hudson believes            that the likelihood it will have a liability in these lawsuits is remote.

**Environmental            Matters**

***Central            Hudson*****:**

**          Air**

          In            October 1999, Central Hudson was informed by the New York State Attorney General            (“Attorney General”) that the Danskammer Point Steam Electric Generating            Station (“Danskammer Plant”) was included in an investigation by the            Attorney General’s Office into the compliance of eight older New York State            coal-fired power plants with federal and state air emissions rules. Specifically, the            Attorney General alleged that Central Hudson “may have constructed, and continues            to operate, major modifications to the Danskammer Plant without obtaining certain            requisite preconstruction permits.” In March 2000, the Environmental Protection            Agency (“EPA”) assumed responsibility for the investigation. Central Hudson            has completed its production of documents requested by the Attorney General, the New            York State Department of Environmental Conservation (“DEC”), and the EPA,            and believes any permits required for these projects were obtained in a timely manner.            Notwithstanding Central Hudson’s sale of the Danskammer Plant on January 30,            2001, Central Hudson could retain liability depending on the type of remedy, if any,            imposed in connection with this matter. Central Hudson presently has insufficient            information with which to predict the outcome of this matter.

**Former Manufactured Gas Plant            Facilities**

          Like            most late 19th and early 20th century utilities in the            northeastern United States, Central Hudson and its predecessors owned and operated            manufactured gas plants (“MGPs”) to serve their customers’ heating            and lighting needs. MGPs manufactured gas from coal and oil. This process produced            certain by-products that may pose risks to human health and the environment.

          The            DEC, which regulates the timing and extent of remediation of MGP sites in New York            State, has notified Central Hudson that it believes Central Hudson or its predecessors            at one time owned and/or operated MGPs at eight sites in Central

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Hudson’s franchise            territory. The DEC has further requested that Central Hudson investigate and, if            necessary, remediate these sites under a Consent Order, Voluntary Cleanup Agreement, or            Brownfield Cleanup Agreement. The DEC has placed five of these sites on the New York            State Environmental Site Remediation Database. A number of the eight sites are now            owned by third parties and have been redeveloped for other uses. The current status of            the eight sites is as follows:

|                                                           |   |                                                                                                                                                                                  |
|----------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                |        |                                                                                                                                                                                       |
| SITE                                                           |   | STATUS                                                                                                                                                                                |
|                                                                |
| #1 Beacon,                        NY                           |   | Remediation                        substantially complete.                                                                                                                            |
|                                                                |        |                                                                                                                                                                                       |
| #2 Newburgh,                        NY                         |   | Remediation complete                        in one area. Pre-design studies being conducted at two additional areas                        under a NYSDEC-approved consent agreement. |
|                                                                |        |                                                                                                                                                                                       |
| #3 Laurel Street,                        Poughkeepsie, NY      |   | Remediation plan                        developed under Voluntary Cleanup Agreement awaiting NYSDEC                        approval.                                                  |
|                                                                |        |                                                                                                                                                                                       |
| #4 North Water                        Street, Poughkeepsie, NY |   | Investigation                        currently underway under NYSDEC-approved Brownfield Clean-up                        Agreement.                                                   |
|                                                                |        |                                                                                                                                                                                       |
| #5 Kingston,                        NY                         |   | Brownfield Clean-up                        Agreement application filed with NYSDEC; awaiting NYSDEC approval prior to                        beginning site investigation.            |
|                                                                |        |                                                                                                                                                                                       |
| #6 Catskill,                        NY                         |   | Investigation                        currently underway under NYSDEC-approved Brownfield Clean-up                        Agreement.                                                   |
|                                                                |        |                                                                                                                                                                                       |
| #7 Saugerties,                        NY                       |   | Central Hudson does                        not believe it has any liability.                                                                                                          |
|                                                                |        |                                                                                                                                                                                       |
| #8 Bayeaux Street,                        Poughkeepsie, NY     |   | Central Hudson does                        not believe it has any liability.                                                                                                          |
|                                                                |        |                                                                                                                                                                                       |

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          Central            Hudson has developed an estimate of the potential remediation cost for sites # 2, 3, 4            and 5 indicating that the total cost for the four sites could exceed $125 million over            the next 30 years. This estimate was based on proposed remediation plans for sites # 2            and 3, and on conceptual plans for sites # 4 and 5. The cost estimate involves            assumptions relating to investigation expenses, remediation costs, potential future            liabilities, and post-remedial monitoring costs, and is based on a variety of factors            including projections regarding the amount and extent of contamination, the location,            size and use of the sites, proximity to sensitive resources, status of regulatory            investigations, and information regarding remediation activities at other MGP sites in            New York State. This cost estimate also assumes that proposed or anticipated            remediation techniques are technically feasible and that proposed remediation plans            receive DEC approval. Further, this estimate could change materially based on changes            to technology relating to remedial alternatives and changes to current laws and            regulations.

          Prior to            2007, Central Hudson recorded a $19.5 million estimated liability for sites # 2 and 3            based on estimates of remediation costs for the proposed clean-up plans. Based on the            actual expenditures from the remediation completed to date and the latest cost            projections, Central Hudson has increased its recorded estimated liability by $1.7            million. As of December 31, 2007, $16.1 million of the recorded estimated liability has            not been spent; $2.5 million of the recorded estimated liability is expected to be            spent over the next twelve months.

          No amounts            have been recorded in connection with sites # 4 and 5, for which Central Hudson has            estimated future costs developed from conceptual plans. Absent DEC-approved remediation            plans, management cannot estimate what cost, if any, will actually be incurred. The            portion of the $125 million referenced above related to these two sites is            approximately $88 million.

          Central            Hudson has performed limited site investigations at site # 6 and does not have            sufficient information to estimate its potential remediation cost.

          With regard            to sites # 7 and 8, as previously stated, Central Hudson now believes that it has no            liability for these sites and therefore does not have sufficient information to            estimate its potential remediation cost if any.

          Central            Hudson spent approximately $5.9 million in 2007 related to site investigation and            remediation of which $0.8 million represents total expenditures for site #1            remediation. Based on the 2006 Rate Order, on July 1, 2007, Central Hudson started the            recovery of a rate allowance for MGP Site Investigation & Remediation Costs which            totaled $0.8 million as of December 31, 2007.

          Future            remediation activities and costs may vary significantly from the assumptions used in            Central Hudson’s current cost estimates, and these costs could have a material            adverse effect (the extent of which cannot be reasonably determined) on the financial            condition, results of operations and cash flows of CH Energy Group and Central Hudson            if Central Hudson were unable to recover all or a substantial portion of these costs            via collection in rates from customers and/or through insurance.

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          Central            Hudson has put its insurers on notice and intends to seek reimbursement from its            insurers for the costs of any liabilities. Certain of these insurers have denied            coverage. Furthermore, pursuant to the 2006 Order, Central Hudson is permitted to defer            for future recovery the differences between actual costs for MGP site investigation and            remediation and the associated rate allowances, with carrying charges to be accrued on            the deferred balances at the authorized pre-tax rate of return.

**          Little            Britain Road**

          In December            1977, Central Hudson purchased property at 610 Little Britain Road, New Windsor, New            York. In 1992, the DEC informed Central Hudson that the DEC was preparing to conduct a            Preliminary Site Assessment (“PSA”) of the site and in 1995, the DEC issued            an Order of Consent in which Central Hudson agreed to conduct the PSA. In 2000,            following completion of the PSA, Central Hudson and the DEC entered into a Voluntary            Cleanup Agreement (“VCA”) whereby Central Hudson removed approximately            3,100 tons of soil and has conducted a routine groundwater sampling program since that            time. Groundwater sampling results show the presence of certain contaminants at levels            exceeding DEC criteria. Deep groundwater wells were installed in 2005 and 2006, which            also show contaminants exceeding DEC criteria. The DEC responded with a request for a            plan to address the situation. Negotiations between DEC and Central Hudson regarding            additional site work and closure of the VCA are ongoing. Central Hudson has submitted a            proposal to DEC for limited additional site work, and closure of the VCA. Although at            this time Central Hudson does not have sufficient information to estimate potential            remediation costs, Central Hudson has put its insurers on notice regarding this matter            and intends to seek reimbursement from its insurers for amounts, if any, for which it            may become liable. Neither CH Energy Group nor Central Hudson can predict the outcome            of this matter.

**          Newburgh            Consolidated Iron Works**

          By letter            from the EPA dated November 28, 2001, Central Hudson, among others, was served with a            Request For Information pursuant to the Comprehensive Environmental Response,            Compensation and Liability Act regarding any shipments of scrap or waste materials that            Central Hudson may have made to Consolidated Iron and Metal Co., Inc.            (“Consolidated Iron”), a Superfund site located in Newburgh, New York.            Sampling by the EPA indicated that lead and polychlorinated biphenyls (or            “PCBs”) are present at the site, and the EPA subsequently commenced a            remedial investigation and feasibility study at the site. No records were found which            indicate that the material sold by Central Hudson to Consolidated Iron contained or was            a hazardous substance. Central Hudson has put its insurers on notice regarding this            matter and intends to seek reimbursement from its insurers for amounts, if any, for            which it may become liable. Neither CH Energy Group nor Central Hudson can predict the            outcome of this investigation at the present time.

- 147            -

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**          Asbestos            Litigation**

          Since 1987,            Central Hudson, along with many other parties, has been joined as a defendant or            third-party defendant in 3,310 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.

          As of            January 15, 2008, of the 3,310 asbestos cases brought against Central Hudson, 1,183            remain pending. Of the cases no longer pending against Central Hudson, 1,976 have been            dismissed or discontinued without payment by Central Hudson, and Central Hudson has            settled 151 cases. Central Hudson is presently unable to assess the validity of the            remaining asbestos lawsuits; accordingly, it cannot determine the ultimate liability            relating to these cases. Based on information known to Central Hudson at this time,            including Central Hudson’s experience in settling asbestos cases and in obtaining            dismissals of asbestos cases, Central Hudson believes that the costs which may be            incurred in connection with the remaining lawsuits will not have a material adverse            effect on either of CH Energy Group’s or Central Hudson’s financial            position, results of operations, or cash flows.

***CHEC:***

          Griffith has            a voluntary environmental program in connection with the West Virginia Division of            Environmental Protection regarding Griffith’s Kable Oil Bulk Plant, located in            West Virginia. The State of West Virginia indicated that some additional remediation            was required and in 2007, $188,000 was spent on site remediation efforts at this            location. In addition, Griffith spent $108,000 on remediation efforts in Maryland,            Virginia, and Connecticut in 2007. Griffith is to be reimbursed $273,000 from the State            of Connecticut under an environmental agreement and has recorded this amount as a            receivable.

          Griffith has            a reserve for environmental remediation which is $1.6 million as of December 31, 2007,            of which approximately $0.3 million is expected to be spent in the next twelve            months.

**Other            Matters**

*Central            Hudson*

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

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**NOTE            13 - SEGMENTS AND RELATED INFORMATION**

          CH Energy            Group’s reportable operating segments are the regulated electric utility business            and regulated natural gas utility business of Central Hudson and the unregulated fuel            distribution business of Griffith.

          Central            Hudson purchases, sells at wholesale, and distributes electricity and natural gas at            retail in New York State’s Mid-Hudson River Valley. 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 certain outlying and            intervening territories. Central Hudson also generates a small portion of its            electricity requirements.

          Griffith is            engaged in fuel distribution including heating oil, gasoline, diesel fuel, kerosene,            and propane, and the installation and maintenance of heating, ventilating, and air            conditioning equipment in Virginia, West Virginia, Maryland, Delaware, New Jersey,            Pennsylvania, Rhode Island, Washington, D.C., Connecticut, Massachusetts, and New York.            Management regularly reviews Griffith’s operating results as a standalone            component of CH Energy Group and assesses its performance as a basis for allocating            resources.

