EXHIBIT (10)(iii)16


                              EMPLOYMENT AGREEMENT

              AGREEMENT by and between CH Energy Group, Inc. ("Energy Group"), a
New York corporation, and Paul J. Ganci (the "Executive"), dated as of the 28th
day of September, 2001.

              The Board of Directors of Energy Group (the "Board"), has
determined that it is in the best interests of Energy Group and its shareholders
to assure that Energy Group will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of Energy Group. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to Energy Group
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused Energy Group to enter into this Agreement with the Executive.

              NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

              1.     This Employment Agreement shall be between Energy Group and
the Executive named above for all periods during which the Executive serves in
the capacity as an officer of Energy Group or any of its affiliated companies.

              2.     CERTAIN DEFINITIONS. (a) As used in this Agreement, "Energy
Group" shall mean CH Energy Group, Inc. as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

              (b)    As used in this Agreement, the term "affiliated companies"
shall include any company controlled by, controlling or under common control
with Energy Group.

              (c)    The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 2(d)) on which a Change of
Control (as defined in Section 3) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with Energy Group or any of its affiliated companies is terminated
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or anticipation of
a Change of Control, then for all purposes of this

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Agreement the "Effective Date" shall mean the date immediately prior to the date
of such termination of employment.

              (d)    The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the following July 31, which July 31
and each annual anniversary thereof shall be hereinafter referred to as the
"Renewal Date". Unless previously terminated, the Change of Control Period shall
be automatically extended so as to terminate one year from such Renewal Date,
unless at least 60 days prior to the Renewal Date Energy Group shall give notice
to the Executive that the Change of Control Period shall not be so extended;
PROVIDED, that such a notice shall be null and void if it is reasonably
demonstrated by the Executive that such notice was given (i) at the request of a
third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise in connection with or anticipation of a Change of
Control.

              (e)    The "Multiple" shall mean three.

              3.     CHANGE OF CONTROL. For the purpose of this Agreement, a
"Change of Control" shall mean:

              (a)    The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (x) the then outstanding shares of common stock of Energy Group
(the "Outstanding Energy Group Common Stock") or (y) the combined voting power
of the then outstanding voting securities of Energy Group entitled to vote
generally in the election of directors (the "Outstanding Energy Group Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from Energy Group, (ii) any acquisition by Energy Group,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by Energy Group or any corporation controlled by Energy Group or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 3; or

              (b)    Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by Energy Group's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

              (c)    Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of Energy
Group (a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding En-

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ergy Group Common Stock and Outstanding Energy Group Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
Energy Group or all or substantially all of Energy Group's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Energy Group Common Stock and Outstanding Energy Group Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of Energy Group or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

              (d)    Approval by the shareholders of Energy Group of a complete
liquidation or dissolution of Energy Group.

              4.     EMPLOYMENT PERIOD. Energy Group hereby agrees to continue,
or cause to be continued, the Executive in the employ, and the Executive hereby
agrees to remain in the employ, of Energy Group or any of its affiliated
companies subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").

              5.     TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location within Energy Group's
service territory (as it existed immediately before the Effective Date);
PROVIDED, that the Executive may be required to relocate outside such service
territory if Energy Group or any of its affiliated companies provides the
Executive with relocation benefits at least as favorable as those that would
have been provided under Energy Group's or any affiliated companies' applicable
relocation policy as in effect immediately before the Effective Date.

              (ii)   During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of Energy Group and its affiliated companies and, to the
extent necessary to discharge the responsibilities assigned to

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the Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of Energy Group or any of its affiliated companies in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to Energy Group and its affiliated companies.

              (b)    COMPENSATION. (i) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal to twelve times
the highest monthly base salary paid or payable, including any base salary which
has been earned but deferred, to the Executive by Energy Group and its
affiliated companies in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as used in this Agreement shall refer to Annual Base Salary
as so increased.

              (ii)   ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under Energy Group's Executive Annual Incentive Plan,
or Energy Group's Executive Compensation Program, as applicable, or any
comparable annual bonus under any predecessor or successor plan, for the last
three full fiscal years prior to the Effective Date (the "Recent Annual Bonus").
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded.

