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, 2002

                                       OR

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

For the transition period from                   to
                               -----------------    --------------------

Commission    Registrant, State of Incorporation            IRS Employer
File Number   Address and Telephone Number                  Identification No.
-----------   ----------------------------                  ------------------

0-30512       CH Energy Group, Inc.                         14-1804460
              (Incorporated in New York)
              284 South Avenue
              Poughkeepsie, New York 12601-4879
              (845) 452-2000

1-3268        Central Hudson Gas & Electric Corporation     14-0555980
              (Incorporated in New York)
              284 South Avenue
              Poughkeepsie, New York 12601-4879
              (845) 452-2000

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

                                                          Name of each exchange
   Title of each class                                     on which registered
   -------------------                                  ------------------------

CH Energy Group, Inc.
Common Stock, $0.10 par value                            New York Stock Exchange


<PAGE>


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

                  Title of each class
                  -------------------

Central Hudson Gas & Electric Corporation Cumulative Preferred Stock

                  4 1/2% Series
                  4.75% Series

      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 |_|

      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. |_|

         Indicate by check mark whether Energy Group is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                        Yes |X|  No |_|

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates of CH Energy Group, Inc. ("Energy Group") as of January 31,
2003 was $685,268,640 based upon the lowest price at which Energy Group's Common
Stock was 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 held
by non-affiliates of Energy Group as of June 28, 2002, the last business day of
Energy Group's most recently completed second fiscal quarter, was $805,832,785
computed by reference to the price at which 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 held
by non-affiliates of Central Hudson Gas & Electric Corporation ("Central
Hudson") as of February 1, 2003, was zero.

      Indicate by check mark whether Central Hudson is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                       Yes |_|  No |X|


<PAGE>

      The number of shares outstanding of Energy Group's Common Stock, as of
February 1, 2003 was 15,996,000.

      The number of shares outstanding of Central Hudson's Common Stock, as of
February 1, 2003 was 16,862,087. All such shares are owned by 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

      Energy Group's definitive Proxy Statement, dated March 3, 2003, and to be
used in connection with its Annual Meeting of Shareholders to be held on April
1, 2003, 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 the Annual Report on this Form 10-K.


<PAGE>


                        TABLE OF CONTENTS
                                                                  Page
                                                                  ----
                                     PART I
ITEM 1      BUSINESS                                                 2

ITEM 2      PROPERTIES                                              11

ITEM 3      LEGAL PROCEEDINGS                                       15

ITEM 4      SUBMISSION OF MATTERS TO A VOTE OF SECURITY
            HOLDERS                                                 15

                                     PART II

ITEM 5      MARKET FOR ENERGY GROUP'S COMMON EQUITY
            AND RELATED STOCKHOLDER MATTERS                         15

ITEM 6      SELECTED FINANCIAL DATA OF ENERGY GROUP AND
            ITS SUBSIDIARIES                                        16

ITEM 7      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS           20

ITEM 7A     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
            MARKET RISK                                             37

ITEM 8      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA             40

ITEM 9      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE                 112

                                    PART III

ITEM 10     DIRECTORS AND EXECUTIVE OFFICERS OF ENERGY GROUP       112

ITEM 11     EXECUTIVE COMPENSATION                                 113

ITEM 12     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS         113

ITEM 13     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS         113

ITEM 14     CONTROLS AND PROCEDURES                                114

                                     PART IV

ITEM 15     EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
            REPORTS ON FORM 8-K                                    114

SIGNATURES                                                     116-118

CERTIFICATIONS                                                 119-124


                                       (i)

<PAGE>


                                     PART I
FILING FORMAT

      This Annual Report on Form 10-K for the fiscal year ended December 31,
2002 ("10-K Annual Report") is a combined report being filed by two different
registrants: CH Energy Group, Inc. ("Energy Group") and Central Hudson Gas &
Electric Corporation ("Central Hudson"). Except where the content clearly
indicates otherwise, any references in this 10-K Annual Report to Energy Group
include all subsidiaries of Energy Group, including Central Hudson. Energy
Group's subsidiaries are each directly or indirectly wholly owned by Energy
Group. Central Hudson makes no representation as to the information contained in
this 10-K Annual Report in relation to Energy Group and its subsidiaries other
than Central Hudson. When this 10-K Annual Report is incorporated by reference
into any filing with the Securities and Exchange Commission ("SEC") made by
Central Hudson, the portions of this 10-K Annual Report that relate to Energy
Group and its subsidiaries, other than Central Hudson, are not incorporated by
reference therein.

FORWARD-LOOKING STATEMENTS

      Statements included in this 10-K Annual Report and the 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 Securities Exchange Act of 1934,
as amended. Forward-looking statements may be identified by words including
"anticipates," "believes," "projects," "intends," "estimates," "expects,"
"plans," 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; energy
supply and demand; fuel prices; interest rates; potential future acquisitions;
developments in the legislative, regulatory and competitive environment; market
risks; electric and gas industry restructuring and cost recovery; the ability to
obtain adequate and timely rate relief; changes in fuel supply or costs; the
success of strategies to satisfy electricity requirements now that Central
Hudson's major electric generation assets have been sold; future market prices
for energy, capacity, and ancillary services; 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 these
forward-looking statements.


                                        1
<PAGE>


ITEM 1 - BUSINESS

CORPORATE STRUCTURE

      On December 15, 1999, Energy Group became the holding company parent
corporation of Central Hudson and Central Hudson Energy Services, Inc. ("CH
Services") (the "Holding Company Restructuring").

      For further information regarding the Holding Company Restructuring and
the Amended and Restated Settlement Agreement dated January 2, 1998, and
thereafter amended ("Agreement"), among Central Hudson, the Staff of the Public
Service Commission of the State of New York ("PSC"), and certain others which,
among other things, permitted the Holding Company Restructuring, see the
captions "Competitive Opportunities Proceeding Settlement Agreement" and "Rate
Proceedings - Electric and Natural Gas" in Note 2 to the Financial Statements
contained in Item 8 of this 10-K Annual Report (each Note being hereinafter
called a "Note"). Surviving provisions of the Agreement discussed herein may
affect future operations of Energy Group and its subsidiaries.

      On November 22, 2002, the Board of Directors of Energy Group approved a
reorganization of its competitive business subsidiaries, effective December 31,
2002. The purpose of the reorganization was to streamline administration and
improve managerial effectiveness. The reorganization is not expected to have any
material effect on the financial condition of Energy Group. Until December 31,
2002, CH Services was a subsidiary of Energy Group and the parent corporation
for each of Energy Group's competitive business subsidiaries: Central Hudson
Enterprises Corporation ("CHEC"); SCASCO, Inc. ("SCASCO"); Prime Industrial
Energy Services, Inc. ("Prime Industrial"); Griffith Energy Services, Inc.
("Griffith Energy"); and Greene Point Development Corporation ("Greene Point").
Another subsidiary of CH Services, CH Resources, Inc. ("CH Resources") and its
subsidiary companies, CH Syracuse Properties, Inc. and CH Niagara Properties,
Inc., were sold in May 2002. For further information on the CH Resources sale,
see the caption "Discontinued Operations" in Note 1.

      On December 31, 2002, CH Services was merged into Energy Group; Greene
Point and Prime Industrial were merged into CHEC; and CHEC replaced CH Services
as the parent of the remaining competitive business subsidiaries. Griffith
Energy and SCASCO continue to operate as direct subsidiaries of CHEC. CHEC,
Griffith Energy, and SCASCO are collectively referred to herein as the
"competitive business subsidiaries." Energy Group's other subsidiary company,
Central Hudson, wholly owns Phoenix Development Company, Inc.

      Central Hudson's preferred stock and debt remain securities of Central
Hudson.

      Because of its ownership of Central Hudson, Energy Group is a "public
utility holding company" under the Public Utility Holding Company Act of 1935
("PUHCA"). However, Energy Group is exempt from the provisions of PUHCA under
the intrastate exemption provisions of ss.3(a)(1) of PUHCA except that, under
ss.9(a)(2) of PUHCA, the approval of the SEC is required for a direct or
indirect acquisition by a public utility holding company of five percent (5%) or
more of the voting securities of any electric or natural gas utility company
subject to PUHCA.

      For a discussion of Energy Group's and its subsidiaries' financing
program, capital structure, and short-term debt, see Item 7 of this 10-K Annual
Report under the subcaptions


                                        2
<PAGE>

"Capital Structure," "Financing Program of Energy Group and Its Subsidiaries"
and "Short-Term Debt" under the caption "Capital Resources and Liquidity." For a
discussion of short-term borrowing, capitalization, and long-term debt, see
Notes 5, 6, and 7, respectively. For information concerning revenues, certain
expenses, earnings per share, and information regarding assets for Central
Hudson's electric and natural gas segments, and the competitive business
subsidiaries' segments, see Note 12.

SUBSIDIARIES OF ENERGY GROUP

CENTRAL HUDSON

      Central Hudson is a New York natural gas and electric corporation formed
on December 31, 1926, as a consolidation of several operating utilities which
had been accumulated under one management during the previous 26 years. Central
Hudson purchases, sells at wholesale, and distributes electricity and natural
gas in New York State. Central Hudson also generates a small portion of its
electricity requirements.

      Central Hudson has, with minor exceptions, valid, non-exclusive
franchises, unlimited in duration, to serve a territory extending about 85 miles
along the Hudson River and about 25 to 40 miles east and west from 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 662,700. 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.

      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.

      The competitive marketplace continues to develop for electric and natural
gas utilities, and Central Hudson electric and natural gas customers are given
the opportunity to purchase energy and related services from other sources.

      The number of Central Hudson employees at December 31, 2002, was 870.

      Sales of Principal Generating Facilities

      For information with respect to the sales of Central Hudson's interests in
the Danskammer Point Steam Electric Generating Station ("Danskammer Plant"), the
Roseton Electric Generating Plant ("Roseton Plant"), and Unit No. 2 of the Nine
Mile Point Nuclear Generating Station ("Nine Mile 2 Plant") during 2001, see the
caption "Sales of Principal Generating Facilities" in Note 2. The Danskammer
Plant, the Roseton Plant, and the Nine Mile 2 Plant are collectively referred to
herein as the "principal generating facilities."


                                        3
<PAGE>

      Regulation

      Central Hudson is subject to regulation by the PSC regarding, among other
things, service rendered (including the rates charged), major transmission
facility siting, accounting procedures, and issuance of securities. For certain
restrictions on Central Hudson's activities imposed by the Agreement, see Note 2
under the caption "Competitive Opportunities Proceeding Settlement Agreement."

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

      Central Hudson is not subject to the provisions of the Natural Gas Act.

      With the exception of the Groveville Hydroelectric Facility in Beacon, New
York, Central Hudson's hydroelectric facilities are not required to be licensed
under the Federal Power Act. The Groveville Hydroelectric Facility is subject to
an Emergency Action Plan mandated by FERC.

      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. In
Central Hudson's most recent rate proceeding, rates for delivery and supply were
unbundled to facilitate competition.

      Central Hudson's present 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. During 2002, the average price of electricity for full service
customers was 7.89 cents per kilowatt-hour ("kWh") as compared to an average of
7.71 cents per kWh for 2001.

      Rate Proceedings - Electric and Natural Gas: For information regarding
Central Hudson's most recent electric and natural gas proceedings filed with the
PSC, see Note 2 under the caption "Rate Proceedings - Electric and Natural Gas."

      Cost Adjustment Clauses: For information regarding Central Hudson's
electric and natural gas cost adjustment clauses, see Note 1 under the caption
"Rates, Revenues and Cost Adjustment Clauses."

      Construction Program and Financing

      For estimates of 2003 construction expenditures, internal funds available,
and optional redemption of long-term securities of Central Hudson, see the
subcaption "Construction Program - Central Hudson" in Item 7 of this 10-K Annual
Report under the caption "Capital Resources and Liquidity."


                                        4
<PAGE>

      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's $75 million credit facility includes limitations on the
amounts of additional funded indebtedness which Central Hudson may issue.
Central Hudson believes these limitations will not impair its ability to issue
any or all of the debt described under the subcaption "Financing Program of
Energy Group and Its Subsidiaries" in Item 7 of this 10-K Annual Report under
the caption "Capital Resources and Liquidity."

      Purchased Power and Generation Costs

      For the 12-month period ended December 31, 2002, the sources and related
costs of purchased electricity and generation for Central Hudson were as
follows:

                                                    Aggregate
      Sources of                                  Percentage of    Costs in 2002
      Generation                               Energy Requirements     ($000)
      ----------                               -------------------     ------

      Purchased Electricity                           98.0%           $246,522
      Hydroelectric & Other                            2.0%                757
                                                     -----
                                                     100.0%
                                                     =====

      Deferred Electricity Cost                                          5,508
                                                                      --------
               Total                                                  $252,787
                                                                      ========


      Other Central Hudson Matters:

      Labor Relations: Central Hudson has an agreement with Local 320 of the
International Brotherhood of Electrical Workers ("IBEW") for its 580 unionized
employees, representing construction and maintenance employees, customer
representatives, service workers and clerical employees (excluding persons in
managerial, professional or supervisory positions). This agreement became
effective on July 1, 1998, and remains effective through April 30, 2003. It
provides for an average annual general wage increase of 3.0% and certain
additional fringe benefits.

      Subsidiary of Central Hudson - Phoenix Development Company, Inc.: Phoenix
Development Company, Inc. ("Phoenix"), a New York corporation, is a wholly owned
subsidiary of Central Hudson. Phoenix was established in June 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.

COMPETITIVE BUSINESS SUBSIDIARIES

      As of December 31, 2002, the effective date of the restructuring described
under the caption "Corporate Structure" of this Item 1, CHEC became the holding
company parent of the competitive business subsidiaries.


                                        5
<PAGE>

CHEC and its Subsidiaries

      Central Hudson Enterprises Corporation: CHEC, a New York corporation, is a
wholly owned subsidiary of Energy Group. CHEC has been engaged in the business
of marketing electricity, natural gas, petroleum products and related services
to retail and wholesale customers; conducting energy audits; providing services
including, but not limited to, the design, financing, installation and
maintenance of energy conservation measures and generation systems for private
businesses, institutions and government entities; and has participated in
cogeneration, small hydroelectric, alternate fuel, and energy production
projects and services in Connecticut, New Jersey, New Hampshire, and New York.

      Griffith Energy Services, Inc.: Griffith Energy, a New York corporation,
is a wholly owned subsidiary of CHEC. Griffith Energy is an energy services
company engaged in the distribution of heating oil, gasoline, diesel fuel,
kerosene, propane, and the installation and maintenance of heating, ventilating,
and air conditioning ("HVAC") equipment in Virginia, West Virginia, Maryland,
Delaware, and Pennsylvania, and in Washington, D.C. In January 2003, Griffith
acquired certain assets of Cook's Fuel & Energy Services, Inc. and Manassas Ice
and Fuel Company, both fuel distribution companies. During 2002, Griffith Energy
acquired certain assets of Charles G. Turner, Jr. Oil Company, Inc. and Farmer's
Oil, Inc., both heating oil distribution companies. During 2001, Griffith Energy
acquired certain assets of Community Oil Company, Inc., Consumers Fuel Company,
Inc., R. S. Leitch Company, McMahan Oil Company, Walker Oil Company, each a fuel
distribution company, and certain assets of one propane distribution company,
Staats Gas, Inc.

      SCASCO, Inc.: SCASCO, a Connecticut corporation, is a wholly owned
subsidiary of CHEC. SCASCO is an energy services company engaged in the
distribution of heating oil, gasoline, diesel fuel, kerosene, propane and
natural gas and the installation and maintenance of electrical services and HVAC
equipment in the states of Connecticut, Massachusetts, and New York.

      Prime Industrial Energy Services, Inc.: Prime Industrial was a subsidiary
of CH Services and was a New York corporation engaged in project construction
and providing services for electric generators and HVAC equipment installed on
customers' property. Prime Industrial's assets were sold in October 2002, and
Prime Industrial was merged into CHEC on December 31, 2002.

      CH Resources, Inc.: On May 31, 2002, CH Services sold all of its stock
ownership interest in CH Resources and its subsidiaries, CH Syracuse Properties,
Inc. and CH Niagara Properties, Inc., to WPS Power Development, Inc. ("WPS"), a
Wisconsin corporation. For more information regarding this sale, see Note 1.

      Greene Point Development Corporation: Greene Point, a New York corporation
and a wholly owned subsidiary of CH Services engaged in the development and
evaluation of business opportunities for CH Services' competitive business
subsidiaries, was merged into CHEC on December 31, 2002.

Environmental Quality Regulation

      Central Hudson and certain of the competitive business subsidiaries are
subject to


                                        6
<PAGE>

regulation by federal, state and, to some extent, local authorities with respect
to the environmental effects of their operations, including regulations relating
to air and water quality, noise, hazardous wastes, toxic substances, protection
of vegetation and wildlife, and limitations on land use. Environmental matters
may expose both Central Hudson and the competitive business subsidiaries to
potential liability that, 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. Central Hudson and the competitive business subsidiaries 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 to which Central Hudson and certain of
the competitive business subsidiaries are subject are generally as follows:

      Air: Central Hudson's South Cairo and Coxsackie combustion turbines are
subject to the Clean Air Act Amendments of 1990 ("Clean Air Act Amendments"),
which 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. Each of the
facilities complied with the Clean Air Act Amendments during 2002. See Note 11
under the caption "Environmental Matters" regarding the investigation by the U.
S. Environmental Protection Agency ("EPA") into the compliance of generating
plants formerly owned by Central Hudson.

      Water: Central Hudson and certain of the competitive business subsidiaries
are required to comply with applicable federal and state laws and regulations
governing the discharge of pollutants into waterways and ground water.

      The discharge of any pollutants into waters of the United States is
prohibited except in compliance with a permit issued by the EPA under the
National Pollutant Discharge Elimination System ("NPDES") established under the
Clean Water Act. Likewise, under the New York Environmental Conservation Law,
pollutants cannot be discharged into state waters without a State Pollutant
Discharge Elimination System ("SPDES") permit issued by the New York State
Department of Environmental Conservation ("NYS DEC"). Issuance of a SPDES permit
satisfies the NPDES permit requirement.

      Central Hudson has SPDES permits for its Eltings Corners maintenance and
warehouse facility and for its Rifton Recreation and Training Center, both in
New York. No other SPDES permits were required for Central Hudson's operations.
Griffith Energy has SPDES permits for its Frederick Bulk Plant, its Westminster
Bulk Plant, its S. L. Bare Bulk Plant, its R. S. Leitch Bulk Plant, and its
Cheverly, Maryland office. Griffith Energy also has storm water discharge
permits for its Charlestown, West Virginia bulk storage plant and its
Martinsburg, West Virginia bulk storage plant. SCASCO does not require SPDES
permits for its operations, but has applied for a SPDES permit for its Willow
Street bulk storage yard in Winsted, Connecticut, currently under construction.

      See Note 11 under the caption "Environmental Matters" regarding Central
Hudson's application to the NYS DEC for a SPDES permit for its Neversink
Hydroelectric Station.

      Toxic Substances and Hazardous Wastes: Central Hudson and certain of the
competitive business subsidiaries are subject to federal and state laws and
regulations relating


                                        7
<PAGE>

to the use, handling, storage, treatment, transportation and disposal of
industrial, hazardous, and toxic wastes. See Note 11 under the caption
"Environmental Matters" regarding, among other things, former manufactured gas
plants, the Orange County Landfill, and Consolidated Iron Works.

      Other: Central Hudson expenditures attributable, in whole or in
substantial part, to environmental considerations totaled $4.5 million in 2002,
of which approximately $2.3 million was capitalized and $2.2 million was charged
to expense. It is estimated that these expenditures will total approximately
$4.5 million in 2003.

      Expenditures attributable, in whole or in substantial part, to
environmental considerations for the competitive business subsidiaries totaled
$0.7 million in 2002, all of which was applied to capital projects. It is
estimated that these expenditures will total approximately $0.5 million in 2003.

      Regarding environmental matters, none of the Energy Group, Central Hudson
or the competitive business subsidiaries 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 except as
described in Note 11 under the subcaption "Environmental Matters."

AVAILABLE INFORMATION

      Energy Group files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission ("SEC").
Central Hudson files annual, quarterly and special reports and other information
with the SEC. The public may read and copy any documents each company files at
the SEC's Public Reference Room at 450 Fifth Street N.W., 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 Securities and Exchange Commission's Internet
website at http://www.sec.gov.

      Energy Group makes available free of charge on or through its Internet
website at http://www.chenergygroup.com its annual report 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.


                                        8
<PAGE>


Executive Officers

      All executive officers of Energy Group are elected or appointed annually
by its Board of Directors. There are no family relationships among any of the
executive officers of Energy Group or its subsidiaries. The names of the current
executive officers of Energy Group, their positions held and business experience
during the past five years and ages (at December 31, 2002) are as follows:

<TABLE>
<CAPTION>
                                Age at
     Executive                 12/31/02          Current and Prior Positions                                Date Commenced
------------------------------------------------------------------------------------------------------------------------------------
Executive Officers of Energy Group
<S>                               <C>     <C>                                                               <C>
Paul J. Ganci(1)                  64      Chairman of the Board, President, and Chief
                                            Executive Officer (c)                                           April 2002
                                          Chairman of the Board and Chief Executive Officer(a) (b) (c)      November 2000
                                          Director, Chairman of the Board, President and Chief
                                            Executive Officer (a) (b) (c)                                   November 1999
                                          Chairman of the Board and Chief Executive Officer(a)              April 1999
                                          President and Chief Executive Officer(a)                          August 1998
                                          President and Chief Operating Officer(a)                          December 1997
                                          Director (a)                                                      December 1997

Steven V. Lant (1)                45      Director, Chief Operating Officer (c)                             February 2002
                                            and Chief Financial Officer (a) (b) (c)                         June 2001
                                          Director (a) (b)                                                  December 1999
                                          Chief Financial Officer and Treasurer (a) (b)                     November 1999
                                          Chief Financial Officer, Treasurer and Corporate Secretary (a)    November 1998
                                          Treasurer and Assistant Corporate Secretary (a)                   December 1997

Carl E. Meyer (2)                 55      Director (a)                                                      December 1999
                                          Executive Vice President (c)                                      November 1999
                                          President and Chief Operating Officer (a)                         April 1999
                                          Executive Vice President (a)                                      April 1998
                                          Senior Vice President-Customer Services (a)                       December 1997
</TABLE>

                                        9
<PAGE>


<TABLE>
<CAPTION>
                                Age at
     Executive                 12/31/02          Current and Prior Positions                                Date Commenced
------------------------------------------------------------------------------------------------------------------------------------
Executive Officers of Energy Group (Cont'd)
<S>                               <C>     <C>                                                               <C>
Arthur R. Upright(2)              59      Director(a)                                                       December 1999
                                          Director(b)                                                       November 1999
                                          Senior Vice President(a) (c)                                      November 1999
                                          Senior Vice President - Regulatory Affairs, Financial
                                            Planning & Accounting(a)                                        November 1998
                                          Assistant Vice President - Cost & Rate/Financial Planning(a)      December 1997

Joseph J. DeVirgilio, Jr.(1)      51      Executive Vice President(d)                                       January 2003
                                          Senior Vice President(a) (b) (c)                                  October 2002
                                          Senior Vice President(a)                                          November 1998
                                          Vice President(a)                                                 December 1997

Donna S. Doyle(2)                 54      Director(b)                                                       June 2002
                                          Vice President - Accounting and Controller(a) (c)                 November 1999
                                          Controller(a)                                                     December 1997

Denise D. VanBuren(2)             41      Vice President - Corporate Communications and Community
                                            Relations(a) (c)                                                November 2000
                                          Assistant Vice President - Corporate Communications(a)            November 1999
                                          Manager - Corporate Communications(a)                             October 1998
                                          October 1998 Director - Media Relations(a)                        December 1997

Gladys L. Cooper(1)(3)            51      Corporate Secretary(a) (c)                                        January 2003
                                          Corporate Secretary (a) (b) (c)                                   July 2000
                                          Corporate Secretary and Assistant Vice President -
                                            Governmental Relations(a) (b)                                   November 1999
                                          Assistant Vice President - Governmental Relations(a)              December 1997
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                Age at
     Executive                 12/31/02          Current and Prior Positions                                Date Commenced
------------------------------------------------------------------------------------------------------------------------------------
Executive Officers of Energy Group (Cont'd)
<S>                               <C>     <C>                                                               <C>
Diane Seitz(1)                    46      Treasurer(a) (b) (c)                                              March 2002
                                          Vice President - Energy Resources(d)                              December 1997
</TABLE>

(1)   Executive is an officer of Energy Group, Central Hudson and CHEC.

(2)   Executive is an officer of Energy Group and Central Hudson.

(3)   Lincoln E. Bleveans, 35, became Secretary and Assistant Treasurer of
      Energy Group and certain of its subsidiaries in January 2003. Previously,
      from September 2000, Mr. Bleveans was Vice President of Greene Point. From
      February 2000 to September 2000, he was Senior Director - Structured
      Investments at Dynegy Marketing & Trade, Inc. Prior to that, Mr. Bleveans
      was Managing Director - Development for Illinova Generating Company.

(a)   For Central Hudson

(b)   For CH Services

(c)   For Energy Group

(d)   For CHEC

ITEM 2 - PROPERTIES

Energy Group has no significant properties other than those of Central Hudson
and the competitive business subsidiaries.

CENTRAL HUDSON

      Electric: Central Hudson owns electric generating facilities (described in
the table below), and substations having an aggregate transformer capacity of
4.2 million kilovolt amps. Central Hudson's transmission system consists of 586
pole miles of line and the distribution system consists of 7,515 pole miles of
overhead lines and 1,028 trench miles of underground lines.

      The aggregate net capability of Central Hudson's electric generating
plants as of December 31, 2002, the net output of each plant for the year ended
December 31, 2002, and the year each plant was placed in service or
rehabilitated are as set forth below:


                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                           MW*              2002 Unit
Electric                            Year Placed       Net Capability       Net Output
Generating                          In Service/    (2002)  (2001-2002)    Megawatthour
Plant               Type of Fuel   Rehabilitated   Summer    Winter          ("MWh")
-----               ------------   -------------   ------    ------          -------
<S>                 <C>               <C>           <C>       <C>           <C>
Neversink**         Water             1953          20.8      20.1           31,537
Hydro Station

Dashville           Water             1920           4.9       5.2           13,900
Hydro Station

Sturgeon Pool       Water             1924          15.7      15.5           42,510
Hydro Station

High Falls          Water             1986           3.0       3.0            6,036
Hydro Station

Coxsackie Gas       Kerosene or       1969          17.5      24.0            6,547
Turbine ("GT")      Natural Gas

So. Cairo GT        Kerosene          1970          16.2      21.7            3,326

Groveville
Hydro Station       Water             2000           0.8       0.8              529
                                                    ----      ----          -------
                                 Total              78.9      90.3          104,385
                                                    ====      ====          =======
</TABLE>

*     Reflects maximum one-hour net capability of Central Hudson's ownership of
      generation resources and therefore does not include firm purchases or
      sales.

**    Central Hudson's ownership interest in the Neversink Hydro Station
      ("Neversink") is governed by an agreement between Central Hudson and the
      New York City Board of Water Supply ("NYC BWS") dated April 21, 1948. This
      agreement provides for the transfer of Central Hudson's ownership interest
      in Neversink to the NYC BWS on December 31, 2003.


                                       12
<PAGE>

      Central Hudson had a contract with the Power Authority of the State of New
York, which entitled Central Hudson to 49 MW net capability from the
Blenheim-Gilboa Pumped Storage Hydroelectric Plant through June 30, 2002.

      Load and Capacity: Central Hudson's maximum one-hour demand within its own
territory for the year ended December 31, 2002, occurred on July 29, 2002, and
amounted to 1,126 megawatts ("MW"). Central Hudson's maximum one-hour demand
within its own territory for that part of the 2002-2003 winter capability period
through January 31, 2003 occurred on January 23, 2003 and amounted to 905 MW.

      As a result of the sales in 2001 of Central Hudson's interests in its
principal generating facilities, Central Hudson no longer owns sufficient
capacity to serve the peak demands of its full-service transmission and
distribution customers and relies on purchased capacity from third-party
providers to meet these demands. To partially supply its full service customers,
Central Hudson entered into a transition power agreement with an affiliate of
Dynegy Power Corporation, Inc. ("Dynegy") for a period from January 30, 2001 to
and including October 31, 2003 for the purchase of capacity and energy from that
affiliate. Central Hudson has exercised its option to extend this contract to
and including October 31, 2004. At December 31, 2002 this contract is
"financially firm" in that the Dynegy affiliate is required to supply
electricity under the terms of the contract regardless of the operational status
of its Danskammer Plant and its Roseton Plant, both sold by Central Hudson to
Dynegy in 2001. For more information, see Note 2.

      Central Hudson has also entered into an agreement with Constellation, Inc.
("Constellation") to purchase capacity and energy from the Nine Mile Point 2
Plant for a ten-year period. The agreement is "unit contingent" in that
Constellation is only required to supply electricity if the Nine Mile 2 Plant is
operating. Central Hudson sold its interest in the Nine Mile 2 Plant to
Constellation in 2001.

      In the case of both contracts, capacity and energy will be purchased at
defined prices that escalate over the lives of the respective contracts.

      On November 12, 2002 Central Hudson has entered into agreements with
Entergy Nuclear Indian Point 2 LLC and Entergy Nuclear Indian Point 3 LLC to
purchase electricity (but not capacity) on a unit contingent basis at defined
prices for a period from January 1, 2005, to and including December 31, 2007.

      The following table compares required capacity with currently existing
resources of Central Hudson by summer and winter capability periods for 2003 and
2004. Central Hudson intends to eliminate any capacity shortfalls through
additional purchases.


                                       13
<PAGE>

<TABLE>
<CAPTION>
                            Forecasted      UCAP
                               Peak -      Reqmts.  Available       Excess of
                               Total      for Peak    UCAP          UCAP Over
                              Delivery      Loads   Capacity         NYS ISO
                 Capability  Rqts. (MW)     (MW)      (MW)            Rqts.
                   Period       (1)        (2)(3)    (4)(5)    (MW)(3)   Percent(3)
                   ------       ---        ------    ------    --------------------
<C>                <C>         <C>        <C>        <C>        <C>        <C>
2003               Summer      1,095      1,044      1,015       (29)       (3%)
2003-4             Winter        915      1,044        880      (164)      (16%)
</TABLE>


(1)   Total delivery requirements include requirements for both full service
      (delivery and energy) and retail access (delivery only) customers.

(2)   Unforced capacity ("UCAP") is generation capacity adjusted for forced
      outages. Summer period UCAP requirements carry over to the following
      winter period.

(3)   Based on full service requirements.

(4)   Owned capacity of 100 MW plus firm contract capacity of 97 MW as of
      January 31, 2003 for the summer 2003 period.

(5)   Owned capacity of 107 MW plus firm contract capacity of 110 MW as of
      January 31, 2003 for the winter 2003-2004 period.

      Natural Gas: Central Hudson's natural gas system consists of 161 miles of
transmission pipelines and 1,041 miles of distribution pipelines.

      For the year ended December 31, 2002, the total amount of natural gas
purchased by Central Hudson from all sources was 11,208,360 thousand cubic feet
("Mcf.").

      Central Hudson also owns two propane-air mixing facilities for emergency
and peak shaving purposes, one located in Poughkeepsie and the other in
Newburgh, New York. Each facility is capable of supplying 8,000 Mcf. per day
with propane storage capability adequate to provide maximum facility output for
up to three consecutive days.

      The peak daily demand for natural gas by Central Hudson's customers for
the year ended December 31, 2002 and for that part of the 2002-2003 heating
season through January 31, 2003 occurred on January 27, 2003 and amounted to
111,776 Mcf. Central Hudson's firm peak day natural gas capability in 2002 was
124,491 Mcf.

      Other Central Hudson Matters: Central Hudson's generating plants and
important property units are generally held by it in fee simple, except certain
rights-of-way 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 rights-of-way 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
telephone companies. In addition, certain electric and natural gas transmission
facilities owned by others are used by Central Hudson under long-term
contractual arrangements.

      All of the physical properties of Central Hudson, other than property such
as material and supplies and Central Hudson franchises, are from time to time
subject to


                                       14
<PAGE>

liens for current taxes and assessments which Central Hudson pays regularly as
and when due.

      During the three-year period ended December 31, 2002, Central Hudson made
gross property additions of $194 million and property retirements and
adjustments of $820.7 million, resulting in a net decrease (including
Construction Work in Progress) in utility plant of $626.7 million, or 39.2%.
This reduction is due to the sale of Central Hudson's interests in its principal
generating facilities.

CHEC

      For a description of the material properties owned by the competitive
business subsidiaries, see Item 1 of this 10-K Annual Report under the caption
"Subsidiaries of Energy Group" and the caption "Acquisitions" in Note 1.

ITEM 3 - LEGAL PROCEEDINGS

      For a discussion of certain legal proceedings and certain administrative
matters involving Central Hudson and the competitive business subsidiaries, see
Note 11, which discussion is incorporated herein by reference.

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, 2002.

