Exhibit 99.(i)11

                                               Filed Session of October 23, 2002
                                               Approved as Recommended
                                               and so Ordered
                                               by the Commission

                                               ----------------------
                                               JANET HAND DEIXLER
                                                        Secretary
                                           Issued and Effective October 25, 2002

                                STATE OF NEW YORK
                          DEPARTMENT OF PUBLIC SERVICE


                                                                 October 3, 2002


TO:       THE COMMISSION

FROM:     OFFICE OF ACCOUNTING & FINANCE

SUBJECT:  CASE 01-G-1821 - Petition of Central Hudson Gas & Electric Corporation
          for Approval to defer Environmental Site Investigation and Remediation
          Costs, filed in C 9218 (SAPA No. 01-G-1821SA1)

SUMMARY OF
RECOMMENDATION:    The Commission should authorize Central Hudson Gas & Electric
                   Corporation (the company) to establish a deferred accounting
                   plan for 2002 and future years site identification and
                   remediation costs relating to the company's remaining seven
                   former manufactured gas plants. The company's deferred
                   accounting plan should be subject to the conditions discussed
                   in this memorandum.

Summary

      In a petition filed on November 16, 2001, Central Hudson Gas & Electric
Corporation (Central Hudson or the company) requests Commission approval to
defer costs for calendar year 2002 and future years relating to its former
manufactured gas plants (MGPs). The company's seven (7) former MGPs were
recently relisted on the NYS Department of Environmental Conservation's (DEC)
Inactive Hazardous Waste Sites Register, which could lead to significant
environmental cleanup costs. In calendar year 2002, Central Hudson has already
incurred $505,227 of actual SIR costs and also recorded a $2.5 million
contingent liability for its estimated remediation costs at one of its MGPs. The
remaining six MGPs are.


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CASE 01-G-1821

currently under investigation by the DEC, but no cost estimates are available.
Absent deferred accounting treatment, these costs could have an adverse impact
on the company's earnings.

      Staff from the Office of Accounting & Finance has reviewed Central
Hudson's petition and supporting documentation. Considering the multi-year
nature of environmental cleanups, staff recommends that the Commission approve
an accounting plan by which the company's 2002 and future site identification
and remediation (SIR) costs may qualify for deferred accounting treatment. Under
the accounting plan, Central Hudson will submit to the Commission, on an annual
basis, an environmental report (see Ordering Clause No. 4), which will include a
materiality calculation, a calculation of the amount of incremental SIR costs
and ratemaking earnings calculation. After an examination of the report, the
Director of Accounting & Finance will then submit a letter to the company on the
amount of authorized deferred SIR costs. For ratemaking purposes, any deferred
SIR costs authorized by the Director of Accounting & Finance will be considered
for recovery from the company's customer benefit fund (1) in the collaboration
on the fund scheduled to commence November 1, 2003, (2) or recovery may be
arranged for in a rate case.

      Staff from the Office of Gas & Water and Leonard Van Ryn from the Office
of General Counsel has reviewed this memorandum and concurs with our
recommendations.

Background

      Central Hudson and its predecessor companies operated eight (8) MGPs from
the 1850s until the 1950s. Coal tars and other byproducts were typically
generated during the coal gas manufacturing process. Studies performed by the
company and the DEC from 1986 to 1990 indicated little risk of human exposure to
coal tar remaining on the Central Hudson sites. DEC subsequently removed the
sites from its Inactive Hazardous Waste Sites Register.

      In 1994, the City of Newburgh (City) notified Central Hudson that it had
encountered a tar-like substance at its wastewater treatment plant that the City
alleged had migrated from the company's former MGP. Subsequently, the company
and City settled

(1)   Central Hudson's customer benefit fund has a balance of $186.7 million as
      of June 30, 2002 which includes the net proceeds from the sale of the
      company's fossil generation.

(2)   Case 00-E-1273, supra, Order Authorizing Benefit Fund Disbursements
      (issued October 3, 2002).


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CASE 01-G-1821

litigation related to the MGP and remediation alternatives are currently under
investigation with DEC pursuant to a Consent Order. The $16 million of SIR costs
(including contingencies) related to the Newburgh site were deferred pursuant to
the Commission's Order in Case 95-M-0874 and were subsequently offset against
deferred credits in the company's recent multi-year rate agreement.(3)

      In February 1999, the DEC informed Central Hudson that it intended to
conduct additional site assessments at three of the company's remaining seven
(7) former MGPs. Central Hudson subsequently performed supplemental site
assessments under agreements negotiated with the DEC. Based on the results of
the additional assessments, the company expects to begin remediation efforts and
incur significant costs at one or more of the MGPs in 2002. Preliminary
estimates by the company are that the total cleanup costs for year 2002 would be
in excess of $3 million.