              (iii)  INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of Energy Group or its affiliated
companies and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by Energy
Group and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of Energy Group or any of its affiliated companies.

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              (iv)   WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by Energy Group or its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of Energy Group or its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of Energy Group or any of its affiliated
companies.

              (v)    EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of Energy Group or any of its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of Energy Group or any
of its affiliated companies.

              (vi)   FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of Energy Group or any of
its affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of Energy Group or any of its affiliated companies.

              (vii)  OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office and support staff at least equal to the
most favorable of the foregoing provided to the Executive by Energy Group or any
of its affiliated companies at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer executives of Energy
Group or any of its affiliated companies.

              (viii) VACATION. During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of Energy Group or any of its affiliated
companies as in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of Energy Group or any of its affiliated companies.

              6.     TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If Energy Group determines in good faith that the
Disability of the Executive has occurred

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during the Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with Section
13(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with Energy Group and its
affiliated companies shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with Energy Group and its affiliated companies on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
Energy Group or its insurers and acceptable to the Executive or the Executive's
legal representative.

              (b)    CAUSE. Energy Group may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:

              (i)    the willful and continued failure of the Executive to
       perform substantially the Executive's duties with Energy Group or any of
       its affiliated companies (other than any such failure resulting from
       incapacity due to physical or mental illness), after a written demand for
       substantial performance is delivered to the Executive by the Board which
       specifically identifies the manner in which the Board believes that the
       Executive has not substantially performed the Executive's duties, or

              (ii)   the willful engaging by the Executive in illegal conduct or
       gross misconduct which is materially and demonstrably injurious to Energy
       Group or any of its affiliated companies.

              For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of Energy
Group and its affiliated companies. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Energy Group shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of Energy Group and its affiliated companies. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board (excluding the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.

              (c)    GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:

              (i)    the assignment to the Executive of any duties inconsistent
       in any respect with the Executive's position (including status, offices,
       titles and reporting requirements),

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       authority, duties or responsibilities as contemplated by Section 5(a) of
       this Agreement (including without limitation the Executive's ceasing to
       serve as sole chief executive officer of a widely held, publicly traded
       corporation), or any other action by Energy Group or any of its
       affiliated companies which results in a diminution in such position,
       authority, duties or responsibilities, excluding for this purpose an
       isolated, insubstantial and inadvertent action not taken in bad faith and
       which is remedied by Energy Group or any of its affiliated companies
       promptly after receipt of notice thereof given by the Executive;

              (ii)   any failure by Energy Group or any of its affiliated
       companies to comply with any of the provisions of Section 5(b) of this
       Agreement, other than an isolated, insubstantial and inadvertent failure
       not occurring in bad faith and which is remedied by Energy Group or any
       of its affiliated companies promptly after receipt of notice thereof
       given by the Executive;

              (iii)  Energy Group's or any of its affiliated companies'
       requiring the Executive to be based at any office or location other than
       as provided in Section 5(a)(i)(B) hereof or Energy Group or any of its
       affiliated companies requiring the Executive to travel on company
       business to a substantially greater extent than required immediately
       prior to the Effective Date;

              (iv)   any purported termination by Energy Group or any of its
       affiliated companies of the Executive's employment otherwise than as
       expressly permitted by this Agreement; or

              (v)    any failure by Energy Group or any of its affiliated
       companies to comply with and satisfy Section 12(c) of this Agreement.

              For purposes of this Section 6(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.

              (d)    NOTICE OF TERMINATION. Any termination by Energy Group for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or Energy
Group to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or Energy Group, respectively, hereunder or preclude the Executive
or Energy Group, re-

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spectively, from asserting such fact or circumstance in enforcing the
Executive's or Energy Group's rights hereunder.

              (e)    DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by Energy Group for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by Energy Group other than for Cause or Disability, the
Date of Termination shall be the date on which Energy Group notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.