                                     PART II

ITEM 5 - MARKET FOR ENERGY GROUP'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      For information regarding the market for Energy Group's Common Stock and
related stockholder matters, see Item 7 of this 10-K Annual Report under the
captions "Capital Resources and Liquidity - Financing Program of Energy Group
and Its Subsidiaries" and "Common Stock Dividends and Price Ranges" and Note 6.

      Under applicable statutes and their respective Certificates of
Incorporation, 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.


                                       15
<PAGE>

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

FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA,*
(ENERGY GROUP)
(In Thousands)

<TABLE>
<CAPTION>
                                                               2002           2001          2000           1999**           1998**
                                                               ----           ----          ----           ----             ----
<S>                                                     <C>            <C>           <C>              <C>              <C>
Operating Revenues
  Electric............................................  $   427,978    $   428,346   $   531,732      $   427,729      $   418,427
  Natural Gas .......................................       105,343        110,296       105,353           93,099           83,899
  Competitive business subsidiaries .................       162,189        189,298       111,027           45,157            9,097
                                                        -----------    -----------   -----------      -----------      -----------
       Total..........................................      695,510        727,940       748,112          565,985          511,423
                                                        -----------    -----------   -----------      -----------      -----------
Operating Expenses
  Operations ........................................       563,036        573,178       526,816          354,940          301,496
  Depreciation and amortization .....................        31,230         35,637        51,453           48,246           45,796
  Taxes other than income tax.........................       38,270         50,402        54,151           64,510           63,591
  Federal and State income tax ......................        21,613         21,043        37,229           27,772           30,108
                                                        -----------    -----------   -----------      -----------      -----------
      Total .........................................       654,149        680,260       669,649          495,468          440,991
                                                        -----------    -----------   -----------      -----------      -----------
Operating Income ....................................        41,361         47,680        78,463           70,517           70,432
                                                        -----------    -----------   -----------      -----------      -----------
Other Income
  Allowance for equity funds used during construction           591            429            --               --               58
  Federal and State income tax ......................          (681)        24,381          (986)            (371)           1,149
  Other - net.........................................       21,958         11,100        10,626           12,051            8,360
                                                        -----------    -----------   -----------      -----------      -----------
      Total...........................................       21,868         35,910         9,640           11,680           10,094
                                                        -----------    -----------   -----------      -----------      -----------
Income before Interest Charges ......................        63,229         83,590        88,103           82,197           80,526
Interest Charges ....................................        24,615         29,525        33,900           30,394           27,982
Net Gain on Discontinued Operations..................         4,828             --            --               --               --
Preferred Stock Dividends of Central Hudson .........         2,161          3,230         3,230            3,230            3,230
                                                        -----------    -----------   -----------      -----------      -----------
</TABLE>


                                       16
<PAGE>

FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA,*
(ENERGY GROUP CONT'D) (In Thousands)

<TABLE>
<CAPTION>
                                                               2002           2001          2000           1999**           1998**
                                                               ----           ----          ----           ----             ----
<S>                                                     <C>            <C>           <C>              <C>              <C>
Net Income...........................................   $    41,281    $    50,835   $    50,973      $    48,573      $    49,314
Dividends Declared on Common Stock ..................        35,095         35,342        35,945           36,422           36,567
                                                        -----------    -----------   -----------      -----------      -----------
Amount Retained in the Business.......................        6,186         15,493        15,028           12,151           12,747
Common Stock Retirement...............................           --             --            --          (12,642)              --
Retained Earnings - beginning of year ...............       163,317        147,824       132,796          133,287          120,540
                                                        -----------    -----------   -----------      -----------      -----------
Retained Earnings - end of year.......................  $   169,503    $   163,317   $   147,824      $   132,796      $   133,287
                                                        ===========    ===========   ===========      ===========      ===========

Common Stock
  Average shares outstanding (000's)..................       16,302         16,362        16,716           16,862           17,034
  Earnings per share on average shares
    outstanding (basic and diluted) .................         $2.53          $3.11         $3.05            $2.90            $2.90
  Dividends declared per share ......................         $2.16          $2.16         $2.16            $2.16           $2.155
  Book value per share (at year-end)..................       $30.31         $30.33        $29.38           $28.80           $28.00

Total Assets ........................................   $ 1,210,107    $ 1,189,798   $ 1,530,973      $ 1,335,899      $ 1,316,038
Long-term Debt........................................      269,877        216,124       320,370          335,451          356,918
Cumulative Preferred Stock ..........................        33,530         56,030        56,030           56,030           56,030
Common Equity .......................................       486,915        496,309       480,742          484,406          472,180
</TABLE>

*     This summary should be read in conjunction with the Consolidated Financial
      Statements and Notes thereto included in Item 8 of this 10-K Annual
      Report.

**    Holding company was formed December 1999; years 1999 and 1998 were
      restated to reflect fully consolidated results for comparative purposes.


                                       17
<PAGE>

                    SELECTED FINANCIAL DATA OF CENTRAL HUDSON

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

<TABLE>
<CAPTION>
                                                      2002           2001           2000           1999           1998
                                                      ----           ----           ----           ----           ----
<S>                                            <C>            <C>            <C>            <C>            <C>
Operating Revenues
  Electric .................................   $   427,978    $   428,346    $   531,732    $   427,729    $   418,427
  Natural Gas ..............................       105,343        110,296        105,353         93,099         83,899
                                               -----------    -----------    -----------    -----------    -----------
     Total .................................       533,321        538,642        637,085        520,828        502,326
                                               -----------    -----------    -----------    -----------    -----------
Operating Expenses
  Operations ...............................       406,705        394,581        423,545        311,165        292,233
  Depreciation and amortization ............        25,350         26,813         47,914         46,913         45,560
  Taxes, other than income tax .............        38,396         50,170         53,993         63,986         63,458
  Federal and State income tax .............        21,056         17,743         36,374         27,852         29,775
                                               -----------    -----------    -----------    -----------    -----------

     Total .................................       491,507        489,307        561,826        449,916        431,026
                                               -----------    -----------    -----------    -----------    -----------

Operating Income ...........................        41,814         49,335         75,259         70,912         71,300
                                               -----------    -----------    -----------    -----------    -----------

Other Income
  Allowance for equity funds
   used during construction ................           591            429             --             --            585
  Federal and State income tax .............          (634)        25,380           (776)          (292)         1,148
  Other - net ..............................        15,481         (2,458)         8,960         10,875          6,865
                                               -----------    -----------    -----------    -----------    -----------
     Total .................................        15,438         23,351          8,184         10,583          8,598
                                               -----------    -----------    -----------    -----------    -----------

Income before Interest Charges .............        57,252         72,686         83,443         81,495         79,898
Interest Charges ...........................        24,728         28,508         30,848         29,614         27,354
                                               -----------    -----------    -----------    -----------    -----------
</TABLE>


                                       18
<PAGE>


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

<TABLE>
<CAPTION>
                                                      2002           2001           2000           1999           1998
                                                      ----           ----           ----           ----           ----
<S>                                            <C>            <C>            <C>            <C>            <C>
Net Income .................................   $    32,524    $    44,178    $    52,595    $    51,881    $    52,544

Dividends Declared on Cumulative Pref. Stock         2,161          3,230          3,230          3,230          3,230
                                               -----------    -----------    -----------    -----------    -----------

Income Available for Common Stock ..........        30,363         40,948         49,365         48,651         49,314
Dividend Declared on Common Stock ..........            --             --             --         27,317         36,567
Dividends Declared to Parent-Energy Group ..        30,000        145,642         27,600          7,000             --
                                               -----------    -----------    -----------    -----------    -----------
Amount Retained in the Business ............           363       (104,694)        21,765         14,334         12,747
Reverse Equity Transfer ....................            --             --         26,000             --             --
Common Stock Retirement ....................            --             --             --        (12,642)            --
Transfer of Competitive Business
  Subsidiaries to Energy Group .............            --             --         (2,500)       (65,698)            --
Transfer of Property to Energy Group .......            --            (75)            --             --             --
Retained Earnings - beginning of year ......         9,777        114,546         69,281        133,287        120,540
                                               -----------    -----------    -----------    -----------    -----------
Retained Earnings - end of year ............   $    10,140    $     9,777    $   114,546    $    69,281    $   133,287
                                               ===========    ===========    ===========    ===========    ===========

Total Assets ...............................   $   945,966    $   915,859    $ 1,332,298    $ 1,259,390    $ 1,316,038
Long-term Debt .............................       269,877        215,874        320,370        335,451        356,918
Cumulative Preferred Stock .................        33,530         56,030         56,030         56,030         56,030
Common Equity ..............................       264,143        263,277        466,230        420,891        472,180
</TABLE>

*     This summary should be read in conjunction with the Consolidated Financial
      Statements and Notes thereto included in Item 8 of this 10-K Annual
      Report.


                                       19
<PAGE>


ITEM  7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

INTRODUCTION

      The following is Management's assessment of certain significant factors
affecting the financial condition and operating results of Energy Group and its
subsidiaries over the past three years. The Consolidated Financial Statements
and the Notes thereto contain additional data. For the twelve months ended
December 31, 2002, 62% of Energy Group's operating revenues were derived from
Central Hudson's electric service, 15% from Central Hudson's natural gas
service, and 23% from the competitive business subsidiaries.

COMPETITION/DEREGULATION

Holding Company Restructuring

      Energy Group is the holding company parent corporation of Central Hudson
and CHEC, as described under the caption "Subsidiaries of Energy Group" in Item
1 of this 10-K Annual Report. Energy Group's operations are conducted through
Central Hudson, CHEC, and the other competitive business subsidiaries. Energy
Group's common stock trades on the New York Stock Exchange under the symbol
"CHG."

      The holding company structure was instituted to permit quick response to
changes in the evolving competitive energy industry. The structure permits the
use of financing techniques that are better suited to the particular
requirements, characteristics, and risks of competitive operations without
affecting the capital structure or creditworthiness of Energy Group's regulated
subsidiary, Central Hudson. This increases Energy Group's financial flexibility
by allowing it to establish different capital structures for each of its
individual lines of business.

Refocusing of CHEC's Business Plan

      The purpose of the reorganization of the competitive business subsidiaries
effected on December 31, 2002 and described herein was to streamline
administration and improve managerial effectiveness. The reorganization is not
expected to have any material effect on the financial condition of Energy Group.

      During 2002, Energy Group's competitive electric generation subsidiary, CH
Resources, Inc., was divested and certain other activities of the competitive
business subsidiaries were streamlined or sold. During 2003, CHEC will continue
to evaluate the long-term viability of certain of its business activities;
namely, cogeneration partnerships, energy efficiency projects, and its limited
partnership interest in Nth Power Technologies Fund II, L.P., a venture capital
fund which invests in technology companies in the energy sector. Energy Group is
unable to predict the outcome of this evaluation. Going forward, CHEC's primary
focus will be on fuel distribution and related services. In 2003, CHEC's fuel
distribution subsidiaries, Griffith Energy and SCASCO, will continue to explore
opportunities to expand through both internal growth and acquisitions, depending
on financial performance and opportunities available.


                                       20
<PAGE>

There can be no assurance that such expansion opportunities will exist, or if
consummated, that they will be profitable.

Competitive Opportunities Proceeding Settlement Agreement

      For a discussion of the Agreement approved by the PSC in its Competitive
Opportunities Proceeding and a discussion of the impact of the Agreement on
Energy Group's accounting policies, see the caption "Competitive Opportunities
Proceeding Settlement Agreement" in Note 2.

Sales of Principal Generating Facilities

      For information on the disposition of Central Hudson's principal
generating facilities in 2001, see Note 2 under the caption "Sales of Principal
Generating Facilities." For information on the divestiture of CH Resources, Inc.
in 2002, see Note 1 under the caption "Discontinued Operations."

FERC Restructuring and Independent System Operator

      For information with respect to the New York State Independent System
Operator ("NYS ISO"), the New York State Reliability Council ("Reliability
Council"), and FERC rulings relating to electric industry restructuring, see
Note 2 under the caption "FERC Restructuring and Independent System Operator."

Rate Proceedings - Electric and Natural Gas

      For information regarding Central Hudson's most recent electric and
natural gas rate filings and the Order of the PSC issued in those proceedings,
see Note 2 under the caption "Rate Proceedings - Electric and Natural Gas."

CRITICAL ACCOUNTING POLICIES

      The following accounting policies have been identified that could result
in material changes to the financial condition or results of operations of
Energy Group and its subsidiaries under different conditions or using different
assumptions.

      Accounting for Regulated Operations - Central Hudson follows generally
accepted accounting principles, including the provisions of Statement of
Financial Accounting Standards No. 71, Accounting for the Effects of Certain
Types of Regulation ("SFAS 71"). The application of this 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 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


                                       21
<PAGE>

experience and assumptions of future expectations. A change in assumption
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 8 - Post-Employment Benefits for
additional discussion.

      Use of Estimates - Preparation of the Consolidated Financial Statements in
accordance with generally accepted accounting principles includes the use of
estimates and assumptions by Management that affect financial results and actual
results may differ from those estimated. See Note 1 under the caption "Use of
Estimates" for additional discussion.

      Accounting for Derivatives - Energy Group and its subsidiaries use
derivatives to manage their commodity and financial market risks. The accounting
requirements for derivatives and hedging activities are complex and still
evolving. 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 and Note 1 under the caption
"Accounting for Derivative Instruments and Hedging Activities."

CAPITAL RESOURCES AND LIQUIDITY

Construction Program - Central Hudson

      As shown in the Consolidated Statement of Cash Flows, cash expenditures
related to Central Hudson's construction program amounted to $65.8 million in
2002, a $5.3 million increase from the $60.5 million expended in 2001. Cash
construction expenditures for 2003 are estimated to be $54.3 million, a decrease
of $11.5 million as compared to 2002 expenditures.

      Central Hudson's estimates of construction expenditures and internal funds
available for 2003 are set forth in the following table:

                                                                      2003
                                                                 (In Thousands)

      Construction Expenditures*
          Cash Construction Expenditures ......................    $54,300

      Less Internal Funds From Operations .....................     29,200
                                                                   -------
      Balance of Construction Requirements to be Financed .....    $25,100
                                                                   =======

    *Excluding the equity portion of the Allowance for Funds Used During
Construction ("AFDC"), a noncash item.

      Estimates of construction expenditures are subject to continuous review
and adjustment, and actual expenditures may vary from these estimates. These
construction expenditures include capitalized overheads and the debt portion of
AFDC.


                                       22
<PAGE>

      Internal funds available to fund cash requirements are less than in past
years because of the reduction in depreciation that occurred due to the sales of
Central Hudson's interest in its principal generating facilities.

      Central Hudson anticipates paying up to its entire earnings in 2003 as a
dividend to Energy Group and may also optionally redeem $12.5 million of
long-term securities.

      In 2003, Central Hudson expects to satisfy its funding requirements with
available cash on hand and short-term borrowings or issuances of Medium-Term
Notes. The amount of financing is not expected to exceed $31 million in
aggregate.

Capital Expenditures and Acquisitions by CH Services and CHEC

      At December 31, 2002, CH Services had a credit facility that provided up
to $12.5 million to be used for working capital purposes, acquisitions, and
capital expenditures, and could borrow funds from Energy Group. CHEC has
succeeded to such credit facility. CH Services' capital expenditures for 2002
were approximately $7.9 million, which included acquisitions of $1.5 million.
CHEC's capital expenditures for 2003 are estimated to be $20 million, which
includes $15 million for acquisitions, and are expected to be financed with
borrowings from Energy Group. The actual amount expended for acquisitions will
depend on the opportunities that develop and may be higher or lower than the
amount projected.

Capital Structure

      As provided in the PSC's Order Establishing Rates (see Note 2 under the
caption "Rate Proceedings - Electric and Natural Gas"), Central Hudson's common
equity ratio was capped, for the purposes of the PSC's return on equity ("ROE")
calculation, at 47% for the twelve months ended June 30, 2002, and at 46% and
45%, respectively, for the two subsequent twelve-month periods. It is expected
that the capital structure of Central Hudson will allow it to maintain a strong
investment grade rating during these periods. Central Hudson's senior debt
ratings are "A2" by Moody's Investors Service and "A" by Standard and Poor's
Corporation and FitchRatings.

      Year-end capital structure for Energy Group and its subsidiaries is set
forth below as of the end of 2002, 2001, and 2000:

Energy Group                                      Year-end Capital Structure
------------                                      --------------------------
                                                 2002         2001         2000
                                               ------       ------       ------
Long-term debt ..........................        35.4%        30.0%        35.3%
Short-term debt .........................          --           --         15.2
Preferred stock .........................         4.2          7.1          5.2
Common equity ...........................        60.4         62.9         44.3
                                               ------       ------       ------
                                                100.0%       100.0%       100.0%
                                               ======       ======       ======


                                       23
<PAGE>

Central Hudson                                    Year-end Capital Structure
--------------                                    --------------------------
                                                 2002         2001         2000
                                               ------       ------       ------
Long-term debt ..........................        48.9%        42.5%        41.2%
Short-term debt .........................          --           --          2.7
Preferred stock .........................         5.8         10.1          6.0
Common equity ...........................        45.3         47.4         50.1
                                               ------       ------       ------
                                                100.0%       100.0%       100.0%
                                               ======       ======       ======

Competitive Business Subsidiaries                Year-end Capital Structure*
---------------------------------                ---------------------------
                                                 2002         2001         2000
                                               ------       ------       ------
Long-term debt ..........................        48.5%        50.5%        73.6%
Short-term debt .........................          --           --           --
Preferred stock .........................          --           --           --
Common equity ...........................        51.5         49.5         26.4
                                               ------       ------       ------
                                                100.0%       100.0%       100.0%
                                               ======       ======       ======

* Based on stand-alone financial statements and includes intercompany balances
which are eliminated in consolidation.

Financing Program of Energy Group and Its Subsidiaries

      Effective August 1, 2002, Energy Group authorized a common stock
repurchase program for the purchase of up to 25% of its then outstanding common
stock over a five-year period and projected that 800,000 shares would be
repurchased during the first twelve (12) months of this program. Between August
2002 and December 2002, the number of shares repurchased under the program were
297,487 at a cost of $14.4 million.

      Also during 2002, Energy Group established an Alternate Investment Program
with the objective of realizing after-tax yields on its cash reserves higher
than those available through money market instruments, while avoiding undue risk
to principal and maintaining adequate liquidity. See Note 10 for further
discussion of this program.

      Central Hudson has received authority from the PSC to issue up to $100
million of unsecured Medium-Term Notes during the three years ending June 30,
2004. During 2002, $69 million of such Notes were issued and $31 million of such
Notes remain authorized but unissued.

      For more information with respect to the financing program of Energy
Group, see Notes 6 and 7.

      Griffith Energy, one of the competitive business subsidiaries and a
subsidiary of CHEC, funded its acquisitions in 2002 with funds received from
Energy Group.


                                       24
<PAGE>

Short-Term Debt

      As more fully discussed in Note 5, Central Hudson, pursuant to authority
from the PSC, entered into a $75 million revolving credit facility in October
2001 to replace its then existing $50 million revolving credit facility. In
addition, Central Hudson maintains a confirmed line of credit of $1 million with
a regional bank and certain uncommitted lines of credit with various banks.
These agreements give Central Hudson competitive options to minimize the cost of
its short-term borrowing. Authorization from the PSC limits the amount Central
Hudson may have outstanding at any time under all of its short-term borrowing
arrangements to $77 million in the aggregate. This authorization expires on June
30, 2004.

      As of December 31, 2002, the competitive business subsidiaries also have a
short-term line of credit totaling $12.5 million.

Parental Guarantees

      For information on parental guarantees issued by Energy Group and certain
of its competitive subsidiaries, see Note 1 under the caption "Parental
Guarantees."

Product Warranties

      For information on product warranties issued by certain of Energy Group's
competitive subsidiaries, see Note 1 under the caption "Product Warranties."

RESULTS OF OPERATIONS

      The following discussion and analyses include explanations of significant
changes in revenues and expenses between 2001 results and 2002 results and
between 2000 results and 2001 results for both Energy Group and Central Hudson.
Additional information relating to changes between these years is provided in
the Notes.

Earnings

      Earnings per share of Energy Group's common stock are shown after
provision for dividends on Central Hudson's preferred stock and are computed on
the basis of the average number of common shares outstanding during the subject
year. The number of shares of Energy Group common stock, the earnings per share,
and the rate of return earned on average common equity are as follows:

                                               2002          2001          2000
                                               ----          ----          ----
Average shares outstanding (000's) ...       16,302        16,362        16,716
Earnings per share (basic and diluted)        $2.53         $3.11         $3.05
Return earned on common equity
 per financial statements ............          8.2%         10.4%         10.4%


                                       25
<PAGE>

      Earnings per share for 2002, basic and diluted, were $2.53 as compared to
$3.11 for 2001, a decrease of $0.58 per share. The decrease in earnings resulted
largely from the effect of regulatory actions taken in 2001 in conjunction with
the sale of Central Hudson's interests in its principal generating facilities.
These actions included the recognition of tax benefits in 2001; a reduction in
rate base related to the sale of Central Hudson's interests in the principal
generating facilities; and an after-tax contribution to Central Hudson's
Customer Benefit Fund in 2001 (described in Note 2 under the captions "Summary
of Regulatory Assets and Liabilities" and "Rate Proceedings - Electric and
Natural Gas"). The reduction in earnings also reflects a decrease in interest
and investment income due to lower cash balances and rates of return; an
increase in other operating expenses for Central Hudson, primarily storm
restoration costs due to increased storm activity in 2002; and a decrease in
Central Hudson's natural gas net operating revenues (net of the cost of natural
gas and revenue taxes) resulting from lower sales due to milder weather.

      The reduction in earnings per share was partially offset by an increase in
Central Hudson's electric net operating revenues (net of the cost of purchased
electricity, fuel used in the generation of electricity, and revenue taxes);
reductions in Central Hudson's interest charges and preferred stock dividends;
and an enhancement in earnings from a non-recurring item recorded by Central
Hudson. The increase in electric net operating revenues results primarily from
increased sales, due in part to hotter weather during the summer months in 2002.
Interest charges and preferred stock dividends were reduced due to the
redemption or repurchase of various long-term debt and preferred stock issues in
2002 and 2001 using proceeds from the sale of Central Hudson's principal
interests in its principal generating facilities. The non-recurring item is
income that was recorded by Central Hudson for the receipt and subsequent sale
of stock related to the demutualization of certain insurance companies through
which Central Hudson provided employee benefits.

      Energy Group's earnings were also enhanced by an increase in earnings from
CH Services, largely attributable to discontinued operations (described in Note
1 under the caption "Discontinued Operations"). A net gain was realized for the
May 2002 sale of CH Resources, CH Services' wholly owned electric generation
subsidiary. This gain was partially offset by one-time charges related to
restructuring certain energy efficiency contracts and lower earnings from sales
by its fuel distribution subsidiaries.

      Earnings increased $.06 per share in 2001 (basic and diluted) when
compared to 2000 (basic and diluted). This increase resulted substantially from
an increase in Central Hudson's electric net operating revenues (net of cost of
purchased electricity, fuel used in the generation of electricity, and revenue
taxes) due primarily to a 4% increase in own- territory sales to residential and
commercial customers. This increase in sales for the year resulted from an
increase in the average number of customers and warmer weather during the summer
months. The number of cooling degree days in 2001 was 22% higher than 2000 and
5% above normal. The increase in Central Hudson's net operating revenues was
partially offset by a reduction in profits permitted by the PSC to be retained
from sales of electricity to other utilities and marketers due to the
termination of this regulatory incentive in early 2001. Also contributing to the
increase in earnings was an increase in Central Hudson's gas net operating
revenues (net of the cost of natural gas and revenue taxes) primarily due to an
increase in residential and


                                       26
<PAGE>

commercial space heating sales, and an increase in the average number of
customers. Earnings were also favorably impacted by Energy Group's favorable
annualization effect in 2001 of the common stock repurchase program in 2000 and
the recognition of gains by Energy Group related to weather derivative
contracts. Central Hudson's earnings were also favorably impacted by the net
effect of various items including cost of capital, income taxes, and operating
expenses.

      Partially offsetting the 2001 increase in Central Hudson's earnings was
the net effect on Central Hudson of regulatory actions in 2001 associated with
the sales of Central Hudson's interests in its principal generating facilities.
These regulatory actions included a reduction in rate base related to those
generating facilities, an after-tax contribution to Central Hudson's Customer
Benefit Fund (described in Note 2 under the caption "Summary of Regulatory
Assets and Liabilities - Customer Benefit Fund"), recognition of tax benefits
related to the sale of those generating facilities, and recognition of net
income for shareholders under a prior regulatory agreement. Also offsetting the
increase in earnings was a reduction in earnings from CH Services, due primarily
to losses incurred by CH Resources prior to its sale, as a result of reduced
margins attributable to volatile natural gas prices and lower-than-expected
wholesale electricity prices. Milder weather also depressed sales of CH
Services' fuel distribution subsidiaries. This reduction in CH Services'
earnings was partly offset by gains recorded by CH Services related to weather
derivative contracts entered into as hedges against variations in heating degree
days.


                                       27
<PAGE>

Operating Revenues

      Total operating revenues of Energy Group decreased $32.4 million, or 5%,
in 2002 as compared to 2001, and decreased $20.2 million, or 3%, in 2001 as
compared to 2000.

      See the table below for details of the variations:

<TABLE>
<CAPTION>
                                                            Increase or (Decrease) from Prior Year
                            -----------------------------------------------------------------------------------------------
                                              2002                                                  2001
                            -----------------------------------------------     -------------------------------------------
                            Electric          Gas        Other        Total     Electric        Gas        Other      Total
                            --------          ---        -----        -----     --------        ---        -----      -----
Operating Revenues                                                   (In Thousands)
<S>                        <C>          <C>          <C>         <C>          <C>          <C>          <C>       <C>
Customer sales .........   $ (77,162)   $ (27,493)   $     --    $(104,655)   $(211,312)   $ (12,649)   $    --   $(223,961)
Sales to other utilities      (4,983)       3,855          --       (1,128)     (54,423)      (4,106)        --     (58,529)
Fuel cost adjustment ...      53,963       20,099          --       74,062      165,580       20,694         --     186,274
Deferred revenues ......      28,174       (1,395)         --       26,779       (3,399)       1,316         --      (2,083)
Miscellaneous ..........        (360)         (19)         --         (379)         168         (312)        --        (144)
                           ---------    ---------    --------    ---------    ---------    ---------    -------   ---------
    Subtotal ...........   $    (368)      (4,953)         --       (5,321)    (103,386)       4,943         --     (98,443)
                           ---------    ---------    --------    ---------    ---------    ---------    -------   ---------
Competitive business
  subsidiary sales .....          --           --     (27,109)     (27,109)          --           --     78,271      78,271
                           ---------    ---------    --------    ---------    ---------    ---------    -------   ---------
     Total .............   $    (368)   $  (4,953)   $(27,109)   $ (32,430)   $(103,386)   $   4,943    $78,271   $ (20,172)
                           =========    =========    ========    =========    =========    =========    =======   =========
</TABLE>

Note: The reduction in revenues from electric sales due to customer refunds is
      offset by the restoration of revenues from Central Hudson's Customer
      Benefit Fund (See Note 2).


                                       28
<PAGE>

Sales - Central Hudson

      Central Hudson's revenues vary seasonally in response to weather. In
particular, electric revenues peak in the summer while natural gas revenues peak
in the winter.

      For 2002, sales of electricity to full service customers, plus delivery of
electricity supplied by others, increased 4% as compared to 2001. Sales to
residential customers increased 3% and sales to commercial customers increased
2% reflecting, in part, an increase in electricity usage due to hotter summer
weather in 2002. Cooling degree days in 2002 were 12% higher than in 2001. Sales
to industrial customers increased 6%, reflecting, in substantial part, a
significant increase in usage by a single large industrial customer.

      For 2002, sales of firm natural gas, plus transportation of natural gas
supplied by others, decreased 5% as compared to the prior year. Residential
sales decreased 7% while sales to commercial customers decreased 4%. Such sales,
comprised largely of sales for heating, decreased primarily as a result of
milder weather as heating degree-days in 2002 were 8% lower than in 2001.
Industrial sales, representing approximately 6% of total uninterruptible sales
in 2001 and 2002, decreased 10% while interruptible sales increased 20%.

      Sales of electricity, plus delivery of electricity supplied by others,
increased 4% in 2001 compared to 2000. Sales to residential and commercial
customers increased 6% and 5%, respectively, while sales to industrial customers
were unchanged. The increase in sales was due primarily to an increase in the
average number of residential and commercial customers and increased usage due
to warmer than normal weather. Cooling degree days in 2001 were 22% higher than
in 2000 and 5% above normal.

      Sales of uninterruptible natural gas, plus transportation of natural gas
supplied by others, decreased by 1% from 2000 to 2001; however, sales to
residential and commercial customers each increased 3%. The increase in sales to
these customers resulted primarily from an increase in the average number of
customers. Industrial sales decreased 8% and interruptible sales decreased 4% as
compared to the prior year due to a decrease in usage.

      Changes in sales from the prior year by major customer classification,
including interruptible natural gas sales are set forth below. Also included are
the changes related to electricity delivery.


                                       29
<PAGE>


                                      % Increase (Decrease) from Prior Year
                                   ---------------------------------------------
                                     Electric (MWh)           Natural Gas (Mcf)
                                   -----------------         -------------------
                                   2002         2001         2002          2001
                                   ----         ----         ----          ----
Residential ..............            3            6           (7)            3
Commercial ...............            2            5           (4)            3
Industrial ...............            6           --          (10)           (8)
Interruptible ............          N/A          N/A           20            (4)

      Because of sharing arrangements established for interruptible natural gas
sales and interruptible transportation of customer-owned natural gas, as
described under the caption "Incentive Arrangements" below, variations in these
sales from year to year typically have a minimal impact on earnings.

Incentive Arrangements

      Under certain earnings sharing formulas approved by the PSC, Central
Hudson either 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 formulas are currently effective for interruptible
natural gas sales, natural gas capacity release transactions, natural gas
reliability, electric service reliability, and certain aspects of customer
service and satisfaction.

      See Note 2 under the caption "Rate Proceedings - Electric and Natural Gas"
for a description of earnings sharing formulas approved by the PSC for Central
Hudson.

      The net results of these and previous earnings sharing formulas were to
increase pretax earnings by $0.1 million, $0.2 million and $4.8 million during
2002, 2001 and 2000, respectively.

Sales and Revenues - Competitive Business Subsidiaries

      Revenues for CH Services decreased from $189.3 in 2001 to $162.2 million
in 2002. The reduction in revenues reflects, in substantial part, the impact of
the sale of CH Resources, which was sold in May 2002. Revenues and expenses for
CH Resources were eliminated from the results of continuing operations beginning
December 2001 in accordance with accounting principles relating to discontinued
operations. CH Resources' cumulative net operating loss and the gain on its sale
are reported separately from the results of continuing operations in Energy
Group's Consolidated Income Statement. The overall decrease in revenues was
partially offset by revenues from increased sales of petroleum products due to
acquisitions of fuel distribution companies in the latter part of 2001.

      Revenues for CH Services increased $78.3 million, from $111 million in
2000 to $189.3 million in 2001. Of the revenue increase in 2001, revenues from
Griffith Energy increased $81 million from $34 million in 2000 to $115 million
in 2001, primarily due to the full year of ownership of Griffith Energy.
Revenues from SCASCO increased $3.4


                                       30
<PAGE>

million, from $31.5 million in 2000 to $34.9 million in 2001, primarily due to a
growth in sales resulting from acquisitions. Sales of wholesale electricity by
CH Resources during 2001 decreased by $4.7 million from $34.4 million in 2000
due to reduced wholesale electric prices in New York State.

Sales

      In 2002, sales of petroleum products increased by 4.8 million gallons, or
3.9%, to 126.9 million gallons from 122.1 million gallons in 2001. This increase
was the result of acquisitions. In 2002, sales of natural gas increased by
400,000 Mcf, or 21.1%, to 2.3 million Mcf from 1.9 million Mcf in 2001. This
increase was due to customer growth.

      In 2001, sales of petroleum products increased by 85.9 million gallons, or
237.3%, to 122.1 million gallons from 36.2 million gallons in 2000. This
increase was due to the full year of ownership of Griffith Energy in 2001. In
2001, sales of natural gas increased by 200,000 Mcf, or 11.8%, to 1.9 million
Mcf from 1.7 million Mcf in 2000. This increase was due to customer growth.

Revenues

      In 2002, revenues from petroleum products increased by $3.9 million, or
3.1%, to $130 million from $126.1 million in 2001. This increase was the result
of increased sales volumes as a result of acquisitions. In 2002, natural gas
revenues increased by $1.9 million, or 19.8%, to $11.5 million from $9.6 million
in 2001. This increase was due to increased sales volume.

      In 2001, revenues from petroleum products increased by $78.4 million, or
164%, to $126.2 million from $47.8 million for 2000. This increase was the
result of increased sales volumes as a result of a full year of ownership of
Griffith Energy in 2001. In 2001, natural gas revenues decreased by $0.6
million, or 5.9%, to $9.6 million from $10.2 million in 2000. This decrease was
due to reduced retail prices as a result of lower commodity costs in 2001.

