Exhibit 10(iii)(32)

CH Energy Group, Inc.
Executive Annual Incentive Plan

March 16, 2004

<PAGE>

Table of Contents

Section I. Objectives                                                          3

       II. Overview                                                            4

      III. Establishing Financial and Operating Goals                          7

       IV. Individual Contributor Evaluation                                   9

        V. Calculating the Annual Incentive Payment                           10


                                                                               2
<PAGE>

                              I.    Objectives

                              The policy of the Board of Directors is to
                              establish that executive compensation which
                              includes direct base compensation, long term
                              incentives, retirement benefits and short term
                              cash incentives at a level which is equal to the
                              median (P50) of the market.

                              The purpose of this plan is to provide annual
                              short term cash incentives for executives that are
                              based on achieving key financial and operational
                              goals .

                              This plan is designed to pay annual cash
                              incentives as a percent of base salary. Overall it
                              is expected that a properly designed incentive
                              system will achieve a payout in any given year
                              ranging from zero to 150% of the target amount,
                              depending on each year's circumstances. Over a
                              period of time, the average overall payout should
                              range between 80% and 100% of the target amount if
                              aggressive but still realistic goals have been
                              set. Longer term average payouts much above or
                              below this level indicate goal setting that is
                              inconsistent with market realities and other
                              comparable executive incentive programs.

Administration                The plan shall be administered by CHEG management
                              under the direct supervision and approval of
                              Central Hudson's Board of Directors.

                              The plan is based on annual performance and
                              requires that the participant be an active
                              employee of Central Hudson Energy Group, Inc.
                              ("CHEG") or its subsidiaries or properties at the
                              end of the calendar year during which performance
                              goals have been set and results have been
                              evaluated, except in the case of death, disability
                              or normal retirement, the incentive opportunity
                              will be prorated and the evaluation of performance
                              against both quantitative goals and subjective
                              goals will be at the sole discretion of Board of
                              Directors and the CEO.

                              Goals shall be agreed upon the Board of Directors
                              and be documented in writing no later than
                              February 1 of each year.

                              Performance evaluations and incentive award
                              payments shall be completed and delivered to the
                              participant no later than March 15 of the
                              following year.


                                                                               3
<PAGE>

                              II.   Overview of the Plan

Incentive Opportunity         This plan offers the participant the opportunity
                              to earn an incentive expressed as a percentage of
                              his/her annual salary which was in effect at the
                              beginning of the fiscal year.

                              It is the intent of this plan's design that a
                              target incentive amount would be paid for full
                              attainment of all quantitative goals and a
                              subjective evaluation which found the
                              participant's performance to be at an expected
                              level in all areas of performance. It should
                              further reflect the individual's contribution or
                              response to unplanned opportunities or challenges.
                              Incentive payments beyond the targeted performance
                              levels should be as a result of performance above
                              targeted goals and expectations. There is no
                              minimum incentive guarantee under this plan.
                              Additionally, the plan limits the overall payment
                              amount.

                              Notwithstanding the above statement, the board, at
                              its sole discretion, may increase the calculated
                              incentive amount or reduce it to zero. The
                              calculated maximum amount may be exceeded should
                              the directors deem that the participant's or
                              company's performance should merit additional
                              compensation.

                              The board, at its sole discretion, may eliminate
                              any or all of the annual awards under this plan in
                              response to a major employee or public safety
                              occurrence that resulted in a death or serious
                              injury or a major public incident that reflected
                              poorly on the company's image or public trust.

Target and Maximum            The following chart specifies the targeted and
Incentive Schedule            maximum incentive opportunity as a percent of base
                              salary for each participant.

                                                  ----------------------
                                                  Percent of Base Salary
            ------------------------------------------------------------
            Officer Level                           Target     Maximum
                                                   Incentive  Incentive
            ------------------------------------------------------------
            CEO                                       45%       67.5%
            ------------------------------------------------------------
            COO's                                     30%        50%
            ------------------------------------------------------------
            SVPs, CFO and CHEC President              25%        40%
            ------------------------------------------------------------
            Other Officers                            20%        35%
            ------------------------------------------------------------


                                                                               4
<PAGE>

Allocation of Incentive       The incentive opportunity is divided various
Opportunities                 segments with varying weights for each segment
                              depending on the participant's business unit
                              affiliation. Executives at CHEG or one of the
                              business units may have their incentive
                              opportunity tied to some or all of the following
                              categories. The categories are:

                              1.    Corporate Financial Performance: Total
                                    Earnings per Share against a goal approved
                                    by The Board Of Directors for CHEG as
                                    measured by (including reported earnings per
                                    share from CHGE and CHEC) or CHGE or CHEC.

                              2.    The operational of CHGE against goals
                                    approved by the Board of Directors.

                              3.    The operational performance of CHEC against
                                    milestones approved by the Board of
                                    Directors.

                              4.    A subjective evaluation, recommended by the
                                    CEO and approved by the Board, of the
                                    participant's overall contribution to the
                                    corporation's performance as well as the
                                    participant's response to unplanned business
                                    or operational opportunities or to unplanned
                                    challenges such as storms, other natural or
                                    man made disasters, regulatory changes,
                                    significant changes in interest rates, etc.


                                                                               5
<PAGE>

                              Each of the incentive opportunities are measured,
                              evaluated and rewarded independently although
                              there are interconnections between each of them.
                              The allocation and weighting of the targeted
                              incentive opportunity is as follows. The sum of
                              each column on the following chart is 100% of the
                              bonus weight allocation.