          The            investment and business development activities of CH Energy Group and the renewable            energy and investment activities of CHEC, including its ownership interests in ethanol,            wind, and biomass energy projects, are reported under the heading “Other            Businesses and Investments”.

          Certain            additional information regarding these segments is set forth in the following tables.            General corporate expenses, Central Hudson property common to both electric and natural            gas segments, and the depreciation of Central Hudson’s common property have been            allocated in accordance with practices established for regulatory purposes.

          Central            Hudson’s and Griffith’s operations are seasonal in nature and            weather-sensitive. Demand for electricity typically peaks during the summer, while            demand for natural gas and heating oil typically peaks during the winter.

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CH Energy Group,            Inc.            Segment Disclosure            Year Ended December 31, 2007

|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
|                                                                                    |   | Central                        Hudson |    | Griffith                           |   | Other                        Businesses                        and                        Investments |   | Eliminations |    | Total  |   |
|                                                                                    |   |                                       |    |                               |   |                                                                                                  |   |
| (In                        Thousands, except                        Earnings per Share) |   | Electric                              |    | Natural                        Gas |   |                                                                                                  |   |         |    |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |
| Revenues from external                        customers                                 |   | $                                     | 616,839 |                               | $      | 165,449                                                                                               |   | $            | 405,753 |   |   | $      | 8,716   |   |   |   | $      | — |   |   | $      | 1,196,757 |   |
| Intersegment                        revenues                                            |   |                                  | 15      |                               |   | 301                                                                                                   |   |         | — |   |   |   | — |   |   |   |   | (316    | )      |   |   | —   |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
| Total                        revenues                                                   |   |                                  | 616,854 |                               |   | 165,750                                                                                               |   |         | 405,753 |   |   |   | 8,716   |   |   |   |   | (316    | )      |   |   | 1,196,757 |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization                                    |   |                                  | 22,251  |                               |   | 6,148                                                                                                 |   |         | 6,715   |   |   |   | 809     |   |   |   |   | — |   |   |   | 35,923    |   |
| Interest and investment                        income                                   |   |                                  | 3,770   |                               |   | 1,973                                                                                                 |   |         | 115     |   |   |   | 7,082   |   |   |   |   | (4,534  | )      |   |   | 8,406     |   |
| Interest                        expense                                                 |   |                                  | 17,535  |                               |   | 5,372                                                                                                 |   |         | 4,091   |   |   |   | 443     |   |   |   |   | (4,534  | )      |   |   | 22,907    |   |
| Earnings before income                        taxes                                     |   |                                  | 42,159  |                               |   | 10,633                                                                                                |   |         | 5,171   |   |   |   | 6,571   |   |   |   |   | — |   |   |   | 64,534    |   |
| Income tax                        expense                                               |   |                                  | 16,018  |                               |   | 4,308                                                                                                 |   |         | 2,005   |   |   |   | (433    | )      |   |   |   | — |   |   |   | 21,898    |   |
| Net Income                                                                              |   |                                  | 26,141  |                               |   | 6,325                                                                                                 |   |         | 3,166   |   |   |   | 7,004   |   |   |   |   | — |   |   |   | 42,636    |   |
| Earnings per                        share-diluted                                       |   |                                  | 1.66    |                               |   | 0.40                                                                                                  |   |         | 0.20    |   |   |   | 0.44    | (1)    |   |   |   | — |   |   |   | 2.70      |   |
| Segment                        assets                                                   |   |                                  | 926,223 |                               |   | 326,471                                                                                               |   |         | 197,425 |   |   |   | 44,655  |   |   |   |   | (26     | )(2)   |   |   | 1,494,748 |   |
| Goodwill                                                                                |   |                                  | — |                               |   | —                                                                                               |   |         | 63,433  |   |   |   | — |   |   |   |   | — |   |   |   | 63,433    |   |
| Capital                        expenditures                                             |   |                                  | 65,548  |                               |   | 17,215                                                                                                |   |         | 2,253   |   |   |   | 1,060   |   |   |   |   | — |   |   |   | 86,076    |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |

|   |                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | The amount of                        Unregulated EPS attributable to CHEC’s other businesses and                        investments was $0.16 per share, with the balance of $0.28 per share                        resulting primarily from interest income. |
| (2)    | Includes minority                        interest of $1,345 related to Lyonsdale.                                                                                                                                                                                   |

CH Energy Group,            Inc.            Segment Disclosure            Year Ended December 31, 2006

|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
|                                                                                    |   | Central                        Hudson |    | Griffith                           |   | Other                        Businesses                        and                        Investments |   | Eliminations |    | Total  |   |
|                                                                                    |   |                                       |    |                               |   |                                                                                                  |   |
| (In                        Thousands, except                        Earnings per Share) |   | Electric                              |    | Natural                        Gas |   |                                                                                                  |   |         |    |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |
| Revenues from external                        customers                                 |   | $                                     | 503,908 |                               | $      | 155,272                                                                                               |   | $            | 327,825 |   |   | $      | 6,428   |   |   |   | $      | — |   |   | $      | 993,433   |   |
| Intersegment                        revenues                                            |   |                                  | 14      |                               |   | 319                                                                                                   |   |         | — |   |   |   | — |   |   |   |   | (333    | )      |   |   | —   |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
| Total                        revenues                                                   |   |                                  | 503,922 |                               |   | 155,591                                                                                               |   |         | 327,825 |   |   |   | 6,428   |   |   |   |   | (333    | )      |   |   | 993,433   |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization                                    |   |                                  | 22,363  |                               |   | 6,639                                                                                                 |   |         | 6,139   |   |   |   | 560     |   |   |   |   | — |   |   |   | 35,701    |   |
| Interest and investment                        income                                   |   |                                  | 4,634   |                               |   | 1,882                                                                                                 |   |         | 105     |   |   |   | 6,726   |   |   |   |   | (3,480  | )      |   |   | 9,867     |   |
| Interest                        expense                                                 |   |                                  | 15,478  |                               |   | 4,934                                                                                                 |   |         | 3,150   |   |   |   | 330     |   |   |   |   | (3,480  | )      |   |   | 20,412    |   |
| Earnings before Income                        taxes                                     |   |                                  | 42,425  |                               |   | 13,004                                                                                                |   |         | 2,407   |   |   |   | 9,017   |   |   |   |   | — |   |   |   | 66,853    |   |
| Income tax                        expense                                               |   |                                  | 16,027  |                               |   | 5,501                                                                                                 |   |         | 799     |   |   |   | 1,442   |   |   |   |   | — |   |   |   | 23,769    |   |
| Net Income                                                                              |   |                                  | 26,398  |                               |   | 7,503                                                                                                 |   |         | 1,608   |   |   |   | 7,575   |   |   |   |   | — |   |   |   | 43,084    |   |
| Earnings per                        share-diluted                                       |   |                                  | 1.67    |                               |   | 0.48                                                                                                  |   |         | 0.10    |   |   |   | 0.48    | (1)    |   |   |   | — |   |   |   | 2.73      |   |
| Segment                        assets                                                   |   |                                  | 899,982 |                               |   | 315,841                                                                                               |   |         | 148,249 |   |   |   | 95,948  |   |   |   |   | 512     | (2)    |   |   | 1,460,532 |   |
| Goodwill                                                                                |   |                                  | — |                               |   | —                                                                                               |   |         | 52,828  |   |   |   | — |   |   |   |   | — |   |   |   | 52,828    |   |
| Capital                        expenditures                                             |   |                                  | 57,340  |                               |   | 14,071                                                                                                |   |         | 3,659   |   |   |   | — |   |   |   |   | — |   |   |   | 75,070    |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |

|   |                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | The amount of                        Unregulated EPS attributable to CHEC’s other businesses and                        investments was $0.23 per share, with the balance of $0.25 per share                        resulting primarily from interest income. |
| (2)    | Includes minority                        interest of $1,481 related to Lyonsdale.                                                                                                                                                                                   |

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CH Energy Group,            Inc.            Segment Disclosure            Year Ended December 31, 2005

|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
|                                                                                    |   | Central                        Hudson |    | Griffith                           |   | Other                        Businesses                        and                        Investments |   | Eliminations |    | Total  |   |
|                                                                                    |   |                                       |    |                               |   |                                                                                                  |   |
| (In                        Thousands, except                        Earnings per Share) |   | Electric                              |    | Natural                        Gas |   |                                                                                                  |   |         |    |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |
| Revenues from external                        customers                                 |   | $                                     | 520,994 |                               | $      | 155,602                                                                                               |   | $            | 295,092 |   |   | $      | 818     |   |   |   | $      | — |   |   | $      | 972,506   |   |
| Intersegment                        revenues                                            |   |                                  | 13      |                               |   | 355                                                                                                   |   |         | — |   |   |   | — |   |   |   |   | (368    | )      |   |   | —   |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
| Total                        revenues                                                   |   |                                  | 521,007 |                               |   | 155,957                                                                                               |   |         | 295,092 |   |   |   | 818     |   |   |   |   | (368    | )      |   |   | 972,506   |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |
|                                                                                    |   |                                  |    |                               |   |                                                                                                  |   |         |    |   |   |   |    |   |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization                                    |   |                                  | 23,209  |                               |   | 6,665                                                                                                 |   |         | 6,345   |   |   |   | — |   |   |   |   | — |   |   |   | 36,219    |   |
| Interest and investment                        income                                   |   |                                  | 5,471   |                               |   | 1,845                                                                                                 |   |         | 49      |   |   |   | 5,858   |   |   |   |   | (2,863  | )      |   |   | 10,360    |   |
| Interest                        expense                                                 |   |                                  | 12,938  |                               |   | 4,107                                                                                                 |   |         | 2,623   |   |   |   | 240     |   |   |   |   | (2,863  | )      |   |   | 17,045    |   |
| Earnings before Income                        taxes                                     |   |                                  | 43,439  |                               |   | 15,162                                                                                                |   |         | 6,069   |   |   |   | 5,440   |   |   |   |   | — |   |   |   | 70,110    |   |
| Income tax                        expense                                               |   |                                  | 17,688  |                               |   | 6,248                                                                                                 |   |         | 2,406   |   |   |   | (523    | )      |   |   |   | — |   |   |   | 25,819    |   |
| Net Income                                                                              |   |                                  | 25,751  |                               |   | 8,914                                                                                                 |   |         | 3,663   |   |   |   | 5,963   |   |   |   |   | — |   |   |   | 44,291    |   |
| Earnings per share -                        diluted                                     |   |                                  | 1.63    |                               |   | 0.57                                                                                                  |   |         | 0.23    |   |   |   | 0.38    | (1)    |   |   |   | — |   |   |   | 2.81      |   |
| Segment                        assets                                                   |   |                                  | 836,564 |                               |   | 289,542                                                                                               |   |         | 152,485 |   |   |   | 105,689 |   |   |   |   | — |   |   |   | 1,384,280 |   |
| Goodwill                                                                                |   |                                  | — |                               |   | —                                                                                               |   |         | 51,333  |   |   |   | — |   |   |   |   | — |   |   |   | 51,333    |   |
| Capital                        expenditures                                             |   |                                  | 46,371  |                               |   | 13,771                                                                                                |   |         | 3,737   |   |   |   | — |   |   |   |   | — |   |   |   | 63,879    |   |
|                                                                                         |        |                                       |         |                                    |        |                                                                                                       |        |              |         |        |        |        |         |        |        |        |        |         |        |        |        |           |        |

|   |                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | The amount of                        Unregulated EPS attributable to CHEC’s other businesses and                        investments was $0.06 per share, with the balance of $0.32 per share                        resulting primarily from interest income |