Operating Expenses - Central Hudson

      The most significant elements of operating expenses are purchased
electricity and purchased natural gas. Approximately 59% in 2002 and 52% in 2001
of every revenue dollar related to sales of electricity was expended for the
combined cost of fuel used in electric generation and purchased electricity. The
corresponding figures for the cost of purchased natural gas were 59% and 57%,
respectively.

      Central Hudson negotiated multi-year electricity purchase contracts with
the new owners of the principal generating facilities it divested. These
purchases are supplemented by purchases from the NYS ISO. For information
regarding these electricity purchase contracts, see Item 2 of this 10-K Annual
Report under the subcaption "Load and Capacity," Note 2 under the caption "Sales
of Principal Generating Facilities" and Note 3.


                                       31
<PAGE>


      Operating expenses increased $2.2 million, or 0.4%, from $489.3 million in
2001 to $491.5 million in 2002. Purchased electricity and fuel used in electric
generation increased by $28.3 million, primarily as a result of the sale of
Central Hudson's interests in its principal generating facilities in January and
November of 2001. Purchased electricity costs for 2002 reflect the purchase of
substantially all of Central Hudson's energy requirements compared to 79% in
2001. The increase in electric sales also contributed to the increase in these
costs. Partially offsetting the increase in operating expenses is the
elimination of operating costs for Central Hudson's principal generating
facilities and a reduction in purchased natural gas costs reflecting both lower
commodity prices and a reduction in sales.

      Total Central Hudson utility operating expenses decreased $72.5 million,
or 12.9% from 2000 to 2001. The reduction in these expenses largely reflected
the effect of the sale of Central Hudson's interests in its principal generating
facilities.

      Fuel and purchased electricity for Central Hudson increased $935,000, or
0.4%, in 2001 compared to 2000 due to an increase in sales to full service
residential and commercial customers. In 2000, Central Hudson's utility fuel and
purchased electricity increased $92 million, or 70%, due to increases in
electric sales and sales of electricity for resale. The rise in costs reflected
both increasing fossil fuel prices and the impact of changing market conditions
brought about by the formation of the NYS ISO in November 1999.

      During 2001, Central Hudson's purchased natural gas costs remained almost
flat with an increase of $804,000, or 1.3%, reflecting an increase in the volume
of natural gas purchased. In 2000, purchased natural gas costs increased $10.3
million, or 19%, due to higher firm and interruptible natural gas sales,
including the use of natural gas as a boiler fuel.

      All other expenses decreased $74.3 million due to a reduction in
depreciation, amortization, taxes, and other expenses associated with the sales
of Central Hudson's interests in the Danskammer Plant and the Roseton Plant and
the reduction in depreciation expense for Central Hudson's interest in the Nine
Mile 2 Plant.

Operating Expenses - CH Services

      Operating expenses for CH Services decreased $25.7 million, from $187.7
million in 2001 to $162.0 million in 2002, largely as a result of the sale of CH
Resources. This decrease was partially offset by increased operating expenses
due to additional acquisitions of fuel distribution companies. The cost of
purchased petroleum products increased by $3.6 million, or 4%, to $92.7 million
from $89.1 million in 2001 from increased sales due to acquisitions of fuel
distribution companies. The cost of natural gas increased by $1.8 million, or
21.2%, to $10.3 million from $8.5 million in 2001 due to an increase in sales.

      CH Services' operating expenses increased $80.0 million from $107.7
million in 2000 to $187.7 million in 2001, primarily due to fuel costs
associated with CH Resources' generating plants and the cost of purchased
petroleum products and natural gas for SCASCO and Griffith Energy.


                                       32
<PAGE>

      In 2001, the cost of petroleum products increased by $53.6 million, or
151%, to $89.1 million from $35.5 million in 2000. The increase was primarily
due to the full year of ownership of Griffith Energy. In 2001, the cost of
natural gas increased by $0.1 million, or 1.2%, to $8.6 million from $8.5
million for 2000. The increase was due to increased sales volume. Fuel costs for
CH Resources decreased from $20 million in 2000 to $19.5 million in 2001 due to
decreased electric generation.

      CH Services' other operating expenses, excluding energy supply costs,
increased $30.5 million, including a $5.3 million increase in depreciation and
amortization on related assets. The primary reasons for both the increase in
energy supply costs and the increase in other expenses of operation are the full
year ownership of Griffith Energy, and the additional acquisitions in 2001.

      See Note 4 for an analysis and reconciliation of federal and state income
taxes.

Other Income and Interest Charges

      In 2002, Energy Group's Other Income and Deductions decreased $14.0
million as compared to 2001 primarily reflecting the net effect of favorable tax
benefits related to the sale of Central Hudson's interests in its principal
generating facilities and the after-tax contribution to Central Hudson's
Customer Benefit Fund, both recorded in 2001. The reduction also reflects a
decrease in interest and investment income.

      Interest Charges and Preferred Stock Dividends decreased $6.0 million in
2002 due primarily to redemptions and repurchases of various long-term debt and
preferred stock issues by Central Hudson in 2001 and 2002 utilizing proceeds
from the sale of Central Hudson's interests in its principal generating
facilities.

      Energy Group's Other Income and Deductions increased $26.3 million in 2001
as compared to 2000, resulting largely from the recognition of tax benefits
related to the sales of Central Hudson's interests in its principal generating
facilities and the restoration of net income for Central Hudson shareholders
under a prior regulatory agreement. The increase also reflects the recognition
of gains related to weather derivative contracts entered into by Energy Group to
hedge the effect of weather patterns on its subsidiaries' operations.

      Energy Group's total interest charges (excluding AFDC) decreased $4.8
million, or 14%, in 2001, primarily due to the redemption and repurchase of its
long-term debt obligations by Central Hudson. This debt was eliminated using a
portion of the proceeds from the sale of Central Hudson's interests in its
principal generating facilities. Partially offsetting the decrease in interest
charges were Central Hudson's carrying charges related to a number of regulatory
obligations, including the Customer Benefit Fund.

      The following table sets forth some of the pertinent data on Energy
Group's outstanding debt (unless noted otherwise, this debt relates to Central
Hudson):


                                       33
<PAGE>


                                           2002            2001         2000
                                           ----            ----         ----
                                                     (In Thousands)
Long-term Debt:
  Debt retired ....................      $ 20,000       $147,630       $ 35,100
  Outstanding at year-end:
   Amount (including current
    portion) ......................       284,877        235,874        382,980
   Effective rate .................         3.92%          4.64%          6.54%
Short-term Debt:
  Average daily amount
   outstanding ....................      $  1,534       $  1,922       $ 13,490
  Weighted average interest rate ..         2.15%          6.56%          6.55%

      In 2001, Central Hudson redeemed, repurchased, or defeased a significant
percentage of its long-term debt and experienced a reduction in interest expense
and its effective rate.

      See Notes 5 and 7 for additional information on short-term and long-term
debt of Energy Group and/or Central Hudson.

Nuclear Operations

      Nine Mile 2 Plant: For information regarding Central Hudson's sale of its
9% ownership interest in the Nine Mile 2 Plant on November 7, 2001, see Note 3.

      During 2001, Central Hudson's share of operating expenses, taxes and
depreciation pertaining to the operation of the Nine Mile 2 Plant were included
in Energy Group's financial results. In both 2001 and 2000, underruns in costs
of operations and maintenance expenses for the Nine Mile 2 Plant, compared to
the amount allowed in rates, were deferred for the future benefit of customers.
For 2002, carrying charges were accrued on the regulatory liability balance. For
further information regarding the deferred Nine Mile 2 Plant costs, see Note 2.

Other Matters

      Change in Accounting Method - Stock Options: In December 2002, the FASB
issued Statement No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure ("SFAS 148"), which amends FASB Statement No. 123, Accounting for
Stock-Based Compensation ("SFAS 123"). For information regarding Energy Group's
change in accounting method for stock-based compensation, see Note 1 and Note 9.

      Other Changes in Accounting Standards: See Note 1 under the caption "New
Accounting Standards and Other FASB Projects" for discussion on other relevant
FASB proposals.


                                       34
<PAGE>

FINANCIAL INDICES - ENERGY GROUP

      Selected financial indices for the last five years are set forth in the
following table:

<TABLE>
<CAPTION>
                                                 2002        2001         2000       1999*       1998*
                                                 ----        ----         ----       -----       -----
<S>                                             <C>         <C>          <C>         <C>         <C>
Pretax coverage of total interest charges:
     Including AFDC ......................      3.38x       2.66x        3.37x       3.59x       3.83x
     Excluding AFDC ......................      3.10x       2.46x        3.11x       3.30x       3.54x
     Funds from Operations ...............      4.66x       3.99x        3.98x       4.34x       4.39x

Pretax coverage of total interest
 charges and preferred stock dividends ...      2.98x       2.41x        2.96x       3.09x       3.27x

Effective tax rate(1) ....................         38%         (7)%         41%         35%         35%
</TABLE>

(1)   Refer to Note 4.

*     Holding Company Restructuring became effective December 15, 1999, and 1999
      and 1998 indices were restated to reflect fully consolidated results for
      comparative purposes.

      The effective tax rate for 2002 consists of a 36.1% effective rate for
federal income taxes and a 1.5% effective rate for state income taxes. The
effective tax rate for 2001 consisted of a (6.7%) rate for federal income taxes
and a 0.1% effective rate for state income taxes. The effective tax rate in 2001
was primarily due to the recognition of Investment Tax Credits in the amount of
$18.8 million upon the sale of Central Hudson's interests in its principal
generating facilities and $2.3 million of tax-exempt interest. The effective tax
rate for 2000 consisted of a 36.6% rate for federal income taxes and a 4.8%
effective rate for state income taxes. The effective tax rates for prior years
are solely the effective tax rates for federal income tax. Prior to the year
2000, when the New York State tax law was changed, Central Hudson and other New
York State utilities were not subject to an income-based state tax.


                                       35
<PAGE>

FINANCIAL INDICES - CENTRAL HUDSON GAS & ELECTRIC CORPORATION

      Selected financial indices for the last five years are set forth in the
following table:

<TABLE>
<CAPTION>
                                                 2002        2001         2000       1999*       1998*
                                                 ----        ----         ----       -----       -----
<S>                                             <C>         <C>          <C>         <C>         <C>
Pretax coverage of total interest charges:
     Including AFDC ......................      3.11x       2.23x        3.75x       3.58x       3.96x
     Excluding AFDC ......................      2.91x       2.04x        3.60x       3.48x       3.87x
     Funds from Operations ...............      3.99x       3.37x        4.22x       4.34x       4.39x

Pretax coverage of total interest
 charges and preferred stock dividends ...      2.72x       2.04x        3.20x       3.08x       3.35x

Effective tax rate(1) ....................         40%        (21)%         41%         35%         35%
</TABLE>

(1)   Refer to Note 4.

*     Holding Company Restructuring became effective December 15, 1999, and 1999
      and 1998 indices were restated to reflect fully consolidated results for
      comparative purposes.

      The effective tax rate for 2002 consists of a 36.0% effective rate for
federal income taxes and a 4.0% effective rate for state income taxes. The
effective tax rate for 2001 consisted of an (18.9%) rate for federal income
taxes and a (2.0%) effective rate for state income taxes. The effective tax rate
in 2001 was primarily due to the recognition of Investment Tax Credits in the
amount of $18.8 million upon the sale of Central Hudson's interests in its
principal generating facilities and $2.3 million of tax-exempt interest. The
effective tax rate for 2000 consisted of a 36.6% rate for federal income taxes
and a 4.8% effective rate for state income taxes. The effective tax rates for
prior years are solely the effective tax rates for federal income tax. Prior to
the year 2000, when the New York State tax law was changed, Central Hudson and
other New York State utilities were not subject to an income-based state tax.


                                       36
<PAGE>

COMMON STOCK DIVIDENDS AND PRICE RANGES

      Energy Group and its principal predecessors (including Central Hudson)
have paid dividends on their respective common stock in each year commencing in
1903, which common stock has been listed on the New York Stock Exchange since
1945. The price ranges and the dividends paid for each quarterly period during
the last two fiscal years are as follows:

                             2002                            2001
                  ---------------------------      ---------------------------
                  High       Low     Dividend      High      Low      Dividend
                  ----       ---     --------      ----      ---      --------

1st Quarter      $48.58    $42.91      $.54       $45.88    $38.50      $.54
2nd Quarter       52.38     46.17       .54        45.00     41.10       .54
3rd Quarter       51.69     39.93       .54        44.15     38.30       .54
4th Quarter       50.83     44.15       .54        43.97     39.77       .54

      In 2002, Energy Group maintained the quarterly dividend rate at $.54 per
share. In making future dividend decisions, Energy Group will evaluate all
circumstances at the time of making such decisions, including business,
financial and regulatory considerations.

      The 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 rating agency due
to performance or concerns about the financial condition of Energy Group or any
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 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 below "BBB-." These restrictions survive the June 30, 2001
expiration of the Agreement. Central Hudson is currently rated "A" or equivalent
and the restrictions noted above do not apply.

      The number of registered holders of common stock of Energy Group as of
December 31, 2002, was 17,932. Of these, 17,135 were accounts in the names of
individuals with total holdings of 4,015,734 shares, or an average of 234 shares
per account. The 797 other accounts, in the names of institutional or other
non-individual holders, for the most part hold shares of common stock for the
benefit of individuals.

      All of the outstanding common stock of Central Hudson and the competitive
business subsidiaries is held by Energy Group.

ITEM  7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The primary market risks for Energy Group and its subsidiaries are
commodity price risk and interest rate risk. Commodity price risk, related
primarily to purchases of natural gas, electricity and petroleum products for
resale, is mitigated in several different ways. Under the Agreement, Central
Hudson may collect its actual purchased electricity and natural gas costs
through automatic adjustment clauses to its tariff rates. These adjustment
clauses provide for the collection of costs, including risk management 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


                                       37
<PAGE>

to customers. These costs include transaction costs, and gains and losses
associated with risk management instruments." CH Services' fuel distribution
companies may increase the prices charged for the commodities they sell in
response to changes in costs, however, the ability to raise prices is limited by
the competitive market. Depending on market conditions, Central Hudson and
certain of the competitive business subsidiaries 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. In addition, Central Hudson and
certain of the competitive business subsidiaries enter into derivative
transactions to hedge market price fluctuations.

      CH Services (now CHEC) and Central Hudson have in place a common energy
risk management program to manage, through the use of defined risk management
practices, price and volume risks associated with commodity purchases in their
respective operations. This program permits the use of derivative financial
instruments to hedge price risk. Both Central Hudson and CH Services (now CHEC)
have entered into either exchange-traded futures contracts or over-the-counter
("OTC") contracts with third parties to hedge commodity price risk associated
with the purchase of natural gas, electricity and petroleum products.

      Central Hudson hedges portions of its total electric and natural gas
supply requirements and the purchase of electricity with derivative contracts.
The fair value of open positions at December 31, 2002 was $2.7 million, and a
total of $635,000 in net gains was recognized in 2002, as compared to a fair
value of $25.6 million at December 31, 2001, and $13.2 million of net gains was
recognized for 2001. These gains served to offset the differences between the
expected price of the commodity and the actual price.

      Central Hudson manages its interest rate risk through the issuance of
fixed-rate debt with varying maturities and variable rate debt for which
interest is reset on a periodic basis to reflect current market conditions. The
difference between costs associated with actual variable interest rates related
to Central Hudson's bonds issued by the New York State Energy Research
Development Authority ("NYSERDA") 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 an interest rate cap agreement, for which
the premium cost and any realized benefits also pass through the aforementioned
regulatory mechanism. Central Hudson also repurchases or redeems existing debt
at a lower cost when market conditions permit.

      CH Services (now CHEC) also enters into derivative transactions to hedge
purchases of heating oil and natural gas. The fair values of open positions at
December 31, 2002 and at December 31, 2001 were not material. Realized net gains
on these derivative transactions in 2002 were not material. In 2001, a net gain
of $3.8 million was realized for such derivatives, which served to offset the
difference between the expected price of the commodity purchased or sold and the
actual price. The large decrease in gains is attributable to derivatives that
hedge commodity transactions for operations that were discontinued effective
December 1, 2001. CH Services' derivative balance of $8.6 million at December
31, 2001 also included $5.6 million of derivatives related to those discontinued
operations.

      In order to hedge weather-related sales volume risk, Energy Group and
certain of its subsidiaries have also entered into weather derivative contracts
known as "costless collars" to hedge the effect on earnings due to significant
variations in weather conditions from normal patterns and to reduce exposure to
variations in heating and cooling degree days. For weather derivative contracts
covering the 2002 heating and cooling seasons, a total net loss of


                                       38
<PAGE>

$363,000 was recorded in 2002 as compared to a net gain of $2.8 million for
similar contracts in 2001.

      In accordance with Energy Group's and Central Hudson's risk management
policy and procedures, 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.

      At December 31, 2002, Central Hudson had open derivative contracts to
hedge natural gas prices through October 2003, covering approximately 4.5% of
Central Hudson's projected total natural gas requirements during that period. In
2002, derivative transactions were used to hedge 4.3% of Central Hudson's total
natural gas supply requirements as compared to 4.6% in 2001. In its electric
operations, Central Hudson had open derivatives at December 31, 2002, hedging
approximately 4.5% of its required electricity supply through August 2003. In
2002, Central Hudson hedged approximately 29.9% of its total electricity supply
requirements with OTC derivative contracts. In addition, Central Hudson has
multi-year transition agreements to purchase electricity, at fixed prices,
produced by its former principal generating facilities. The notional amounts
hedged by the derivatives and the purchase electricity agreements for 2003 and
2004 represent approximately 49.8% and 37.8%, respectively.

      At December 31, 2002, CH Services' (now CHEC's) subsidiaries, Griffith
Energy and SCASCO, had open OTC put and call option positions with
counter-parties extending through April 2003, covering approximately 9.7% of the
anticipated fuel oil supply requirements for the period January 2003 through
April 2003. Griffith Energy and SCASCO generally enter into heating oil put
derivative contracts to hedge firm heating oil purchase commitments and in 2002
began to enter into call option purchases to cover their heating oil supply
requirements for fixed and capped price programs not hedged by firm contracts to
protect against commodity price increases or supply restrictions resulting from
colder than normal weather.

      Derivative contracts are discussed in more detail in Note 1 under the
caption "Accounting for Derivative Instruments and Hedging Activities."


                                       39
<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

I - Index to Financial Statements:                                          Page
                                                                            ----

          Report of Independent Accountants                                   41

          Statement of Management's Responsibility                            42

          Energy Group Consolidated Statement of Income for the three
               years ended December 31, 2002                                  43

          Energy Group Consolidated Statement of Comprehensive
               Income for the three years ended December 31, 2002             45

          Energy Group Consolidated Statement of Cash Flows for the
               three years ended December 31, 2002                            46

          Energy Group Consolidated Balance Sheet at December 31, 2002
               and 2001                                                       48

          Energy Group Consolidated Statement of Retained Earnings
               for the three years ended December 31, 2002                    50

          Central Hudson Consolidated Statement of Income for the three
               years ended December 31, 2002                                  51

          Central Hudson Consolidated Statement of Comprehensive Income
               for the three years ended December 31, 2002                    53

          Central Hudson Consolidated Statement of Retained Earnings
               for the three years ended December 31, 2002                    54

          Central Hudson Consolidated Balance Sheet at December 31, 2002
               and 2001                                                       55

          Central Hudson Consolidated Statement of Cash Flows for the
               three years ended December 31, 2002                            57

          Notes to Consolidated Financial Statements                          59

          Selected Quarterly Financial Data (Unaudited)                      108

II - Schedule II - Reserves                                                  110

      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.

Supplementary Data

      Supplementary data are included in "Selected Quarterly Financial Data
(Unaudited)" referred to in "I" above, and reference is made thereto.


                                       40
<PAGE>

Report of Independent Accountants

To the Board of Directors and Shareholders of CH Energy Group, Inc. and 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 CH Energy Group, Inc. and its directly or indirectly wholly owned
subsidiaries and Central Hudson Gas & Electric Corporation and its subsidiary at
December 31, 2002 and 2001, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedules listed
in the accompanying index in Item 8 "Financial Statements and Supplementary
Data" of this 10-K Annual Report presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedules are the responsibility of CH Energy Group, Inc.'s and
Central Hudson Gas & Electric Corporation's Management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurances about whether the
financial statements are free of material misstatement. An audit includes
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. We believe that our audits provide a reasonable basis
for our opinion.


/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
January 30, 2003


                                       41
<PAGE>

STATEMENT OF MANAGEMENT'S RESPONSIBILITY

      The management personnel of CH Energy Group, Inc. ("Management") are
responsible for the preparation, integrity, and objectivity of the consolidated
financial statements of CH Energy Group, Inc., its subsidiary Central Hudson Gas
& Electric Corporation, and its competitive business subsidiaries (for the
purposes of this statement of management's responsibility, collectively the
"Corporation"), as well as all other information contained in this Form 10-K
Annual Report for the fiscal year ended December 31, 2002. The consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles and, in some cases, reflect amounts based on the best
estimates and judgments of Management, giving due consideration to materiality.

      The Corporation maintains adequate systems of internal control to provide
reasonable assurance that, among other things, transactions are executed in
accordance with Management's authorizations, that the consolidated financial
statements are prepared in accordance with generally accepted accounting
principles, and that the assets of the Corporation are properly safeguarded. The
systems of internal control are documented, evaluated, and tested by the
Corporation's internal auditors on a continuing basis. Due to the inherent
limitations of the effectiveness of internal controls, no such system can
provide absolute assurance that errors will not occur. Management believes that
the Corporation has maintained an effective system of internal control over the
preparation of its financial information, including the consolidated financial
statements of the Corporation for the year ended December 31, 2002.

      Independent accountants were engaged to audit the consolidated financial
statements of the Corporation and issue their report thereon. The Report of
Independent Accountants, which is presented herein, does not limit the
responsibility of Management for information contained in the consolidated
financial statements and elsewhere in this Form 10-K Annual Report.

      The Corporation's Board of Directors maintains an Audit Committee which is
composed of Directors who have been determined to be independent in accordance
with applicable rules and laws. The Audit Committee meets with Management, the
Internal Auditing Manager, and the Corporation's independent accountants several
times a year to discuss internal controls and accounting matters, the
Corporation's consolidated financial statements, and the scope and results of
the audits performed by both the independent accountants and the Internal
Auditing Department.

      The independent accountants and the Internal Auditing Manager have direct
access to the Audit Committee.


PAUL J. GANCI                                       DONNA S. DOYLE
Chairman of the Board, President                    Vice President - Accounting
and Chief Executive Officer                         and Controller

                                                    January 31, 2003


                                       42
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
                                                  Year ended December 31,
                                               2002         2001          2000
                                               ----         ----          ----
Operating Revenues
  Electric ..............................   $ 427,978    $ 428,346    $ 531,732
  Natural Gas ...........................     105,343      110,296      105,353
  Competitive business subsidiaries .....     162,189      189,298      111,027
                                            ---------    ---------    ---------
    Total Operating Revenues ............     695,510      727,940      748,112
                                            ---------    ---------    ---------
Operating Expenses
 Operation:
  Purchased electricity and fuel
   used in electric generation ..........     254,249      248,879      249,250
  Purchased natural gas .................      71,991       71,893       73,938
  Purchased petroleum ...................      92,733       89,173       35,485
  Other expenses of operation -
    regulated activities ................      92,351      106,751      137,800
  Other expenses of operation -
    competitive business subsidiaries ...      51,712       56,482       30,343
  Depreciation and amortization
    (Note 1) ............................      31,230       35,637       51,453
  Taxes, other than income tax ..........      38,270       50,402       54,151
  Federal and State income tax
    (Note 4) ............................      21,613       21,043       37,229
                                            ---------    ---------    ---------
    Total Operating Expenses ............     654,149      680,260      669,649
                                            ---------    ---------    ---------

Operating Income ........................      41,361       47,680       78,463
                                            ---------    ---------    ---------

Other Income
  Allowance for equity funds
   used during construction
   (Note 1) .............................         591          429           --
  Federal and State income tax
   (Note 4) .............................        (681)      24,381         (986)
  Interest and investment income ........      13,780       20,338        4,893
  Other - net ...........................       8,178       (9,238)       5,733
                                            ---------    ---------    ---------
    Total Other Income ..................      21,868       35,910        9,640
                                            ---------    ---------    ---------

Income before Interest
  Charges ...............................      63,229       83,590       88,103
                                            ---------    ---------    ---------

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


                                       43
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME (CONT'D)
(In Thousands)
                                                  Year ended December 31,
                                               2002         2001          2000
                                               ----         ----          ----
Interest Charges
 Interest on mortgage bonds .............    $  2,136     $  5,211     $ 11,342
 Interest on other long-term debt .......       9,819       10,446       12,864
 Other interest .........................      12,908       14,187       10,473
 Allowance for borrowed
  funds used during
  construction (Note 1) .................        (248)        (319)        (779)
                                             --------     --------     --------
   Total Interest Charges ...............      24,615       29,525       33,900
                                             --------     --------     --------

Net income from continuing
  operations ............................      38,614     $ 54,065     $ 54,203
Net loss from discontinued
  operations, net of income tax
  benefit of $1,377 .....................      (2,237)          --           --
Gain on disposal of discontinued
  operations, net of income tax
  of ($5,239) ...........................       7,065           --           --
Cumulative Preferred Stock Dividends
 of Central Hudson ......................       2,161        3,230        3,230
                                             --------     --------     --------

Net Income ..............................    $ 41,281     $ 50,835     $ 50,973
                                             ========     ========     ========
Dividends Declared on Common
  Stock .................................      35,095       35,342       35,945

Balance Retained in the Business ........    $  6,186     $ 15,493     $ 15,028
                                             ========     ========     ========

Common Stock:
  Average shares outstanding
  (000's) ...............................      16,302       16,362       16,716
  Earnings per share (basic
   and diluted) .........................    $   2.53     $   3.11     $   3.05

Dividends Declared per share ............    $   2.16     $   2.16     $   2.16

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


                                       44
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)

<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                                      2002        2001         2000
                                                                      ----        ----         ----
<S>                                                                 <C>         <C>         <C>
Net Income ......................................................   $ 41,281    $ 50,835    $ 50,973

Other comprehensive income, net of tax:
     FAS 133 transition adjustment -
      cumulative effect of unrealized
      losses at implementation date of
      January 1, 2001 ...........................................         --      (1,896)         --

         Less:  reclassification adjustment
                for gains realized in net
                income ..........................................         --        (795)         --
         Plus:  change in fair value for transition
                adjustment amounts ..............................         --       2,691
                                                                    --------    --------    --------
         Balance of FAS 133 transition
          adjustment at December 31,
          2001 ..................................................         --          --          --
                                                                    --------    --------    --------

     Fair value of cash flow hedges - FAS 133:
       Unrealized gain, net of tax of ($13) .....................         19          --          --

     Net unrealized gains (losses) on investment in partnership:
         Unrealized loss, net of tax of $219 ....................       (319)         --          --

      Net unrealized gains (losses) on
      Marketable securities:
      Unrealized loss, net of tax
      of $896 ...................................................     (1,394)         --          --
      Less:  reclassification adjustment
             for gain included in net
             income, net of tax of
             of $26 .............................................        (38)         --          --
                                                                    --------    --------    --------

                           Subtotal .............................     (1,432)         --          --
                                                                    --------    --------    --------

      Other comprehensive income (loss) .........................     (1,732)         --          --
                                                                    --------    --------    --------

Comprehensive Income ............................................   $ 39,549    $ 50,835    $ 50,973
                                                                    ========    ========    ========
</TABLE>

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


                                       45
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                       2002         2001          2000
                                                       ----         ----          ----
<S>                                                 <C>          <C>          <C>
Operating Activities
 Net Income .....................................   $  41,281    $  50,835    $  50,973
 Adjustments to reconcile net
  income to net cash provided
  by (used in) operating activities:
   Depreciation, amortization and
     nuclear fuel amortization ..................      32,687       39,138       55,297
   Deferred income taxes, net ...................      25,639        2,545        2,940
   Gain on disposal of subsidiary ...............     (18,985)          --           --
   Loss on sale of temporary investments ........         960           --           --
   Nine Mile 2 Plant deferred
     finance charges, net .......................          --           22       (3,286)
   Provision for uncollectibles .................       3,062        2,614        3,935
   Accrued/deferred pension
     costs ......................................     (19,561)     (17,304)     (13,789)
   Amortization of fossil plant incentive .......      (4,794)      (5,393)          --
   Other - net ..................................      10,978       21,436       10,231
 Changes in operating assets and liabilities, net:
   Accounts receivable, unbilled utility
     revenues and other receivables .............       4,506       54,951      (60,422)
   Fuel, materials and supplies .................        (820)      (6,034)         856
   Special deposits and
     prepayments ................................       1,155      (12,652)      (6,216)
   Contribution - prefunded pension costs .......     (32,000)          --           --
   Accounts payable .............................      (1,357)      12,764       27,099
   Accrued taxes and interest ...................       8,586      (61,628)      10,209
   Deferred taxes related to sale of plants
     and Nine Mile 2 Plant write-off ............          --     (259,494)          --
   Deferred gas costs ...........................       3,014       (3,388)      (4,769)
   Customer benefit and carrying
     charge - net ...............................     (23,859)      (8,509)          --
   Other - net ..................................       3,454       12,175          780
                                                    ---------    ---------    ---------
 Net cash provided by (used in) operating
   activities ...................................      33,946     (177,922)      73,838
                                                    ---------    ---------    ---------
</TABLE>

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


                                       46
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
(In Thousands)

<TABLE>
<CAPTION>
                                                   2002          2001         2000
                                                   ----          ----         ----
<S>                                            <C>          <C>          <C>
Investing Activities
  Proceeds from sale of subsidiary .........      58,373           --           --
  Purchase of temporary investments ........    (124,062)          --           --
  Proceeds from sale of temporary
    investments ............................      33,616           --           --
  Mortgage receivable - sale of
    Nine Mile 2 Plant ......................      28,885      (29,688)          --
  Proceeds from sale of principal generating
    facilities .............................          --      770,835           --
  Additions to utility and other property
    and plant ..............................     (72,287)     (67,818)     (58,656)
  Acquisitions made by unregulated
   affiliate ...............................      (1,461)     (17,908)     (77,543)
  Nine Mile 2 Plant decommissioning
   trust fund (Note 3) .....................          --         (737)        (868)
  Other - net ..............................        (974)      17,409         (855)
                                               ---------    ---------    ---------
  Net cash (used in) provided by investing
   activities ..............................     (77,910)     672,093     (137,922)
                                               ---------    ---------    ---------

Financing Activities
  Proceeds from issuance of
    long-term debt .........................      69,000           --       47,500
  Redemption of preferred stock ............     (22,500)          --           --
  (Repayments) borrowings of short-term
    debt, net ..............................          --     (164,250)     115,000
  Repayments of long-term debt .............          --     (147,880)     (35,100)
  Dividends paid on common
   stock ...................................     (35,095)     (35,342)     (36,215)
  Defeasance of long-term debt .............          --      (39,281)          --
  Purchase of treasury stock ...............     (14,351)          --      (18,765)
  Issuance and redemption costs ............      (1,962)      (3,341)        (403)
                                               ---------    ---------    ---------
  Net cash (used in) provided by
   financing activities ....................      (4,908)    (390,094)      72,017
                                               ---------    ---------    ---------

Net Change in Cash and Cash
 Equivalents ...............................     (48,872)     104,077        7,933
Cash and Cash Equivalents at
 Beginning of Year .........................     132,395       28,318       20,385
                                               ---------    ---------    ---------
Cash and Cash Equivalents at End
 of Year ...................................   $  83,523    $ 132,395    $  28,318
                                               =========    =========    =========

Supplemental Disclosure of Cash
 Flow Information
   Interest paid ...........................   $  12,498    $  22,144    $  25,904
   Federal and State income taxes paid .....       2,370      263,005       24,300
</TABLE>

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


                                       47
<PAGE>

ENERGY GROUP CONSOLIDATED BALANCE SHEET
(In Thousands)
                                                           December 31,
                                                        2002         2001
ASSETS                                                  ----         ----
Utility Plant
  Electric .....................................   $  605,989      584,831
  Natural Gas ..................................      189,143      180,673
  Common .......................................      100,476       97,124
                                                   ----------   ----------
                                                      895,608      862,628

  Less: Accumulated depreciation ...............      370,349      354,010
                                                   ----------   ----------
                                                      525,259      508,618
  Construction work in progress ................       76,398       53,139
                                                   ----------   ----------
    Net Utility Plant ..........................      601,657      561,757
                                                   ----------   ----------

Other Property and Plant .......................       18,337       48,202
                                                   ----------   ----------

Current Assets
  Cash and cash equivalents ....................       83,523      132,395
  Accounts receivable from customers - net of
   allowance for doubtful accounts; $4.2 million
   in 2002 and $3.8 million in 2001 ............       60,978       61,540
  Accrued unbilled utility revenues ............        7,894       11,765
  Other receivables ............................        1,998        8,968
  Fuel, materials and supplies, at average
    cost .......................................       16,033       18,402
  Fair value of derivative instruments .........        2,747       16,661
  Bond defeasance escrow .......................       16,275       20,669
  Special deposits and prepayments .............       28,466       31,249
                                                   ----------   ----------
    Total Current Assets .......................      217,914      301,649
                                                   ----------   ----------