Company's Filing

      Central Hudson requests that the Commission grant authorization to employ
deferred accounting treatment for the 2002 and future years incremental costs
(excluding company labor) related to environmental SIR actions at its former
MGPs. The company believes that deferred accounting should be permitted because
the costs in question are a legitimate cost of service that were not reasonably
known at the time of the company's last rate case, and without deferred
accounting these costs will distort the company's earnings. The company also
requests deferral of legal costs, which may be incurred, related to any of the
MGPs. Central Hudson believes that defending its position on clean up costs is a
prudent action for both the company and ratepayers and could likely result in
mitigation of remediation costs. Additionally, permission is requested to defer
consultant fees and costs related to negotiation of insurance settlements. Any
insurance settlements would be credited against the deferred costs. Central
Hudson requests that the Commission grant deferral of the above costs, plus
carrying charges, until such time as recovery is provided for in a rate
proceeding. It requests that a determination

(3)   Cases 00-E-1273 and 00-G-1274, Proceeding on Motion of the Commission as
      to the Rates, Charges, Rules and Regulations of Central Hudson Gas &
      Electric Corporation for Electric and Gas Service, Order Establishing
      Rates (issued October 25, 2001).


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CASE 01-G-1821

be made as soon as possible to provide the authorization needed to record these
costs as a regulatory asset on the company's books and records.

Discussion

      The Commission has traditionally applied a three-step process in examining
deferred accounting requests. To qualify for deferred accounting treatment, an
item must be incremental to current rates; the amount must be material to the
utility's earnings; and the utility cannot be over earning. In addition,
deferral petitions are normally addressed after the close of the year in which
the costs are actually incurred. This allows staff an opportunity to examine the
costs and review the utility's overall earnings position.

      However, considering the environmental nature of these costs and the fact
that the costs will be incurred over several years, staff recommends that a
deferred accounting plan be approved for Central Hudson's remaining SIR costs.
Staff is not recommending the deferral of any specific amount of SIR costs at
this time, but rather establishing an accounting plan by which the company's
2002 and future years SIR costs may qualify for deferred accounting treatment.
The advantage of the accounting plan is that it streamlines regulation by
eliminating the need for the company to file annual petitions. The company's
deferred accounting plan, however, should be subject to all the conditions
discussed below.

      Central Hudson's SIR costs have traditionally been treated as a gas
operations expenditure. However, in Cases 00-E-1273 and 00-G-1274, the company
proposed to allocate the deferred SIR costs associated with the Newburgh MGP
between electric and gas using the company's common allocation factor. In
addition, the company requested permission to offset the deferred Newburgh costs
against the customer benefit fund, which was funded predominantly from electric
operations. Staff did not object to either proposal and the Commission accepted
the company's positions in its Order. As a result, staff believes it is
appropriate to treat the company's current and future SIR costs as a corporate
wide expenditure. By doing so, total company figures will be used to test for
materiality, the incremental nature of the costs, and over earnings.

      The SIR costs that Central Hudson will incur to investigate and remediate
the remaining MGPs are unanticipated and nonrecurring in nature. The company
claims that there is no provision for these costs in current rates, and
therefore they are incremental in nature. Central Hudson is also requesting
permission to defer legal fees and costs related to insurance


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CASE 01-G-1821

negotiations. Staff cannot determine at this time if all related SIR costs are
truly incremental since the company's current rates were based on a specific
level of environmental, legal and outside services costs. To facilitate the
deferral process, the company should be required to submit an annual calculation
of its incremental SIR costs by taking into account rate allowances for
like-kind expenses such as environmental, legal and outside consultant fees.
This calculation should be included in the company's annual compliance filing.

      The Commission's current policy on materiality is that an item must exceed
5% of the company's net income to qualify for deferred accounting treatment.
Considering the environmental nature of the costs, staff recommends that a lower
threshold (3%) be used in this case. A 3% materiality threshold would protect
the company from otherwise expensing annual SIR costs in the range of $2 million
to $2.5 million. However, the 3% materiality test must be met each year by the
company and will be calculated on actual cash expenditures only. Recorded
accruals and contingencies will be excluded from this calculation. The company's
annual filing should include this materiality calculation.

      The third test in examining deferred accounting requests relates to a
utility's earnings position. The Commission has traditionally denied deferred
accounting requests if the utility has sufficient earnings to absorb the costs.
Staff recommends the continuation of this practice for Central Hudson's SIR
costs. Specifically, the company should be permitted to defer SIR costs up to
its authorized return on equity (ROE) of 10.3%. Earnings above 10.3% should be
used to offset the company's SIR costs. The company's annual filing should also
include an earnings calculation (actual versus authorized).