Central Hudson            Gas & Electric Corporation            Segment Disclosure            Year Ended December 31, 2007

|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
|----------------------------------------------------------|--------|----------|---------|------------------------------------|--------|--------------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
| (In                        Thousands)                    |   | Electric |    | Natural                        Gas |   | Eliminations |   | Total  |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |
| Revenues from external                        customers  |   | $        | 616,839 |                               | $      | 165,449      |   |   | $      | — |   |   | $      | 782,288   |   |
| Intersegment                        revenues             |   |     | 15      |                               |   | 301          |   |   |   | (316    | )      |   |   | —   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
| Total                        revenues                    |   |     | 616,854 |                               |   | 165,750      |   |   |   | (316    | )      |   |   | 782,288   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization     |   |     | 22,251  |                               |   | 6,148        |   |   |   | — |   |   |   | 28,399    |   |
| Interest                        income                   |   |     | 3,770   |                               |   | 1,973        |   |   |   | — |   |   |   | 5,743     |   |
| Interest                        expense                  |   |     | 17,535  |                               |   | 5,372        |   |   |   | — |   |   |   | 22,907    |   |
| Income tax                        expense                |   |     | 16,018  |                               |   | 4,308        |   |   |   | — |   |   |   | 20,326    |   |
| Income available for                        common stock |   |     | 26,141  |                               |   | 6,325        |   |   |   | — |   |   |   | 32,466    |   |
| Segment                        assets                    |   |     | 926,223 |                               |   | 326,471      |   |   |   | — |   |   |   | 1,252,694 |   |
| Capital                        expenditures              |   |     | 65,548  |                               |   | 17,215       |   |   |   | — |   |   |   | 82,763    |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |

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Central Hudson            Gas & Electric Corporation            Segment Disclosure            Year Ended December 31, 2006

|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
|----------------------------------------------------------|--------|----------|---------|------------------------------------|--------|--------------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
| (In                        Thousands)                    |   | Electric |    | Natural                        Gas |   | Eliminations |   | Total  |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |
| Revenues from external                        customers  |   | $        | 503,908 |                               | $      | 155,272      |   |   | $      | — |   |   | $      | 659,180   |   |
| Intersegment                        revenues             |   |     | 14      |                               |   | 319          |   |   |   | (333    | )      |   |   | —   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
| Total                        revenues                    |   |     | 503,922 |                               |   | 155,591      |   |   |   | (333    | )      |   |   | 659,180   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization     |   |     | 22,363  |                               |   | 6,639        |   |   |   | — |   |   |   | 29,002    |   |
| Interest                        income                   |   |     | 4,634   |                               |   | 1,882        |   |   |   | — |   |   |   | 6,516     |   |
| Interest                        expense                  |   |     | 15,478  |                               |   | 4,934        |   |   |   | — |   |   |   | 20,412    |   |
| Income tax                        expense                |   |     | 16,027  |                               |   | 5,501        |   |   |   | — |   |   |   | 21,528    |   |
| Income available for                        common stock |   |     | 26,398  |                               |   | 7,503        |   |   |   | — |   |   |   | 33,901    |   |
| Segment                        assets                    |   |     | 899,982 |                               |   | 315,841      |   |   |   | — |   |   |   | 1,215,823 |   |
| Capital                        expenditures              |   |     | 57,340  |                               |   | 14,071       |   |   |   | — |   |   |   | 71,411    |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |

Central Hudson            Gas & Electric Corporation            Segment Disclosure            Year Ended December 31, 2005

|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
|----------------------------------------------------------|--------|----------|---------|------------------------------------|--------|--------------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
| (In                        Thousands)                    |   | Electric |    | Natural                        Gas |   | Eliminations |   | Total  |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |
| Revenues from external                        customers  |   | $        | 520,994 |                               | $      | 155,602      |   |   | $      | — |   |   | $      | 676,596   |   |
| Intersegment                        revenues             |   |     | 13      |                               |   | 355          |   |   |   | (368    | )      |   |   | —   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
| Total                        revenues                    |   |     | 521,007 |                               |   | 155,957      |   |   |   | (368    | )      |   |   | 676,596   |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |
|                                                     |   |     |    |                               |   |         |   |   |   |    |   |   |   |      |   |
| Depreciation and                        amortization     |   |     | 23,209  |                               |   | 6,665        |   |   |   | — |   |   |   | 29,874    |   |
| Interest                        income                   |   |     | 5,471   |                               |   | 1,845        |   |   |   | — |   |   |   | 7,316     |   |
| Interest                        expense                  |   |     | 12,938  |                               |   | 4,107        |   |   |   | — |   |   |   | 17,045    |   |
| Income tax                        expense                |   |     | 17,688  |                               |   | 6,248        |   |   |   | — |   |   |   | 23,936    |   |
| Income available for                        common stock |   |     | 25,751  |                               |   | 8,914        |   |   |   | — |   |   |   | 34,665    |   |
| Segment                        assets                    |   |     | 836,564 |                               |   | 289,542      |   |   |   | — |   |   |   | 1,126,106 |   |
| Capital                        expenditures              |   |     | 46,371  |                               |   | 13,771       |   |   |   | — |   |   |   | 60,142    |   |
|                                                          |        |          |         |                                    |        |              |        |        |        |         |        |        |        |           |        |

**NOTE 14 -            ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES**

          SFAS            No. 133, titled *Accounting for Derivative Instruments and Hedging Activities*            (“SFAS 133”), as amended, 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            on 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.

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

          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            typically

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used by Central Hudson are            natural gas futures and 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. On April 1, 2006, Central Hudson replaced            its interest rate cap agreement with a new two-year agreement through April 1, 2008,            with similar terms as the expired agreement. This rate cap agreement hedges the            variability in interest rates related to Central Hudson’s bonds issued by the            NYSERDA. 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 Central            Hudson’s variable rate 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, 2007, Central Hudson had open derivative contracts to hedge natural gas            prices through March 2008, covering approximately 38.9% of Central Hudson’s            projected total natural gas supply requirements during this period. In 2007, derivative            transactions were used to hedge 15.1% of Central Hudson’s total natural gas            supply requirements as compared to 14.1% in 2006. In its electric operations, Central            Hudson had an open derivative contract to hedge the price of approximately 4.5% of its            NYISO requirement for unforced capacity (“UCAP”) for the Summer 2008            capability period at December 31, 2007. In 2007, Central Hudson hedged approximately            18.0% of its total electricity supply requirements with over-the-counter            (“OTC”) derivative contracts as compared to 11.0% in 2006. Central Hudson            also hedged approximately 13.6% of its Summer 2007 UCAP capability period requirement            and 4.5% of its Winter 2007-2008 UCAP capability period requirement. 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 currently hedged by the            electricity purchase agreements for 2008 and 2009 represent approximately 33.1% and            34.6%, respectively, of its total anticipated electricity supply requirements in each            year.

          The            total fair value (net unrealized loss) of Central Hudson’s derivatives at            December 31, 2007, was ($1.2) million as compared to a fair value (net unrealized loss)            of ($3.0) million at December 31, 2006. Fair value is determined based on market quotes            for exchange traded derivatives and broker quotes for OTC derivatives. Actual net            losses of ($14.6) million were recorded in 2007, which increased amounts recovered            through Central Hudson’s electric and natural gas cost adjustment clauses for the            overall cost of electricity and natural gas. This compares to a total net loss of            ($10.7) million recorded in 2006, which increased the overall cost of electricity and            natural gas.

          Griffith            uses derivative instruments to hedge variability in the price of heating oil purchased            for delivery to its customers. In 2007, Griffith purchased call option contracts to            establish ceiling prices to hedge forecasted heating oil supply requirements for capped            price programs not hedged by firm purchase commitments. In 2006, Griffith sold put            option contracts and purchased call option contracts to establish floor and

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ceiling prices to hedge            forecasted heating oil supply requirements for fixed price programs not hedged by firm            purchase commitments. The options hedge commodity price changes. These derivatives are            designated as 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 2007 or 2006. The assessment of hedge effectiveness for these hedges            excludes the change in the fair value of the premium paid or received for these            derivative instruments. The total amount of premiums expensed in 2007 and 2006, was            $0.5 million. These net premiums are expensed based on the change in their respective            fair value. The total fair value of open derivative instruments at December 31, 2007,            was a net unrealized gain of $1.2 million. The total fair value at December 31, 2006,            was a net unrealized loss of ($0.6) million. Including premium costs, a net actual loss            of ($0.7) million was recorded in 2007, and a net loss of ($0.8) million was recorded            in 2006. These losses were recorded in each year as part of the cost or price of the            related commodity transactions. The fair values of put and call options are determined            based on the market value of the underlying commodity.

          At            December 31, 2007, Griffith had open OTC call option positions covering approximately            6.2% of its anticipated fuel oil supply requirements for the period January 2008            through June 2008. The percentage hedged at December 31, 2006, for the period January            2007 to June 2007 was 8.2%. In 2007, derivative instruments were used to hedge 7.3% of            total fuel oil requirements as compared to 6.0% in 2006.

          In            the first quarter of 2007, Griffith entered into derivative contracts to hedge the fair            value of certain fixed price purchase commitments assumed from tuck-in acquisitions.            These derivative instruments were comprised of calendar average New York Mercantile            Exchange (“NYMEX”) swaps. The actual settlement amount recorded in 2007 for            these derivative contracts was not material.

          In            the first quarter of 2006, Griffith also entered into derivative contracts to hedge a            portion (714,000 gallons) of its fuel oil inventory. These derivative instruments,            comprised of calendar average NYMEX swaps, were designated as a fair value hedge of            inventory. These derivative contracts were settled in December 2006 and an actual net            gain of $0.2 million was recorded.

          In            addition to the above, Central Hudson and Griffith 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. Weather derivative            contracts are generally entered into for the periods November through December and            January through March, which covers the bulk of the heating season. Central Hudson also            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, titled *Accounting for Weather Derivatives*. In 2007, Central            Hudson made a total payment to counter-parties of $0.2 million. In 2006,

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a total payment of $0.5 million,            including premiums, was made to counter-parties. The 2007 payment was a premium payment            for an option related to the February – March time frame that settled out of the            money since weather was colder than the contractual strike point. The 2006 settlement            payment related to the cooling season contract and resulted from weather that was            warmer than the contractual strike point. In 2007, Griffith made total payments of $0.9            million, including premiums paid. These payments related to heating season contracts            and resulted from weather that was colder than the contractual strike point. In 2006,            Griffith received payments of $0.7 million, net of premiums paid. In each case the            amounts recorded partially offset variations in revenues experienced due to the actual            weather patterns that occurred in each period. Central Hudson and Griffith have each            entered into weather derivative contracts for January through March 2008.

**NOTE 15 -            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, Cash Equivalents and Short-term Investments: The carrying amount approximates            fair value because of the short maturity of those instruments.

                      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.

                      Notes Receivable: The carrying amount approximates fair value because of the short            maturity of those instruments.

                      Short-term Investments: CH Energy Group’s investments include tax-exempt ARS            and VRDN with interest rates that are reset anywhere from 7 to 35 days. These            investments are available to fund current operations or to provide funding in            accordance with CH Energy Group’s strategy to redeploy equity into its            subsidiaries. Due to the nature of these securities with regard to their interest reset            periods, the aggregate carrying value approximates their fair value, thereby not            impacting shareholders equity with regard to unrealized gains and losses. The aggregate            fair value of these short- term investments was $3.5 million at December 31, 2007 and            $42.6 million at December 31, 2006. Cash flows from the purchases and liquidation of            these investments are reported separately as investing activities in CH Energy            Group’s Consolidated Statement of Cash Flows.