Investments  (Note 10) .........................       95,786        6,300
                                                   ----------   ----------

Deferred Charges and Other Assets
  Prefunded pension costs ......................      108,242       78,743
  Goodwill and other intangible assets .........       77,972       79,587
  Regulatory assets (Note 2) ...................       74,000       36,250
  Unamortized debt expense .....................        3,623        3,545
  Fair value of derivative instruments .........           --       17,548
  Bond defeasance escrow .......................           --       18,612
  Other ........................................       12,576       37,605
                                                   ----------   ----------
    Total Deferred Charges and Other Assets ....      276,413      271,890
                                                   ----------   ----------

TOTAL ASSETS ...................................   $1,210,107   $1,189,798
                                                   ==========   ==========

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


                                       48
<PAGE>

ENERGY GROUP CONSOLIDATED BALANCE SHEET  (CONT'D)
(In Thousands)

CAPITALIZATION AND LIABILITIES                        December 31,
                                                 2002           2001
                                                 ----           ----
Capitalization
 Common Stock Equity
   Common stock, $.10 par value (Note 6)   $     1,686    $     1,686
   Paid-in capital (Note 6) ............       351,230        351,230
   Retained earnings ...................       169,503        163,317
   Treasury stock (Note 6) .............       (33,117)       (18,766)
   Other comprehensive income ..........        (1,732)            --
   Capital stock expense ...............          (655)        (1,158)
                                           -----------    -----------
    Total Common Stock Equity ..........       486,915        496,309
                                           -----------    -----------

 Cumulative Preferred Stock (Note 6)
   Not subject to mandatory redemption .        21,030         21,030
   Subject to mandatory redemption .....        12,500         35,000
                                           -----------    -----------
    Total Cumulative Preferred Stock ...        33,530         56,030
                                           -----------    -----------

 Long-term Debt (Note 7) ...............       269,877        216,124
                                           -----------    -----------
    Total Capitalization ...............       790,322        768,463
                                           -----------    -----------

Current Liabilities
 Current maturities of long-term debt ..        15,000         20,000
 Notes payable .........................            --            250
 Accounts payable ......................        45,649         41,061
 Accrued interest ......................         4,273          2,538
 Dividends payable .....................         9,113          9,643
 Accrued vacation ......................         3,671          3,900
 Customer deposits .....................         5,268          5,032
 Other .................................        29,131         28,782
                                           -----------    -----------
    Total Current Liabilities ..........       112,105        111,206
                                           -----------    -----------

Deferred Credits and Other Liabilities
 Regulatory liabilities (Note 2) .......       192,074        237,116
 Operating reserves ....................         4,912          4,853
 Deferred gain - sale of plants ........        19,774         24,568
 Accrued environmental remediation costs        18,304          6,059
 Other .................................        16,846         16,173
                                           -----------    -----------
  Total Deferred Credits and
   Other Liabilities ...................       251,910        288,769
                                           -----------    -----------

Accumulated Deferred Income Tax (Note 4)        55,770         21,360
                                           -----------    -----------

 TOTAL CAPITALIZATION AND LIABILITIES ..   $ 1,210,107    $ 1,189,798
                                           ===========    ===========

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


                                       49
<PAGE>

ENERGY GROUP CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(In Thousands)

                                         Year ended December 31,
                                      2002         2001         2000
                                      ----         ----         ----

Balance at beginning of  year .   $ 163,317    $ 147,824    $ 132,796

Net Income ....................      41,281       50,835       50,973

Dividends declared:
  On common stock ($2.16 per
  share in 2002, 2001 and 2000)     (35,095)     (35,342)     (35,945)
                                  ---------    ---------    ---------


Balance at end of year ........   $ 169,503    $ 163,317    $ 147,824
                                  =========    =========    =========

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


                                       50
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF INCOME
(In Thousands)

                                              Year ended December 31,
                                         2002         2001          2000
                                         ----         ----          ----
Operating Revenues
  Electric .......................   $ 427,978    $ 428,346    $ 531,732
  Natural Gas ....................     105,343      110,296      105,353
                                     ---------    ---------    ---------
      Total Operating Revenues ...     533,321      538,642      637,085
Operating Expenses
  Operation:
  Purchased electricity ..........     252,030      209,033      123,199
  Fuel used in electric generation         757       15,406      100,305
  Purchased natural gas ..........      61,672       63,330       62,526
  Other expenses of operation ....      92,246      106,812      137,515
  Depreciation and amortization
  (Note 1) .......................      25,350       26,813       47,914
  Taxes, other than income tax ...      38,396       50,170       53,993
  Federal and State income tax
  (Note 4) .......................      21,056       17,743       36,374
                                     ---------    ---------    ---------
    Total Operating Expenses .....     491,507      489,307      561,826
                                     ---------    ---------    ---------

Operating Income .................      41,814       49,335       75,259
                                     ---------    ---------    ---------
Other Income
  Allowance for equity funds
   used during construction
   (Note 1) ......................         591          429           --
  Federal and State income tax
   (Note 4) ......................        (634)      25,380         (776)
  Interest income ................       9,102       11,517        4,589
  Other - net ....................       6,379      (13,975)       4,371
                                     ---------    ---------    ---------
    Total Other Income ...........      15,438       23,351        8,184
                                     ---------    ---------    ---------

Income before Interest
  Charges ........................      57,252       72,686       83,443
                                     ---------    ---------    ---------

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


                                       51
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF INCOME (CONT'D)
(In Thousands)
                                               Year ended December 31,
                                             2002        2001        2000
                                             ----        ----        ----
Interest Charges
 Interest on mortgage bonds ...........      2,136       5,211      11,342
 Interest on other long-term debt .....      9,819      10,446      12,864
 Interest on regulatory liabilities and
  other interest ......................     13,021      13,170       7,421
 Allowance for borrowed
  funds used during
  construction (Note 1) ...............       (248)       (319)       (779)
                                          --------    --------    --------
  Total Interest Charges ..............     24,728      28,508      30,848
                                          --------    --------    --------

Net Income ............................   $ 32,524    $ 44,178    $ 52,595
                                          ========    ========    ========
Dividends Declared on Cumulative
  Preferred Stock .....................      2,161       3,230       3,230
                                          --------    --------    --------

Income Available for Common
  Stock ...............................   $ 30,363    $ 40,948    $ 49,365
                                          ========    ========    ========

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


                                       52
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                             2002        2001       2000
                                                             ----        ----       ----
<S>                                                       <C>         <C>        <C>
Net Income ............................................   $ 32,524    $ 44,178   $ 52,595

Net unrealized gains (losses) on Marketable securities:
    Unrealized loss, net of tax
    of $(26) ..........................................         38          --         --
    Less:  reclassification adjustment
           for gain included in net
           income, net of tax of
           of $26 .....................................        (38)         --         --
                                                          --------    --------   --------

                  Subtotal ............................         --          --         --

Comprehensive Income ..................................   $ 32,524    $ 44,178   $ 52,595
                                                          ========    ========   ========
</TABLE>

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


                                       53
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(In Thousands)

                                           Year ended December 31,
                                       2002         2001         2000
                                       ----         ----         ----

Balance at beginning of  year ..   $   9,777    $ 114,546    $  69,281

Net Income .....................      32,524       44,178       52,595

Reverse Equity Transfer ........          --           --       26,000

Transfer of Competitive Business
   Subsidiaries to Energy Group           --           --       (2,500)

Transfer of Property to Energy
   Group .......................          --          (75)          --

Dividends declared:
  On cumulative preferred
  stock ........................      (2,161)      (3,230)      (3,230)
  To parent - Energy Group .....     (30,000)    (145,642)     (27,600)
                                   ---------    ---------    ---------
   Total Dividends Declared ....     (32,161)    (148,872)     (30,830)
                                   ---------    ---------    ---------

Balance at end of year .........   $  10,140    $   9,777    $ 114,546
                                   =========    =========    =========

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


                                       54
<PAGE>

CENTRAL HUDSON CONSOLIDATED BALANCE SHEET
(In Thousands)
                                                        December 31,
                                                      2002       2001
ASSETS                                                ----       ----
Utility Plant
  Electric .....................................   $605,989   $584,831
  Natural Gas ..................................    189,143    180,673
  Common .......................................    100,476     97,124
                                                   --------   --------
                                                    895,608    862,628

  Less: Accumulated depreciation ...............    370,349    354,010
                                                   --------   --------
                                                    525,259    508,618
  Construction work in progress ................     76,398     53,139
                                                   --------   --------
    Net Utility Plant ..........................    601,657    561,757
                                                   --------   --------

Other Property and Plant .......................        968        970
                                                   --------   --------

Current Assets
  Cash and cash equivalents ....................     54,989     47,864
  Accounts receivable from customers - net of
   allowance for doubtful accounts; $2.7 million
   in 2002 and $2.3 million in 2001 ............     35,216     37,356
  Accrued unbilled utility revenues ............      7,894     11,765
  Other receivables ............................      2,407      9,145
  Fuel, materials and supplies - at average
    cost .......................................     12,459     13,867
  Fair value of derivative instruments .........      2,715     13,072
  Bond defeasance escrow .......................     16,275     20,669
  Special deposits and prepayments .............     17,656     20,988
                                                   --------   --------
    Total Current Assets .......................    149,611    174,726
                                                   --------   --------

  Investments ..................................      2,186      1,893
                                                   --------   --------

Deferred Charges and Other Assets
  Prefunded pension costs ......................    108,242     78,743
  Regulatory assets (Note 2) ...................     74,000     36,250
  Unamortized debt expense .....................      3,623      3,545
  Fair value of derivative instruments .........         --     12,570
  Bond defeasance escrow .......................         --     18,612
  Other ........................................      5,679     26,793
                                                   --------   --------
    Total Deferred Charges and Other Assets ....    191,544    176,513
                                                   --------   --------

TOTAL ASSETS ...................................   $945,966   $915,859
                                                   ========   ========

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


                                       55
<PAGE>

CENTRAL HUDSON CONSOLIDATED BALANCE SHEET  (CONT'D)
(In Thousands)

CAPITALIZATION AND LIABILITIES                    December 31,
                                               2002         2001
                                               ----         ----
Capitalization
 Common Stock Equity
   Common stock, $5 par value (Note 6) .   $  84,311    $  84,311
   Paid-in capital (Note 6) ............     174,980      174,980
   Retained earnings ...................      10,140        9,777
   Capital stock expense ...............      (5,288)      (5,791)
                                           ---------    ---------
    Total Common Stock Equity ..........     264,143      263,277
                                           ---------    ---------

 Cumulative Preferred Stock (Note 6)
   Not subject to mandatory redemption .      21,030       21,030
   Subject to mandatory redemption .....      12,500       35,000
                                           ---------    ---------
    Total Cumulative Preferred Stock ...      33,530       56,030
                                           ---------    ---------

 Long-term Debt (Note 7) ...............     269,877      215,874
                                           ---------    ---------
    Total Capitalization ...............     567,550      535,181
                                           ---------    ---------

Current Liabilities
 Current maturities of long-term debt ..      15,000       20,000
 Accounts payable ......................      37,066       32,125
 Accrued interest ......................       4,273        2,538
 Dividends payable .....................         451          807
 Accrued vacation and payroll ..........       4,891        4,914
 Customer deposits .....................       5,268        5,032
 Other .................................       8,688       10,531
                                           ---------    ---------
    Total Current Liabilities ..........      75,637       75,947
                                           ---------    ---------

Deferred Credits and Other Liabilities
 Regulatory liabilities (Note 2) .......     192,074      237,116
 Operating reserves ....................       4,912        4,853
 Deferred gain - sale of plants ........      19,774       24,568
 Accrued environmental remediation costs      18,304        6,059
 Accrued OPEB costs ....................       4,514        3,500
 Other .................................       8,247        8,436
                                           ---------    ---------
  Total Deferred Credits and
   other liabilities ...................     247,825      284,532
                                           ---------    ---------

Accumulated Deferred Income Tax (Note 4)      54,954       20,199
                                           ---------    ---------

 TOTAL CAPITALIZATION AND LIABILITIES ..   $ 945,966    $ 915,859
                                           =========    =========

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


                                       56
<PAGE>

CENTRAL HUDSON CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                    2002         2001         2000
                                                    ----         ----         ----
<S>                                             <C>          <C>          <C>
Operating Activities
  Net Income ................................   $  32,524    $  44,178    $  52,595
  Adjustments to reconcile net income to net
    cash provided by (used in) operating
    activities:
       Depreciation, amortization and
        nuclear fuel amortization ...........      26,808       30,315       51,757
     Deferred income taxes, net .............      25,984        1,765        2,940
     Nine Mile 2 Plant deferred finance
       charges, net .........................          --           22       (3,286)
     Provision for uncollectibles ...........       3,062        2,614        3,350
     Accrued/deferred pension costs .........     (19,561)     (17,304)     (13,789)
     Amortization of fossil plant incentive .      (4,794)      (5,393)          --
     Other - net ............................       5,799       23,324       10,380
  Changes in operating assets and
     liabilities, net:
     Accounts receivable, unbilled
       revenues and other receivables .......       3,536       39,003      (30,617)
     Fuel, materials and supplies ...........       1,408       (4,668)       2,825
     Special deposits and prepayments .......        (931)       1,334          195
     Contribution - prefunded pension costs .     (32,000)          --           --
     Accounts payable .......................       4,941       (4,594)       8,693
     Accrued taxes and interest .............       9,004      (57,857)      12,508
     Deferred taxes related to sale of plants
      and Nine Mile 2 Plant write-off .......          --     (259,494)          --
     Deferred gas costs .....................       3,014       (3,388)      (4,769)
     Customer benefit and carrying charge -
     net ....................................     (23,859)      (8,509)          --
     Other - net ............................      (2,011)      12,175          452
                                                ---------    ---------    ---------
  Net cash provided by (used in) operating
   activities ...............................      32,924     (206,477)      93,234
                                                ---------    ---------    ---------
</TABLE>

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


                                       57
<PAGE>

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

                                                  2002        2001        2000
                                                  ----        ----        ----
Investing Activities
 Proceeds from sale of principal generating
    facilities ............................          --     770,835          --
  Mortgage receivable - sale of
   Nine Mile 2 Plant ......................      28,885     (29,688)         --
  Additions to plant ......................     (65,830)    (60,469)    (58,656)
  Net return of equity from subsidiaries ..          --         (76)     23,500
  Nine Mile 2 Plant decommissioning
   trust fund (Note 3) ....................          --        (737)       (868)
  Other - net .............................        (875)     19,579        (854)
                                              ---------   ---------   ---------
  Net cash (used in) provided by investing
   activities .............................     (37,820)    699,444     (36,878)
                                              ---------   ---------   ---------

Financing Activities
  Proceeds from issuance of
    long-term debt ........................      69,000          --      47,500
  Retirement of preferred stock ...........     (22,500)         --          --
  Repayments of short-term debt, net ......          --     (25,000)    (25,000)
  Repayments of long-term debt ............          --    (147,630)    (35,100)
  Dividends paid on cumulative preferred
   and common stock .......................     (32,517)    (35,130)    (37,830)
  Defeasance of long-term debt ............          --     (39,281)         --
  Special dividend to parent ..............          --    (212,000)         --
  Issuance and redemption costs ...........      (1,962)     (3,341)       (403)
                                              ---------   ---------   ---------
  Net cash provided by (used in) financing
    activities ............................      12,021    (462,382)    (50,833)
                                              ---------   ---------   ---------

Net Change in Cash and Cash
 Equivalents ..............................       7,125      30,585       5,523
Cash and Cash Equivalents at
 Beginning of Year ........................      47,864      17,279      11,756
                                              ---------   ---------   ---------
Cash and Cash Equivalents at End
 of Year ..................................   $  54,989   $  47,864   $  17,279
                                              =========   =========   =========

Supplemental Disclosure of Cash
 Flow Information
    Interest paid .........................   $  10,740   $  19,817   $  22,922
    Federal and State income taxes paid ...       5,068     269,567      22,300

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


                                       58
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

      This is a combined report of CH Energy Group, Inc. ("Energy Group") and
Central Hudson Gas & Electric Corporation ("Central Hudson"), a wholly owned
subsidiary of Energy Group. The Notes to the Consolidated Financial Statements
apply to the Consolidated Financial Statements of both Energy Group and Central
Hudson. Energy Group's Consolidated Financial Statements include the accounts of
Energy Group and its wholly owned subsidiaries, including Central Hudson. Energy
Group's Consolidated Financial Statements, following a one-for-one common stock
share exchange with Central Hudson effective on December 15, 1999 (the "Holding
Company Restructuring") have been prepared from Central Hudson's prior period
consolidated financial statements.

      Central Hudson and the competitive business subsidiaries (as hereinafter
defined) are each wholly owned, directly or indirectly, by Energy Group. Their
businesses are comprised of an electric and natural gas utility, cogeneration,
fuel distribution, energy management, and electric and natural gas sales.

Principles of Consolidation

      Upon the Holding Company Restructuring, Central Hudson became a wholly
owned subsidiary of Energy Group. In addition, Central Hudson Energy Services,
Inc. ("CH Services") became a wholly owned subsidiary of Energy Group for the
purpose of becoming the holding company parent of Central Hudson Enterprises
Corporation ("CHEC"), SCASCO, Inc. ("SCASCO"), Prime Industrial Energy Services,
Inc. ("Prime Industrial"), CH Syracuse Properties, Inc. ("CH Syracuse"), CH
Niagara Properties, Inc. ("CH Niagara"), CH Resources, Inc. ("CH Resources"),
and Greene Point Development Corporation ("Greene Point").

      In November 2002, the Boards of Directors of Energy Group and the
competitive business subsidiaries approved a reorganization of the competitive
business subsidiaries, effective December 31, 2002. CH Services, which had been
the holding company parent of all competitive business subsidiaries of Energy
Group, was merged into Energy Group, CHEC replaced CH Services as the holding
company parent of the remaining competitive business subsidiaries, Griffith
Energy Services, Inc. ("Griffith Energy") and SCASCO. In addition, Greene Point
and Prime Industrial were merged into CHEC, effective the same date. CHEC,
Griffith Energy, and SCASCO are hereinafter referred to collectively as the
"competitive business subsidiaries."

      Phoenix Development Company, Inc. remains a wholly owned subsidiary of
Central Hudson. See Note 2 - "Regulatory Matters," under the caption
"Competitive Opportunities Proceeding Settlement Agreement" for further details
regarding the Holding Company Restructuring.


                                       59
<PAGE>

      Energy Group's Consolidated Financial Statements include the accounts of
Energy Group, Central Hudson and the competitive business subsidiaries.
Intercompany balances and transactions have been eliminated.

Rates, Revenues and Cost Adjustment Clauses

      Central Hudson's electric and natural gas retail rates are regulated by
the Public Service Commission of the State of New York ("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 tariff for retail electric service includes a purchased
electricity cost adjustment clause by which electric rates are adjusted to
collect actual purchased electricity costs incurred in providing service.
Central Hudson's tariff for natural gas service contains a comparable clause to
collect actual costs incurred in purchasing natural gas.

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 the thirty (30) days subsequent to the meter-read date through the end of
the accounting period.

      Revenues are recognized by the competitive business subsidiaries when
products are delivered to customers or services have been rendered.

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 an Allowance for the
Funds Used During Construction ("AFDC") as defined below. 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.

Allowance For Funds Used During Construction

      Central Hudson's regulated utility plant includes AFDC, which is defined
in applicable regulatory systems 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 AFDC rate was 6.75% in 2002, 8.25% in 2001, and 6.50% in 2000.

Depreciation and Amortization

      For financial statement purposes, Central Hudson's depreciation provisions
are


                                       60
<PAGE>

computed on the straight-line method using rates based on studies of the
estimated useful lives and estimated net salvage value of properties. Central
Hudson performs depreciation studies on a continuing basis 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 3.20% in 2002,
3.17% in 2001, and 3.21% in 2000 in each case of the original cost of average
depreciable property. The ratio of the amount of accumulated depreciation to the
original cost of depreciable property at December 31 was 41.5% in 2002, 41.2% in
2001, and 42.1% in 2000.

      For financial statement purposes, the competitive business subsidiaries'
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.

Goodwill and Other Intangible Assets

      Goodwill, customer lists, 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. In July 2001, the
Financial Accounting Standards Board ("FASB") issued Statement No. 142, 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
against earnings, but instead be periodically reviewed for impairment. The
amortization of goodwill related to all acquisitions made by the competitive
business subsidiaries ceased upon adoption of SFAS 142 by Energy Group on
January 1, 2002, which favorably impacted Energy Group's results of operations
by $1.6 million for the year ended December 31, 2002. Upon implementation of
SFAS 142, the competitive business subsidiaries tested the goodwill remaining on
the balance sheet for impairment by measuring future expected cash flows using
historical profit margins of the companies acquired by the competitive business
subsidiaries and confirmed that no impairment existed.

      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 lists is 15 years, which is believed to be appropriate in view
of currently experienced 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 10-year
amortization period were used, annual amortization expense would increase by
approximately $847,000. The useful life of a covenant not to compete is based on
the term of each covenant, generally between two to ten years.


                                       61
<PAGE>

      The components of amortizable intangible assets of Energy Group are
summarized as follows (thousands of dollars):

<TABLE>
<CAPTION>
                                      December 31, 2002              December 31, 2001
                                      -----------------              -----------------
                              Gross Carrying    Accumulated   Gross Carrying   Accumulated
                                 Amount        Amortization      Amount       Amortization
                                 ------        ------------      ------       ------------
<S>                              <C>             <C>             <C>             <C>
Customer Lists                   $36,287         $ 5,932         $35,656         $ 3,248

Covenants Not To Compete           1,439             506           1,379             328
                                 -------         -------         -------         -------

Total Amortizable
Intangibles                      $37,726         $ 6,438         $37,035         $ 3,576
                                 =======         =======         =======         =======
</TABLE>

      Amortization expense was $2.9 million, excluding goodwill, and $5.1
million, including goodwill, for the years ended December 31, 2002 and 2001,
respectively. The estimated amortization expense for each of the next five
years, assuming no new acquisitions, is as follows (thousands of dollars):

                              2003       $2,782
                              2004       $2,490
                              2005       $2,488
                              2006       $2,463
                              2007       $2,450

      The carrying amount for goodwill not subject to amortization was $46.7
million and $46.1 million, as of December 31, 2002 and December 31, 2001,
respectively. During 2002, the competitive business subsidiaries recognized an
impairment loss on goodwill of $92,000 associated with assets purchased from an
energy services company specializing in energy efficiency projects; this loss is
included in Other Expenses of Operations - Competitive Business Subsidiaries.
The impairment was caused by negative cash flows and the loss of key employees
relating to the assets acquired. The competitive business subsidiaries retested
the goodwill balance at December 31, 2002 and found no further impairment.

      Pro forma earnings of Energy Group as a result of the changes associated
with SFAS 142 were as follows:

                                                         For the Year
                                                       Ended December 31
                                                 ----------------------------
                                                      2002           2001
                                                      ----           ----
Net Income:
    Reported net income                          $    41,281      $    50,835
    Add back goodwill amortization                        --            1,598
                                                 -----------      -----------
    Adjusted net income                          $    41,281      $    52,433
                                                 ===========      ===========

Earnings per Share (basic and diluted)
    Reported net income                          $      2.53      $      3.11
    Add back goodwill amortization                        --              .09
                                                 -----------      -----------
    Adjusted net income                          $      2.53      $      3.20
                                                 ===========      ===========


                                       62
<PAGE>

Acquisitions

      In January 2003, Griffith Energy acquired certain assets of two companies
for $7.5 million. The amount charged to intangible assets (including goodwill)
was $6.9 million, of which $3.7 million was charged to goodwill. During 2002,
Griffith Energy acquired the operating assets of two companies. The total amount
paid for these assets was $1.5 million and both acquisitions have been accounted
for using the purchase method of accounting. The amount charged to intangible
assets (including goodwill) was $1.4 million, of which $0.7 million was charged
to goodwill. The principal tangible assets acquired were vehicles, petroleum
products, and spare parts.

Discontinued Operations

      On December 21, 2001, CH Services entered into an agreement to sell all of
its stock ownership interest in CH Resources and its subsidiaries, CH Syracuse
and CH Niagara, to WPS Power Development, Inc., a Wisconsin corporation. The
sale closed on May 31, 2002.

      The sale was accounted for in accordance with Accounting Principles Board
("APB") Opinion No. 30, Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, and Emerging Issues Task Force ("EITF")
Abstract 85-36, Discontinued Operations with Expected Gain and Interim Operating
Losses. CH Resources' principal assets at the sale closing date were three
electric generating facilities consisting of fixed assets of $32.3 million,
inventory of $3.2 million, and other assets of $7.1 million. The sale proceeds
of $58.4 million resulted in a gain of $7.1 million (net of income taxes of $5.2
million). A net operating loss of $2.2 million (net of an income tax benefit of
$1.4 million) was recorded in 2002. Therefore, the net income from discontinued
operations in 2002 was $4.9 million.

      In December 2001, CH Resources, in accordance with the accounting
pronouncements noted above, deferred a net operating loss of $293,000 for offset
against the expected gain on the date of disposal. This operating loss is
included in the $2.2 million loss recorded in 2002. The Consolidated Income
Statement for Energy Group for the year ended December 31, 2001 does not include
any operating results for CH Resources related to December 2001 operations. The
deferred net income effect is reflected as part of Special Deposits and
Prepayments on Energy Group's Consolidated Balance Sheet at December 31, 2001.

Cash and Cash Equivalents

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

Stock-Based Compensation

      At December 31, 2002, Energy Group had a stock-based employee compensation
plan that is described more fully in Note 9. Energy Group as permitted by SFAS
123, "Accounting for Stock-Based Compensation," has accounted for this plan
under the recognition and measurement provisions of APB No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. No stock-based employee
compensation cost was reflected in 2000, 2001, or 2002 net income, as all
options granted under those plans had an exercise price equal to the


                                       63
<PAGE>

market value of the underlying common stock on the date of grant. Effective
January 1, 2003, Energy Group is adopting the fair value recognition provisions
of FASB No. 123, Accounting for Stock-Based Compensation utilizing the modified
prospective method under the provisions of FASB Statement No.148, Accounting for
Stock-Based Compensation - Transition and Disclosure. Compensation cost
recognized in 2003 will be that which would have been recognized had the
recognition provisions of Statement 123 been applied from its original effective
date. The following table illustrates the effect on net income and earnings per
share if the fair value method had been applied to all outstanding and unvested
awards in each period.

                                                     Year Ended December 31
                                                     ----------------------
       (In Thousands)                             2002        2001        2000
                                                  ----        ----        ----

Net income, as reported                        $ 41,281    $ 50,835    $ 50,973

Deduct: Total stock-based employee
  compensation expense determined under
  fair value based method for all awards,
  net of related tax effects                        (41)       (107)        (16)
                                               --------    --------    --------

Pro forma net income                           $ 41,240    $ 50,728    $ 50,957
                                               ========    ========    ========

Earnings per share:
         Basic and diluted - as reported       $   2.53    $   3.11    $   3.05
                                               ========    ========    ========

         Basic and diluted - pro forma         $   2.53    $   3.10    $   3.05
                                               ========    ========    ========

Investments in Marketable Securities

      Marketable Securities include debt and equity instruments. Debt securities
and publicly traded equity securities are classified as available-for-sale and
are marked to market using the specific identification method; unrealized gains
and losses are reflected in Other Comprehensive Income.

Investments in Limited Partnerships

      These investments are accounted for under the equity method. Unrealized
gains and losses on these investments are recognized in Other Comprehensive
Income.

Income Tax

      Energy Group and its subsidiaries file consolidated federal and state
income tax returns. Federal and state income taxes are allocated to operating
expenses and to other income and deductions in the Consolidated Statement of
Income. Income taxes are deferred under the liability method in accordance with
Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes
("SFAS 109"). Under the 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, Energy Group and its subsidiaries use an accelerated method
of depreciation and generally use the shortest life


                                       64
<PAGE>

permitted for each class of assets. 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. For more information, see Note 4 - "Income Tax."

Use of Estimates

      Preparation of the financial statements in accordance with generally
accepted accounting principles 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. Expense items most
affected by the use of estimates are depreciation and amortization (including
amortization of intangible assets), the reserve for uncollectible accounts,
other operating reserves, and unbilled revenues. Depreciation and amortization
is based on estimates of the useful lives and estimated net salvage value of
properties (as described in Note 1 under the caption "Depreciation and
Amortization"). Amortizable intangible assets include the amortization of
customer lists related to CH Services' operations, which is based on an
assessment of customer turnover (as described in Note 1 under the caption
"Goodwill and Other Intangible Assets"). Depreciation and amortization amounts
included in Energy Group income for years 2002 and 2001 are $31.2 million and
$35.6 million, respectively.

      Estimates for uncollectible accounts are based on customer accounts
receivable aging data as well as consideration for special collection issues.
The estimates for other operating reserves are based on assessments of future
obligations as it relates to injuries and damages and workers compensation
claims. A summary of the activity in these reserves, including charges to
expense, for years 2000 through 2002 can be found on Schedule II - Reserves for
both Energy Group and Central Hudson. Unbilled revenues are determined based on
the estimated sales for each account that have not yet been billed by Central
Hudson. The estimation methods used in determining the sales are the same
methods used for billing customers when actual meter readings cannot be
obtained. Central Hudson has several estimation routines and the routine used
for each account is dependent on the billing history data available for each
classification of customer. Revenues for 2002 include an estimate of $5.3
million for unbilled revenues and 2001 includes an estimate of $4.8 million.

      Estimates are also reflected for certain commitments and contingencies,
where there is sufficient basis to project a future obligation. Disclosures
related to same can be found in Note 11 - "Commitments and Contingencies."

Related Party Transactions

      Thompson Hine LLP (formerly Gould & Wilkie LLP) serves as general counsel
to Energy Group and Central Hudson. A partner in that firm serves as Assistant
Secretary of each corporation. This Assistant Secretary appointment serves to
assist in closure of specified transactions in the ordinary course of business.
While this partner receives no additional compensation for his role as Assistant
Secretary, time spent performing the duties of Assistant Secretary is charged to
the Energy Group on an hourly basis. The combined fees paid by Energy Group and
Central Hudson to Thompson Hine LLP (formerly Gould & Wilkie LLP) during 2000
through 2002 range from $2.5 to $3.2 million annually.


                                       65
<PAGE>

      During 2002, SCASCO purchased certain operating locations from an entity
owned by an officer of SCASCO for $500,000. The locations consisted of office
and warehouse facilities, as well as bulk fuel storage facilities.

Parental Guarantees

      Energy Group and certain of the competitive business subsidiaries have
issued guarantees in conjunction with certain commodity and derivative contracts
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. In addition, Energy Group
has agreed to guarantee the post-closing obligations of CH Services under the
agreement related to the sale of CH Resources, which guarantee now applies to
CHEC. See Note 11 under the caption "CH Services."

      The guarantees described have been issued to counter-parties to assure the
payment, when due, of certain obligations incurred by the Energy Group
subsidiaries in physical and financial transactions related to natural gas,
heating oil, propane, other petroleum products, weather and commodity hedges,
and certain obligations related to the sale of CH Resources. At December 31,
2002, the aggregate amount of subsidiary obligations (excluding obligations
related to CH Resources) covered by these guarantees was $1.4 million. Where
liabilities exist under the commodity-related contracts subject to these
guarantees, these liabilities are included in the consolidated balance sheet.

Product Warranties

      The fuel distribution subsidiaries offer a multi-year warranty on heating
system installations and multi-year service contracts as an incentive to new
heating oil delivery customers. The fuel distribution companies have recorded a
liability for the estimated costs of fulfilling their respective obligations
under these warranty and service contracts. The amount of these liabilities was
approximately $1 million at both December 31, 2002 and 2001. The accounting
policy and methodology used to determine the subsidiary's liability for these
product warranties is to accrue the present value of future warranty expense
based on the number and type of contracts outstanding and historical costs for
these contracts.

Accounting for Derivative Instruments and Hedging Activities

      In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, subsequently amended in June 2000 by FASB
Statement No. 138 Accounting for Certain Derivative Instruments and Certain
Hedging Activities (as amended, "SFAS 133"), which established accounting and
reporting requirements for derivative instruments and hedging activities. The
standard requires that an entity recognize the fair value of all derivative
instruments as either assets or liabilities in 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, until the hedged transaction is realized. The standard
also provides an exception for certain derivative transactions that qualify as
"normal purchases and normal sales." Transactions that provide for the purchase
or sale of something other than a financial or derivative instrument that will
be delivered in quantities expected to be used or sold by the reporting entity
over a reasonable period in the normal course of business are exempt from SFAS
133.

                                       66
<PAGE>

      As part of its adoption of SFAS 133, Energy Group recognized a net of tax
transition adjustment of $(1.9) million in Other Comprehensive Income ("OCI") at
January 1, 2001. This amount represents the cumulative effect of a change in
accounting principle for unrealized losses when certain derivatives owned by CH
Services were redesignated as cash flow hedges. This adjustment was reversed by
December 31, 2001, as the actual related gains and losses were realized during
the period from January 2001 to December 2001. The actual gains and losses
served to offset the variability in cash flows related to the energy
transactions hedged.