      As stated earlier in this memorandum, Central Hudson is also requesting
permission to defer costs related to insurance negotiations. According to its
petition, the company expects to begin negotiations with its insurance companies
in 2002. Staff recommends that the Commission stipulates that any recovery by
the company from insurance companies and/or other responsible third-parties are
deferred pending an offset to the deferred SIR costs.

      The company also requests permission to accrue a carrying charge on the
deferred costs. Considering the multi-year nature of environmental cleanups,
staff concurs with the company. Specifically, Central Hudson should be allowed
to accrue interest at a rate equal to the


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CASE 01-G-1821

unadjusted customer deposit rate (4) only on the portion of deferred SIR costs
that represent actual cash expenditures. The interest accrual shall cease once
the deferred costs are offset against the company's customer benefit fund.
Recorded accruals and/or contingencies will not be included in the interest
calculation. The unadjusted customer deposit rate for 2002 is 6.45% and is reset
by the Commission on an annual basis.

      Once the Director of Accounting & Finance has authorized the deferral of
any SIR costs, the company should be permitted to seek the offset of the
deferred costs against its customer benefit fund in the benefit fund
collaborative scheduled to commence November 1, 2003. The advantage to this
approach is that it eliminates the buildup of regulatory assets, minimizes
interest accruals and provides certainty on the recovery of the deferred costs
if Central Hudson delays the filing of a rate case beyond November 1, 2003. If
it files prior to that date, recovery could be arranged for in the rate case
process.

      Although the deferred accounting plan endorsed by staff is based on actual
SIR costs only, staff is not suggesting that the company cannot defer costs
associated with contingent liabilities. The company may defer these costs, but
at their own risk. Staff cannot assure recovery of any contingencies until
actual costs have been expended and staff has had an opportunity to examine the
full financial impact including a test for materiality, a determination on
whether the costs are incremental, and a review of the company's earnings
position.

Recommendation

      It is recommended that the Commission adopt the following authorizations
and directives:

      1.    Central Hudson Gas & Electric Corporation is authorized to defer in
            Account 186, Miscellaneous Deferred Debits, the 2002 and future
            years incremental site investigation and remediation costs
            (excluding company labor), related to the company's remaining seven
            manufactured gas sites. To qualify for deferred accounting
            treatment, the costs must meet all the criteria and safeguards
            discussed in this memorandum.

(4)   This is consistent with the Commission's treatment of Central Hudson's
      deferred Newburgh SIR costs, Case 95-M-0874, Untitled Order (Issued June
      3, 1997) and Con Edison's deferred SIR costs, Case 96-G-0548, Opinion and
      Order Approving Settlement Agreement with Changes (Issued February 19,
      1997).


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CASE 01-G-1821

      2.    Central Hudson Gas & Electric Corporation is authorized to defer in
            Account 186, Miscellaneous Deferred Debits, a carrying charge on the
            deferred SIR costs in Clause 1 above, beginning January 1, 2002, at
            a rate equal to the unadjusted customer deposit rate as determined
            by the Commission.

      3.    Central Hudson Gas & Electric Corporation is directed to credit
            Account 186, Miscellaneous Deferred Debits, with any recovery of SIR
            costs, as described in Clause 1 above, from other potential
            responsible parties, insurance carriers, or other sources.

      4.    Central Hudson Gas & Electric Corporation is directed to submit an
            annual report detailing the status of environmental measures at all
            manufactured gas sites where the company may be required to perform
            remediation. The report shall include all relevant information on
            the status of these sites, and shall include, but not be limited to,
            a site-by-site description of the work completed at each site,
            including relevant dates, corresponding costs, recovery of
            reimbursement of costs, and whether the work was undertaken in
            response to on-site or off-site contamination, the work still to be
            performed, copies of applicable orders from Environmental Protection
            Agency, the Department of Environmental Conservation or other
            governmental bodies, and cost estimates for future work, broken down
            by the type and source of costs. The report shall also include a
            calculation of the amount of incremental SIR costs on an annual
            basis, a 3% materiality threshold calculation performed annually and
            an annual calculation comparing Central Hudson Gas & Electric
            Corporation's actual versus allowed ratemaking return on equity
            including the amount of excess earnings. The report will be filed
            with the Secretary of the Public Service Commission on an annual
            basis, with the first report to be filed no later than February 28,
            2003.

      5.    The proceeding be continued.


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CASE 01-G-1821


                                             Respectively submitted,


                                             RICHARD M. DAVI
                                             Public Utilities Auditor II
                                             Office of Accounting and Finance

Reviewed by:


JOSEPH G. LOCHNER
Supervisor
Office of Accounting and Finance

Approved by:                                 Approved by:


FREDERICK J. PERKINS                         LEONARD VAN RYN
Chief, Utility Accounting and Finance        Assistant Counsel
Office of Accounting and Finance             Office of General Counsel



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