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|                                                                |
|---------------------------------------------------------------------|
| **CH ENERGY GROUP /                        CENTRAL HUDSON**         |
| **Long-term Debt                        Maturities and Fair Value** |

|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|----------------------------------------------------|--------|--------|---------|--------|-----------------------------------------------|---------|--------|----------------------------------------------------------|---------|--------|--------|------------|---------|--------|---------|-----------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| **December 31,                        2007**       |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   | Expected Maturity                        Date |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   |   |    |   |                                               |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   |   |    |   | (In                        Thousands)         |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   | 2008   |    | 2009   |                                          | 2010    |   | 2011                                                     |    | 2012   |   | Thereafter |    | Total  |    | Fair                        Value |   |
|                                               |   |        |    |        |                                          |         |   |                                                          |    |        |   |            |    |        |    |                                   |   |
|                                               |
| **Fixed                        Rate:**             |   |   | — |   | $                                             | 20,000  |   | $                                                        | 24,000  |   |   | —    |    | $      | 36,000  |                              | $      | 208,042 |   | $      | 288,042 |   | $      | 287,308 |   |
| **Estimated**                                      |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Effective Interest                        Rate** |   |   |    |   |                                          | 6.07    | %      |                                                     | 4.38    | %      |   | —    |    |   | 6.64    | %                                 |   | 5.48    | %      |   | 6.30    | %      |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Variable                        Rate:**          |   |   | — |   |                                          | — |   |                                                     | — |   |   | —    |    |   | — |                              | $      | 115,850 |   | $      | 115,850 |   | $      | 115,850 |   |
| **Estimated**                                      |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Effective Interest                        Rate** |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   | 3.69    | %      |   | 3.69    | %      |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   | Total Debt                        Outstanding            |    |   |   | $          | 403,892 |   | $       | 403,158                           |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |            |         |   |         |                                   |   |
|                                               |   |   |    |   |                                          |    |   | Estimated Effective                        Interest Rate |    |   |   | 5.49       | %       |   |    |                              |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |            |         |   |    |                              |   |

|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|----------------------------------------------------|--------|--------|---------|--------|-----------------------------------------------|---------|--------|----------------------------------------------------------|---------|--------|--------|------------|---------|--------|---------|-----------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| **December 31,                        2006**       |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   | Expected Maturity                        Date |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   |   |    |   |                                               |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   |   |    |   | (In                        Thousands)         |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |
|                                               |   | 2007   |    | 2008   |                                          | 2009    |   | 2010                                                     |    | 2011   |   | Thereafter |    | Total  |    | Fair                        Value |   |
|                                               |   |        |    |        |                                          |         |   |                                                          |    |        |   |            |    |        |    |                                   |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Fixed                        Rate:**             |   | $      | 33,000  |   |                                          | — |   | $                                                        | 20,000  |   | $      | 24,000     |    |   | — |                              | $      | 178,039 |   | $      | 255,039 |   | $      | 255,540 |   |
| **Estimated**                                      |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Effective Interest                        Rate** |   |   | 5.92    | %      |                                          | — |   |                                                     | 6.07    | %      |   | 4.38       | %       |   | — |                              |   | 5.54    | %      |   | 5.52    | %      |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Variable                        Rate:**          |   |   | — |   |                                          | — |   |                                                     | — |   |   | —    |    |   | — |                              | $      | 115,850 |   | $      | 115,850 |   | $      | 115,850 |   |
| **Estimated**                                      |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
| **Effective Interest                        Rate** |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   | 3.44    | %      |   | 3.44    | %      |   |    |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   | Total Debt                        Outstanding            |    |   |   | $          | 370,889 |   | $       | 371,390                           |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |        |         |   |        |         |   |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |       |    |   |    |                              |   |    |   |   |    |   |   |    |   |
|                                               |   |   |    |   |                                          |    |   | Estimated Effective                        Interest Rate |    |   |   | 4.87       | %       |   |    |                              |
|                                               |   |   |    |   |                                          |    |   |                                                     |    |   |   |            |         |   |    |                              |   |

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**SELECTED QUARTERLY FINANCIAL            DATA (UNAUDITED) – CH ENERGY GROUP**

Selected financial data for each            quarterly period within 2007 and 2006 are presented below:

|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |   |   |   |   |
|---------------------------------------|--------|-------------------------------------------|---------|-----------------------------------------|---------------------------------------|-----------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|
|                                  |   | Operating                        Revenues |    | Operating                        Income |                                  | Net                        Income |   | Earnings Per                        Average                        Share of                        Common                        Stock (Diluted)                        Outstanding |   |
|                                  |   |                                           |    |                                         |                                  |                                   |   |                                                                                                                                                                                     |   |
|                                  |   |                                      |    |                                    | (In                        Thousands) |                              |   |                                                                                                                                                                                |   | (Dollars) |   |
|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |
| Quarter                        Ended: |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |
| **2007**                              |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |
| March 31                              |   | $                                         | 343,378 |                                    |                                  | $                                 | 37,405 |                                                                                                                                                                                |   | $         | 21,698 |   |   | $      | 1.37   |   |   |
| June 30                               |   |                                      | 270,983 |                                    |                                  |                              | 10,065 |                                                                                                                                                                                |   |      | 5,189  |   |   |   | .33    |   |   |
| September                        30   |   |                                      | 260,116 |                                    |                                  |                              | 10,640 |                                                                                                                                                                                |   |      | 4,329  |   |   |   | .27    |   |   |
| December                        31    |   |                                      | 322,280 |                                    |                                  |                              | 21,158 |                                                                                                                                                                                |   |      | 11,420 |   |   |   | .73    |   |   |
|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |   |   |   |   |
| **2006**                              |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |   |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                              |   |                                                                                                                                                                                |   |      |   |   |   |   |   |   |   |
| March 31                              |   | $                                         | 317,231 |                                    |                                  | $                                 | 34,078 |                                                                                                                                                                                |   | $         | 18,300 |   |   | $      | 1.16   |   |   |
| June 30                               |   |                                      | 213,891 |                                    |                                  |                              | 6,784  |                                                                                                                                                                                |   |      | 4,068  |   |   |   | .26    |   |   |
| September                        30   |   |                                      | 239,820 |                                    |                                  |                              | 18,664 |                                                                                                                                                                                |   |      | 10,970 |   |   |   | .70    |   |   |
| December                        31    |   |                                      | 222,491 |                                    |                                  |                              | 17,954 |                                                                                                                                                                                |   |      | 9,746  |   |   |   | .61    |   |   |

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**SELECTED QUARTERLY FINANCIAL            DATA (UNAUDITED) – CENTRAL HUDSON**

Selected financial data for each            quarterly period within 2007 and 2006 are presented below:

|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |   |   |   |   |
|---------------------------------------|--------|-------------------------------------------|---------|-----------------------------------------|---------------------------------------|---------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                  |   | Operating                        Revenues |    | Operating                        Income |                                  | Income                        Available for                        Common Stock |   |
|                                  |   |                                           |    |                                         |                                  |                                                                                 |   |
|                                  |   |                                      |    |                                    | (In                        Thousands) |                                                                            |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |
| Quarter                        Ended: |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |
| **2007**                              |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |
| March 31                              |   | $                                         | 215,866 |                                    |                                  | $                                                                               | 26,035 |   |   |   | $      | 13,129 |   |   |
| June 30                               |   |                                      | 190,687 |                                    |                                  |                                                                            | 11,799 |   |   |   |   | 5,020  |   |   |
| September                        30   |   |                                      | 189,571 |                                    |                                  |                                                                            | 15,201 |   |   |   |   | 5,863  |   |   |
| December                        31    |   |                                      | 186,164 |                                    |                                  |                                                                            | 18,371 |   |   |   |   | 8,454  |   |   |
|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |   |   |   |   |
| **2006**                              |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |   |   |   |   |
|                                  |   |                                      |    |                                    |                                  |                                                                            |   |   |   |   |   |   |   |   |
| March 31                              |   | $                                         | 206,856 |                                    |                                  | $                                                                               | 25,805 |   |   |   | $      | 12,811 |   |   |
| June 30                               |   |                                      | 144,388 |                                    |                                  |                                                                            | 10,203 |   |   |   |   | 3,881  |   |   |
| September                        30   |   |                                      | 173,107 |                                    |                                  |                                                                            | 20,407 |   |   |   |   | 10,531 |   |   |
| December                        31    |   |                                      | 134,829 |                                    |                                  |                                                                            | 14,541 |   |   |   |   | 6,678  |   |   |

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----

**SCHEDULE II            - Reserves – CH Energy Group**

|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
|-----------------------------------------------------------|--------|------------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|--------|-----------|--------|--------|-----------|--------|
| Description                                               |   | Balance at                        Beginning                        of Period |      | Charged to                        Cost and                        Expenses |   | Charged to                        Other                        Accounts |   | Payments and                        Other                        Reductions to                        Reserves |   | Balance                        at End                        of Period |   |
|                                                           |   |                                                                              |      |                                                                            |   |                                                                         |   |                                                                                                                |   |                                                                        |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |
| YEAR ENDED DECEMBER 31,                        2007       |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |
| Operating                        Reserves                 |   | $                                                                            | 4,906,000 |                                                                       | $      | 1,879,000                                                               |   |                                                                                                           | $      | 65,000                                                                 |   |   | $      | 1,638,000 |   | $      | 5,212,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 5,761,000 |                                                                       | $      | 5,853,000                                                               |   |                                                                                                           | $      | —                                                                |   |   | $      | 6,785,000 |   | $      | 4,829,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| YEAR ENDED DECEMBER 31,                        2006       |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| Operating                        Reserves                 |   | $                                                                            | 6,216,000 |                                                                       | $      | 45,000                                                                  |   |                                                                                                           | $      | 32,000                                                                 |   |   | $      | 1,387,000 |   | $      | 4,906,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 4,588,000 |                                                                       | $      | 5,675,000                                                               |   |                                                                                                           | $      | —                                                                |   |   | $      | 4,502,000 |   | $      | 5,761,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| YEAR ENDED DECEMBER 31,                        2005       |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| Operating                        Reserves                 |   | $                                                                            | 6,515,000 |                                                                       | $      | 1,415,000                                                               |   |                                                                                                           | $      | 40,000                                                                 |   |   | $      | 1,754,000 |   | $      | 6,216,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |      |   |   |      |   |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 4,830,000 |                                                                       | $      | 4,375,000                                                               |   |                                                                                                           | $      | —                                                                |   |   | $      | 4,617,000 |   | $      | 4,588,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                           |        |                                                                        |   |   |        |           |   |        |           |   |

- 159            -

----

**SCHEDULE II            - Reserves – Central Hudson**

|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                           |   |                                                                   |   |   |   |   |      |   |   |   |      |   |
|-----------------------------------------------------------|--------|------------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|
| Description                                               |   | Balance at                        Beginning                        of Period |      | Charged to                        Cost and                        Expenses |   | Charged to                        Other                        Accounts |   | Payments and                        Other                        Reductions to                        Reserves |   | Balance                        at End                        of Period |   |
|                                                           |   |                                                                              |      |                                                                            |   |                                                                         |   |                                                                                                                |        |                                                                        |   |        |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                         |   |                                                                                                                |   |                                                                        |   |        |   |   |      |
| YEAR ENDED DECEMBER 31,                        2007       |   |                                                                         |      |                                                                       |   |                                                                         |   |                                                                                                                |   |                                                                        |   |        |   |   |      |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                         |   |                                                                                                                |   |                                                                        |   |        |   |   |      |
| Operating                        Reserves                 |   | $                                                                            | 3,936,000 |                                                                       | $      | 991,000                                                                 |   |                                                                                                                | $      | 65,000                                                                 |        |   |        | $      | 749,000   |        |   | $      | 4,243,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 3,800,000 |                                                                       | $      | 4,850,000                                                               |   |                                                                                                                | $      | —                                                                |        |   |        | $      | 5,889,000 |        |   | $      | 2,761,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| YEAR ENDED DECEMBER 31,                        2006       |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| Operating                        Reserves                 |   | $                                                                            | 5,137,000 |                                                                       | $      | (475,000                                                                | )      |                                                                                                                | $      | 32,000                                                                 |        |   |        | $      | 758,000   |        |   | $      | 3,936,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 3,400,000 |                                                                       | $      | 4,435,000                                                               |   |                                                                                                                | $      | —                                                                |        |   |        | $      | 4,035,000 |        |   | $      | 3,800,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| YEAR ENDED DECEMBER 31,                        2005       |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
|                                                      |   |                                                                         |      |                                                                       |   |                                                                    |   |                                                                                                                |   |                                                                   |        |   |        |   |      |        |   |   |      |   |
| Operating                        Reserves                 |   | $                                                                            | 5,969,000 |                                                                       | $      | 370,000                                                                 |   |                                                                                                                | $      | 40,000                                                                 |        |   |        | $      | 1,242,000 |        |   | $      | 5,137,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |
|                                                      |
| Reserve for                        Uncollectible Accounts |   | $                                                                            | 3,800,000 |                                                                       | $      | 3,592,000                                                               |   |                                                                                                                | $      | —                                                                |        |   |        | $      | 3,992,000 |        |   | $      | 3,400,000 |   |
|                                                      |   |                                                                              |           |                                                                       |        |                                                                         |   |                                                                                                                |        |                                                                        |        |   |        |        |           |        |   |        |           |   |

- 160            -

----

|                                |                                                                                                                                   |
|-------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|
| **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 10-K Annual Report, CH Energy Group and            Central Hudson each carried out an evaluation, under the supervision and with the            participation of the Chief Executive Officer and the Chief Financial Officer of CH            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 each of CH Energy            Group’s and Central Hudson’s disclosure controls and procedures as of            December 31, 2007, 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.