--------------------------------------------------------------------------------
                                                            COO
                                           CH Energy         &
Performance Category                         Group         CHG&E          CHEC
--------------------                         -----         -----          ----
--------------------------------------------------------------------------------
Corporate Financial
Performance                                   100%           0%            0%
EPS - CH Energy Group
--------------------------------------------------------------------------------

CHG&E Performance                              0%           100%           0%

--------------------------------------------------------------------------------
Central Hudson Energy                          0%            0%           100%
Services Performance

--------------------------------------------------------------------------------
Response To Unplanned                        +/-50%        +/-50%        +/-50%
Opportunities, Problems &
Integration of Results
Within Each Business Unit



<PAGE>

                              III.  Establishing Financial and Operating Goals
                                    and Milestones

Agreeing on and Defining      Prior to the beginning of the fiscal year, the CEO
Operating Goals               and the Board will agree on one or several
                              critical financial and/or operating goals to be
                              achieved in the coming year by Central Hudson
                              Energy Group, Inc., CHGE and/or CHEC.

The Goal Definition           Annually, the CEO and the board or its designated
Process                       committee will reach an agreement on several
                              parameters for each goal or goals specified:

                              o     The definition of the measurement involved

                              o     The relative weight assigned to that goal
                                    for each category of executive.

                              o     Three performance benchmarks for each goal:

                                    o     Threshold performance

                                    o     Targeted (or expected) performance

                                    o     Superior performance

                              Wherever possible, goals should be as definitive
                              and quantitative as possible.

                              The current year's Goals are attached as Exhibit
                              I.

Calculating a Weighted        Each of the goal-based performances would be
Performance Grade             evaluated at the end of the year and evaluation %
                              approved by the committee. The relationship
                              between performance and % award is as follows:

                              o     Below "Threshold" -- 0 %

                              o     "Threshold" -- 50%

                              o     "Targeted' -- 100%

                              o     "Superior" -- 150%

                              o     Above "Superior" -- 150%


                                                                               7
<PAGE>

                              For performances between these benchmarks, a
                              fractional % would be given based on a linear
                              interpolation of the measurement and the % award.
                              For example, if the performance were exactly
                              midway between Targeted and Superior, then 125% of
                              Target (midway between 100 and 150 %) would be
                              awarded.

Converting Earned Points      Each performance category has been assigned a
to Weighted Earned Points     weighting. These have been specified in Section II
                              of this document. For purposes of calculating an
                              incentive, the % earned in each category is then
                              weighted based on the weighting assigned to the
                              category.


                                                                               8
<PAGE>

                              IV.   Individual Contributor Evaluation

                              For Response to Unforeseen Problems and
                              Opportunities and Unusual Circumstances.

Intent of this Element        This incentive opportunity is intended to provide
                              the CEO and board with flexibility to reflect the
                              participant's performance in areas other than
                              those directly quantified in the previous
                              incentive elements. Included in the considerations
                              for this incentive would be the following:

                              o     Contribution to the business drivers
                                    encountered during the past year.

                              o     Effectiveness of response to unplanned
                                    business or market opportunities.

                              o     Quality of response to unforeseen operating
                                    difficulties during the year.

                              o     Success in recruiting, developing and
                                    retaining senior operating company
                                    management talent and planning for
                                    management succession.

                              o     Success in anticipating and then alerting
                                    the CEO and board to problems and issues or
                                    opportunities in any aspect of CHEG's or any
                                    of its business units' operations or
                                    interests

                              o     Identification and acquisition of new
                                    business opportunities.

                              o     Effectiveness in integrating the various
                                    business units' interests in the best
                                    interests of Central Hudson Energy Group,
                                    Inc. as a whole.

Calibration of the            For all employee groups the weighting for this
Incentive Award               segment is +/- 50% of the incentive opportunity.
                              The targeted evaluation is 0%.


                                                                               9
<PAGE>

                              V.    Calculating the Incentive Payment

                              The steps used to convert the various weighted
                              average % earned are as follows:

                              1.    Calculate the evaluation % for each
                                    performance category.

                              2.    Convert the evaluation % based on the
                                    weighting for each category.

                              3.    Add the weighted evaluation percentages for
                                    all categories to determine the award
                                    percentage.

                              4.    Adjust the award percentage by +/- 50 % for
                                    the individual contribution evaluation and
                                    apply this amount to the incumbent's salary
                                    at the beginning of the year to arrive at
                                    the incentive payment to be made.

                              An example of this calculation method is attached
                              as Exhibit II.


                                                                              10
<PAGE>

                                                             2004: Exhibit I

                              CH ENERGY GROUP, INC.

                           2004 EXECUTIVE COMPENSATION
                  ANNUAL VARIABLE COMPENSATION PROGRAM TARGETS

      All four performance categories were maintained. New objectives
established for the 2004 short-term incentives tied to the operational and
financial performance of CH Energy Group and its subsidiaries were developed as
set forth below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Category               Description of Target              Weighting     Threshold     Target     Superior
---------------------------------------------------------------------------------------------------------
<S>            <C>                                        <C>           <C>             <C>         <C>

    I          CH Energy Group EPS                           100%
---------------------------------------------------------------------------------------------------------
    II         CHGE EPS                                       60%

               Percent of Highly Satisfied                    20%
               Customers

               Three-Year Rolling Average of                  20%
               Equivalent Minutes of Interruption Per
               Customer
---------------------------------------------------------------------------------------------------------
   III         Realization of CHEC EPS vs. Plan(e)            50%

               Specific Milestone Completions (f)             50%       Consistent with business
                                                                        plan for CHEC
---------------------------------------------------------------------------------------------------------
    IV         Individual Problem and Opportunity         +/- 50% of
               Contribution                                 earned         N/A          N/A         N/A
                                                          incentive
                                                             from
                                                          Categories
                                                            I - III
---------------------------------------------------------------------------------------------------------
</TABLE>