              7.     OBLIGATIONS OF ENERGY GROUP UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, Energy Group shall terminate the Executive's employment other than for
Cause or Disability or the Executive shall terminate employment for Good Reason:

              (i)    Energy Group shall pay, or cause to be paid, to the
       Executive in a lump sum in cash within 30 days after the Date of
       Termination the aggregate of the following amounts:

                     A.     the sum of (1) the Executive's Annual Base Salary
              through the Date of Termination to the extent not theretofore
              paid, (2) the product of (x) the higher of (I) the Recent Annual
              Bonus and (II) the Annual Bonus paid or payable, including any
              bonus or portion thereof which has been earned but deferred (and
              annualized for any fiscal year consisting of less than twelve full
              months or during which the Executive was employed for less than
              twelve full months), for the most recently completed fiscal year
              during the Employment Period, if any (such higher amount being
              referred to as the "Highest Annual Bonus") and (y) a fraction, the
              numerator of which is the number of days in the current fiscal
              year through the Date of Termination, and the denominator of which
              is 365 and (3) any accrued vacation pay, in each case to the
              extent not theretofore paid (the sum of the amounts described in
              clauses (1), (2), and (3) shall be hereinafter referred to as the
              "Accrued Obligations"); and

                     B.     the amount equal to the product of (1) the Multiple
              and (2) the sum of (x) the Executive's Annual Base Salary and (y)
              the Highest Annual Bonus;

              (ii)   for a number of years after the Executive's Date of
       Termination equal to the Multiple, or such longer period as may be
       provided by the terms of the appropriate plan, program, practice or
       policy, Energy Group or any of its affiliated companies shall continue
       benefits to the Executive and/or the Executive's family at least equal to
       those which would have been provided to them in accordance with the
       plans, programs, practices and policies described in Section 5(b)(iv) of
       this Agreement if the Executive's employment had not been terminated or,
       if more favorable to the Executive, as in effect generally at any time
       thereafter with respect to other peer executives of Energy Group or any

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       of its affiliated companies and their families, provided, however, that
       if the Executive becomes reemployed with another employer and is eligible
       to receive medical or other welfare benefits under another employer
       provided plan, the medical and other welfare benefits described herein
       shall be secondary to those provided under such other plan during such
       applicable period of eligibility. For purposes of determining eligibility
       (but not the time of commencement of benefits) of the Executive for
       retiree benefits pursuant to such plans, practices, programs and
       policies, the Executive shall be considered to have remained employed
       until the expiration of a number of years after the Date of Termination
       equal to the Multiple and to have retired on the last day of such period;

              (iii)  Energy Group or any of its affiliated companies shall, at
       its sole expense as incurred, provide the Executive with outplacement
       services from a recognized outplacement service provider, the scope of
       which shall be selected by the Executive in his sole discretion but the
       cost to Energy Group of which shall not exceed $30,000; and

              (iv)   to the extent not theretofore paid or provided, Energy
       Group or any of its affiliated companies shall timely pay or provide to
       the Executive any other amounts or benefits required to be paid or
       provided or which the Executive is eligible to receive under any plan,
       program, policy or practice or contract or agreement of Energy Group or
       any of its affiliated companies (such other amounts and benefits shall be
       hereinafter referred to as the "Other Benefits").

              (b)    DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 7(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by Energy Group or any of
its affiliated companies to the estates and beneficiaries of peer executives of
Energy Group and any such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of Energy
Group or any of its affiliated companies and their beneficiaries.

              (c)    DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate as of the Disability Effective Date, without further
obligations to the Executive, other than for payment of Accrued Obligations and
the timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 7(c) shall include, and the Executive shall
be entitled after the Disability Effective Date to receive, disability and other
benefits at least equal to the most favorable of those generally

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provided by Energy Group or any of its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of Energy Group or any of its
affiliated companies and their families.

              (d)    CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.

              8.     NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by Energy Group or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with Energy Group or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with Energy Group or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.

              9.     FULL SETTLEMENT. The obligation of Energy Group and its
affiliated companies to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
Energy Group or any of its affiliated companies may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. Energy
Group agrees to pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by Energy Group or any of its
affiliated companies, the Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").

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              10.    CERTAIN ADDITIONAL PAYMENTS BY ENERGY GROUP.

              (a)    Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by Energy Group or any of its affiliated companies to or
for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 10(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
amount (the "Reduced Amount") that could be paid to the Executive such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.