          There            were no significant changes to the Registrants’ internal control over financial            reporting during the Registrants’ last fiscal year.

          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.

- 161            -

----

**PART            III**

|                                 |                                                                           |
|--------------------------------------|--------------------------------------------------------------------------------|
| **ITEM 10                        -** | **DIRECTORS AND                        EXECUTIVE OFFICERS OF CH ENERGY GROUP** |

The Directors of CH Energy Group            are as follows:

|                                              |                                                             |                                                                |                                             |
|---------------------------------------------------|------------------------------------------------------------------|---------------------------------------------------------------------|--------------------------------------------------|
| Name                                              | Age                        as of                        12/31/07 | Year                        Joined                        the Board | Term                        of Office            |
|                                                   |
| Margarita K.                        Dilley(1),(2) | 50                                                               | 2004                                                                | Class                        II Director(5),(6)  |
|                                              |                                                             |                                                                |                                             |
| Steven M.                        Fetter(1),(4)    | 55                                                               | 2002                                                                | Class                        II Director(5),(6)  |
|                                              |                                                             |                                                                |                                             |
| Stanley J.                        Grubel(2),(3)   | 65                                                               | 1999                                                                | Class                        II Director(5), (6) |
|                                              |                                                             |                                                                |                                             |
| Manuel J.                        Iraola(1),(2)    | 59                                                               | 2006                                                                | Class                        III Director(7)     |
|                                              |                                                             |                                                                |                                             |
| E. Michel                        Kruse(3),(4)     | 63                                                               | 2002                                                                | Class                        III Director(7)     |
|                                              |                                                             |                                                                |                                             |
| Steven V.                        Lant(3)          | 50                                                               | 2002                                                                | Class                        I Director(8)       |
|                                              |                                                             |                                                                |                                             |
| Jeffrey D.                        Tranen(3),(4)   | 61                                                               | 2004                                                                | Class                        I Director(8)       |
|                                              |                                                             |                                                                |                                             |
| Ernest R.                        Verebelyi(1),(2) | 60                                                               | 2006                                                                | Class                        III Director(7)     |

----

|   |                                                                                                                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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)    | Ms. Dilley, Mr. Fetter                        and Mr. Grubel are standing for election at the Annual Meeting of                        Shareholders as Class II Directors. |
| (6)    | Term expires at Annual                        Meeting of Shareholders in 2008.                                                                                             |
| (7)    | Term expires at Annual                        Meeting of Shareholders in 2009.                                                                                             |
| (8)    | Term expires at Annual                        Meeting of Shareholders in 2010.                                                                                             |

- 162            -

----

Officers of the            Board:

Steven V. Lant            Chairman of the Board

E. Michel Kruse            Lead Independent Director and Chair of the Strategy and Finance Committee

Steven M. Fetter            Chair of the Governance and Nominating Committee

Stanley J. Grubel            Chair of the Compensation Committee

Margarita K. Dilley            Chair of the Audit Committee

          The            information on those directors of CH Energy Group standing for election by shareholders            at the Annual Meeting of Shareholders to be held on April 22, 2008, is incorporated by            reference to the caption “Election of Directors” in CH Energy Group’s            definitive proxy statement (“Proxy Statement”) to be used in connection            with its Annual Meeting of Shareholders to be held on April 22, 2008, which Proxy            Statement will be filed with the SEC.

          The            information on the executive officers of CH 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 CH Energy Group is            incorporated by reference to the Proxy Statement.

          CH            Energy Group submitted a CEO Certification to the New York Stock Exchange in 2007. CH            Energy Group and Central Hudson each filed with the SEC, as an exhibit to its most            recently filed Form 10-K, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley            Act”) Section 302 certification regarding the quality of the company’s            public disclosure.

          CH            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 and            Item 406 of Regulation S-K, constitutes CH 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 CH            Energy Group’s Internet website at www.CHEnergyGroup.com.

          If            CH 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

- 163            -

----

accepted accounting principles,            laws and regulations designed to produce full, fair, accurate, timely, and            understandable disclosure in CH Energy Group’s periodic reports filed with the            SEC, CH Energy Group will post such information on its Internet website at            www.CHEnergyGroup.com.

          CH            Energy Group’s governance guidelines, Code, and the charters of its Audit,            Compensation, Governance and Nominating, and Strategy and Finance Committees are            available on CH Energy Group’s Internet website at            www.CHEnergyGroup.com.

          The            governance guidelines, the Code, 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.

|                                 |                                              |
|--------------------------------------|---------------------------------------------------|
| **ITEM 11                        -** | **EXECUTIVE                        COMPENSATION** |

          The            information required hereunder for Directors and executive officers of CH Energy Group            is incorporated by reference to the section captioned “Executive            Compensation” of the Proxy Statement.

|                                 |                                                                                                                                             |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| **ITEM 12                        -** | **SECURITY                        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                        STOCKHOLDER MATTERS** |

**Equity-Based Compensation            Plan Information**

          The            following table sets forth information concerning CH Energy Group’s compensation            plans (including individual compensation arrangements) as of December 31, 2007, under            which equity securities of CH Energy Group are authorized for issuance:

|                                                                              |   |                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                         |
|-----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Plan                        Category                                              |   | Number of                        securities                        to be issued upon                        exercise of                        outstanding options,                        warrants and rights                        (a) |   | Weighted                        average                        exercise price of                        outstanding                        options,                        warrants and                        rights                        (b) |   | Number of                        securities                        remaining available for                        future issuance under                        equity-based                        compensation plans                        (excluding securities                        reflected in column (a)                        (c) |
|                                                                                   |
| Equity compensation                        plans approved by security holders     |   |    40,300                        (1)                                                                                                                                                                                       |   | $46.05                                                                                                                                                                                                                                           |   |    258,370                        (2)                                                                                                                                                                                                                                                                                         |
| Equity compensation                        plans not approved by security holders |   |      —                                                                                                                                                                                                     |   |      —                                                                                                                                                                                                            |   |       —                                                                                                                                                                                                                                                                                                  |
|                                                                                   |
| Total                                                                             |   | 40,300                                                                                                                                                                                                                                    |   | $46.05                                                                                                                                                                                                                                           |   | 258,370                                                                                                                                                                                                                                                                                                                                      |
|                                                                                   |

|   |                                                                                                                                                                                                                                                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | This includes only                        stock options granted under the 2000 Plan.                                                                                                                                                                                                 |
| (2)    | Pertains to the 2006                        Plan only, and excludes 41,630 performance shares granted under the 2006                        Plan through December 31, 2007. Effective April 25, 2006, securities can no                        longer be issued under the 2000 Plan. |

- 164            -

----

          The            information required hereunder regarding equity ownership in CH Energy Group by its            Directors and executive officers is incorporated by reference to the section captioned            “Beneficial Ownership” of the Proxy Statement.

|                                     |                                                                                                                       |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
| **ITEM 13                        -****** | **CERTAIN                        RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR                        INDEPENDENCE** |

          See            Note 1 - “Summary of Significant Accounting Policies” under the caption            “Related Party Transactions.” The information required hereunder regarding            Director independence is incorporated by reference to the section captioned            “Director Independence” of the Proxy Statement.

|                                     |                                                              |
|------------------------------------------|-------------------------------------------------------------------|
| **ITEM 14                        -****** | **PRINCIPAL                        ACCOUNTANT FEES AND SERVICES** |

          The            information required by this Item regarding CH Energy Group’s Audit            Committee’s policies and procedures and annual fees rendered to CH Energy            Group’s principal accountants is incorporated by reference to the Report of the            Audit Committee and to the caption “Principal Accountant Fees and            Services,” both of which are included in the Proxy Statement.

          The            following information is provided for Central Hudson:

**PRINCIPAL ACCOUNTANT FEES AND            SERVICES**

|                                                                                            |   |     |    |     |   |    |   |
|-------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|---------|--------|
| **PricewaterhouseCoopers                        LLP**                                           |   | **2007** |    | **2006** |   |
|                                                                                                 |        |          |         |          |        |
| Audit Fees                                                                                      |   | $        | 735,138 |     | $      | 636,907 |   |
|                                                                                                 |        |          |         |          |        |         |        |
| Tax Fees                                                                                        |   |     |    |     |   |    |   |
| Includes review of                        federal and state income tax returns and tax research |   |     | 11,800  |     |   | 11,200  |   |
| All Other                        Fees                                                           |   |     |    |     |   |    |   |
| Includes software                        licensing fee for accounting research tool             |   |     | 1,500   |     |   | 1,500   |   |
|                                                                                                 |        |          |         |          |        |         |        |
| TOTAL                                                                                           |   | $        | 748,438 |     | $      | 649,607 |   |
|                                                                                                 |        |          |         |          |        |         |        |

- 165            -

----

**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.                                                                                                                                                                                                                                  |

- 166            -

----

**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 13, 2008                                       |   |                                             |   |
|                                                                                        |   |                                             |   |
| CENTRAL HUDSON GAS                        & ELECTRIC                        CORPORATION |
|                                                                                        |   |                                             |   |
|                                                                                        | By     | /s/                        Steven V. Lant        |   |
|                                                                                        |   |                                                  |   |
|                                                                                        |   | Steven V.                        Lant            |   |
|                                                                                        |   | Chairman of the Board                        and |   |
|                                                                                        |   | Chief                        Executive Officer   |   |
|                                                                                        |   |                                             |   |
| Dated:                         February 13, 2008                                       |   |                                             |   |

- 167            -

----

Pursuant to the requirements of            the Securities Exchange Act of 1934, this 10-K Annual Report has been signed below by            the following persons 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                                                  |   | Chairman of the                        Board, President and Chief Executive Officer of CH Energy Group, Inc. and                        Chairman of the Board and Chief Executive Officers of Central Hudson Gas                        & Electric Corporation |                                     |   |
|                                                                                            |   |                                                                                                                                                                                                                                                               |                                     |
| (Steven V.                        Lant)                                                    |   |                                                                                                                                                                                                                                                               |                                     |
|                                                                                       |   |                                                                                                                                                                                                                                                               | February 13,                        2008 |
|                                                                                       |   |                                                                                                                                                                                                                                                               |                                     |   |
| (b) Principal                        Accounting                        Officer:            |   |                                                                                                                                                                                                                                                               |                                     |   |
|                                                                                       |   |                                                                                                                                                                                                                                                               |                                     |   |
|                                                                                       |   |                                                                                                                                                                                                                                                               |                                     |   |
| /s/ Donna S.                        Doyle                                                  |   | Vice President                        –Accounting and Controller of CH Energy Group, Inc.; Vice President                        –Accounting of Central Hudson Gas & Electric                        Corporation                                   |                                     |   |
|                                                                                            |   |                                                                                                                                                                                                                                                               |                                     |
| (Donna S.                        Doyle)                                                    |   |                                                                                                                                                                                                                                                               | February 13,                        2008 |
|                                                                                       |   |                                                                                                                                                                                                                                                               |                                     |   |
| (c) Chief Financial                        Officer:                                        |   |                                                                                                                                                                                                                                                               |                                     |   |
|                                                                                       |   |                                                                                                                                                                                                                                                               |                                     |   |
| /s/ Christopher M.                        Capone                                           |   | Executive Vice                        President and Chief Financial Officer of CH Energy Group, Inc. and Central                        Hudson Gas & Electric Corporation                                                                                      |                                     |   |
|                                                                                            |   |                                                                                                                                                                                                                                                               |                                     |
| (Christopher M.                        Capone)                                             |   |                                                                                                                                                                                                                                                               | February 13,                        2008 |