      Central Hudson uses derivative instruments to hedge the exposure
variability in the prices of natural gas and electricity as well as to
variability in interest rates for its variable rate long-term debt. These
derivatives are not designated as hedges under the provisions of SFAS 133, and
derivatives existing at January 1, 2001 were not redesignated as hedges as 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. The premium related to the interest rate hedge, as well as any
related actual gains, is deferred as part of the true-up mechanism authorized by
the PSC for the variable long-term debt. The earnings impact from these
derivatives is, therefore, deferred for refund to, or recovery from, customers
under these regulatory adjustment mechanisms. The total fair value (net
unrealized gain) of Central Hudson derivatives at December 31, 2002 is $2.7
million as compared to a fair value of $25.6 million at December 31, 2001. The
reduction in fair value of $22.9 million is due largely to the reconversion of
Central Hudson's financial multi-year transition electricity purchase agreement
("TPA") with Dynegy (as hereinafter defined) to a physical arrangement on June
1, 2002. See the subcaption "Sale of Principal Generating Facilities" in Note 2
for additional information on the TPA. Actual net gains of $635,000 were
recognized in 2002, which served to reduce energy costs recovered through
Central Hudson's electric and natural gas cost adjustment clauses. This compares
to a total net gain of $13.2 million recognized in 2001.

      CH Services (now CHEC) uses derivative instruments to hedge variability in
the price of natural gas and heating oil purchased for resale. These derivatives
are designated as either fair value hedges or 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 highly effective with no gains or losses from ineffectiveness recorded in
2002. The assessment of hedge effectiveness for these hedges excludes the change
in the fair value of the premium paid for these derivative instruments. These
premiums, which are not material, are expensed based on the change in their
respective fair value. At December 31, 2002, CH Services has open put and call
options hedging firm commitments and forecasted requirements for the purchase of
heating oil. The fair values of these derivative instruments at December 31,
2002 and at December 31, 2001 were not material. Actual net gains for 2002,
which served to offset corresponding increases in the cost or price of the
related commodity transactions, were not material. In 2001, a net gain of $3.8
million was recognized. The large decrease in gains from 2001 to 2002 is
attributable to derivatives that hedged commodity transactions for operations
that were discontinued effective December 1, 2001. The total derivative balance
at December 31, 2001 for CH Services, of $8.6 million, also included $5.6
million of derivatives related to these discontinued operations.

      In addition to the above, Energy Group and its subsidiary companies have
entered into weather derivative contracts to hedge the effect on earnings due to
significant variances in weather conditions from normal patterns. Weather
derivative contracts are not subject to SFAS


                                       67
<PAGE>

133 provisions and are accounted for in accordance with EITF Statement 99-2,
Accounting for Weather Derivatives ("EITF 99-2"). Contracts were entered into
for both the 2002 cooling season and the 2002-2003 heating season. These weather
derivatives were structured based on put and call strike levels with a deadband
and an aggregate settlement cap of $5.0 million. In 2002, a total net realized
loss of $363,000 related to weather derivative contracts was recorded. A gain of
$2.8 million was recorded in 2001. In each case these amounts partially offset
variations in revenues experienced due to the actual weather patterns that
occurred in each period. Contracts were entered into to cover the months of
January and February 2003, with an aggregate settlement cap of $5.9 million.

New Accounting Standards and Other FASB Projects

      Asset Retirement Obligations

      On July 5, 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143"). Initiated in 1994 as a project to account
for the costs of nuclear decommissioning, the FASB expanded the scope to include
similar closure or removal-related costs in other industries that are incurred
at any time during the life of an asset. SFAS 143 requires entities to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is shown at its present value each period, and
the capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, an entity either settles the obligation for
its recorded amount or incurs a gain or loss upon settlement. SFAS 143 is
effective for the calendar year that begins January 1, 2003. This new accounting
standard is not expected to impact the financial condition, results of
operations, or cash flows of Energy Group and/or its subsidiaries at this time.

      Long-Lived Assets

      In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 requires that
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell. Whether reported in continuing or discontinued operations, an
impairment loss is the amount by which the carrying amount of the long-lived
asset exceeds its fair value. SFAS 144 also contains specific accounting and
financial reporting criteria for the disposal of a long-lived asset either by
sale or other than by sale. The standard is effective for Energy Group's 2002
fiscal year and subsequent fiscal years. The change in accounting had no impact
on either Energy Group's or Central Hudson's results of operations. Both Energy
Group and Central Hudson have reviewed their assets under these impairment
standards and found no impairment.

      Property, Plant and Equipment

      During the second quarter of 2001, the FASB issued an Exposure Draft
entitled Accounting in Interim and Annual Financial Statements for Certain Costs
and Activities Related to Property, Plant, and Equipment, that would amend
certain Accounting Principles Board Opinions and FASB Statements to incorporate
changes resulting from the issuance of a proposed American Institute of
Certified Public Accountants Statement of Position ("SOP"), Accounting for
Certain Costs and Activities Related to Property, Plant, and Equipment. The
proposed SOP addresses diversity in accounting for expenditures related to
property, plant and


                                       68
<PAGE>

equipment ("PP&E"), including improvements, replacements, betterments,
additions, repairs, and maintenance, as well as accounting and disclosure issues
regarding accounting for PP&E costs as either capital or expense. The proposed
SOP also addresses capitalization of indirect and overhead costs and component
accounting for PP&E. The FASB Exposure Draft proposes to amend APB Opinion No.
28, Interim Financial Reporting, so the provisions of the proposed SOP requiring
certain costs to be charged to expense as incurred would also apply to interim
periods.

      At this time the FASB proposal is not expected to be released until
sometime in 2003, and a proposed effective date will be disclosed by the FASB at
that time.

      Neither Energy Group nor Central Hudson can currently predict the ultimate
form of the proposed accounting standard (assuming it is adopted) nor can they
make any prediction as to its ultimate effect(s) on the financial condition,
results of operations, or cash flows of Energy Group and/or its subsidiaries.

      Guarantor's Accounting and Disclosure Requirements for Guarantees

      In November 2002, FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (the "Interpretation"). The Interpretation
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees it
has issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. For Energy Group
and Central Hudson, disclosure requirements are effective with the 2002
financial statements contained in this report.

      The application of this Interpretation is not expected to materially
impact the financial condition, results of operations, and cash flows of Energy
Group and/or its subsidiaries.

      Stock-Based Compensation

      In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure ("SFAS 148"), which amends
FASB Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123").
For information regarding Energy Group's accounting for stock-based
compensation, see Note 9.

NOTE 2 - REGULATORY MATTERS

Competitive Opportunities Proceeding Settlement Agreement

      In response to the May 1996 Order of the PSC issued in its generic
Competitive Opportunities Proceeding, Central Hudson, the PSC Staff and certain
other parties entered into an Amended and Restated Settlement Agreement, dated
January 2, 1998. The PSC approved the Amended and Restated Settlement Agreement
by its final Order issued and effective June 30, 1998, for which a final
amendment was issued and approved as of March 7, 2000 (hereinafter called the
"Agreement").


                                       69
<PAGE>

      The 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 Central Hudson, Energy Group, and the competitive business
subsidiaries; (iii) prohibitions against Central Hudson making loans to Energy
Group or any other subsidiary of Energy Group and on Central Hudson guaranteeing
debt of Energy Group or any other subsidiary of Energy Group; (iv) limitations
on the transfer of Central Hudson employees to Energy Group or other Energy
Group subsidiaries, and the use of Central Hudson officers in common with Energy
Group or other 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 generally accepted accounting principles, which,
for regulated public utilities, include Statement of Financial Accounting
Standards No. 71, Accounting for the Effects of Certain Types of Regulation
("SFAS 71"). Under SFAS 71, regulated companies apply AFDC to the cost of
construction projects and defer costs and credits on the balance sheet as
regulatory assets and liabilities (see Note 2 under the caption "Summary of
Regulatory Assets and Liabilities") 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. These
deferred regulatory assets and liabilities are then either eliminated by offset
against each other or reflected in the income statement 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.

Sales of Principal Generating Facilities

      Pursuant to the Agreement, on January 30, 2001 Central Hudson, after a
competitive bidding process, sold its Danskammer Point Steam Electric Generating
Station ("Danskammer Plant") and its interest in the Roseton Electric Generating
Station ("Roseton Plant") to affiliates of Dynegy Power Corp. (collectively,
"Dynegy") for $713 million. By Order issued and effective October 26, 2001
("Nine Mile 2 Order"), the PSC authorized the sale of Central Hudson's interest
in the Nine Mile 2 Nuclear Generating Plant ("Nine Mile 2 Plant"). The
Danskammer Plant, the Roseton Plant, and the Nine Mile 2 Plant are referred to
collectively herein as the "principal generating facilities." On November 7,
2001, Central Hudson sold its interest in the Nine Mile 2 Plant to an affiliate
of Constellation Nuclear LLC ("Constellation") for approximately $58.2 million,
of which $28.4 million was paid in cash with the remaining principal to be paid
under a five year, 11% promissory note, all subject to certain post-closing
adjustments. On April 12, 2002, Constellation elected to pay the then remaining
balance of $29.8 million on the promissory note. Central Hudson's net gain after
tax from these sales was used to recover the book value and the net regulatory
assets related to Central Hudson's interests in its principal generating
facilities.

      Despite these sales, Central Hudson remains obligated to serve its retail
electric customers. Under the Agreement, Central Hudson's retail customers may
elect to procure electricity from third party suppliers, or may continue to rely
on Central Hudson. No prediction can be made as to the amount of service that
Central Hudson will be obligated to provide or the cost or availability of
electricity to satisfy Central Hudson's retail customers' requirements. To
partially supply these customers, Central Hudson entered into a Transition Power
Agreement


                                       70
<PAGE>

("TPA") with Dynegy to purchase capacity and energy from January 30, 2001
through October 31, 2003. On July 1, 2001, the TPA was converted from a physical
to a financial arrangement. Under the terms of the modified arrangement, Central
Hudson purchased electric energy volumes covered by the TPA at market prices and
then settled with Dynegy for differences between those market prices and the
fixed prices stipulated in the TPA. This financial arrangement qualified as a
derivative under SFAS 133 (See Note 1 - "Summary of Significant Accounting
Policies," under the subcaption "Accounting for Derivative Instruments and
Hedging Activities"). On June 1, 2002, Central Hudson converted the TPA back to
a physical arrangement. On August 2, 2002, Central Hudson exercised an option to
extend the TPA through October 31, 2004. Central Hudson also entered into an
agreement with Constellation to purchase capacity and energy from the Nine Mile
2 Plant during the ten-year period beginning on the sale of that plant on
November 7, 2001. In the case of each of the TPA and the Constellation
agreements, electricity will be purchased at defined prices that escalate over
the lives of the respective contracts. The capacity and energy supplied under
these two agreements in 2002 was sufficient to supply approximately 56% of
Central Hudson's retail customer requirements. 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
a unit-contingent basis at defined prices to January 1, 2005 to and including
December 31, 2007.

Summary of Regulatory Assets and Liabilities

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

At December 31,                                              2002          2001
--------------------------------------------------------------------------------
Regulatory Assets (Debits):                                  (In Thousands)
Deferred electric and natural gas purchased costs
  (Note 1) ............................................  $  15,359    $  24,954
Income taxes recoverable
  through future rates ................................      1,519       (2,987)
Deferred manufactured gas sites (Note 11) .............     12,760           --
Deferred pension costs undercollection
 (Note 8) .............................................     15,943          915
Deferred OPEB costs undercollection
 (Note 8) .............................................      2,617           25
Carrying charges - pension reserve (Note 8) ...........      8,863        2,453
Deferred debt expense on reacquired debt
  (Note 7) ............................................      9,489        9,390
Other .................................................      7,450        1,500
                                                         ---------    ---------
  Total Regulatory Assets .............................  $  74,000    $  36,250
                                                         ---------    ---------

Regulatory Liabilities (Credits):
FAS 133 - deferred change in fair value
 (Note 1) .............................................  $   2,715    $  25,642
Income taxes refundable ...............................      1,568        5,834
Deferred Nine Mile 2 Plant costs overcollection .......      1,508        1,318
Customer benefit fund .................................    171,887      195,746
Other .................................................     14,396        8,576
                                                         ---------    ---------
  Total Regulatory Liabilities ........................  $ 192,074    $ 237,116
                                                         ---------    ---------

     Net Regulatory (Liabilities) Assets ..............  $(118,074)   $(200,866)
                                                         =========    =========


                                       71
<PAGE>

      The significant regulatory assets and liabilities include:

      Income Taxes Recoverable/Refundable: The adoption of SFAS 109 in 1993
increased Central Hudson's net deferred taxes. As it is probable that the
related balances will be either recoverable from or refundable to customers,
Central Hudson established a net regulatory asset for the recoverable future
taxes and a net regulatory liability for balances refundable to customers. The
SFAS 109 amounts related to the principal generating facilities were eliminated
at the time of the sales of Central Hudson's interests in the respective plants,
with no impact on earnings.

      Carrying Charges - Pension Reserves: Under the policy of the PSC regarding
pension costs, carrying charges are accrued on cash differences between rate
allowances and cash contributions to the Retirement Plan.

      Deferred Nine Mile 2 Plant Costs: The PSC Order on Nine Mile 2 Plant
Operating and Capital Forecast for 1996 ("Supplement No. 5") provided for the
deferral of the difference between actual and authorized operating and
maintenance expenses for the Nine Mile 2 Plant. Central Hudson's interest in the
Nine Mile 2 Plant was sold in November 2001. The regulatory liability recorded
represents the residual overcollection balance and related carrying charges due
customers.

      Customer Benefit Fund: The Agreement required that Central Hudson make
available $10 million per calendar year of the Agreement in a Customer Benefit
Fund to fund rate reductions and retail access options. Funding sources included
$3 million from shareholder sources, $3.5 million from fuel cost savings
generated by the installation of a coal dock unloading facility at the
Danskammer Plant, and $3.5 million from deferred credits related to the
reconciliation of rate allowances compared to actual costs for pension and other
post-employment benefit costs. The Agreement also stipulated that unused funds
accumulated to the end of the Agreement's term be used to offset strandable
costs or to provide other benefits to ratepayers. The terms of the Customer
Benefit Fund were later supplemented as described in the following caption,
"Rate Proceedings - Electric and Natural Gas."

Rate Proceedings - Electric and Natural Gas

      On August 1, 2000, Central Hudson filed an electric and natural gas case
with the PSC which proposed, among other things: (a) unbundled natural gas and
electric delivery rates, (b) purchased electricity and natural gas cost recovery
mechanisms, (c) retail choice for all customers, (d) a return on equity of 12%,
(e) removal of all fossil production costs from rates, (f) enhanced electric
reliability programs, and (g) a performance incentive and penalty system to
reflect Central Hudson's performance in meeting important customer service
objectives. New electric and natural gas delivery prices resulting from this
filing were to go into effect on July 1, 2001 at the expiration of the
Agreement.

      After full evidentiary hearings and several public hearings, a recommended
decision was issued by an Administrative Law Judge on April 24, 2001. This
recommended decision called for a number of modifications to Central Hudson's
filing but recommended further negotiations among the parties on rate and other
issues. To allow for negotiations and PSC review of any resulting proposal,
Central Hudson waived the expiration of the statutory suspension period through
October 31, 2001. On August 21, 2001, after numerous negotiation sessions, a
joint proposal was filed by the Company, PSC Staff, and other parties to the
case.


                                       72
<PAGE>

      On October 25, 2001 the PSC issued its Order Establishing Rates in the
proceeding ("Rate Order") incorporating the provisions of the joint proposal.
New rates became effective November 1, 2001. All accounting related to the rate
proceeding and any offsetting balances, which would have resulted as if the new
rates had been in effect on July 1, 2001, were reconciled.

      Significant terms and conditions of the joint proposal and the Rate Order
are: (i) a three year term, beginning July 1, 2001, with a Central Hudson option
to extend the Rate Order for up to two years; (ii) electric delivery rates were
reduced by 1.2% and then frozen at rates in effect on June 30, 2001, for the
remainder of the term of the Rate Order and natural gas delivery rates were
frozen for the term of the Rate Order; (iii) Central Hudson will continue to
purchase electricity and natural gas for its full service customers and will
recover these costs from customers through energy adjustment mechanisms; (iv)
customer charges were and will be increased and volumetric delivery charges were
reduced; (v) customer bills will be formatted to show the market price of
electricity in order to encourage competition and enhance customer migration to
third party energy suppliers; (vi) electric customers will receive refunds of
$25 million annually for each of the first three (3) years the Rate Order is
effective; (vii) Central Hudson will be allowed a base return on equity ("ROE")
of 10.3% on the equity portion of its rate base (approximately $250 million);
(viii) the common equity ratio will be capped, for purposes of the PSC's ROE
calculation, at 47% in the first year of the Rate Order and decline 1% per year
in each of the following two (2) years; (ix) earnings above the 10.3% base ROE
will be retained by Central Hudson up to 11.3%, with an equal sharing of
earnings between customers and Central Hudson, between 11.3% and 14%, and
earnings above 14% will be added to the Customer Benefit Fund; (x) the
establishment of customer service standards with associated penalties if
standards are not met and enhanced low income and customer education programs;
and (xi) excess proceeds from the sales of Central Hudson's interests in its
principal generating facilities and net deferred regulatory accounts
approximating $169 million (net of tax) were made available for the Customer
Benefit Fund and a portion of such Fund was directed to be used as follows:

      1)   Customer refunds                      $45.0 million (after tax)
      2)   Rate base reduction                   $42.5 million (after tax)
      3)   Enhanced electric
           reliability program                   $13.0 million (after tax)
      4)   Offset of manufactured gas
           plant site remediation costs          $12.6 million (after tax)

      Also included in the Rate Order and the Nine Mile 2 Order were approval
for Central Hudson to recognize $19.8 million of tax benefits related to the
sales of its interests in its principal generating facilities, offset by $11.4
million of after-tax contributions by Central Hudson to the Customer Benefit
Fund, or a net benefit to shareholders of $8.4 million, which amount was
recorded in the fourth quarter of 2001. Central Hudson has or will additionally
recognize net income for shareholders under a prior PSC regulatory settlement as
follows: $2.9 million in 2002, $5.9 million in 2003, and $5.9 million in 2004.
These tax benefits and prior settlement-related amounts are excluded from the
earnings that are subject to the ROE sharing formula described above.

      On October 3, 2002, the PSC issued two additional orders in the electric
rate proceeding. The first such order authorized and directed Central Hudson to
refund to electric customers an additional $10 million in aggregate from the
Customer Benefit


                                       73
<PAGE>

Fund over the period November 1, 2002 through June 30, 2004. The second such
order authorized the implementation of an $11 million Economic Development
Program to be funded from the Customer Benefit Fund over a period of five years.

FERC Restructuring and Independent System Operator

      In its Order No. 888, the FERC directed jurisdictional transmission owners
to restructure their operations to promote open transmission access. As proposed
in response to Order 888 and as approved by the FERC, on December 1, 1999, the
New York State Independent System Operator ("NYS ISO") was created and given
responsibility for the operation of the New York State transmission system.

      The NYS ISO is a not-for-profit New York corporation open to buyers,
sellers, consumers, and transmission owners, each of which are represented on
its Management Committee. As part of the restructuring, a New York State
Reliability Council ("Reliability Council") was also established. The
Reliability Council is governed by a committee comprised of transmission owners
and representatives of buyers, sellers, and consumer and environmental groups.
The Reliability Council promotes and preserves the reliability of the bulk power
system within New York State through its promulgation of reliability rules; the
NYS ISO develops the procedures necessary to operate the system within those
reliability rules. Central Hudson is a member of the NYS ISO and the Reliability
Council.

      In its Order No. 2000, the FERC directed all utilities subject to its
jurisdiction under the Federal Power Act that belong to an ISO to make a filing
on or before January 15, 2001 addressing the extent to which, and the plan for,
that ISO to conform to the minimum characteristics and functions of a Regional
Transmission Organization ("RTO") and to identify any obstacles to full
compliance with the FERC's RTO requirements. A compliance filing was made by the
six jurisdictional New York State transmission owners (including Central Hudson)
and the NYS ISO which demonstrated that the NYS ISO would satisfy all of FERC's
RTO requirements. Upon review of this compliance filing, the FERC issued an
order determining that the NYS ISO does not satisfy the RTO requirements set
forth in Order No. 2000.

      On November 7, 2001, the FERC issued an "Order Providing Guidance on
Continued Processing of RTO Filings" under which the FERC intends to complete
the RTO effort using two parallel tracks to resolve business and process issues
relating to: (i) geographic scope and governance of qualifying RTOs across the
nation, and (ii) transmission tariff and market design rulemaking for public
utilities, including RTOs, to accomplish the objectives of Order No. 2000.

      On July 31, 2002, the FERC released its third major restructuring
initiative by issuing a Notice of Proposed Rulemaking on Remedying Undue
Discrimination through Open Access Transmission Service and Standard Electricity
Market Design ("SMD NOPR"). A significant requirement of the SMD NOPR is that
all public utilities become Independent Transmission Providers ("ITP"), turn
over their transmission facilities to an ITP, or contract with an ITP to operate
their transmission facilities. It is expected that the FERC will issue a SMD
Final Rule sometime in late 2003.

      On August 23, 2002, the NYS ISO and the ISO New England, Inc. ("ISO-NE")
filed a joint petition with the FERC for a declaratory order regarding the
creation of a Northeastern Regional Transmission Organization ("NERTO")
comprised of the NYS ISO and ISO-NE. On November 8, 2002, Central Hudson joined
in two separate filings in opposition to the proposed NERTO. This joint petition
was withdrawn by NYS ISO and ISO-NE on November 22, 2002.


                                       74
<PAGE>

      No prediction can be made as to the outcome of the FERC electric
restructuring effort.

NOTE 3 - NINE MILE 2 PLANT

General

      The Nine Mile 2 Plant, formerly owned as tenants-in-common by Central
Hudson (9% interest), Niagara Mohawk Power Corporation ("Niagara Mohawk") (41%
interest), New York State Electric and Gas Corporation ("NYSEG") (18% interest),
Long Island Lighting Company, d/b/a Long Island Power Authority (18% interest),
and Rochester Gas and Electric Corporation ("Rochester") (14% interest), is
located in Oswego County, New York and has a rated net capability of 1,143 MW.
As described in Note 2 herein, Central Hudson, together with Niagara Mohawk,
NYSEG and Rochester, sold its interest in the Nine Mile 2 Plant to an affiliate
of Constellation on November 7, 2001.

      The output of the Nine Mile 2 Plant was shared among, and its operating
expenses allocated among, the cotenants in the same proportions as the
cotenants' respective ownership interests. Central Hudson's share of direct
operating expense for the Nine Mile 2 Plant was included in the appropriate
expense classifications in the accompanying Consolidated Statement of Income.

      As part of an agreement with Constellation, Central Hudson will buy, at
negotiated prices, approximately 8% of the output of the Nine Mile 2 Plant over
the next ten years. After the completion of the power purchase agreement, a
Revenue Sharing Agreement with Constellation begins which will provide Central
Hudson with a hedge against electricity price increases and could provide
additional future revenue for Central Hudson through 2021.

Nuclear Plant Decommissioning Costs

      Prior to the sale of Central Hudson's interest in the Nine Mile 2 Plant,
Central Hudson made annual contributions of $868,000 to a qualified external
nuclear decommissioning trust fund relating to the Nine Mile 2 Plant. The total
annual amount allowed in rates was $999,000, but the maximum annual tax
deduction allowed was $868,000. The difference between the rate allowance and
the amount contributed to the external qualified fund was recorded as an
internal reserve, and the funds were held by Central Hudson.

      As part of the sale of the Nine Mile 2 Plant, the external decommissioning
fund amounting to $14.7 million and the obligation of the selling owners for
decommissioning were transferred to Constellation on November 7, 2001, subject
to possible post-closing adjustments.

NOTE 4 - INCOME TAX

      Energy Group and its subsidiaries file a consolidated federal and New York
State income tax return.

      In 2000, New York State law was changed so that Central Hudson and other
New York State utilities became subject to an income-based state income tax. The
tax law repealed the 0.75 percent (0.75%) tax on gross earnings and the excess
dividends tax under Section 186 of the New York State Tax Law and replaced it
with an income-based tax under Article 9-A of the New York State Tax Law. The
Article 9-A state income tax obligation is recovered from Central


                                       75
<PAGE>

Hudson customers as a revenue tax, and this treatment will continue until such
time that the PSC includes this obligation in the base rates of Central Hudson
in the same manner as is already accorded Central Hudson's federal income tax
obligation.

      See Note 2 - "Regulatory Matters - Summary of Regulatory Assets and
Liabilities" for additional information regarding Energy Group and its
subsidiaries' income taxes.

Components of Income Tax

      The following is a summary of the components of state and federal income
taxes for Energy Group as reported in its Consolidated Statement of Income:

                                                2002         2001          2000
                                                ----         ----          ----
                                                       (In Thousands)
Charged to operating expense:
  Federal income tax ....................   $  (1,832)   $ 227,732    $  27,926
  State income tax ......................      (3,230)      22,843        5,808
  Federal income tax from
      discontinued operations ...........       2,939           --           --
  State income tax from
      discontinued operations ...........         923           --           --
  Deferred federal income tax ...........      23,385     (207,867)       2,725
  Deferred state income tax .............       3,290      (21,665)         770
                                            ---------    ---------    ---------
    Income tax charged to
      operating expense .................      25,475       21,043       37,229
                                            ---------    ---------    ---------
Charged (credited) to other income and deductions:
  Federal income tax ....................       1,517        3,678        1,352
  State income tax ......................         133          (44)         189
  Deferred federal income tax ...........        (911)     (26,963)        (731)
  Deferred state income tax .............         (58)      (1,052)         176
                                            ---------    ---------    ---------
    Income tax charged (credited) to
      other income and deductions .......         681      (24,381)         986
                                            ---------    ---------    ---------
    Total income tax ....................   $  26,156    $  (3,338)   $  38,215
                                            =========    =========    =========

      The 2001 deferred federal income tax credited to other income and
deductions includes recognition of investment tax credit in the amount of
$(18.8) million upon the sales of Central Hudson's interests in its principal
generating facilities.


                                       76
<PAGE>

      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 the Energy Group Consolidated Statement of Income:

                                               2002         2001          2000
                                               ----         ----          ----
                                                      (In Thousands)

Net income .............................   $  41,281    $  50,835     $  50,973
Preferred Stock Dividend of Central
  Hudson ...............................       2,161        3,230         3,230
Federal income tax .....................       2,624      231,410        29,278
State income tax ("SIT") ...............      (2,174)      22,799         5,997
Deferred federal income tax ............      22,474     (234,830)        1,994
Deferred state income tax ..............       3,232      (22,717)          946
                                           ---------    ---------     ---------
  Income before taxes ..................   $  69,598    $  50,727     $  92,418
                                           =========    =========     =========

Computed federal tax @ 35%
 statutory rate ........................   $  24,359    $  17,754     $  32,346
SIT net of federal tax benefit .........       3,393        2,638         5,106
Increase (decrease) to computed
 tax due to:
  Pension expense ......................     (17,130)      (5,569)       (5,424)
  Tax depreciation .....................      (2,427)      (1,711)        2,822
  Customer Benefit  Fund ...............     (10,775)      (2,178)        2,132
  Nine Mile 2 Plant write-off ..........          --        7,638            --
  Amortization of shareholder's share of
    gain on plant sale .................          --       (2,168)           --
  Deferred gain on sale of Plants -
    Roseton and Danskammer .............          --      230,620            --
  Deferred gain on sale of Nine Mile 2
    Plant ..............................          --       12,171            --
  Regulatory asset write-off ...........          --       (1,766)           --
  Carrying charge - Customer Benefit
    Fund ...............................       4,386        3,260            --
  Deferred electric fuel costs .........       2,835       (6,016)       (1,882)
  Other ................................      (4,191)        (464)          175
                                           ---------    ---------     ---------
Subtotal income tax ....................         450      254,209        35,275
Deferred income tax ....................      25,706     (257,547)        2,940
                                           ---------    ---------     ---------
  Total income tax .....................   $  26,156    $  (3,338)    $  38,215
                                           =========    =========     =========

  Effective tax rate - federal .........        36.1%        (6.7%)        36.6%
  Effective tax rate - state ...........         1.5%          .1%          4.8%
                                           ---------    ---------     ---------
  Effective tax rate - combined ........        37.6%        (6.6%)        41.4%
                                           =========    =========     =========


                                       77
<PAGE>

      The following is a summary of the components of deferred taxes at December
31, 2002 and December 31, 2001, as reported in Energy Group's Consolidated
Balance Sheet:

                                              2002       2001
                                              ----       ----
Accumulated Deferred Income                    (In Thousands)
  Tax Assets:
    Customer Benefit Fund ..............   $ 62,232   $ 76,150
    Future tax benefits on investment
       tax credit basis difference .....      1,990      2,063
    Unbilled revenues ..................      7,927      7,279
    Other ..............................     30,208     25,278
                                           --------   --------
 Accumulated Deferred Income
  Tax Assets ...........................   $102,357   $110,770
                                           --------   --------
Accumulated Deferred Income
  Tax Liabilities:
     Tax depreciation ..................   $ 79,453   $ 74,630
     Accumulated deferred investment
       tax credit ......................      3,695      3,832
     Future revenues - recovery of plant
      basis differences ................      2,967      1,078
   Other ...............................     72,012     52,590
                                           --------   --------
 Accumulated Deferred Income
   Tax Liabilities .....................   $158,127   $132,130
                                           --------   --------
 Net Accumulated Deferred Income
   Tax Liability .......................   $ 55,770   $ 21,360
                                           ========   ========

         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:

                                           2002         2001         2000
                                           ----         ----         ----
                                                  (In Thousands)
Charged to operating expense:
  Federal income tax ...............   $  (4,440)   $ 225,240    $  27,297
  State income tax .................      (1,179)      22,035        5,582
  Deferred federal income tax ......      23,385     (207,867)       2,725
  Deferred state income tax ........       3,290      (21,665)         770
                                       ---------    ---------    ---------
    Income tax charged to
      operating expense ............      21,056       17,743       36,374
                                       ---------    ---------    ---------
Charged (credited) to other income and deductions:
  Federal income tax ...............       1,470        2,679        1,142
  State income tax .................         133          (44)         189
  Deferred federal income tax ......        (911)     (26,963)        (731)
  Deferred state income tax ........         (58)      (1,052)         176
                                       ---------    ---------    ---------
    Income tax charged (credited) to
      other income and deductions ..         634      (25,380)         776
                                       ---------    ---------    ---------
    Total income tax ...............   $  21,690    $  (7,637)   $  37,150
                                       =========    =========    =========

      The 2001 deferred federal income tax credited to other income and
deductions includes recognition of investment tax credit in the amount of
$(18.8) million upon the sales of Central Hudson's interests in its principal
generating facilities.


                                       78
<PAGE>

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 the Central Hudson Consolidated Statement of Income:

                                               2002          2001          2000
                                               ----          ----          ----
                                                      (In Thousands)

Net income .............................   $  32,524     $  44,178     $  52,595
Federal income tax .....................      (2,970)      227,919        28,437
State income tax .......................      (1,046)       21,991         5,771
Deferred federal income tax ............      22,474      (234,830)        1,994
Deferred state income tax ..............       3,232       (22,717)          946
                                           ---------     ---------     ---------
  Income before taxes ..................   $  54,214     $  36,541     $  89,743
                                           =========     =========     =========

Computed federal tax @ 35%
 statutory rate ........................   $  18,975     $  12,789    $  31,410
SIT net of federal tax benefit .........       2,643         1,900        4,958
Increase (decrease) to computed
 tax due to:
  Pension expense ......................     (17,130)       (5,569)      (5,424)
  Tax depreciation .....................      (2,427)       (1,711)       2,822
  Customer Benefit Fund ................     (10,775)       (2,178)       2,132
  Nine Mile 2 Plant write-off ..........          --         7,638           --
  Amortization of shareholder's share of
    gain on plant sale .................          --        (2,168)          --
  Deferred gain on sale of Plants -
    Roseton and Danskammer .............          --       230,620           --
  Deferred gain on sale of Nine
    Mile 2 Plant .......................          --        12,171           --
  Regulatory asset write-off ...........          --        (1,766)          --
  Carrying charge - Customer Benefit
    Fund ...............................       4,386         3,260           --
  Deferred electric fuel costs .........       2,835        (6,016)      (1,897)
  Other ................................      (2,523)          940          209
                                           ---------     ---------    ---------
Subtotal income tax ....................      (4,016)      249,910       34,210
Deferred income tax ....................      25,706      (257,547)       2,940
                                           ---------     ---------    ---------
  Total income tax .....................   $  21,690     $  (7,637)   $  37,150
                                           =========     =========    =========

  Effective tax rate - federal .........        36.0%        (18.9%)       36.6%
  Effective tax rate - state ...........         4.0%         (2.0%)        4.8%
                                           ---------     ---------    ---------
  Effective tax rate - combined ........        40.0%        (20.9%)       41.4%
                                           =========     =========    =========


                                       79
<PAGE>

      The following is a summary of the components of deferred taxes at December
31, 2002 and December 31, 2001, as reported in Central Hudson's Consolidated
Balance Sheet:

                                             2002        2001
                                             ----        ----
Accumulated Deferred Income                  (In Thousands)
  Tax Assets:
     Future tax benefits on investment
       tax credit basis difference ....   $  1,990   $  2,063
    Unbilled revenues .................      7,927      7,279
    Other .............................     92,440    101,364
                                          --------   --------
 Accumulated Deferred Income
  Tax Assets ..........................   $102,357   $110,706
                                          --------   --------
Accumulated Deferred Income
  Tax Liabilities:
     Tax depreciation .................   $ 79,453   $ 74,630
     Accumulated deferred investment
       tax credit .....................      3,695      3,832
    Future revenues - recovery of plant
      basis differences ...............      2,967      1,078
   Other ..............................     71,196     51,365
                                          --------   --------
 Accumulated Deferred Income
   Tax Liabilities ....................   $157,311   $130,905
                                          --------   --------
 Net Accumulated Deferred Income
   Tax Liability ......................   $ 54,954   $ 20,199
                                          ========   ========

NOTE 5 - SHORT-TERM BORROWING ARRANGEMENTS

      Energy Group's $170 million revolving credit agreement with several
commercial banks expired on December 4, 2001. Energy Group determined that its
cash reserves were sufficient to meet its needs, and the establishment of
another revolving credit agreement will be reviewed in the future as conditions
warrant. In early February 2001, the short-term debt under Energy Group's
revolving credit agreement was prepaid in full with a portion of the proceeds
from the sales of Central Hudson's interests in the Roseton Plant and Danskammer
Plant.