              (b)    Subject to the provisions of Section 10(c), all
determinations required to be made under this Section 10, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a major accounting firm with expertise in such matters designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to Energy Group and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by Energy Group. All fees and expenses of the
Accounting Firm shall be borne solely by Energy Group. Any Gross-Up Payment, as
determined pursuant to this Section 10, shall be paid (or caused to be paid) by
Energy Group to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon Energy Group and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by Energy Group should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that Energy Group exhausts its remedies pursuant to Section 10(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid (or caused to be paid) by
Energy Group to or for the benefit of the Executive.

              (c)    The Executive shall notify Energy Group in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by Energy Group of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise Energy

                                       11
<PAGE>


Group of the nature of such claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to Energy
Group (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If Energy Group notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:

              (i)    give Energy Group any information reasonably requested by
       Energy Group relating to such claim,

              (ii)   take such action in connection with contesting such claim
       as Energy Group shall reasonably request in writing from time to time,
       including, without limitation, accepting legal representation with
       respect to such claim by an attorney reasonably selected by Energy Group,

              (iii)  cooperate with Energy Group in good faith in order
       effectively to contest such claim, and

              (iv)   permit Energy Group to participate in any proceedings
       relating to such claim;

provided, however, that Energy Group shall bear and pay (or caused to be borne
and paid) directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 10(c), Energy Group shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
Energy Group shall determine; provided, however, that if Energy Group directs
the Executive to pay such claim and sue for a refund, Energy Group shall advance
(or cause to be advanced) the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Energy Group's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

                                       12
<PAGE>


              (d)    If, after the receipt by the Executive of an amount
advanced (or caused to be advanced) by Energy Group pursuant to Section 10(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to Energy Group's complying with the requirements
of Section 10(c)) promptly pay to Energy Group the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced (or cause
to be advanced) by Energy Group pursuant to Section 10(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and Energy Group does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

              11.    CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of Energy Group and its affiliated companies
all secret or confidential information, knowledge or data relating to Energy
Group or any of its affiliated companies, and their respective businesses, which
shall have been obtained by the Executive during the Executive's employment by
Energy Group or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with Energy Group and its affiliated companies, the Executive shall
not, without the prior written consent of Energy Group or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than Energy Group and those designated by it.
In no event shall an asserted violation of the provisions of this Section 11
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.

              12.    SUCCESSORS. (a) This Agreement is personal to the Executive
and without the prior written consent of Energy Group shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.

              (b)    This Agreement shall inure to the benefit of and be binding
upon Energy Group and its successors and assigns.

              (c)    Energy Group will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Energy Group to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that Energy Group would be required to perform it if no such succession
had taken place.

              13.    MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

                                       13
<PAGE>


              (b)    All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

              IF TO THE EXECUTIVE:

                     Paul J. Ganci
                     50 Pleasant Ridge
                     Poughkeepsie, New York  12603


              IF TO ENERGY GROUP:

                     CH Energy Group, Inc.
                     284 South Avenue
                     Poughkeepsie, New York  12601-4879

                     Attention:  Chief Financial Officer


or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

              (c)    The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

              (d)    Energy Group may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.

              (e)    The Executive's or Energy Group's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or Energy Group may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 6(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.

              (f)    The Executive and Energy Group acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and Energy Group, the employment of the Executive by Energy Group
and/or any of its affiliated companies is "at will" and, subject to Section 2(c)
hereof, prior to the Effective Date, the Executive's employment and/or this
Agreement may be terminated by either the Executive or Energy Group at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this

                                       14
<PAGE>


Agreement; PROVIDED, that this Agreement may not be terminated by Energy Group
if it is reasonably demonstrated by the Executive that such termination (i) was
at the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, including, without limitation, the Employment
Agreement entered into by the parties as of December 1, 1998, other than the
letter dated May 30, 1990 regarding confidentiality.



              IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, Energy
Group has caused these presents to be executed in its name on its behalf, all as
of the day and year first above written.




                                      /s/ PAUL J. GANCI
                                  ----------------------------------------------
                                                   Paul J. Ganci



                                  CH Energy Group, Inc.



                                  By   /s/ JACK EFFRON
                                    --------------------------------------------
                                       Jack Effron
                                       Chairman of the Compensation & Succession
                                       Committee of the Board of Directors