- 168            -

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|                                                                                                                                                                                                                                            |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| (d) A majority of                        Directors of CH Energy Group, Inc.:                                                                                                                                                                    |   |   |
|                                                                                                                                                                                                                                            |   |   |
| Steven V. Lant*,                        Margarita K. Dilley*, Steven M. Fetter*, Stanley J. Grubel*, Manuel J.                        Iraola*, E. Michel Kruse*,                        Jeffrey D. Tranen*, and Ernest R. Verebelyi*, Directors |   |   |

|                                                                             |                                                                                                                    |                                     |
|----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|------------------------------------------|
| By                                                                               | /s/ Steven V.                        Lant                                                                               |                                     |
|                                                                             |                                                                                                                         |                                     |
|                                                                             | (Steven V.                        Lant)                                                                                 | February 13,                        2008 |
|                                                                             |                                                                                                                    |                                     |
| (e)                                                                              | A majority of                        Directors of Central Hudson Gas &                        Electric Corporation: |                                     |
|                                                                             |                                                                                                                    |                                     |
| Steven V. Lant*,                        Christopher M. Capone*,                  |                                                                                                                    |
| Joseph J.                        DeVirgilio, Jr.*, and Carl E. Meyer*, Directors |                                                                                                                    |
|                                                                             |                                                                                                                    |                                     |
| By                                                                               | /s/ Steven V.                        Lant                                                                               |                                     |
|                                                                             |                                                                                                                         |                                     |
|                                                                             | (Steven V.                        Lant)                                                                                 | February 13,                        2008 |

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

- 169            -

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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:

|                                                                                                                   |   |                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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. (Incorporated herein by reference to Energy Group’s                        Annual Report, on Form 10-K, for the fiscal year ended December 31, 2000;                        Exhibit 2(i)) |
|                                                                                                                   |   |                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                   |   | (ii)                                                                                                | Agreement and Plan                        of Exchange by and between Central Hudson Gas & Electric Corporation                        and CH Energy Group, Inc. (Incorporated herein by reference to Central                        Hudson’s Current Report on Form 8-K dated December 15, 1999; 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. (Incorporated herein by reference                        to Central Hudson’s Current Report on Form 8-K filed on September 30,                        1998; Exhibit 3(i))                                                                                                                                                                     |
|                                                                                                                   |   |                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                   |   | (ii)                                                                                                | By-laws of CH Energy                        Group, Inc. in effect on the date of this Report. (Incorporated herein by                        reference to Energy Group’s Current Report on Form 8-K filed on                        February 16, 2006; Exhibit (99))                                                                                                                                                                                                                                                                   |
|                                                                                                                   |   |                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                   |   | (iii)                                                                                               | Restated Certificate                        of Incorporation of Central Hudson Gas & Electric Corporation under                        Section 807 of the Business Corporation Law. (Incorporated herein by                        reference to                                                                                                                                                                                                                                                                                          |

----

|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                               | Central                        Hudson’s Quarterly Report on Form 10-Q for the fiscal quarter ended                        September 30, 1993; Exhibit (3)1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iv)                                                                                                                                                               | Certificate of                        Amendment to the Certificate of Incorporation of Central Hudson Gas &                        Electric Corporation under Section 805 of the Business Corporation Law.                        (Incorporated herein by reference to Central Hudson’s Quarterly                        Report on Form 10-Q for the fiscal quarter ended September 30, 1993;                        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.                        (Incorporated herein by reference to Central Hudson’s Quarterly                        Report on Form 10-Q for the fiscal quarter ended September 30, 1993;                        Exhibit (3)3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (vi)                                                                                                                                                               | By-laws of Central Hudson Gas & Electric Corporation in effect on the                        date of this Report. (Incorporated herein by reference to CH Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (3)(vi))                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (4)    |   | Instruments defining                        the rights of security holders, including indentures (see also Exhibits                        (3)(i) and (ii) above): |
|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (ii)                                                                                                                                                               | 1—       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.                        (Incorporated herein by reference to Central Hudson’s Current Report                        on Form 8-K, dated May 27, 1992; Exhibit (4)(ii)29)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (ii)                                                                                                                                                               | 2—       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, 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. |

----

|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (ii)   | 3— 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.                                           |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 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. |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (ii)   | 4—     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, 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. |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (ii)   | 5—     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, 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.                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | (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.                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | (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. |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | (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 March                        25, 2002) filed pursuant to Rule 424(b) in connection with Registration                        Statement No. 333-83542.    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | (ii)   | 6—     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. 333-116286, 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.                        333-116286.             |

----

|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 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.                        333-116286.  |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Pricing Supplement                        No. 3, Dated November 30, 2005 (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.                        333-116286. |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Pricing Supplement                        No. 4, Dated November 17, 2006 (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.                        333-116286.    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (ii)   | 7—     Prospectus                        Supplement Dated March 20, 2007 (To Prospectus dated December 1, 2006)                        relating to $140,000,000 principal amount of Medium-Term Notes, Series F,                        as filed on March 20, 2007, pursuant to Rule 424 (b) in connection with                        Registration Statement No. 333-138510, and, as applicable to a tranche of                        such Medium-Term Notes, each of the following:                                                                                                                                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Pricing Supplement                        No. 1, Dated March 20, 2007 filed on March 21, 2007, pursuant to Rule 424                        (b).                                                                                                                                                                                                              |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                         |
|   |   |   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Pricing Supplement                        No. 2, Dated September 14, 2007 filed on September 14, 2007, pursuant to                        Rule 424 (b).                                                                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (ii)   | 8—     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. |

----

|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10)   |   | Material                        contracts: |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 1—     Assignment                        and Assumption dated as of October 24, 1975 between Central Hudson and New                        York State Electric & Gas Corporation. (Incorporated herein by                        reference to Central Hudson’s Registration Statement No. 2-54690;                        Exhibit 5.25)                                                       |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 2—     Amendment                        to Assignment and Assumption dated October 30, 1978 between Central Hudson                        and New York State Electric & Gas Corporation. (Incorporated herein by                        reference to Central Hudson’s Registration Statement No. 2-65127;                        Exhibit 5.34)                                                |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 3—     Agreement                        dated April 2, 1980 by and between Central Hudson and the Power Authority                        of the State of New York. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K/A for the fiscal year ended                        December 31, 1992; Exhibit (10)(i)24)                               |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 4—     Transmission                        Agreement, dated October 25, 1983, between Central Hudson and Niagara                        Mohawk Power Corporation. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K/A for the fiscal year ended                        December 31, 1992; Exhibit (10)(i)30)                                |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 5—     Underground                        Storage Service Agreement, dated June 30, 1982, between Central Hudson and                        Penn-York Energy Corporation. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K/A for the fiscal year ended                        December 31, 1992; Exhibit (10)(i)32)                        |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 6—     Interruptible                        Transmission Service Agreement, dated December 20, 1983, between Central                        Hudson and Power Authority of the State of New York. (Incorporated herein                        by reference to Central Hudson’s Annual Report on Form 10-K/A for the                        fiscal year ended December 31, 1992; Exhibit (10)(i)33) |
|   |   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | (i)                                        | 7—     Agreement,                        dated December 7, 1983, between Central Hudson and the Power Authority of                        the State of New York. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K/A for the fiscal year ended                        December 31, 1992; Exhibit (10)(i)34)                                 |

----

|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (i)    | 8—     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). (Incorporated herein by reference                        to Central Hudson’s Annual Report on Form 10-K/A for the fiscal year                        ended December 31, 1992; Exhibit (10)(i)37)                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 9—     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. (Incorporated                        herein by reference to Central Hudson’s Annual Report on Form 10-K/A                        for the fiscal year ended December 31, 1992; Exhibit (10)(i)38) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 10—   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. (Incorporated herein by reference to Central Hudson’s                        Annual Report on Form 10-K/A for the fiscal year ended December 31, 1992;                        Exhibit                        (10)(i)39)                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 11—   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. (Incorporated                        herein by reference to Central Hudson’s Annual Report on Form 10-K                        for the fiscal year ended December 31, 1987; Exhibit (10)(i)98)           |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 12—   Agreement,                        dated October 9, 1990, between Texas Eastern Transmission Corporation and                        Central Hudson. (Incorporated herein by reference to Central Hudson’s                        Annual Report on Form 10-K for the fiscal year ended December 31, 1990;                        Exhibit (10)(i)80)                                                                                                                                                           |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 13—   Agreement,                        dated December 28, 1989, between Texas Eastern Transmission Corporation and                        Central Hudson. (Incorporated herein by reference to Central Hudson’s                        Annual Report on Form 10-K for the fiscal year ended December 31, 1990;                        Exhibit (10)(i)83)                                                                                                                                                         |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 14—   Agreement,                        dated November 3, 1989, between Texas Eastern Transmission Corporation and                        Central Hudson. (Incorporated herein by reference to Central                        Hudson’s                                                                                                                                                                                                                                                                            |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Annual Report on                        Form 10-K for the fiscal year ended December 31, 1990; Exhibit                        (10)(i)84)                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 15—   Storage                        Service Agreement, dated July 1, 1989, between CNG Transmission Corporation                        and Central Hudson. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1990; Exhibit (10)(i)91)                                                                                                                                                                                                                   |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 16—   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. (Incorporated herein by                        reference to Central Hudson’s Annual Report on Form 10-K for the                        fiscal year ended December 31, 1990; Exhibit (10)(i)92)                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 17—   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. (Incorporated herein by reference to                        Central Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1990; Exhibit (10)(i)93) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 18—   Agreement                        dated as of February 7, 1991 between Central Hudson and Alberta Northeast                        Gas, Limited for the purchase of Canadian natural gas from ProGas Limited                        to be delivered on the Iroquois Gas Transmission System. (Incorporated                        herein by reference to Central Hudson’s Annual Report on Form 10-K                        for the fiscal year ended December 31, 1990; Exhibit (10)(i)94)                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 19—   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. (Incorporated herein by                        reference to Central Hudson’s Annual Report on Form 10-K for the                        fiscal year ended December 31, 1990; Exhibit (10)(i)95) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (i)    | 20—   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                                                                                                                                                                                                                                                                                                                                        |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Pipelines Limited                        under Precedent Agreement No. 1 to be delivered on the Iroquois Gas                        Transmission System. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1990; Exhibit (10)(i)96)                                                                                                                                                                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 21—   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. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1990; Exhibit (10)(i)97)                                                                                                                                                              |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 22—   Agreement,                        dated December 28, 1990 and effective February 5, 1991, between Central                        Hudson and National Fuel Gas Supply Corporation for interruptible                        transportation. (Incorporated herein by reference to Central Hudson’s                        Annual Report on Form 10-K for the fiscal year ended December 31, 1991;                        Exhibit (10)(i)100)                                                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 23—   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.                        (Incorporated herein by reference to Central Hudson’s Annual Report                        on Form 10-K for the fiscal year ended December 31, 1991; Exhibit                        (10)(i)101) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 24—   Service                        Agreement, effective December 1, 1990, between Central Hudson and Texas                        Eastern Transmission Corporation, for firm transportation service under                        Rate Schedule FT-1. (Incorporated herein by reference to Central                        Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1991; Exhibit (10)(i)103)                                                                                                                                                                   |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 25—   Service                        Agreement, dated February 25, 1991, between Central Hudson and Texas                        Eastern Transmission Corporation, for incremental 5,056 dth. under Rate                        Schedule CD-1. (Incorporated herein by reference to Central Hudson’s                        Annual Report on Form 10-K for the fiscal year ended December 31, 1991;                        Exhibit (10)(i)104)                                                                                                                                                                           |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 26—   Agreement                        dated as of July 1, 1992 between Central Hudson and Tennessee Gas Pipeline                        Company for storage of natural gas. (Incorporated herein by reference to                        Central                                                                                                                                                                                                                                                                                                                                                                               |