      Pursuant to PSC authorization, effective October 19, 2001, Central Hudson
terminated its $50 million revolving credit facility and entered into a $75
million revolving credit facility with several commercial banks through June 30,
2004 ("Borrowing Agreement"). Compensating balances are not required under the
Borrowing Agreement. In addition, Central Hudson maintains a confirmed line of
credit of $1 million with a regional bank. There were no outstanding loans under
the Borrowing Agreement or the line of credit at December 31, 2002 or 2001. In
order to diversify its sources of short-term financing, Central Hudson has
entered into short-term credit facility agreements with several commercial
banks. The PSC limits the amount Central Hudson may have outstanding, at any
time, under all of its short-term borrowing arrangements to $77 million in the
aggregate. This PSC authorization expires June 30, 2004.

      Also in October 2001, the PSC approved the issuance by Central Hudson of
up to $100 million of unsecured Medium-Term Notes prior to June 30, 2004. On
March 28, 2002, $33 million of five-year, Series D Notes were issued at 5.87%
and $36 million of ten-year, Series D Notes were issued at 6.64%.


                                       80
<PAGE>

      In May 2002, Central Hudson repurchased $17.5 million of its 6.20%
cumulative preferred stock and $5.0 million of its 6.80% cumulative preferred
stock in order to recalibrate its capital structure following the reduction of
its asset base as a result of the sale of its interests in its principal
generating facilities.

      In September 2002, Central Hudson redeemed its $10 million 8.12% and $10
million 8.14% Medium-Term Notes, which were both previously issued under the
Company's First Mortgage Bond Indenture (described in Note 7, under the caption
"Mortgage Indenture") and were due August 29, 2022. The First Mortgage Bond
Indenture was defeased on November 6, 2001.

      At December 31, 2002, Central Hudson had no short-term debt outstanding
and had cash and cash equivalents, including investments in short-term
securities of $55.0 million. For years ended 2002 and 2001, Central Hudson had
an average daily amount of short-term debt outstanding of $1,534,000 and
$1,922,000, respectively. The weighted-average interest rate for borrowing
during 2002 was 2.15% and 6.56% for 2001.

      The competitive business subsidiaries have a line of credit totaling $12.5
million. There were no borrowings against this line of credit at December 31,
2002.

      At December 31, 2002, Energy Group had no short-term debt outstanding.
Cash and cash equivalents for Energy Group, including investments in short-term
securities, were $83.5 million at December 31, 2002.


                                       81
<PAGE>

NOTE 6 - CAPITALIZATION - ENERGY GROUP CAPITAL STOCK

Common Stock, $.10 par value; 30,000,000 shares authorized:

<TABLE>
<CAPTION>
                                  Common Stock
                             ----------------------       Paid-In      Treasury
                                Shares       Amount       Capital       Stock
                             Outstanding     ($000)        ($000)       ($000)
                             -----------     ------        ------       ------
<S>                          <C>           <C>         <C>           <C>
January 1, 2000 .........    16,862,087    $  1,686    $  351,230    $       --
Repurchased under common
  stock repurchase plan .      (500,000)         --            --       (18,766)
                             ----------    --------    ----------    ----------
December 31, 2000 .......    16,362,087       1,686       351,230       (18,766)
                             ----------    --------    ----------    ----------

December 31, 2001 .......    16,362,087       1,686       351,230       (18,766)
                             ----------    --------    ----------    ----------

Repurchased under common
  stock repurchase plan .      (297,487)         --            --       (14,351)
                             ----------    --------    ----------    ----------
December 31, 2002 .......    16,064,600    $  1,686    $  351,230    $  (33,117)
                             ==========    ========    ==========    ==========
</TABLE>

CAPITALIZATION - CENTRAL HUDSON CAPITAL STOCK

Common Stock, $5.00 par value; 30,000,000 shares authorized:

                                           Common Stock
                                    ----------------------      Paid-In
                                       Shares       Amount      Capital
                                    Outstanding     ($000)       ($000)
                                    -----------     ------       ------
January 1, 2000 .................   16,862,087   $   84,311   $  273,238
December 31, 2000 ...............   16,862,087       84,311      273,238
                                    ----------   ----------   ----------
Dividend to Parent - Energy Group           --           --      (98,258)
                                    ----------   ----------   ----------
December 31, 2001 ...............   16,862,087       84,311      174,980
                                    ----------   ----------   ----------
December 31, 2002 ...............   16,862,087   $   84,311   $  174,980
                                    ==========   ==========   ==========


                                       82
<PAGE>

Cumulative Preferred Stock, Central Hudson, $100 par value; 1,200,000 shares
authorized:

                                                            Shares Outstanding
                                      Final     Redemption  ------------------
                                    Redemption    Price         December 31,
                           Series      Date      12/31/02      2002      2001
                           ------      ----      --------      ----      ----
Not Subject to Mandatory
 Redemption:
                           4 1/2%                $ 107.00    70,300    70,300
                            4.75%                  106.75    20,000    20,000
                            4.35%                  102.00    60,000    60,000
                            4.96%                  101.00    60,000    60,000
                                                            -------   -------
                                                            210,300   210,300
                                                            -------   -------
Subject to Mandatory
 Redemption:
                            6.20%  10/1/08 (a)               25,000   200,000
                            6.80%  10/1/27 (b)              100,000   150,000
                                                            -------   -------
                                                            125,000   350,000
                                                            -------   -------
                                         Total              335,300   560,300
                                                            =======   =======

(a)   Cannot be redeemed prior to October 1, 2003. Subject to mandatory annual
      sinking fund payment of $100,000 commencing October 1, 2003 with final
      payment of $2.5 million on the final redemption date.

(b)   Cannot be redeemed prior to October 1, 2003. Subject to mandatory annual
      sinking fund payment of $500,000 commencing October 1, 2003 through final
      redemption date.

      As noted previously in Note 5, in May 2002, Central Hudson repurchased
175,000 shares of its 6.20% cumulative preferred stock and 50,000 shares of its
6.80% cumulative preferred stock in order to recalibrate its capital structure
following the reduction of its asset base.

      Central Hudson had no cumulative preferred stock redemptions or issuances
during 2001.

      Capital Stock Expense: Expenses incurred on issuance of capital stock are
accumulated and reported as a reduction in common stock equity. These expenses
are generally not amortized; however, as directed by the PSC, certain issuance
and redemption costs and unamortized expenses associated with certain issues of
preferred stock that were redeemed have been deferred and are being amortized
over the remaining lives of the issues subject to mandatory redemptions.

      Repurchase Program: On July 25, 2002, the Board of Directors of Energy
Group authorized a Common Stock Repurchase Program ("Program") to repurchase up
to 4 million shares, or approximately 25% of its outstanding common stock, over
the five years beginning August 1, 2002. The Board of Directors has targeted
800,000 shares for repurchase in the first year of the program, but has
authorized the repurchase of up to 1.2 million shares during the first year. As
of December 31, 2002, the number of shares repurchased during 2002 under this
program was 297,487 at a cost of $14.4 million. Energy Group intends to set
repurchase targets each year based on circumstances then prevailing. Energy
Group reserves the right to modify, suspend, or terminate the program at any
time without notice.


                                       83
<PAGE>

NOTE 7 - CAPITALIZATION - LONG-TERM DEBT

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

  Series                            Maturity Date             December 31,
  ------                            -------------             ------------
First Mortgage Bonds:                                      2002         2001
                                                           ----         ----
                                                            (In Thousands)
7.97% (a)(b)(e)                     June 11, 2003      $   5,000    $   5,000
7.97% (a)(b)(e)                     June 13, 2003            500          500
6.46% (a)(b)(e)                     Aug. 11, 2003          9,500        9,500
8.12% (a)(b)(d)                     Aug. 29, 2022             --       10,000
8.14% (a)(b)(d)                     Aug. 29, 2022             --       10,000
                                                       ---------    ---------
                                                          15,000       35,000
Promissory Notes:
1998 Series A (4.20%)(c)             Dec. 1, 2028         16,700       16,700
7.85% (b)                            July 2, 2004         15,000       15,000
1999 Series C (6%)(b)               Jan. 15, 2009         20,000       20,000
1999 Series A (5.45%)(c)             Aug. 1, 2027         33,400       33,400
1999 Series B (Var. rate)(c)         July 1, 2034         33,700       33,700
1999 Series C (Var. rate)(c)         Aug. 1, 2028         41,150       41,150
1999 Series D (Var. rate)(c)         Aug. 1, 2028         41,000       41,000
2002 Series D (5.87%)(b)            Mar. 28, 2007         33,000           --
2002 Series D (6.64%)(b)            Mar. 28, 2012         36,000           --
                                                       ---------    ---------
                                                         269,950      200,950

Unamortized Discount on Debt                                 (73)         (76)
                                                       ---------    ---------
                                                       $ 284,877    $ 235,874
Less:  Current Portion                                   (15,000)     (20,000)
                                                       ---------    ---------
                           Total                       $ 269,877    $ 215,874
                                                       =========    =========

(a)   Central Hudson's First Mortgage Bond Indenture was defeased on November 6,
      2001.

(b)   Issued under Central Hudson's Medium-Term Note Program.

(c)   First Mortgage Bonds or Promissory Notes issued in connection with the
      sale by New York State Energy Research and Development Authority
      ("NYSERDA") of tax-exempt pollution control revenue bonds.

(d)   Redeemed in 2002 using defeasance funds held by the Mortgage Trustee.

(e)   To be redeemed in 2003 using defeasance funds held by the Mortgage
      Trustee.

      The competitive business subsidiaries had no long-term debt outstanding as
of December 31, 2002 and had $250,000 of long-term debt outstanding as of
December 31, 2001.


                                       84
<PAGE>

Long-Term Debt Maturities

      The aggregate principal amounts of Central Hudson long-term debt maturing
or to be redeemed for the next five years and thereafter are as follows: $15
million in 2003, $15 million in 2004, none in 2005 and 2006, $33 million in
2007, and $222 million during the years thereafter. Defeasance funds held by the
Mortgage Trustee will be used to retire debt maturing in 2003. See also this
Note under the caption "Mortgage Indenture."

NYSERDA

      Central Hudson's 1999 NYSERDA Bonds Series B, C, D are unsecured, variable
rate, 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. In
its rate orders, the PSC has authorized deferred accounting for the interest
costs on these Bonds. This authorization provides for full recovery of the
actual interest costs supporting utility operations. The percent of interest
costs supporting utility operations represents approximately 94% of the total
costs. The deferred balances under this accounting were $1.5 million and $0.2
million at December 31, 2002 and at December 31, 2001, respectively, and are
included in "Regulatory Liabilities" in Energy Group's and Central Hudson's
Consolidated Balance Sheets. The deferred balances at June 30, 2001 were
eliminated in accordance with a Rate Order from the PSC. The ongoing deferred
balances are to be addressed in future rate cases. 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 5.5% cost ceiling for
the period April 1, 2002 - April 1, 2004.

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.

Debt Covenants

      Central Hudson's $75 million credit facility requires the maintenance by
Central Hudson of certain financial ratios and contains other restrictive
covenants. Currently, Central Hudson is in compliance with all of its debt
covenants. The only debt outstanding at CH Services is amounts borrowed from
Energy Group. As of December 31, 2002, no amounts were outstanding on CH
Services' line of credit with its commercial bank and, accordingly, it is in
compliance with all of its debt covenants.

Mortgage Indenture

      Effective November 6, 2001, Central Hudson defeased its First Mortgage
Bond Indenture, dated January 1, 1927 and thereafter amended and supplemented,
by depositing


                                       85
<PAGE>

approximately $39 million with the Mortgage Trustee under this Indenture.
Central Hudson remains obligated under outstanding First Mortgage Bonds to the
extent, if any, amounts payable under this Indenture exceed this deposit. Upon
this defeasance, Central Hudson was released of all obligations under the
Indenture, the lien of the Indenture was released from Central Hudson's
property, and Central Hudson can no longer issue secured debt under the
Indenture. The amount deposited with the Trustee is included in Bond Defeasance
Escrow on Central Hudson's Balance Sheet.

      In September 2002 Central Hudson redeemed its $10 million 8.12% and 10
million 8.14% Medium-Term Notes, pursuant to their terms.

      Article XXI of Central Hudson's Mortgage Indenture required generally
that, to the extent that the cost of property additions (as defined in the
Mortgage) acquired by Central Hudson during a calendar year was less than the
allowance for depreciation on property subject to the Mortgage for that calendar
year, Central Hudson deposit cash with the Mortgage Trustee in the amount of the
deficiency, less certain credits available to Central Hudson under the Mortgage
("Article XXI Deficiency"). For calendar year 2000, Central Hudson experienced
an Article XXI Deficiency in an amount that was not material, in satisfaction of
which it deposited with the Mortgage Trustee cash for the purpose of satisfying
the deficiency. Central Hudson did not experience an Article XXI Deficiency
during 2001, and is no longer subject to the provisions of Article XXI.

NOTE 8 - POST-EMPLOYMENT BENEFITS

Pension Benefits

      Central Hudson has a non-contributory retirement income plan ("Retirement
Plan") covering substantially all of its employees and certain employees of
CHEC. The Retirement Plan provides pension benefits that are based on the
employee's compensation and years of service. It has been Central Hudson's
practice to provide periodic updates to the benefit formula stated in the
Retirement Plan.

      During the quarter ended September 2002, Central Hudson contributed $32
million to the Trust Fund for the Retirement Plan to avoid a pension fund
deficit arising from declines in the market value of the Trust Fund's investment
portfolio and a reduction in the discount rate used to determine the accumulated
benefit obligation. Under the policy of the PSC regarding pension costs,
differences between pension expense and rate allowances covering pension
expenses are deferred for future recovery from customers and carrying charges
are accrued on cash differences. The $32 million contribution is subject to such
carrying charges.

      The recent circumstances noted above have resulted in a significant
increase in annual pension expense as compared to the level upon which current
rates were set. This difference is deferred under the PSC's policy for recovery
of pension expense and post-retirement


                                       86
<PAGE>

benefits. This deferral, if it continues in the future, could result in the
accumulation of a significant regulatory asset which Central Hudson will seek to
recover as provided for under the PSC's policy.

      Central Hudson's accounts for pension in accordance with PSC-prescribed
provisions which, among other things, require ten-year amortization of actuarial
gains and losses. As authorized by the PSC, any difference between the amount
collected in rates and the actual amount recorded as net periodic pension cost
was deferred as either a regulatory asset or liability, as appropriate. The
pension assets and liabilities transferred to Dynegy as a result of the sale of
Central Hudson's interests in the Danskammer Plant and the Roseton Plant were
reflected in the amount recorded in 2001 for net periodic pension cost.

      In addition to the Retirement Plan, Central Hudson's and Energy Group's
officers and executives are covered under a non-qualified Directors and
Executives Deferred Compensation Plan and a non-qualified Supplementary
Retirement Plan. Central Hudson also sponsors a non-qualified Retirement Benefit
Restoration Plan.

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 employees may become eligible for these benefits if they
reach retirement age while employed by Central Hudson. These and similar
benefits for active employees are provided through insurance companies whose
premiums are based on the benefits paid during the year. In order to reduce the
total costs of these benefits, Central Hudson requires employees who retired on
or after October 1, 1994 to contribute toward the cost of these benefits.

      Central Hudson is fully recovering its net periodic post-retirement costs
in accordance with PSC guidelines. 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 actuary under SFAS 106,
Employers Accounting for Post-retirement Benefits Other Than Pensions, is
deferred as either a regulatory asset or liability, as appropriate.


                                       87
<PAGE>

      As of December 31, 2002, the only post-retirement benefits provided to
employees of any of the competitive business subsidiaries were those offered to
employees of CHEC, who are allowed to participate in the Central Hudson benefit
plans. All other employees of the competitive business subsidiaries are eligible
to participate in Griffith Energy's 401(k) plan. No other post-retirement
benefits are provided.

      Reconciliations of the 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
competitive business subsidiary employees not covered by these plans) are as
follows:

<TABLE>
<CAPTION>
                                                     Pension Benefits           Other Benefits
                                                     ----------------           --------------
                                                      2002         2001         2002         2001
                                                      ----         ----         ----         ----
                                                       In Thousands              In Thousands
                                                       ------------              ------------
<S>                                               <C>          <C>          <C>          <C>
                 Change in Benefit Obligation:
       Benefit obligation at beginning of year    $ 273,381    $ 264,158    $  85,081    $  80,132
                                  Service cost        5,404        5,035        2,242        1,756
                                 Interest cost       20,553       19,251        7,041        5,833
                     Participant contributions           --           --          238          197
                               Plan amendments           --          255           --           --
                     Acquisitions/divestitures           --      (15,340)          --       (4,897)
                                 Benefits paid      (17,967)     (17,921)      (4,609)      (3,309)
                      Actuarial (gain) or loss       33,096       17,943       21,184        5,369
                                                  ---------    ---------    ---------    ---------
             Benefit Obligation at End of Year    $ 314,467    $ 273,381    $ 111,177    $  85,081
                                                  ---------    ---------    ---------    ---------
                        Change in Plan Assets:
Fair value of plan assets at beginning of year    $ 291,288    $ 358,465    $  64,588    $  67,636
                  Actual return on plan assets      (15,787)     (32,109)      (6,720)      (2,468)
                     Acquisitions/divestitures           --      (16,100)          --           --
                        Employer contributions       32,283          238        5,700        2,725
                     Participant contributions           --           --          238          197
                                 Benefits paid      (17,967)     (17,921)      (4,609)      (3,309)
                       Administrative expenses       (2,463)      (1,285)        (364)        (193)
                                                  ---------    ---------    ---------    ---------
      Fair Value of Plan Assets at end of Year    $ 287,354    $ 291,288    $  58,833    $  64,588
                                                  ---------    ---------    ---------    ---------
</TABLE>


                                       88
<PAGE>

<TABLE>
<CAPTION>
                                                                                  Pension Benefits              Other Benefits
                                                                                  ----------------              --------------
                (In Thousands)                                                     2002          2001          2002          2001
                                                                                   ----          ----          ----          ----
<S>                                                                            <C>           <C>           <C>           <C>
Reconciliation of Funded Status:
  Funded Status                                                                $ (27,114)    $  17,907     $ (52,344)    $ (20,493)
  Unrecognized actuarial loss/(gain)                                             111,146        35,501        22,260       (11,133)
  Unrecognized transition (asset) or obligation                                       --          (152)       25,644        28,209
  Unamortized prior service cost                                                  19,966        21,682           (74)          (83)
                                                                               ---------     ---------     ---------     ---------
Accrued Benefit Cost                                                           $ 103,998     $  74,938     $  (4,514)    $  (3,500)
                                                                               ---------     ---------     ---------     ---------
Amounts Recognized on Consolidated Balance Sheet:
  Prepaid benefit cost                                                         $ 108,242     $  78,743            --            --
  Accrued benefit liability                                                       (4,244)       (3,805)    $  (4,514)    $  (3,500)
                                                                               ---------     ---------     ---------     ---------
Net Amount Recognized at End of Year                                           $ 103,998     $  74,938     $  (4,514)    $  (3,500)
                                                                               ---------     ---------     ---------     ---------
Components of Net Periodic Benefit Cost:
  Service cost                                                                 $   5,404     $   5,035     $   2,242     $   1,756
  Interest cost                                                                   20,553        19,251         7,041         5,833
  Expected return on plan assets                                                 (22,698)      (29,398)       (4,200)       (4,525)
  Amortization of prior service cost                                               1,716         1,788            (9)           (9)
  Amortization of transitional (asset) or obligation                                (152)         (611)        2,566         2,608
  Recognized actuarial (gain) or loss                                             (1,599)       (9,584)       (1,068)       (3,317)
  Recognized curtailment loss                                                         --           493            --         1,333
  Recognized settlement gain                                                          --        (1,652)           --           (55)
                                                                               ---------     ---------     ---------     ---------
Net Periodic Benefit Cost                                                      $   3,224     $ (14,678)    $   6,572     $   3,624
                                                                               ---------     ---------     ---------     ---------
Weighted-average assumptions of December 31:
  Discount rate                                                                     6.75%         7.25%         6.75%         7.25%
  Expected long-term rate of return on plan assets                                  8.75%         9.25%         6.80%         6.80%
  Rate of compensation increase                                                     4.50%         4.00%         4.50%         4.00%
                                                                               ---------     ---------     ---------     ---------
Additional Year-End Disclosure
Plans with benefit obligations in excess of plan assets:
  Projected benefit obligation                                                 $ 314,467     $   4,541     $ 111,177     $  85,081
  Fair value of plan assets                                                      287,354            --        58,833        64,588
                                                                               ---------     ---------     ---------     ---------
Pension plans with accumulated benefit obligations in excess of plan assets:
  Projected benefit obligation                                                 $   5,398     $   4,541            --            --
  Accumulated benefit obligation                                                   4,624         4,162            --            --
  Fair Value of plan assets                                                           --            --            --            --
                                                                               ---------     ---------     ---------     ---------
</TABLE>


                                       89
<PAGE>

      For measurement purposes, a 7.7% (8.1% for participants over age 65)
annual rate of increase in the per capita cost of covered health benefits was
assumed for 2003. The rate is assumed to decrease gradually to 5.5% for 2008 and
remain at that level thereafter.

      Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one percentage point change in
assumed health care cost trend rates would have the following effects:

                                    One Percentage   One Percentage
                                    Point Increase   Point Decrease
                                    --------------   --------------

Effect on total of service
 and interest cost components
 for 2002                             $  1,469,000   $ (1,276,000)

Effect on year-end 2002
 post-retirement benefit obligation   $ 14,632,000   $(12,937,000)

NOTE 9 - STOCK-BASED COMPENSATION INCENTIVE PLANS

      Energy Group's Long-Term Performance-Based Incentive Plan ("Incentive
Plan"), adopted in 2000 and amended in 2001, reserves 500,000 shares of the
Energy Group's common stock for awards to be granted under the plan. The
Incentive 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 Incentive Plan. The stock options granted to officers of Energy
Group and its subsidiaries are exercisable over a period of ten years, with 40%
vesting after two years and 20% each year thereafter for the following three
years; however, stock options granted to officers retiring prior to June 30,
2006 are immediately exercisable upon retirement. Additionally, stock options
granted to Non-Employee Directors are immediately exercisable.

      Effective January 1, 2000, stock options covering 30,300 shares were
granted with an exercise price per share of $31.94. Further, effective January
1, 2001, stock options covering 59,900 shares were granted with an exercise
price per share of $44.06. There were no options granted in 2002. During the
fourth quarter of 2002, stock options covering 3,600 shares with an exercise
price per share of $31.94 were exercised. Compensation cost recognized at
exercise was not material. Effective January 1, 2003, stock options covering a
total of 30,900 shares were granted with an exercise price per share of $48.62.

      The fair market values per share of Energy Group stock options granted in
2001 and 2000 are $4.46 and $4.41, 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:


                                       90
<PAGE>

                                               2002      2001        2000
                                               ----      ----        ----

      Risk-free interest rate                   --       4.78%       6.36%
      Expected Lives - in years                 --          5           5
      Expected stock volatility                 --      20.06%      15.59%
      Dividend yield                            --        5.4%        5.4%

      A summary of the status of stock options awarded to officers and
Non-Employee Directors of Energy Group under the Incentive Plan as of December
31, 2002, 2001 and 2000 and changes during those years is as follows:

                                                Weighted
                                                Average
                                       Stock    Exercise    Remaining
                                      Options    Price    Contractual Life
                                      -------    -----    ----------------

Outstanding at 1/1/00
                  Granted              30,300    $31.94         7 years
                  Exercised                --        --
                  Forfeited                --        --
                                       ------    ------      ----------
Outstanding at 12/31/00                30,300    $31.94
                  Granted 1/1/01       59,900    $44.06         8 years
                  Exercised                --        --
                  Forfeited              (800)   $44.06
                                       ------    ------      ----------
Outstanding at 12/31/01                89,400    $39.95
                  Granted 1/1/02           --        --
                  Exercised            (3,600)   $31.94
                  Forfeited              (800)   $44.06
                                       ------    ------      ----------
Total Outstanding at 12/31/02          85,000    $40.25      7.70 years
                                       ------    ------      ----------

      The Incentive Plan also provides for the granting of performance shares.
On January 1, 2000, performance shares totaling 6,380 were granted, in
aggregate, to executives covered under the Incentive Plan, and on January 1,
2001, an additional 7,570 performance shares were granted. No performance shares
were granted in 2002. The ultimate number of shares awarded will be based on the
performance of Energy Group's common stock over the three years following the
date of grant compared to an index of peer companies, but shall not exceed 150%
of the number of shares granted. Based on performance for the three years ended
December 31, 2002, shares totaling 7,538 were earned based on the January 1,
2000 grant. As of December 31, 2002, the number of performance shares that
remain outstanding issued in 2000 and 2001 were 5,170 and 6,020, respectively.
Compensation expense recorded related to these performance shares was $458,402,
$211,282, and $95,168 for 2002, 2001, and 2000 respectively. Performance shares
totaling 14,800 were granted effective January 1, 2003.

      In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure ("SFAS 148"), which amends
FASB Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123").


                                       91
<PAGE>

      SFAS 148 provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based employee
compensation. In addition, Statement 148 amends the disclosure requirements of
SFAS 123 to require more prominent and more frequent disclosures in financial
statements about the effects of stock-based compensation.

      Effective January 1, 2003, Energy Group is adopting the fair value method
of recording stock-based compensation utilizing the "modified prospective"
approach, whereby existing options will be expensed prospectively over their
respective vesting periods. Historically, Energy Group has applied the intrinsic
value method permitted under SFAS 123, as defined in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees and related
Interpretations in accounting for stock-based compensation plans. Accordingly,
with the exception of 3,600 options exercised in the fourth quarter of 2002, no
compensation cost has been recognized for stock option plans in the past. Under
the fair value method, all future employee stock option grants and other
stock-based compensation will be expensed over their respective vesting periods
based on the fair value at the date the stock-based compensation is granted. It
is expected this change in accounting will not have a material impact on Energy
Group's results of operations.

NOTE 10 - OTHER INVESTMENTS

      Energy Group initiated an Alternate Investment Program in the third
quarter of 2002. The Alternate Investment Program involves investing
approximately $100 million of Energy Group's cash reserves made available from
the sales of Central Hudson's interests in its principal generating facilities
with the objective of realizing higher after tax yields than are available
through money market instruments, while avoiding undue risk to principal and
maintaining adequate liquidity.

      The investments held by Energy Group include marketable debt and equity
securities classified as available-for-sale. Debt securities include corporate
and government notes and bonds. These investments are reported at fair value
with unrealized gains and losses reported as a component of other comprehensive
income, net of tax. Available-for-sale securities as of December 31, 2002, are
summarized as follows (thousands of dollars):


                                       92
<PAGE>

<TABLE>
<CAPTION>
                                             Cost      Unrealized   Unrealized    Recorded
                                            Basis        Gains        Losses        Basis
                                            -----        -----        ------        -----
<S>                                        <C>          <C>          <C>           <C>
Debt securities recorded at market, maturing:
   Due after 1 year through 5 years        $15,480      $   125      $    --       $15,605
   Due after 5 years through 10 years       18,162           70           --        18,232

Common Stocks                               24,037           --       (1,955)       22,082
Preferred Stocks                            35,053          118         (649)       33,522

Other Non-Readily Marketable
Investments                                  6,851           32         (538)        6,345
                                           -------      -------      -------       -------
         Other Investments                 $98,583      $   345      $(3,142)      $95,786
                                           =======      =======      =======       =======
</TABLE>

      Proceeds from sales of available-for-sale securities during the year ended
December 31, 2002 were $33.6 million. Realized gains associated with sales of
available-for-sale securities were $1.6 million and realized losses were $2.6
million; the cost of these securities was determined on a specific
identification basis.

      To date, the Alternate Investment Program has experienced a greater degree
of volatility than anticipated, especially in the portion of the portfolio
invested in electric utility common stocks. In an attempt to mitigate the
volatility while maintaining an attractive after-tax yield, revised investment
criteria were established in January 2003 emphasizing large, stable utilities
with low price volatility and sustainable dividend payouts. In order to augment
the after-tax yield of the new portfolio, covered calls were sold against
certain of the issues in the electric utility common stock portfolio in January
2003.

      Energy Group may revise its investment criteria from time to time. Energy
Group may also discontinue and restart the program at any time. Energy Group
anticipates that its investment in this program will be liquidated over the next
two to three years to fund acquisitions and repurchases of Energy Group common
stock. The investment results experienced through January 31, 2003, are shown in
the following table. The results include the gain (loss) realized from the
transition to the revised electric common stock portfolio as well as the
realized gain (loss) in the preferred stock portfolio which was liquidated in
anticipation of short-term cash requirements.


                                       93
<PAGE>

     Detailed Alternate Investment Program Results through January 31, 2003
                                 (In Thousands)

                                                     Unrealized      Realized
                                      Cost Basis     Gain/(Loss)    Gain/(Loss)
Bank One Intermediate Bond Fund         $33,658      $   (52)(2)     $    --

Electric Utility Common Stock:
    Consolidated Edison                 $ 1,978      $   (33)        $    --
    Ameren Corp.                          1,922         (147)             --
    Sempra Energy                         1,822          377              --
    Cinergy Corp.                         1,886          (10)             --
    Progress Energy                       1,934         (189)             --
    Keyspan Corp.                         2,111          (96)             --
    Nstar                                 2,102          (91)             --
    FPL Group, Inc.                       1,893          (45)             --
    Southern Co.                          1,889          (65)             --
    Exelon Corp.                          1,888         (125)             --
    Constellation Energy                  1,852          (46)             --
    Wisconsin Energy                      1,871          (93)             --
    Scana Corp. WI                        1,870          (33)             --
    DTE Energy                            1,889         (169)             --
    Energy East Corp.                     1,873         (220)             --
    Pepco Holdings                        1,889         (104)             --
    OGE Energy (1)                                                       (91)
    Alliant Energy (1)                                                   (94)
    American Electric Power (1)                                          (88)
    Idacorp, Inc. (1)                                                   (201)
    Northwestern Corp. (1)                                            (1,489)
                                        -------      -------         -------
      Total Utility Common Stock        $30,669      $(1,089)(2)     $(1,963)(3)

Preferred Stock:
    Household International 7.60%       $ 2,995      $    23         $    --
    HSBC USA 5.715%                       1,958           32              --
    Freddie Mac 6.00% Series P              533           --              --
    ABN Ambro 6.59%                       2,295           34              --
    Heller Financial (GE) 6.95%           1,092           53              --
    Freddie Mac 6%                          261            6              --
    Heller Financial (GE) 6.95%           4,548           32              --
    Freddie Mac 5.70% Series R            1,257            2              --
    Household International 7.625%        2,093           70              --
    ABN Ambro 6.46%                       1,969           86              --
    Citigroup Inc. 6.365% (1)                                            287
    South Carolina G&E 6.25% (1)                                         (21)
    Sallie Mae 6.97% (1)                                                 (33)
    Sallie Mae 6.97% (1)                                                 (24)
    San Diego G&E 6.80% (1)                                             (118)
    San Diego G&E 7.05% (1)                                               (3)
                                        -------      -------         -------
        Total Preferred Stock           $19,001      $   338(2)      $    88(3)

(1) No longer held in portfolio.

(2) Unrealized gain/(loss) as of January 31, 2003.

(3) Cumulative realized gain/(loss) through January 31, 2003.


                                       94
<PAGE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Electricity Purchase Commitments

      Under federal and New York State laws and regulations, Central Hudson is
required to purchase the electrical output of unregulated cogeneration
facilities ("IPPs") which meet certain criteria for Qualifying Facilities, as
the term is defined in the applicable legislation. Purchases are made under
long-term contracts which require payment at rates higher than prevailing rates
in the wholesale market. These costs are currently fully recoverable through
Central Hudson's energy adjustment mechanism, which provides for recovery from
customers of certain costs of fuels used to generate electricity. Central Hudson
had contracts with IPPs in 2002, which represented 2% of Central Hudson's energy
purchases. These contracts are physical contracts that do not meet the
definition of a derivative instrument under SFAS 133 and, accordingly, are not
recorded at their fair value.