----

|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Hudson’s                        Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,                        1992; Exhibit (10)(i)114)                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 27—   Agreement                        dated as of July 1, 1992 between Central Hudson and Tennessee Gas Pipeline                        Company for firm transportation periods. (Incorporated herein by reference                        to Central Hudson’s Quarterly Report on Form 10-Q for the fiscal                        quarter ended September 30, 1992; Exhibit (10)(i)115)                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 28—   Agreement,                        dated December 1, 1991, between Central Hudson and Iroquois Gas                        Transmission System for interruptible gas transportation service.                        (Incorporated herein by reference to Central Hudson’s Annual Report                        on Form 10-K/A for the fiscal year ended December 31, 1992; Exhibit                        (10)(i)101)                                                                                                         |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 29—   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.                        (Incorporated herein by reference to Central Hudson’s Annual Report                        on Form 10-K for the fiscal year ended December 31, 1990; Exhibit                        (10)(i)102) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 30—   Gas                        Transportation Agreement, dated as of September 1, 1993, by and between                        Tennessee Gas Pipeline Company and Central Hudson. (Incorporated herein by                        reference to Central Hudson’s Quarterly report on Form 10-Q for                        fiscal quarter ended September 30, 1993; Exhibit (10)(i)108)                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 31—   Agreement,                        dated as of May 20, 1993, between Central Hudson and New York State                        Electric & Gas Corporation. (Incorporated herein by reference to                        Central Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1993; Exhibit (10)(i)93)                                                                                                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 32—   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. (Incorporated                        herein by reference to Central Hudson’s Current Report on Form 8-K,                        dated January 7, 1998; Exhibit (10))                                                            |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (i)    | 33—   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. (Incorporated herein by reference to Central Hudson’s                        Current Report on Form 8-K, dated February 10, 1998; Exhibit                        (10)(2)) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 34—   Participation                        Agreement, dated as of June 1, 1977 by and between New York State Energy                        Research and Development Authority and Central Hudson. (Incorporated herein                        by reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(i)67)                                                                                                                                         |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 35—   Participation                        Agreement, dated as of December 1, 1998, by and between New York State                        Energy Research and Development Authority and Central Hudson. (Incorporated                        herein by reference to Central Hudson’s Annual Report on Form 10-K                        for the fiscal year ended December 31, 1998; Exhibit (10)(i)82)                                                                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 36—   Participation                        Agreement, dated as of July 15, 1999, by and between New York State Energy                        Research and Development Authority and Central Hudson. (Incorporated herein                        by reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(i)66)                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 37—   Participation                        Agreement, dated as of August 1, 1999, by and between New York State Energy                        Research and Development Authority and Central Hudson. (Incorporated herein                        by reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(i)67)                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 38—   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. (Incorporated herein by reference to                        Energy Group’s Quarterly Report on Form 10-Q for the fiscal quarter                        ended September 30, 2000; Exhibit (10)(i)93)                                                              |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (i)    | 39—   Asset                        Purchase and Sale Agreement, dated August 7, 2000, by and between Central                        Hudson and Dynegy Power                                                                                                                                                                                                                                                                                                                                                                                    |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Corp. (Incorporated                        herein by reference to Energy Group’s Quarterly Report on Form 10-Q                        for the fiscal quarter ended September 30, 2000; Exhibit                        (10)(i)94)                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 40—   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. (Incorporated herein by reference to Energy                        Group’s Quarterly Report on Form 10-Q for the fiscal quarter ended                        September 30, 2000; Exhibit (10)(i)95)                                                                                                                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 41—   Guarantee                        Agreement, dated August 7, 2000, among Central Hudson, Consolidated Edison                        Company of New York, Inc., Niagara Mohawk Power Corporation and Dynegy                        Holdings, Inc. (Incorporated herein by reference to Energy Group’s                        Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,                        2000; Exhibit (10)(i)96)                                                                                                                                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 42—   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. (Incorporated herein by reference to Energy                        Group’s Annual Report, on Form 10-K, for the fiscal year ended                        December 31, 2000; Exhibit (10)(i)79) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 43—   Power                        Purchase Agreement, dated as of December 11, 2000, by and between                        Constellation Nuclear, LLC and Central Hudson. (Incorporated herein by                        reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(i)80)                                                                                                                                                                                                                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 44—   Revenue                        Sharing Agreement, dated as of December 11, 2000, by and between                        Constellation Nuclear LLC and Central Hudson. (Incorporated herein by                        reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(i)84)                                                                                                                                                                                                                                                                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (i)    | 45—   Transition                        Power Agreement, dated January 30, 2001, by and between Central Hudson and                        Dynegy Power Marketing, Inc. (Incorporated herein by reference to Energy                        Group’s Annual Report, on Form 10-K, for the fiscal year ended                        December 31, 2000; Exhibit (10)(i)82)                                                                                                                                                                                                                                                                                     |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (i)    | 46—   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. (Incorporated herein by reference                        to Energy Group’s Quarterly Report on Form 10-Q for the fiscal                        quarter ended June 30, 2000; Exhibit (10)(i)92) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 47—   Stock                        Purchase Agreement, dated December 21, 2001 between Central Hudson Energy                        Services, Inc. and WPS Power Development, Inc. (Incorporated herein by                        reference to Energy Group’s Annual Report on Form 10-K, for the                        fiscal year ended December 31, 2001; Exhibit (10)(i)69)                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 48—   Letter                        Agreement, dated December 21, 2001, between Central Hudson Enterprises                        Corporation and WPS Power Development, Inc. (Incorporated herein by                        reference to Energy Group’s Annual Report on Form 10-K, for the                        fiscal year ended December 31, 2001; Exhibit (10)(i)70)                                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 49—   Letter                        Agreement, dated July 3, 2001 between Central Hudson and Dynegy.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K, for the fiscal year ended December 31, 2001; Exhibit                        (10)(i)72)                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 50—   Amendment                        No. 1, dated April 27, 2005, to Credit Agreement, dated November 21, 2003,                        among CH Energy Group, Inc., certain lenders described therein and KeyBank,                        N.A., as administrative agent. (Incorporated herein by reference to Energy                        Group’s Current Report on Form 8-K filed on April 29, 2005; Exhibit                        99)                                   |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 51—   Amended                        and Restated Credit Agreement effective as of January 2, 2007 among Central                        Hudson, certain lenders described therein and JPMorgan Chase Bank, N.A., as                        arranger and administrative agent. (Incorporated herein by reference to                        Central Hudson’s Current Report on Form 8-K filed on December 20,                        2006;                        Exhibit 1)     |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (i)    | 52—   $25,000,000                        Demand Note of Griffith Energy Services, Inc. dated January 18, 2008,                        payable to the order of Manufacturers and Traders Trust Company.                        (Incorporated herein by reference to Energy Group’s Current Report on                        Form 8-K filed on January 18, 2008; Exhibit 10.1)                                                                                                   |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Guaranty Agreement                        dated as of January 18, 2008, from Central Hudson Enterprises Corporation                        to Manufacturers and Traders Trust Company. (Incorporated herein by                        reference to Energy Group’s Current Report on Form 8-K filed on                        January 18, 2008; Exhibit 10.2) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                               |
|   |   |   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Guaranty Agreement                        dated as of January 18, 2008, from CH Energy Group to Manufacturers and                        Traders Trust Company. (Incorporated herein by reference to Energy                        Group’s Current Report on Form 8-K filed on January 18, 2008; Exhibit                        10.3)                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (i)    | 53—   Promissory Note of Central Hudson Gas &                        Electric Corporation, dated April 16, 2007, payable to the order of                        JPMorgan Chase Bank, N.A. (Incorporated herein by reference to CH Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (10)(i)53)                                                                                                                                                                     |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (i)    | 54—   Promissory Note of Central Hudson Gas &                        Electric Corporation, dated June 22, 2007, payable to the order of Citizens                        Bank, N.A. (Incorporated herein by reference to CH Energy Group’s                        Annual Report on Form 10-K for the year ended December 31, 2007; Exhibit                        (10)(i)54)                                                                                                                                                                            |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (i)    | 55—   Distribution                        Agreement dated March 19, 2007 between the Company, and Banc of America                        Securities LLC, J.P. Morgan Securities Inc. and McDonald Investments Inc.,                        as agents. (Incorporated herein by reference to Central Hudson’s                        Current Report on Form 8-K filed on March 19, 2007; Exhibit 1)                                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | (iii)1 | 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. (Incorporated herein by reference to Central Hudson’s Quarterly                        Report on Form 10-Q for the fiscal quarter ended June 30, 1994; 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. (Incorporated herein by                        reference to                                                                                                                                                                                                                                                                                                      |