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. Seven separate lawsuits arising out of this
incident have been commenced in New York State Supreme Court, County of
Dutchess, by approximately 23 plaintiffs against Central Hudson and other
defendants, each lawsuit alleging that Central Hudson supplied the Taylor Avenue
residence with natural gas service for cooking purposes at the time of the fire.
The basis for Central Hudson's alleged liability in these actions is that it was
negligent in the supply of such natural gas. The suits seek an aggregate of $528
million in compensatory damages for alleged property damage, personal injuries,
wrongful death and loss of consortium or services. Central Hudson notified its
insurance carrier, has denied liability, and is defending the lawsuits. It
presently has insufficient information on which to predict the outcome of these
lawsuits.

ENVIRONMENTAL MATTERS

      Central Hudson and certain of the competitive business subsidiaries are
subject to regulation by federal, state and, to some extent, local authorities
with respect to the environmental effects of their operations, including
regulations relating to air and water quality, levels of noise, hazardous
wastes, toxic substances, protection of vegetation and wildlife and limitations
on land use. Environmental matters may expose both Central Hudson and certain of
the competitive business subsidiaries to 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. Both Central
Hudson and the applicable competitive business subsidiaries monitor their
activities in order to determine the impact of their activities on the
environment and to comply with applicable environmental laws and regulations.


                                       95
<PAGE>

CENTRAL HUDSON:

      Water: In February 2001, Central Hudson received a letter from the New
York State Department of Environmental Conservation ("NYS DEC") indicating that
it must terminate the discharge from an internal sump at its Neversink
Hydroelectric Facility into a regulated stream or obtain a State Pollutant
Discharge Elimination System ("SPDES") permit for it. An emergency authorization
for the discharge was issued by the NYS DEC. Central Hudson has evaluated the
discharge and receiving stream characteristics and does not believe that this
discharge causes or contributes to a violation of water quality. As a result,
Central Hudson believes that a SPDES permit is unnecessary. Central Hudson has
advised the NYS DEC of this opinion, but has also submitted an application to
the NYS DEC for a SPDES permit as a precautionary measure. The NYS DEC has
authorized the continued discharge during its review of Central Hudson's
application.

      Air: In October 1999, Central Hudson was informed by the New York State
Attorney General that the Danskammer Plant was part of an investigation by the
Attorney General's Office into the compliance of eight older New York State
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." As part of this
investigation, Central Hudson has received several requests for information from
the New York State Attorney General, the NYS DEC and the U.S. Environmental
Protection Agency ("EPA"), seeking information about the operation and
maintenance of the Danskammer Plant during the period of 1980 to 2000, including
specific information regarding approximately 45 projects conducted during that
period. In March 2000, the EPA assumed responsibility for the investigation.
Central Hudson has concluded its production of documents in connection with the
information requests, 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.

      Former Manufactured Gas Plant Facilities

      In 1986, the NYS DEC added to the New York State Registry of Inactive
Hazardous Waste Disposal Sites ("Registry") six locations, including a site in
Newburgh, New York, discussed below, at which manufactured gas plants ("MGP")
owned or operated by Central Hudson or its predecessors were once located. Two
additional former MGP sites were identified by Central Hudson but not placed on
the Registry by the NYS DEC. Three of the eight sites identified are in
Poughkeepsie, New York (at Laurel Street, North Water Street, and North Perry
Street); the remaining five sites are in Newburgh, Beacon, Saugerties, Kingston,
and Catskill, New York. Central Hudson studied all eight sites to determine
whether or not they contain any hazardous wastes which could pose a threat to
the environment or public health and, if wastes were located at the sites, to
determine whether or not remedial actions should be considered. The NYS DEC
subsequently removed the six sites it had previously placed on the Registry,
subject to future revisions of its testing methods.


                                       96
<PAGE>

      Central Hudson has recently become aware of information contained in a NYS
DEC Internet website indicating that, in addition to the eight sites referenced
above, Central Hudson is attributed with responsibility for three additional MGP
sites. The Internet website states that the additional sites are located on
Broadway in Kingston, at Vassar College in Poughkeepsie, and on Water Street in
Newburgh. No former MGP is believed to have been present at the Broadway,
Kingston location. Rather, the location is likely to have been used for an
office associated with the MGP site at East Strand Street, Kingston. Central
Hudson does not believe that it ever owned or operated the site at Vassar
College. The site identified as the Water Street, Newburgh site is, to Central
Hudson's knowledge, an MGP site that ceased operations in the 1880's. The land
upon which the plant was located was sold in 1891. The stock of the MGP site's
former operator, Consumers Gas Company of Newburgh, New York, was acquired in
1900-01 by Newburgh Light, Heat and Power Company, which was later consolidated
with several other companies to form Central Hudson.

      City of Newburgh: In October 1995, Central Hudson and the NYS DEC entered
into an Order on Consent regarding the development and implementation of an
investigation and remediation program for Central Hudson's former MGP in
Newburgh, New York ("Central Hudson Site"), the City of Newburgh's ("City")
adjacent and nearby property and the adjoining areas of the Hudson River. The
City subsequently filed a lawsuit against Central Hudson in the United States
District Court for the Southern District of New York alleging violation by
Central Hudson of, among others, federal environmental laws and seeking damages
of at least $70 million.

      Subsequent to a 1998 jury award of $16 million in that lawsuit, reflecting
the estimated cost of environmental remediation and damages, Central Hudson and
the City entered into a court-approved Settlement Agreement in 1999 under which,
among others, (i) Central Hudson agreed to remediate the City's property at
Central Hudson's cost pursuant to the NYS DEC's October 1995 Order on Consent
and (ii) if the total cost of the remediation were less than $16 million,
Central Hudson would pay the City an additional amount up to $500,000 depending
on the extent to which the cost of remediation was less than $16 million.

      Further studies of the City's property by Central Hudson were provided to
the NYS DEC, which determined that the contaminants found may pose a significant
threat to human health or the environment. As a result, Central Hudson developed
a draft Feasibility Study Report ("Feasibility Report") which was filed with the
NYS DEC and given to the City in December 1999. Following their review of the
Feasibility Report, the NYS DEC and the New York State Department of Health
("NYS DOH") requested additional sampling. Central Hudson performed the
requested work and reported results to the NYS DEC, NYS DOH, and the City in
revised risk assessments that were submitted in June 2001 (which encompassed
additional clean-up of Hudson River sediments and property owned by the City of
Newburgh).

      The NYS DEC and NYS DOH have approved the revised risk assessments. The
Feasibility Report was revised based on the revised assessments and filed with
the NYS DEC for its approval on November 4, 2002.


                                       97
<PAGE>

      After approving the Feasibility Report, the NYS DEC will issue a Proposed
Remedial Action Plan for public review and comment. After the public review, the
NYS DEC will issue a Record of Decision that will specify a remediation plan for
Central Hudson's implementation. It is presently anticipated that the NYS DEC
will issue the Record of Decision before December 31, 2003.

      As of January 21, 2003, approximately $10.1 million has been spent on the
City of Newburgh matter, including the defense of the litigation described
above. It is not possible to predict the extent of additional remediation costs
that will be incurred in connection with this matter, but Central Hudson
believes that such costs could be in excess of $17 million. As of December 31,
2002, liabilities of $15.8 million were recorded regarding this matter which are
included in "Deferred Credits and Other Liabilities - Accrued Environmental
Remediation Costs" in Energy Group's and Central Hudson's Consolidated Balance
Sheets.

      Neither Energy Group nor Central Hudson can make any prediction as to the
full financial effect this matter will have on it, including the extent, if any,
of insurance reimbursement and including implementation of environmental
clean-up under the Order on Consent. However, Central Hudson has put its
insurers on notice of this matter and intends to seek reimbursement from its
insurers for the cost of any liability. Two of the insurers have denied
coverage.

      Other MGP Sites: In February 1999 the NYS DEC informed Central Hudson of
its intention to perform site assessments at three of the other previously
identified MGP sites; namely, the Poughkeepsie Laurel Street and North Water
Street sites and the Beacon site. Central Hudson conducted these site
assessments under agreements negotiated with the NYS DEC to determine if there
are any significant quantities of residues from the MGP operations on the sites.

      In October 2000, Central Hudson was notified by the NYS DEC that it had
determined that the Poughkeepsie North Perry Street site and the Catskill site
posed little or no significant threat to the public and that no additional
investigation or action was necessary at the present time. During the fourth
quarter of 2001, Central Hudson was advised that the NYS DEC and the NYS DOH
found that no further remedial action is presently necessary at the Beacon site.

      In March 2002, the NYS DEC informed Central Hudson that both it and the
NYS DOH had approved Central Hudson's Supplemental Preliminary Site Assessment
for the North Water Street, Poughkeepsie site, which had concluded that the
contamination at the site "does not appear to pose a significant threat to
public health and the environment." At that time, the NYS DEC and Central Hudson
agreed that further investigation at the site would be given a lower priority
than work at the other Central Hudson MGP sites. In August 2002, however, an
oily sheen was reported to the NYS DEC on the Hudson River adjacent to this
site. As a result, the NYS DEC has reversed its priority determination with
respect to the North Water Street site, and has now given it a high priority for
action. Central Hudson has agreed to provide the NYS DEC with an investigative
work plan for identifying the content and origin of the sheen. The investigative
work is expected to take place during the spring and/or summer of 2003.


                                       98
<PAGE>

Neither Energy Group nor Central Hudson can predict the outcome of the
investigative work at this time.

      NYS DEC has not yet approved the cleanup plan for the Laurel Street,
Poughkeepsie site, delaying the initiation of cleanup until the spring of 2003,
at the earliest. The current estimate for cleanup at Laurel Street is $2.5
million. Additional work at the Kingston and Saugerties sites has been deferred
pending completion of work at the other sites.

      The $2.5 million estimate for the Laurel Street site cleanup was recorded
as a liability in June 2002, and the expense will be deferred, subject to the
provisions of a PSC order issued on October 25, 2002, that granted permission
for the deferral of these and other costs relating to the manufactured gas plant
sites. Recovery of the deferred costs, net of any insurance recoveries, will be
subject to the following three conditions at the time the expenditures are made
on an annual basis: 1) the expenditures are incremental to current rates; 2) the
expenditures are material; and 3) Central Hudson is not earning above its
allowed rate of return on equity. Central Hudson cannot predict whether it will
meet these three conditions.

      Remedial actions ultimately required at any of the four sites
(Poughkeepsie North Water Street and Laurel Street, Kingston and Saugerties) for
which additional information has been requested by the NYS DEC could cause a
material adverse effect (the extent of which cannot be reasonably estimated) on
the financial condition of Energy Group and Central Hudson if Central Hudson
were unable to recover all, or a substantial portion of these costs through
insurance and rates. Central Hudson has put its insurers on notice regarding
this matter and intends to seek reimbursement from its carriers for amounts for
which it may become liable.

      Orange County Landfill

      In June 2000, the NYS DEC sent a letter to Central Hudson requesting that
it provide information about disposal of wastes at the Orange County Landfill
("Orange County Site") located in the Township of Goshen, New York, which is
listed on the New York State Inactive Hazardous Waste Disposal Site Registry.

      The NYS DEC states that its records indicate Central Hudson, or a
predecessor entity, disposed or may have disposed of wastes at the Site or that
Central Hudson transported wastes to the Orange County Site for disposal.
Central Hudson has put its insurers on notice regarding this matter and intends
to seek reimbursement from its carriers for amounts for which it may become
liable.

      Documents submitted by Central Hudson in response to the request of the
NYS DEC indicate that at least three shipments of wastes may have been disposed
of by Central Hudson at the Orange County Site; one of construction waste, one
of office and commercial waste, and one of asbestos waste. Central Hudson
entered into a Tolling Agreement, (i.e., an agreement extending the applicable
statute of limitations) dated September 7, 2001, with the NYS DEC and other
state agencies whereby Central Hudson agreed to toll the applicable statute of
limitations by the state agencies against


                                       99
<PAGE>

Central Hudson for certain alleged causes of action until February 28, 2002. The
tolling agreement has been renewed through March 31, 2003.

      Neither Energy Group nor Central Hudson can predict the outcome of this
investigation at this time.

      Newburgh Consolidated Iron Works

      By letter dated November 28, 2001 from the EPA, Central Hudson, among
others, was served with a Request For Information pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") regarding any
shipments of scrap or waste materials that Central Hudson may have made to the
Consolidated Iron and Metal Co., Inc. ("Consolidated Iron"), a Superfund site
located in Newburgh, New York. Sampling by the EPA has indicated that lead and
polychlorinated biphenyls (or "PCBs") are present at the site, and the EPA
expects to commence a remedial investigation/feasibility study at the site in
the near future. Central Hudson responded to the EPA's information request on
January 30, 2002. In its response, Central Hudson stated that it had entered
into a contract with Consolidated Iron under which Central Hudson sold scrap to
Consolidated Iron. The term of the contract was from 1988 to 1989. Records of
eight and a possible ninth shipment of scrap to Consolidated Iron have been
identified. No records were found which indicate that the material sold 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 carriers for amounts for which it may become liable.

      Neither Energy Group nor Central Hudson can predict the outcome of this
investigation at the present time.

      Asbestos Litigation

      Since 1987, Central Hudson, along with many other parties, has been joined
as a defendant or third-party defendant in 3,000 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 Danskammer Plant.

      As of January 21, 2003, of the 3,000 cases brought against Central Hudson,
1,323 remain pending. Of the 1,677 cases no longer pending against Central
Hudson, 1,540 have been dismissed or discontinued, and Central Hudson has
settled 137 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
costs which may be incurred in connection with the remaining lawsuits will not
have a material adverse effect on Energy Group's or Central Hudson's financial
positions or results of operations.


                                       100
<PAGE>

Other Central Hudson Matters

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

CH SERVICES:

      In November 2000, CHEC purchased the fuel oil distribution business of
Griffith Consumers Division (the "Griffith Business"), a division of NEES
Energy, Inc. ("NEES") from NEES and AllEnergy Marketing Company, LLC, a
subsidiary of NEES. Pursuant to an earn-out provision in the agreement effecting
this purchase (the "Griffith Asset Purchase Agreement"), the purchase price is
subject to a post-closing adjustment if the earnings of the Griffith Business
before interest, taxes, depreciation and amortization for the year 2001 were
$10.2 million or more. The amount of the earn-out payment is determined on a
formula basis, up to a maximum amount of $12 million. The Griffith Asset
Purchase Agreement provides that the earn-out payment, if any, was payable on
March 31, 2002.

      Following review of relevant financial information, CHEC determined that
the Griffith Business's 2001 earnings were substantially less than $10.2
million, and that therefore no earn-out payment is due to NEES.

      In August 2002, Energy Group received an Earnings Dispute Notice
("Notice") from NEES concerning the earn-out provisions in the Griffith Asset
Purchase Agreement. The Notice disputes the earnings information provided to
NEES regarding the Griffith Business's 2001 and contends that costs were
unreasonably incurred and/or improperly allocated to the Griffith Business, thus
reducing the earnings below the $10.2 million threshold at which NEES would
receive an earn-out payment under the provisions of the Griffith Asset Purchase
Agreement. In subsequent correspondence and discussions, CHEC has provided NEES
with more detailed information in support of CHEC's determination that no
earn-out is payable to NEES as a result of the above mentioned earnings
shortfall.

      On May 15, 2001, Griffith received a demand, addressed to the Griffith
Business, from the CITGO Petroleum Corporation ("CITGO") for defense and
indemnification of CITGO in a lawsuit commenced on or about March 13, 2001, by
James and Casey Threatte against CITGO and Gordon E. Wenner in the Circuit Court
for Loudon County, Virginia. The lawsuit seeks compensatory damages of $1.4
million plus attorneys' fees, jointly and severally from CITGO and defendant
Wenner, for the alleged contamination of the plaintiffs' property in
Lovettsville, Virginia, by gasoline containing methyl tertiary butyl ether
("MTBE") emanating from the neighboring Lovettsville Garage. CITGO maintains
that the Griffith Business owes it a defense and indemnification pursuant to a
February 1, 1999 "Distribution Franchise Agreement" pursuant to which CITGO sold
gasoline to the Griffith Business, which then resold the gasoline to the
Lovettsville Garage. Griffith does not believe it or the Griffith Business is
responsible to CITGO in this matter, in part


                                       101
<PAGE>

because the supply agreement with the Lovettsville Garage was transferred to
another distributor on August 1, 2001, and the transferee agreed to assume any
liabilities existing as of that date. Moreover, even if Griffith were determined
to be responsible to CITGO, Energy Group believes that CITGO itself is not a
proper party to the lawsuit and, therefore, Griffith would be liable only for
the reimbursement of defense costs.

      On May 31, 2002, CH Services sold all of its stock ownership interest in
CH Resources to WPS Power Development, Inc. In connection with the sale, CH
Services has agreed for four years following the date of this sale to retain up
to $4 million of potential environmental liabilities which may have been
incurred by CH Resources prior to the closing, although no such material
liabilities have been identified. Energy Group has agreed to guarantee the
post-closing obligations of CH Services under the sale agreement, which
guarantee now applies to CHEC.

      Griffith has a voluntary environmental program in connection with the West
Virginia Division of Environmental Protection regarding Griffith's Kable Oil
Bulk Plant. During 2002, approximately $350,000 was spent on site remediation
efforts and it is anticipated that an additional $100,000 may be expended in
2003. The State of West Virginia has indicated no further remediation of the
site will be required.

NOTE 12 - SEGMENTS AND RELATED INFORMATION

      Energy Group

      Energy Group's reportable operating segments are the regulated electric
and natural gas operations of Central Hudson and the activities of the
competitive business subsidiaries covered under the "Unregulated" segment for
Energy Group. Also included in the "Unregulated" segment is the investment
activity of Energy Group. All three segments currently operate in the Northeast
and mid-Atlantic regions of the United States.

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


                                       102
<PAGE>

                              CH Energy Group, Inc.
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2002

<TABLE>
<CAPTION>

(In Thousands) except                           Natural
 Earnings per Share              Electric         Gas       Unregulated      Eliminations          Total
                                 --------         ---       -----------      ------------          -----
<S>                            <C>            <C>             <C>               <C>             <C>
Revenues from external
  customers                    $ 427,978      $ 105,343       $ 162,189         $      --       $ 695,510
Intersegment revenues                 47            490              --              (537)             --
                               ---------      ---------       ---------         ---------       ---------
    Total revenues               428,025        105,833         162,189              (537)        695,510
                               ---------      ---------       ---------         ---------       ---------

Depreciation and
  amortization                    19,652          5,698           5,880                --          31,230
Interest expense                  21,634          3,342           1,444            (1,557)         24,863
Interest and investment
   Income                          7,963          1,139           6,235            (1,557)         13,780
Income tax expense                16,252          5,438             604                --          22,294
Earnings per share                  1.38            .48             .67(1)             --            2.53
Segment assets                   739,136        206,830         264,141                --       1,210,107
Construction expenditures         51,989         13,841           6,457                --          72,287
                               ---------      ---------       ---------         ---------       ---------
</TABLE>

(1)   The amount attributable to the competitive business units was $.27 with
      the balance of Unregulated EPS of $.40 resulting primarily from investment
      activity .

                              CH Energy Group, Inc.
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2001

<TABLE>
<CAPTION>
(In Thousands) except                           Natural
 Earnings per Share              Electric         Gas       Unregulated      Eliminations       Total
                                 --------         ---       -----------      ------------       -----
<S>                           <C>            <C>           <C>              <C>            <C>
Revenues from external
  customers                   $   428,346    $   110,296   $   189,298      $        --    $   727,940
Intersegment revenues                  70            421                           (491)            --
                              -----------    -----------   -----------      -----------    -----------

   Total revenues                 428,416        110,717       189,298             (491)       727,940
                              -----------    -----------   -----------      -----------    -----------

Depreciation and
 amortization                      21,541          5,272         8,824               --         35,637
Interest expense                   24,752          4,075         3,994           (2,977)        29,844
Interest and investment
 income                             9,899          1,618        11,798           (2,977)        20,338
Income tax (credit) expense       (13,383)         5,746         4,299               --         (3,338)
Earnings per share                   1.94            .56           .61(1)            --           3.11
Segment assets                    714,992        200,867       273,939               --      1,189,798
Construction expenditures          49,951         10,518         6,048               --         66,517
                              -----------    -----------   -----------      -----------    -----------
</TABLE>

(1)   The amount attributable to the competitive business units was $.09 with
      the balance of Unregulated EPS of $.52 largely attributable to investment
      activity.


                                       103
<PAGE>

                              CH Energy Group, Inc.
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2000

<TABLE>
<CAPTION>
(In Thousands) except                           Natural
 Earnings per Share              Electric         Gas      Unregulated    Eliminations       Total
                                 --------         ---      -----------    ------------       -----
<S>                           <C>            <C>            <C>             <C>           <C>
Revenues from external
  customers                   $  531,732     $  105,353     $  111,027      $       --    $  748,112
Intersegment revenues                 88          1,686             --          (1,774)           --
                              ----------     ----------     ----------      ----------    ----------

   Total revenues                531,820        107,039        111,027          (1,774)      748,112
                              ----------     ----------     ----------      ----------    ----------
Depreciation and
 amortization                     42,973          4,941          3,539              --        51,453
Interest expense                  27,201          4,426          3,052              --        34,679
Interest and investment
 income                            3,556          1,033            304              --         4,893
Income tax expense                31,600          5,550          1,065              --        38,215
Earnings per share                  2.58            .38            .09(1)           --          3.05
Segment assets                 1,135,574        196,724        198,675              --     1,530,973
Construction expenditures         50,446          8,210          4,801              --        63,457
                              ----------     ----------     ----------      ----------    ----------
</TABLE>

(1)   The amount of Unregulated EPS attributable to the competitive business
      units was $.10, offset by a $.01 loss of Energy Group.

                    Central Hudson Gas & Electric Corporation
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2002

<TABLE>
<CAPTION>
                                                    Natural
     (In Thousands)                  Electric         Gas      Eliminations        Total
                                     --------         ---      ------------        -----
<S>                                <C>            <C>           <C>            <C>
Revenues from external
  customers                        $   427,978    $   105,343   $        --    $   533,321
Intersegment revenues                       47            490          (537)            --
                                   -----------    -----------   -----------    -----------
    Total revenues                     428,025        105,833          (537)       533,321
                                   -----------    -----------   -----------    -----------
Depreciation and
  amortization                          19,652          5,698            --         25,350
Interest expense                        21,634          3,342            --         24,976
Interest income                          7,963          1,139            --          9,102
Income tax expense                      16,252          5,438            --         21,690
Income Avail. for Common
  Stock                                 22,545          7,818            --         30,363
Segment assets                         739,136        206,830            --        945,966
Construction expenditures               51,989         13,841            --         65,830
</TABLE>


                                       104
<PAGE>

                    Central Hudson Gas & Electric Corporation
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2001

<TABLE>
<CAPTION>
                                                    Natural
     (In Thousands)                  Electric         Gas       Eliminations       Total
                                   -----------    -----------   ------------    -----------
<S>                                <C>            <C>           <C>            <C>
Revenues from external
  customers                        $   428,346    $   110,296   $        --    $   538,642
Intersegment revenues                       70            421          (491)            --
                                   -----------    -----------   -----------    -----------

   Total revenues                      428,416        110,717          (491)       538,642
                                   -----------    -----------   -----------    -----------

Depreciation and amortization           21,541          5,272            --         26,813
Interest expense                        24,752          4,075            --         28,827
Interest income                          9,899          1,618            --         11,517
Income tax expense                     (13,383)         5,746            --         (7,637)
Income Avail. for  Common
  Stock                                 31,731          9,217            --         40,948
Segment assets                         714,992        200,867            --        915,859
Construction Expenditures               49,951         10,518            --         60,469
                                   -----------    -----------   -----------    -----------
</TABLE>

                    Central Hudson Gas & Electric Corporation
                          Segment Disclosure - FAS 131
                          Year Ended December 31, 2000

<TABLE>
<CAPTION>
                                                    Natural
     (In Thousands)                  Electric         Gas       Eliminations       Total
                                   -----------    -----------   ------------    -----------
<S>                                <C>            <C>           <C>            <C>
Revenues from external
  customers                        $   531,732    $   105,353   $        --    $   637,085
Intersegment revenues                       88          1,686        (1,774)            --
                                   -----------    -----------   -----------    -----------

   Total revenues                      531,820        107,039        (1,774)       637,085
                                   -----------    -----------   -----------    -----------

Depreciation and amortization           42,973          4,941            --         47,914
Interest expense                        27,201          4,426            --         31,627
Interest income                          3,556          1,033            --          4,589
Income tax expense                      31,600          5,550            --         37,150
Income Avail. for Common
  Stock                                 43,110          6,255            --         49,365
Segment assets                       1,135,574        196,724            --      1,332,298
Construction expenditures               50,446          8,210            --         58,656
                                   -----------    -----------   -----------    -----------
</TABLE>


                                       105
<PAGE>

NOTE 13 - 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 and Temporary Cash Investments: The carrying amount approximates fair
value because of the short maturity of those instruments.

      Cumulative Preferred Stock Subject to Mandatory Redemption: The fair value
is estimated with reference to the quoted market price of similar instruments.
The preferred stock is issued by Central Hudson.

      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.

      The estimated fair values of Energy Group's and Central Hudson's financial
instruments are as follows:


                                       106
<PAGE>

                                           December 31, 2002
                                        Carrying         Fair
                                         Amount         Value
                                         ------         -----
Energy Group                               (In Thousands)
Cumulative preferred stock subject
  to mandatory redemption ........      $ 12,500      $ 13,038
Long-term debt (including
  current maturities) ............       284,877       302,354

Central Hudson
Cumulative preferred stock subject
  to mandatory redemption ........      $ 12,500      $ 13,038
Long-term debt (including
  current maturities) ............       284,877       302,354

                                           December 31, 2001
                                        Carrying         Fair
                                         Amount         Value
                                         ------         -----
Energy Group                               (In Thousands)
Cumulative preferred stock subject
  to mandatory redemption ........      $ 35,000      $ 35,513
Long-term debt (including
  current maturities) ............       236,124       241,498

Central Hudson
Cumulative preferred stock subject
  to mandatory redemption ........      $ 35,000      $ 35,513
Long-term debt (including
  current maturities) ............       235,874       241,248


                                       107
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - ENERGY GROUP

      Selected financial data for each quarterly period within 2002 and 2001 are
presented below:

<TABLE>
<CAPTION>
                                                                   Earnings Per
                                                                     Average
                                                                     Share of
                                                                      Common
                           Operating      Operating        Net        Stock
                           Revenues         Income        Income   Outstanding
                           --------         ------        ------   -----------
                                        (In Thousands)              (Dollars)
                           -------------------------------------    ---------
<S>                        <C>            <C>           <C>         <C>
Quarter Ended:

       2002

March 31 ...........       $196,962       $ 18,118      $ 19,442    $   1.19
June 30 ............        152,816          3,812         5,098         .31
September 30 .......        169,313          6,626         6,111         .37
December 31 ........        176,419         12,805        10,630         .66

      2001

March 31 ...........       $242,318       $ 24,346      $ 18,310    $   1.12
June 30 ............        166,318          5,328         3,224         .20
September 30 .......        165,731         10,837         9,539         .58
December 31 ........        153,573          7,169        19,762        1.21
</TABLE>


                                       108
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - CENTRAL HUDSON

      Selected financial data for each quarterly period within 2002 and 2001 are
presented below:

<TABLE>
<CAPTION>
                                                                   Income
                                                                Available for
                                   Operating     Operating         Common
                                   Revenues        Income           Stock
                                   ---------     ---------      -------------
                                               (In Thousands)
                                   ------------------------------------------
<S>                                 <C>          <C>            <C>
Quarter Ended:

       2002

March 31 .................          $143,171     $ 15,403       $ 14,449
June 30 ..................           122,945        6,396          2,772
September 30 .............           144,548       10,437          6,713
December 31 ..............           122,657        9,578          6,429

      2001

March 31 .................          $168,677     $ 19,451       $ 11,807
June 30 ..................           129,514        8,667          2,118
September 30 .............           130,211       12,341          9,245
December 31 ..............           110,240        8,876         17,778
</TABLE>


                                       109
<PAGE>

SCHEDULE II  - Reserves - Energy Group

<TABLE>
<CAPTION>
                                                     Additions
                                   --------------------------------------------
                                                                                      Payments         Balance
                                  Balance at      Charged to       Charged to         Charged          at End
                                   Beginning       Cost and           Other              to              of
Description                        of Period       Expenses         Accounts          Reserves         Period
-----------                        ---------       --------         --------          --------         ------
<S>                               <C>             <C>             <C>                <C>             <C>
YEAR ENDED DECEMBER 31, 2002

Operating Reserves .........      $4,852,994      $  607,972      $   1,353,700      $1,902,582      $4,912,084
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $3,800,000      $3,582,200      $          --      $3,182,200      $4,200,000
                                  ==========      ==========      =============      ==========      ==========

YEAR ENDED DECEMBER 31, 2001

Operating Reserves .........      $4,754,783      $  736,029      $     819,000      $1,456,818      $4,852,994
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $3,400,000      $3,912,893      $          --      $3,512,893      $3,800,000
                                  ==========      ==========      =============      ==========      ==========

YEAR ENDED DECEMBER 31, 2000

Operating Reserves .........      $6,293,658      $2,752,777      $   1,585,500      $5,877,152      $4,754,783
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $3,200,000      $4,050,000      $          --      $3,850,000      $3,400,000
                                  ==========      ==========      =============      ==========      ==========
</TABLE>


                                       110
<PAGE>

SCHEDULE II  - Reserves - Central Hudson

<TABLE>
<CAPTION>
                                                     Additions
                                   --------------------------------------------
                                                                                     Payments          Balance
                                  Balance at      Charged to       Charged to         Charged          at End
                                   Beginning       Cost and           Other              to              of
Description                        of Period       Expenses         Accounts          Reserves         Period
-----------                        ---------       --------         --------          --------         ------
<S>                               <C>             <C>             <C>                <C>             <C>
YEAR ENDED DECEMBER 31, 2002

Operating Reserves .........      $4,852,994      $  607,972      $   1,353,700      $1,902,582      $4,912,084
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $2,300,000      $3,061,800      $          --      $2,661,800      $2,700,000
                                  ==========      ==========      =============      ==========      ==========

YEAR ENDED DECEMBER 31, 2001

Operating Reserves .........      $4,754,783      $  736,029      $     819,000      $1,456,818      $4,852,994
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $2,500,000      $2,612,893      $          --      $2,812,893      $2,300,000
                                  ==========      ==========      =============      ==========      ==========

YEAR ENDED DECEMBER 31, 2000

Operating Reserves .........      $6,293,658      $2,752,777      $   1,585,500      $5,877,152      $4,754,783
                                  ==========      ==========      =============      ==========      ==========

Reserve for Uncollectible
 Accounts ..................      $2,900,000      $3,350,000      $          --      $3,750,000      $2,500,000
                                  ==========      ==========      =============      ==========      ==========
</TABLE>


                                       111
<PAGE>

ITEM  9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM  10 - DIRECTORS AND EXECUTIVE OFFICERS OF ENERGY GROUP

      The information on Directors of Energy Group required hereunder is as
follows:

<TABLE>
<CAPTION>
                               Age
                              as of       Year Joined
      Name                   12/31/02     the Board(6)       Term of Office
      ----                   --------     ------------       --------------
<S>                             <C>           <C>        <C>
Paul J. Ganci(2,4,5)            64            1989       Class III Director(8)

Jack Effron(3,5)                69            1987       Class III Director(8)

Heinz K. Fridrich(1,2,4)        69            1988       Class III Director(8)

Edward F. X. Gallagher(1,5)     69            1984       Class I Director(7)

Stanley J. Grubel(2,3,4)        60            1999       Class II Director(9)

E. Michel Kruse(1)              58            2002       Unclassified Director(10)

Steven M. Fetter(1,2,3,4,5)     51            2002       Class II Director(9)

Steven V. Lant(5)               45            2002       Class I Director(7)
</TABLE>

----------
(1)   Member, Audit Committee of the Board of Directors.

(2)   Member, Business Development Committee of the Board of Directors.

(3)   Member, Compensation and Succession Committee of the Board of Directors.

(4)   Member, Executive Committee of the Board of Directors.

(5)   Member, Finance Committee of the Board of Directors.

(6)   Years prior to 1999 reflect Directorships of Central Hudson.

(7)   Term expires at Annual Meeting of Shareholders in 2004.

(8)   Term expires at Annual Meeting of Shareholders in 2003. Messrs. Ganci and
      Fridrich are nominees for re-election as Directors at that Meeting. Mr.
      Effron is not standing for re-election.

(9)   Term expires at Annual Meeting of Shareholders in 2005.

(10)  Mr. Kruse is standing for election at the Annual Meeting of Shareholders
      as a Class III Director.