|                                                                                                                                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                             |
| 1                        Exhibits in Part (iii) of this Section 10 are management contracts and                        compensatory plans and arrangements. |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Central                        Hudson’s Annual Report on Form 10-K for the fiscal year ended                        December 31, 1994; 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.                        (Incorporated herein by reference to Central Hudson’s Annual Report                        on Form 10-K for the fiscal year ended December 31, 1994; Exhibit                        (10)(iii)20)                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 4—     Management                        Incentive Program of Central Hudson, effective April 1, 1994. (Incorporated                        herein by reference to Central Hudson’s Annual Report on Form 10-K                        for the fiscal year ended December 31, 1996; Exhibit                        (10)(iii)23)                                                                                                                                                                                                |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 5—     Amendment,                        dated July 25, 1997, to the Management Incentive Program of Central Hudson,                        effective August 1, 1997. (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; Exhibit                        (10)(iii)24)                                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 6—     CH                        Energy Group, Inc. Change-of-Control Severance Policy, effective December                        1, 1998. (Incorporated herein by reference to Central Hudson’s Annual                        Report on Form 10-K for the fiscal year ended December 31, 1998;                        Exhibit                        (10)(iii)14)                                                                                                                                                            |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 7—     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.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K for the fiscal year ended December 31, 1999; Exhibit                        (10)(iii)26) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 8—     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.                        (Incorporated herein by reference to Energy Group’s Quarterly Report                        on Form 10-Q for the fiscal quarter ended June 30, 2000; Exhibit                        (10)(iii)29)      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (iii)  | 9—     Amendment                        Number Three to the Central Hudson Savings Incentive Plan, effective                        January 1, 2001.                                                                                                                                                                                                                                                                                                                                                                                |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | (Incorporated herein                        by reference to Energy Group’s Annual Report, on Form 10-K, for the                        fiscal year ended December 31, 2000; Exhibit (10)(iii)32)                                                                                                                                                                                                                                                                                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 10—   Amendment                        to the CH Energy Group, Inc. Change-of-Control Severance Policy, effective                        August 1, 2000. (Incorporated herein by reference to Energy Group’s                        Annual Report, on Form 10-K, for the fiscal year ended December 31, 2000;                        Exhibit (10)(iii)33)                                                                                                                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 11—   Employment                        Agreement, dated September 28, 2001, between CH Energy Group, Inc. and Paul                        J. Ganci. (Incorporated herein by reference to Energy Group’s Annual                        Report on Form 10-K, for the fiscal year ended December 31, 2001; Exhibit                        (10)(iii)16)                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 12—   Amendment,                        effective January 1, 2001, to Energy Group’s Long-Term                        Performance-Based Incentive Plan. (Incorporated herein by reference to                        Energy Group’s Quarterly Report on Form 10-Q for the fiscal quarter                        ended March 31, 2001; Exhibit (10)(iii)1)                                                                                                                   |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 13—   Amendment                        and Restatement, dated October 1, 2001, of the Central Hudson Savings                        Incentive Plan. (Incorporated herein by reference to Energy Group’s                        Annual Report on Form 10-K, for the fiscal year ended December 31, 2001;                        Exhibit                        (10)(iii)18)                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 14—   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. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K, for the fiscal year ended                        December 31, 2001; Exhibit                        (10)(iii)19) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 15—   Amendment                        No. 2, effective January 1, 2002, to Energy Group’s Long-Term                        Performance-Based Incentive Plan. (Incorporated herein by reference to                        Energy Group’s Annual Report on Form 10-K, for the fiscal year ended                        December 31, 2001; Exhibit (10)(iii)20)                                                                                                              |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (iii)  | 16—   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. (Incorporated herein by                        reference to Energy Group’s Annual Report on                                                                                                      |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Form 10-K, for the                        fiscal year ended December 31, 2001; Exhibit (10)(iii)21)                                                                                                                                                                                                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 17—   Amendment                        and restatement of CH Energy Group, Inc. Supplementary Retirement Plan,                        effective July 1, 2001. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K, for the fiscal year ended                        December 31, 2001; Exhibit (10)(iii)23)                                  |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 18—   Amendment                        and restatement of Central Hudson Gas & Electric Corporation Retirement                        Benefit Restoration Plan effective June 22, 2001. (Incorporated herein by                        reference to Energy Group’s Annual Report on Form 10-K, for the                        fiscal year ended December 31, 2001; Exhibit (10)(iii)24)    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 19—   Agreement,                        dated May 10, 2002, between CH Energy Group, Inc. and Allan R. Page.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K, for the fiscal year ended December 31, 2002; Exhibit                        (10)(iii)25)                                                            |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 20—   Central                        Hudson Gas & Electric Corporation Savings Incentive Plan, January 1,                        2004 Restatement. (Incorporated herein by reference to Energy Group’s                        Registration Statement on Form S-8, filed on January 16, 2004; Exhibit                        (99)(a))                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 21—   Amendment                        to CH Energy Group, Inc. Long-Term Performance-Based Incentive Plan, dated                        October 24, 2003, effective as of September 26, 2003. (Incorporated herein                        by reference to Energy Group’s Annual Report on Form 10-K, for the                        fiscal year ended December 31, 2003; Exhibit (10)(iii)28) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 22—   CH                        Energy Group, Inc. Amended and Restated Stock Plan for Outside Directors,                        dated October 24, 2003, effective as of September 26, 2003. (Incorporated                        herein by reference to Energy Group’s Annual Report on Form 10-K, for                        the fiscal year ended December 31, 2003; Exhibit (10)(iii)30)   |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | 23—   First                        Amendment to the Central Hudson Gas & Electric Corporation Savings                        Incentive Plan (Incorporated herein by reference to Energy Group’s                        Quarterly Report on Form 10-Q for the quarter ended March 31, 2004; Exhibit                        (10)(iii)31)                                                     |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (iii)  | 24—   CH                        Energy Group, Inc. 2004 Executive Annual Incentive Plan, dated March 16,                        2004. (Incorporated herein by reference to Energy Group’s Annual                        Report on Form 10-K for the year ended December 31, 2004; Exhibit                        (10)(iii)32)                                                                                                                                                                                |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 25—   CH                        Energy Group, Inc. 2005 Executive Annual Incentive Plan, dated February 11,                        2005. (Incorporated herein by reference to Energy Group’s Annual                        Report on Form 10-K for the year ended December 31, 2004; Exhibit                        (10)(iii)33)                                                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 26—   CH                        Energy Group, Inc. Form of Performance Shares Agreement. (Incorporated                        herein by reference to Energy Group’s Quarterly Report on Form 10-Q                        for the quarter ended June 30, 2005; Exhibit 10(iii)34)                                                                                                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 27—   CH                        Energy Group, Inc. Supplemental Executive Retirement Plan, as amended.                        (corrected March 31, 2006). (Incorporated herein by reference to Energy                        Group’s Current Report on Form 8-K/A filed on April 6, 2006; Exhibit                        (10)(iii)40)                                                                                                                                                                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 28—   Amendment                        to the CH Energy Group, Inc. Supplementary Retirement Plan. (Incorporated                        herein by reference to Energy Group’s Current Report on Form 8-K/A                        filed on April 6, 2006; Exhibit (62)(iii)41)                                                                                                                                                                                                                               |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 29—   Long-Term                        Equity Incentive Plan of CH Energy Group, Inc. effective as of April 25,                        2006. (Incorporated as Appendix A to Energy Group’s proxy statement                        filed on March 10, 2006; Appendix A)                                                                                                                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 30—   Form                        of Performance Share Award Agreement under CH Energy Group, Inc. Long-Term                        Equity Incentive Plan. (Incorporated herein by reference to Energy                        Group’s Current Report on Form 8-K filed on April 28, 2006; Exhibit                        (10)(iii)43)                                                                                                                                                                        |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (iii)  | 31—   Amended and Restated CH Energy Group, Inc.                        Directors and Executives Deferred Compensation Plan, effective as of                        January 1, 2008, (dated December 31, 2007). (Incorporated herein by                        reference to Energy Group’s Current Report on Form 8-K filed on                        January 3, 2008, and Energy Group’s Annual Report on Form 10-K for                        the year ended December 31, 2007; Exhibit (10)(iii)31) |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (iii)  | 32—   Amended and restated Employment Agreement                        between CH Energy Group, Inc. and the Chief Executive Officer effective as                        of January 1, 2008. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (10)(iii)32)                                      |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 33—   Amended and restated Employment Agreement                        between CH Energy Group, Inc. and the three most senior executives (after                        Chief Executive Officer) effective as of January 1, 2008. (Incorporated                        herein by reference to Energy Group’s Annual Report on Form 10-K for                        the year ended December 31, 2007; Exhibit (10)(iii)33) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 34—   Amended and restated Employment Agreement                        between CH Energy Group, Inc. and the other executive officers effective as                        of January 1, 2008. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (10)(iii)34)                                     |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 35—   Amendment to CH Energy Group, Inc. 2000                        Long-Term Equity Incentive Plan effective as of December 31, 2007.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K for the year ended December 31, 2007; Exhibit                        (10)(iii)35)                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 36—   Amendment to CH Energy Group, Inc. 2006                        Long-Term Equity Incentive Plan effective as of December 31, 2007.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K for the year ended December 31, 2007; Exhibit                        (10)(iii)36)                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 37—   Amended and Restated CH Energy Group, Inc.                        Supplemental Executive Retirement Plan effective as of January 1, 2008,                        (dated December 31, 2007). (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (10)(iii)37)                                 |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | (iii)  | 38—   Amendment to CH Energy Group, Inc. Supplementary                        Retirement Plan effective as of December 31, 2007. (Incorporated herein by                        reference to Energy Group’s Annual Report on Form 10-K for the year                        ended December 31, 2007; Exhibit (10)(iii)38)                                                                                                  |

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|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-------------|--------|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   | (iii)                                                                                           | 39—   Amended and Restated Central Hudson Gas &                        Electric Corporation Retirement Benefit Restoration Plan effective as of                        January 1, 2008, (dated December 31, 2007). (Incorporated herein by                        reference to Energy Group’s Current Report on Form 8-K filed on                        January 3, 2008, and Central Hudson’s Annual Report on Form 10-K for                        the year ended December 31, 2007; Exhibit (10)(iii)39) |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |   | (iii)                                                                                           | 40—   Amended and Restated CH Energy Group, Inc.                        Short-Term Incentive Plan effective as of January 1, 2008, (dated December                        31, 2007). (Incorporated herein by reference to Energy Group’s Annual                        Report on Form 10-K for the year ended December 31, 2007; Exhibit                        (10)(iii)40)                                                                                                                                          |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |   | (iii)                                                                                           | 41—   Amendments to CH Energy Group, Inc. 2005, 2006                        and 2007 Long-Term Equity Incentive Plans effective as of January 1, 2008,                        (dated December 31, 2007). (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K for the year ended December 31,                        2007; Exhibit (10)(iii)41)                                                                                                                      |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |   | (iii)                                                                                           | 42—   Amended and restated Employment Agreement                        between CH Energy Group, Inc. and Griffith Energy Services, Inc. executive                        effective as of January 1, 2008. (Incorporated herein by reference to                        Energy Group’s Annual Report on Form 10-K for the year ended December                        31, 2007; Exhibit (10)(iii)42)                                                                                                                     |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |   | (iii)                                                                                           | 43—   CH Energy Group, Inc. 2007 Executive Annual                        Incentive Plan, dated May 320, 2007. (Incorporated herein by reference to                        Energy Group’s Annual Report on Form 10-K for the year ended December                        31, 2007; Exhibit (10)(iii)43)                                                                                                                                                                                                                 |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (12)        |   | (i)—                                                                                      | CH Energy Group Statement showing the computation of the ratio of earnings                        to fixed charges.                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |   | (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.                                                                                                                                                                                                                                                                                                                                         |
|        |   |                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (21)— |   | Subsidiaries of Energy Group and Central Hudson as of December 31,                        2007. |
|        |   |                                                                                            |
| (23)— |   | Consents of                        Independent Registered Public Accounting Firm.               |

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|        |   |                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------|--------|-----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                            | 1—     Consents of Independent Registered                        Public Accounting Firm for incorporation by reference of Energy Group                        Inc.’s Registration Statements on Form S-3 and S-8.                                                                                                                                                                                                                                                                                                                 |
|        |   |                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |   |                                                            | 2—     Consents of Independent Registered                        Public Accounting Firm for incorporation by reference of Central Hudson Gas                        & Electric Corporation’s Registration Statement on Form                        S-3.                                                                                                                                                                                                                                                                       |
|        |   |                                                            |
| (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:                     |
|        |   |                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |   | (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.                        (Incorporated herein by reference to Central Hudson’s Quarterly                        Report on Form 10-Q for the fiscal quarter ended September 30, 1995;                        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. (Incorporated herein by reference to Central                        Hudson’s Current Report on Form 8-K, dated January 7, 1998; Exhibit                        (99)2) |
|        |   |                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |   | (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                                                                                                                                                                                                                                                                                    |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Agreement, subject                        to certain modifications and conditions. (Incorporated herein by reference                        to Central Hudson’s Current Report on Form 8-K, dated February 10,                        1998; 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. (Incorporated herein by                        reference to Central Hudson’s Current Report on Form 8-K, dated July                        24, 1998; Exhibit (10)1) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 5—     Order                        of the Public Service Commission of the State of New York, issued and                        effective October 25, 2001, establishing new rates for Central Hudson.                        (Incorporated herein by reference to Energy Group’s Annual Report on                        Form 10-K, for the fiscal year ended December 31, 2001; Exhibit                        (99)(i)9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 6—     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. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K, for the fiscal year ended                        December 31, 2002; Exhibit (99)(i)10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (i)    | 7—     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. (Incorporated                        herein by reference to Energy Group’s Annual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | Report on Form 10-K,                        for the fiscal year ended December 31, 2002; Exhibit (99)(i)11)                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | (i)    | 8—     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. (Incorporated herein by reference to Energy                        Group’s Annual Report on Form 10-K, for the fiscal year ended                        December 31, 2003; Exhibit (99)(i)12) |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | (i)    | 9—     Order                        of the Public Service Commission of the State of New York, issued and                        effective June 14, 2004, modifying the rate plan. (Incorporated herein by                        reference to Energy Group’s Quarterly Report on Form 10-Q for the                        quarter ended June 30, 2004; Exhibit 99(i)14)                                                                                     |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | (i)    | 10—   Order                        of the Public Service Commission of the State of New York, issued and                        effective July 24, 2006, establishing the rate plan. (Incorporated herein                        by reference to Energy Group’s Quarterly Report on Form 10-Q for the                        quarter ended September 30, 2006; Exhibit 99)                                                                                             |

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