                                       112
<PAGE>

Officers of the Board:

Paul J. Ganci
Chairman of the Board and the Executive Committee

Heinz K. Fridrich
Vice Chairman of the Board and the Executive Committee
and Chairman of the Audit Committee

Steven M. Fetter
Chairman of the Compensation and Succession Committee

Stanley J. Grubel
Chairman of the Business Development Committee

Edward F. X. Gallagher
Chairman of the Finance Committee

      The information on those directors of Energy Group standing for election
by shareholders at the Annual Meeting of Shareholders to be held on April 1,
2003, is incorporated by reference to the caption "Proposal - Election of
Directors" in Energy Group's definitive proxy statement dated March 3, 2003, and
to be used in connection with the Annual Meeting, which proxy statement will be
filed with the SEC.

      The information on the executive officers of Energy Group required
hereunder is incorporated by reference to Item 1 of this 10-K Annual Report
under the caption "Executive Officers."

ITEM  11 - EXECUTIVE COMPENSATION

      The information required hereunder for directors and executives of Energy
Group is incorporated by reference to Energy Group's definitive proxy statement,
dated March 3, 2003, and to be used in connection with its Annual Meeting of
Shareholders to be held on April 1, 2003.

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

      The information required hereunder regarding equity ownership in Energy
Group by its Directors and executive officers is incorporated by reference to
the caption "Security Ownership of Directors and Officers" in Energy Group's
definitive proxy statement, dated March 3, 2003, and to be used in connection
with its Annual Meeting of Shareholders to be held on April 1, 2003.

ITEM  13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      See Note 1 under the caption "Related Party Transactions."


                                       113
<PAGE>

ITEM  14 - CONTROLS AND PROCEDURES

      The Chief Executive Officer and Chief Financial Officer of Energy Group
and Central Hudson evaluated the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934, as amended) within 90 days of the filing date of this report (the
"Evaluation Date") and, based on that evaluation, concluded that, as of the
Evaluation Date, Energy Group's and Central Hudson's controls and procedures are
effective for recording, processing, summarizing, and reporting information that
is required to be disclosed in their reports under the Securities Exchange Act
of 1934, as amended, within the time periods specified in the SEC's rules and
forms.

      Since the Evaluation Date, there have not been any significant changes to
the internal controls or other factors that could significantly affect such
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

                                     PART IV

ITEM  15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this Report

      1. and 2. All Financial Statements and Financial Statement Schedules filed
      as part of this Report are included in Item 8 of this 10-K Annual Report
      and reference is made thereto.

      3. Exhibits

      Incorporated herein by reference to the Exhibit Index for this Report.
      Such Exhibits include the following management contracts or compensatory
      plans or arrangements required to be filed as an Exhibit pursuant to Item
      14(c) hereof:

      Description in the Exhibit List and Exhibit Nos. for this Report

      Energy Group's Stock Plan for Outside Directors. (Exhibits (10) (iii) 7)

      Energy Group's Supplementary Retirement Plan. (Exhibits (10) (iii) 11 and
      23)

      Central Hudson's Retirement Benefit Restoration Plan. (Exhibits (10) (iii)
      12 and 24)

      Form of Employment Agreement for all officers of Energy Group and its
      subsidiary companies. (Exhibits (10) (iii) 13)

      Employment Agreement between Paul J. Ganci and Energy Group. (Exhibit (10)
      (iii) 16)


                                       114
<PAGE>

      Energy Group's Change of Control Severance Policy. (Exhibits (10) (iii) 6
      and 15)

      Central Hudson's Savings Incentive Plan. (Exhibits (10) (iii) 1, 2, 3, 14,
      18, 19 and 21)

      Energy Group's Long-Term Performance-Based Incentive Plan. (Exhibit (10)
      (iii) 10, 17 and 20)

      Energy Group's Directors and Executives Deferred Compensation Plan.
      (Exhibits (10) (iii) 8, 9 and 22)

      Agreement between Energy Group and Allan R. Page. (Exhibit (10)(iii)25)

(b) Reports on Form 8-K

      During the last quarter of the period covered by this Report and including
      the period to the date hereof, the following Reports on Form 8-K were
      filed by Energy Group and/or Central Hudson:

      1.    Report dated October 24, 2002, of Energy Group relating to the
            appointment of Joseph J. DeVirgilio, Jr. to the position of Senior
            Vice President of Energy Group.

      2.    Report dated November 22, 2002, of Energy Group relating to the
            appointment of E. Michel Kruse to Energy Group's Board of Directors
            and restructuring of Energy Group's competitive business
            subsidiaries.

      3.    Report dated January 31, 2003 of Energy Group relating to Energy
            Group's 2002 Earnings and 2003 Earnings Guidelines.

(c) Exhibits Required by Item 601 of Regulation S-K

      Incorporated herein by reference to subpart (a)-3 of Item 15, above.

(d)   Financial Statement Schedule required by Regulation S-X which is excluded
      from Energy Group's Annual Report to Shareholders for the fiscal year
      ended December 31, 2002

      Not applicable, see Item 8 hereof.


                                       115
<PAGE>

                                   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 Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            CH ENERGY GROUP, INC.


                                            By         /s/ Paul J. Ganci
                                              ----------------------------------
                                                           Paul J. Ganci
                                               Chairman of the Board, President
                                                   and Chief Executive Officer

Dated:  February 19, 2003

                                            CENTRAL HUDSON GAS & ELECTRIC
                                                    CORPORATION


                                            By     /s/ Paul J. Ganci
                                              ---------------------------------
                                                    Paul J. Ganci
                                               Chairman of the Board and
                                                Chief Executive Officer


Dated:   February 19, 2003


                                       116
<PAGE>

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following person 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/ Paul J. Ganci
----------------------
(Paul J. Ganci)              Chairman of the
                             Board, President and
                             Chief Executive Officer of
                             CH Energy Group, Inc.
                             and Chairman of the Board
                             and Chief Executive Officer
                             of Central Hudson Gas
                             & Electric Corporation          February 19, 2003

(b) Principal Accounting
         Officer:


/s/ Donna S. Doyle
----------------------
(Donna S. Doyle)             Vice President -
                             Accounting and
                             Controller of
                             CH Energy Group, Inc.
                             and Central Hudson Gas
                             & Electric Corporation          February 19, 2003

(c) Chief Financial
     Officer:


/s/ Steven V. Lant
----------------------
(Steven V. Lant)           Chief Operating Officer and
                           Chief Financial Officer of
                           CH Energy Group, Inc.
                           and Chief Financial Officer
                           of Central Hudson Gas
                           & Electric Corporation            February 19, 2003


                                       117
<PAGE>

(d) A majority of Directors of CH Energy Group, Inc.:

Jack Effron*, Heinz K. Fridrich*,
Edward F.X. Gallagher*, Paul J. Ganci*,
 Stanley J. Grubel*, Steven M. Fetter*,
E. Michel Kruse*, and Steven V. Lant*, Directors


By  /s/ Paul J. Ganci
   ----------------------------------
     (Paul J. Ganci)                                         February 19, 2003


(e) A majority of Directors of Central Hudson Gas & Electric Corporation:

Paul J. Ganci*, Carl E. Meyer*, Steven V. Lant*,
and Arthur R. Upright*, Directors


By  /s/ Paul J. Ganci
   ----------------------------------
     (Paul J. Ganci)                                         February 19, 2003

----------
* Paul J. Ganci, 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 SEC as Exhibit 24 hereof.


                                       118
<PAGE>

                                 CERTIFICATIONS

I, Paul J. Ganci, Chairman of the Board, President and Chief Executive Officer
of CH Energy Group, Inc. and Chairman of the Board and Chief Executive Officer
of Central Hudson Gas & Electric Corporation (the "Companies"), do hereby
certify for each of the Companies that:

1. I have reviewed this annual report on Form 10-K of the Companies;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

      a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

      c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and


                                       119
<PAGE>

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                          CH ENERGY GROUP, INC.
                                              (Registrant)

                              By:          /s/ Paul J. Ganci
                                  ----------------------------------------------
                                             Paul J. Ganci
                                  Chairman of the Board, President and
                                      Chief Executive Officer


                              CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                                             (Co-Registrant)

                              By:             /s/ Paul J. Ganci
                                   ------------------------------------------
                                               Paul J. Ganci
                                         Chairman of the Board and
                                          Chief Executive Officer


Dated:  January 27, 2003


                                       120
<PAGE>

                                 CERTIFICATIONS

I, Steven V. Lant, Chief Operating Officer and Chief Financial Officer of CH
Energy Group, Inc. and Chief Financial Officer of Central Hudson Gas & Electric
Corporation (the "Companies"), do hereby certify for each of the Companies that:

1. I have reviewed this annual report on Form 10-K of the Companies;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

      a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

      c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and


                                       121
<PAGE>

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                            CH ENERGY GROUP, INC.
                                                (Registrant)

                              By:            /s/ Steven V. Lant
                                  ----------------------------------------------
                                              Steven V. Lant
                                        Chief Operating Officer and
                                          Chief Financial Officer


                                  CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                                              (Co-Registrant)

                              By:           /s/ Steven V. Lant
                                   ---------------------------------------------
                                             Steven V. Lant
                                         Chief Financial Officer

Dated:  January 27, 2003


                                       122
<PAGE>

                                 CERTIFICATIONS

I, Paul J. Ganci, Chairman of the Board, President and Chief Executive Officer
of CH Energy Group, Inc. and Chairman of the Board and Chief Executive Officer
of Central Hudson Gas & Electric Corporation (the "Companies"), do hereby
certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:

1.    The Annual Report on Form 10-K of the Companies for the period ending
      December 31, 2002 (the "Annual Report") fully complies with the
      requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
      1934 (15 U.S.C. 78m or 78o(d)) and

2.    The information contained in the Annual Report fairly presents, in all
      material respects, the financial condition and results of operations of
      the Companies.

                                             CH ENERGY GROUP, INC.
                                                  (Registrant)

                              By:               /s/ Paul J. Ganci
                                  ----------------------------------------------
                                                 Paul J. Ganci
                                     Chairman of the Board, President and
                                           Chief Executive Officer


                                   CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                                                (Co-Registrant)

                              By:               /s/ Paul J. Ganci
                                   ---------------------------------------------
                                                 Paul J. Ganci
                                          Chairman of the Board and
                                           Chief Executive Officer


Dated:   January 27, 2003


                                       123
<PAGE>

                                 CERTIFICATIONS

I, Steven V. Lant, Chief Operating Officer and Chief Financial Officer of CH
Energy Group, Inc. and Chief Financial Officer of Central Hudson Gas & Electric
Corporation (the "Companies"), do hereby certify in accordance with 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

1.    The Annual Report on Form 10-K of the Companies for the period ending
      December 31, 2002 (the "Annual Report") fully complies with the
      requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
      1934 (15 U.S.C. 78m or 78o(d)) and

2.    The information contained in the Annual Report fairly presents, in all
      material respects, the financial condition and results of operations of
      the Companies.

                                             CH ENERGY GROUP, INC.
                                                 (Registrant)

                              By:              /s/ Steven V. Lant
                                  ----------------------------------------------
                                               Steven V. Lant
                                         Chief Operating Officer and
                                           Chief Financial Officer


                              CENTRAL HUDSON GAS & ELECTRIC CORPORATION
                                                (Co-Registrant)

                              By:               /s/ Steven V. Lant
                                   ---------------------------------------------
                                               Steven V. Lant
                                             Chief Financial Officer


Dated:   January 27, 2003

                                       124
<PAGE>

                                  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 (1):

  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. ((45); Exhibit 2(i))

                  (ii)  Agreement and Plan of Exchange by and between Central
                        Hudson Gas & Electric Corporation and CH Energy Group,
                        Inc. ((39; 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. ((37); Exhibit
                        (3)1)

                  (ii)  By-laws of CH Energy Group, Inc. in effect on the date
                        of this Report.

                  (iii) Restated Certificate of Incorporation of Central Hudson
                        Gas & Electric Corporation under Section 807 of the
                        Business Corporation Law. ((18); Exhibit (3)1)

--------------------
      (1) Exhibits which are incorporated by reference to other filings are
followed by information contained in parentheses, as follows: The first
reference in the parenthesis is a numeral,


                                      E-1
<PAGE>

corresponding to a numeral set forth in the Notes which follow this Exhibit
list, which identifies the prior filing in which the Exhibit was physically
filed; and the second reference in the parenthesis is to the specific document
in that prior filing in which the Exhibit appears.


                                      E-2
<PAGE>

                  (iv)  Certificate of Amendment to the Certificate of
                        Incorporation of Central Hudson Gas & Electric
                        Corporation under Section 805 of the Business
                        Corporation Law. ((18) 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. ((18); Exhibit (3)3)

                  (vi)  By-laws of Central Hudson Gas & Electric Corporation in
                        effect on the date of this Report. ((49); 3(vi))

(4)               Instruments defining the rights of security holders, including
                  indentures (see also Exhibits (3)(i)and (ii) above):

                  (ii)  1-- Indenture dated January 1, 1927 between Central
                            Hudson Gas & Electric Corporation ("Central Hudson")
                            and American Exchange Irving Trust Company, as
                            Trustee. ((2); Exhibit (4)(ii)1)

                  (ii)  2-- Fourth Supplemental Indenture dated March 1, 1941
                            between Central Hudson and Irving Trust Company, as
                            Trustee. ((2); Exhibit (4)(ii)5)

                  (ii)  3-- Fifth Supplemental Indenture dated December 1, 1950
                            between Central Hudson and Irving Trust Company, as
                            Trustee. ((2); Exhibit (4)(ii)6)

                  (ii)  4-- Ninth Supplemental Indenture dated December 1, 1967
                            between Central Hudson and Irving Trust Company, as
                            Trustee. ((2); Exhibit (4)(ii)10)

                  (ii)  5-- Twenty-Seventh Supplemental Indenture dated as of
                            May 15, 1992 between Central Hudson


                                      E-3
<PAGE>

                            and The Bank of New York, as Trustee. ((2); Exhibit
                            (4)(ii)28); and

                            Prospectus Supplement Dated May 28, 1992 (To
                            Prospectus Dated April 13, 1992) relating to
                            $125,000,000 principal amount of First Mortgage
                            Bonds, designated Secured 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. ((6)(a)), and, as applicable
                            to a tranche of such Secured Medium-Term Notes, one
                            of the following:

                            (a)   Pricing Supplement No. 2, Dated June 4, 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. ((6)(b))

                            (b)   Pricing Supplement No. 3, Dated June 4, 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. ((6)(c))

                            (c)   Pricing Supplement No. 4, Dated August 20,
                                  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. ((6)(d)

                            (d)   Pricing Supplement No. 5, Dated August 20,
                                  1992 (To Prospectus Dated April 13, 1992, as
                                  supplemented by a


                                      E-4
<PAGE>

                                  Prospectus Supplement Dated May 28, 1992)
                                  filed pursuant to Rule 424(b) in connection
                                  with Registration Statement No. 33-46624.
                                  ((6)(e)

                            (e)   Pricing Supplement No. 7, Dated July 26, 1993
                                  (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. ((6)(f)

                  (ii)  6-- Discharge, release and cancellation of Indenture of
                            Mortgage, dated November 6, 2001, from the Bank of
                            New York, as Trustee. ((47)); Exhibit (4) (ii) (6))

                  (ii)  7-- 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. ((7); Exhibit (4)(ii)29)

                  (ii)  8-- 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. ((8)(a)), 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.
                            ((8)(b)).

                  (ii)  9-- Prospectus Supplement Dated January 8, 1999


                                      E-5
<PAGE>

                            (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.
                            ((36)(a)), 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. ((36)(b)).

                  (ii) 10-- 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 ((13)(a)), 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. ((13)(b))

                            (b)   Pricing Supplement No. 2, Dated March 25, 2002
                                  (to said Prospectus Dated March 14, 2002, as
                                  supplemented by said Prospectus


                                      E-6
<PAGE>

                                  Supplement Dated March 20, 2002) filed
                                  pursuant to Rule 424 (b) in connection with
                                  Registration Statement No. 333-83542.((13)(c))

                  (ii) 11-- 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-- Agreement dated April 27, 1973 between Central
                            Hudson and the Power Authority of the State of New
                            York. ((11); Exhibit 5.19)

                  (i)   2-- Assignment and Assumption dated as of October 24,
                            1975 between Central Hudson and New York State
                            Electric & Gas Corporation. ((12); Exhibit 5.25)

                  (i)   3-- Amendment to Assignment and Assumption dated October
                            30, 1978 between Central Hudson and New York State
                            Electric & Gas Corporation. ((3); Exhibit 5.34)

                  (i)   4-- Agreement dated April 2, 1980 by and between Central
                            Hudson and the Power Authority of the State of New
                            York. ((2); Exhibit (10)(i)24)

                  (i)   5-- Transmission Agreement, dated October 25, 1983,
                            between Central Hudson and Niagara


                                      E-7
<PAGE>

                            Mohawk Power Corporation. ((2); Exhibit (10)(i)30)

                  (i)   6-- Underground Storage Service Agreement, dated June
                            30, 1982, between Central Hudson and Penn-York
                            Energy Corporation. ((2); Exhibit (10)(i)32)

                  (i)   7-- Interruptible Transmission Service Agreement, dated
                            December 20, 1983, between Central Hudson and Power
                            Authority of the State of New York. ((2); Exhibit
                            (10)(i)33)

                  (i)   8-- Agreement, dated December 7, 1983, between Central
                            Hudson and the Power Authority of the State of New
                            York. ((2); Exhibit (10)(i)34)

                  (i)   9-- 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). ((2);
                            Exhibit (10)(i)37)

                  (i)   10--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. ((2); Exhibit (10)(i)38)

                  (i)   11--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. ((2); Exhibit (10)(i)39)

                  (i)   12--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


                                      E-8
<PAGE>

                            Natural Gas Company and Connecticut Natural Gas
                            Corporation. ((17); Exhibit (10)(i)98)

                  (i)   13--Agreement, effective as of November 1, 1989, between
                            Columbia Gas Transmission Corporation and Central
                            Hudson. ((19); Exhibit (10)(i)75)

                  (i)   14--Agreement, dated as of November 1, 1989, between
                            Columbia Gas Transmission Corporation and Central
                            Hudson. ((19); Exhibit (10)(i)77)

                  (i)   15--Agreement, dated as of November 1, 1989, between
                            Columbia Gas Transmission Corporation and Central
                            Hudson. ((19); Exhibit (10)(i)78)

                  (i)   16--Agreement, dated as of November 1, 1989, between
                            Columbia Gulf Transmission Company and Central
                            Hudson. ((19); Exhibit (10)(i)79)

                  (i)   17--Agreement, dated October 9, 1990, between Texas
                            Eastern Transmission Corporation and Central Hudson.
                            ((19); Exhibit (10)(i)80)

                  (i)   18--Agreement, dated July 2, 1990, between Texas Eastern
                            Transmission Corporation and Central Hudson. ((19);
                            Exhibit (10)(i)81)

                  (i)   19--Agreement, dated December 28, 1989, between Texas
                            Eastern Transmission Corporation and Central Hudson.
                            ((19); Exhibit (10)(i)82)

                  (i)   20--Agreement, dated December 28, 1989, between Texas
                            Eastern Transmission Corporation and Central Hudson.
                            ((19); Exhibit (10)(i)83)

                  (i)   21--Agreement, dated November 3, 1989, between Texas
                            Eastern Transmission Corporation and Central Hudson.
                            ((19); Exhibit (10)(i)84)


                                      E-9
<PAGE>

                  (i)   22--Agreement, dated September 4, 1990, between
                            Algonquin Gas Transmission Company and Central
                            Hudson. ((19); Exhibit (10)(i)87)

                  (i)   23--Storage Service Agreement, dated July 1, 1989,
                            between CNG Transmission Corporation and Central
                            Hudson. ((19); Exhibit (10)(i)91)

                  (i)   24--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. ((19); Exhibit (10)(i)92)

                  (i)   25--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. ((19); Exhibit (10)(i)93)

                  (i)   26--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. ((19); Exhibit (10)(i)94)

                  (i)   27--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. ((19); Exhibit (10)(i)95)


                                     E-10
<PAGE>

                  (i)   28--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 Pipelines Limited under Precedent
                            Agreement No. 1 to be delivered on the Iroquois Gas
                            Transmission System. ((19); Exhibit (10)(i)96)

                  (i)   29--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. ((19); Exhibit (10)(i)97)

                  (i)   30--Service Agreement, dated September 30, 1986, between
                            Central Hudson and Algonquin Gas Transmission
                            Company, for firm storage transportation under Rate
                            Schedule SS-III. ((20); Exhibit (10)(i)95)

                  (i)   31--Service Agreement, dated March 12, 1991, between
                            Central Hudson and Algonquin Gas Transmission
                            Company, for firm transportation of 5,056 dth. of
                            Texas Eastern Transmission Corporation incremental
                            volume. ((20); Exhibit (10)(i)99)

                  (i)   32--Agreement, dated December 28, 1990 and effective
                            February 5, 1991, between Central Hudson and
                            National Fuel Gas Supply Corporation for
                            interruptible transportation. ((20); Exhibit
                            (10)(i)100)

                  (i)   33--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. ((20); Exhibit
                            (10)(i)101)


                                     E-11
<PAGE>


                  (i)   34--Service Agreement, effective December 1, 1990,
                            between Central Hudson and Texas Eastern
                            Transmission Corporation, for firm transportation
                            service under Rate Schedule FT-1. ((20); Exhibit
                            (10)(i)103)

                  (i)   35--Service Agreement, dated February 25, 1991, between
                            Central Hudson and Texas Eastern Transmission
                            Corporation, for incremental 5,056 dth. under Rate
                            Schedule CD-1. ((20); Exhibit (10)(i)104)

                  (i)   36--Service Agreement, dated January 7, 1992, between
                            Central Hudson and Texas Eastern Transmission
                            Corporation, for the firm transportation of 6,000
                            dth./day under Rate Schedule FTS-5. ((20); Exhibit
                            (10)(i)106)

                  (i)   37--Agreement dated as of July 1, 1992 between Central
                            Hudson and Tennessee Gas Pipeline Company for
                            storage of natural gas. ((21); Exhibit (10)(i)114)

                  (i)   38--Agreement dated as of July 1, 1992 between Central
                            Hudson and Tennessee Gas Pipeline Company for firm
                            transportation periods. ((21); Exhibit (10)(i)115)

                  (i)   39--Agreement, dated November 1, 1990, between Tennessee
                            Gas Pipeline and Central Hudson for transportation
                            of third-party gas for injection into and withdrawal
                            from Penn York storage. ((2); Exhibit (10)(i)100)

                  (i)   40--Agreement, dated December 1, 1991, between Central
                            Hudson and Iroquois Gas Transmission System for
                            interruptible gas transportation service. ((2);
                            Exhibit (10)(i)101)

                  (i)   41--Letter Agreement, dated August 24, 1992, between
                            Central Hudson and Iroquois Gas Transmission System
                            amending that certain


                                     E-12
<PAGE>

                            Agreement, dated December 1, 1991 between said
                            parties for interruptible gas transportation
                            service. ((19); Exhibit (10)(i)102)

                  (i)   42--Gas Transportation Agreement, dated as of September
                            1, 1993, by and between Tennessee Gas Pipeline
                            Company and Central Hudson. ((1); Exhibit(10)(i)108)

                  (i)   43--Agreement, dated as of May 20, 1993, between Central
                            Hudson and New York State Electric & Gas
                            Corporation. ((24); Exhibit (10)(i)93)

                  (i)   44--Agreement for the Sale and Purchase of Coal, dated
                            as of December 1, 1996, among Central Hudson,
                            Inter-American Coal N.V. and Inter-American Coal,
                            Inc. [Certain portions of the agreement setting
                            forth or relating to pricing provisions are omitted
                            and filed separately with the Securities and
                            Exchange Commission pursuant to a request for
                            confidential treatment under the rules of said
                            Commission.] ((30); Exhibit (10)(i)107)

                  (i)   45--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. ((32); Exhibit (10)(i)112)

                  (i)   46--Amendment, dated as of November 1, 1997, to the
                            Agreement for the Sale and Purchase of Coal, dated
                            December 1, 1996, among Central Hudson,
                            Inter-American Coal N.V. and Inter-American Coal,
                            Inc. [Certain portions of said Amendment set forth
                            and relate to pricing provisions and will be filed
                            separately with the Securities and Exchange
                            Commission pursuant to a request for confidential
                            treatment under the rules of


                                     E-13
<PAGE>

                            said Commission.] ((33); Exhibit (10)(i)113)

                  (i)   47--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. ((34); Exhibit (10)(i)115)

                  (i)   48--Amendment II, dated as of November 1, 1998, to the
                            Agreement for the Sale and Purchase of Coal, dated
                            December 1, 1996, among Central Hudson,
                            Inter-American Coal N.V. and Inter-American Coal,
                            Inc. [Certain portions of said Amendment setting
                            forth or relating to pricing provisions are omitted
                            and filed separately with the Securities and
                            Exchange Commission pursuant to a request for
                            confidential treatment under the rules of said
                            Commission.] ((40); Exhibit (10)(i)80)

                  (i)   49--Participation Agreement, dated as of June 1, 1977 by
                            and between New York State Energy Research and
                            Development Authority and Central Hudson. ((45);
                            Exhibit (10)(i)67)

                  (i)   50--Agreement, dated as of November 1, 1998, between
                            Central Hudson and Glencore Ltd., for the Sale and
                            Purchase of Coal. [Certain portions of said
                            Agreement setting forth or relating to pricing
                            provisions are omitted and filed separately with the
                            Securities and Exchange Commission pursuant to a
                            request for confidential treatment under the rules
                            of said Commission.] ((40); Exhibit (10)(i)81)

                  (i)   51--Participation Agreement, dated as of December 1,
                            1998, by and between New York State Energy Research
                            and Development


                                     E-14
<PAGE>

                            Authority and Central Hudson. ((40); Exhibit
                            (10)(i)82)

                  (i)   52--Participation Agreement, dated as of July 15, 1999,
                            by and between New York State Energy Research and
                            Development Authority and Central Hudson. ((45);
                            Exhibit (10)(i)66)

                  (i)   53--Participation Agreement, dated as of August 1, 1999,
                            by and between New York State Energy Research and
                            Development Authority and Central Hudson. ((45);
                            Exhibit (10)(i)67)

                  (i)   54--Agreement, dated April 1, 1999, between Central
                            Hudson and Arch Coal Sales Company, Inc. for the
                            Sale and Purchase of Coal. [Certain portions of the
                            Agreement setting forth or relating to pricing
                            provisions are omitted and filed separately with the
                            Securities and Exchange Commission pursuant to a
                            request for confidential treatment under the rules
                            of said Commission.] ((38); Exhibit (10)(i)89)

                  (i)   55--Amendment No. 3, dated as of November 1, 1999, to
                            the Agreement for the Sale and Purchase of Coal,
                            dated December 1, 1996, between Central Hudson and
                            Inter-American Coal, Inc. [Certain portions of said
                            Amendment set forth and relate to pricing provisions
                            and will be filed separately with the Securities and
                            Exchange Commission pursuant to a request for
                            confidential treatment under the rules of said
                            Commission.] ((41); Exhibit (10)(i)88)

                  (i)   56--Amendment No. 1, dated as of November 1, 1999, to
                            the Agreement for the Sale and Purchase of Coal,
                            dated November 1, 1998, between Central Hudson and
                            Glencore, Ltd.


                                     E-15
<PAGE>

                            [Certain portions of said Amendment set forth and
                            relate to pricing provisions and will be filed
                            separately with the Securities and Exchange
                            Commission pursuant to a request for confidential
                            treatment under the rules of said Commission.]
                            ((41); Exhibit (10)(i)89)

                  (i)   57--Amendment No. 1, dated as of November 1, 1999, to
                            the Agreement for the Sale and Purchase of Coal,
                            dated April 1, 1999 between Central Hudson and Arch
                            Coal. [Certain portions of said Amendment set forth
                            and relate to pricing provisions and will be filed
                            separately with the Securities and Exchange
                            Commission pursuant to a request for confidential
                            treatment under the rules of said Commission.]
                            ((41); Exhibit (10)(i)90)

                  (i)   58--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. ((44);
                            Exhibit (10)(i)93)

                  (i)   59--Asset Purchase and Sale Agreement, dated August 7,
                            2000, by and between Central Hudson and Dynegy Power
                            Corp. ((44); Exhibit (10)(i)94)

                  (i)   60--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. ((44); Exhibit (10)(i)95)

                  (i)   61--Guarantee Agreement, dated August 7, 2000, among
                            Central Hudson, Consolidated Edison Company of New
                            York, Inc., Niagara Mohawk Power Corporation and
                            Dynegy Holdings, Inc. ((44); Exhibit (10)(i)96)


                                     E-16
<PAGE>

                  (i)   62--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. ((45); Exhibit (10)(i)(79))

                  (i)   63--Power Purchase Agreement, dated as of December 11,
                            2000, by and between Constellation Nuclear, LLC and
                            Central Hudson. ((45); Exhibit (10)(i)(80))

                  (i)   64--Revenue Sharing Agreement, dated as of December 11,
                            2000, by and between Constellation Nuclear LLC and
                            Central Hudson. ((45); Exhibit (10)(i)(84))

                  (i)   65--Transition Power Agreement, dated January 30, 2001,
                            by and between Central Hudson and Dynegy Power
                            Marketing, Inc. ((45); Exhibit (10)(i)(82))

                  (i)   66--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. ((43); Exhibit
                            (10)(i)92)

                  (i)   67--Amendment II, dated as of December 22, 2000, to the
                            Agreement for the Sale and Purchase of Coal, dated
                            April 1, 1999, between Central Hudson and Arch Coal
                            Sales Company, Inc. [Certain portions of said
                            Amendment set forth and relate to pricing provisions
                            and will be filed separately with the Securities and
                            Exchange Commission pursuant to a request for
                            confidential treatment under the rules of said
                            Commission.] ((45); Exhibit


                                     E-17
<PAGE>

                            (10)(i)(84))

                  (i)   68--Amendment IV, dated as of December 29, 2000, to the
                            Agreement for the Sale and Purchase of Coal made as
                            of December 1, 1996, between Central Hudson and
                            Inter-American Coal N.V. and Inter-American Coal,
                            Inc. [Certain portions of said Amendment set forth
                            and relate to pricing provisions and will be filed
                            separately with the Securities and Exchange
                            Commission pursuant to a request for confidential
                            treatment under the rules of said Commission.]
                            ((45); Exhibit (10)(i)(85))

                  (i)   69--Stock Purchase Agreement, dated December 21, 2001
                            between Central Hudson Energy Services, Inc. and WPS
                            Power Development, Inc. ((47); Exhibit (10) (i)
                            (69))

                  (i)   70--Letter Agreement, dated December 21, 2001, between
                            Central Hudson Enterprises Corporation and WPS Power
                            Development, Inc. ((47); Exhibit (10) (i) (70))

                  (i)   71--[Reserved]

                  (i)   72--Letter Agreement, dated July 3, 2001 between Central
                            Hudson and Dynegy. ((47); Exhibit (10) (i) (72))


                  (iii) 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. ((25); 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. ((26); Exhibit (10)(iii)19)


                                     E-18
<PAGE>

                  (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. ((26);
                            Exhibit (10)(iii)20)

                  (iii) 4-- Management Incentive Program of Central Hudson,
                            effective April 1, 1994. ((30); Exhibit (10)(iii)23)

                  (iii) 5-- Amendment, dated July 25, 1997, to the Management
                            Incentive Program of Central Hudson, effective
                            August 1, 1997. ((33); Exhibit (10)(iii)24)

                  (iii) 6-- CH Energy Group, Inc. Change-of-Control Severance
                            Policy, effective December 1, 1998. ((40); Exhibit
                            (10)(iii)14)

                  (iii) 7-- Amended and Restated Stock Plan for Outside
                            Directors of CH Energy Group, Inc. effective
                            December 15, 1999. ((41); Exhibit (10)(iii)21).

                  (iii) 8-- CH Energy Group, Inc. Directors and Executives
                            Deferred Compensation Plan effective January 1,
                            2000. ((41); Exhibit (10)(iii)25)

                  (iii) 9-- 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.((41); Exhibit (10)(iii)26)

                  (iii) 10--Long-Term Performance-Based Incentive Plan of CH
                            Energy Group, Inc. effective January 1, 2000. ((41);
                            Exhibit (10)(iii)27)


                                     E-19
<PAGE>

                  (iii) 11--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. ((43); Exhibit (10)(ii)29)

                  (iii) 12--Amendment to and Restatement of Central Hudson's
                            Retirement Benefit Restoration Plan, effective as of
                            January 1, 2000. ((43); Exhibit (10)(iii)30)

                  (iii) 13--Form of Employment Agreement, for all officers of CH
                            Energy Group, Inc. and its subsidiary companies.
                            ((47); Exhibit (10) (iii) (13))

                  (iii) 14--Amendment Number Three to the Central Hudson Savings
                            Incentive Plan, effective January 1, 2001. ((45);
                            Exhibit (10)(iii)32)

                  (iii) 15--Amendment to the CH Energy Group, Inc.
                            Change-of-Control Severance Policy, effective August
                            1, 2000. ((45); Exhibit (10)(iii)33)

                  (iii) 16--Employment Agreement, dated September 28, 2001,
                            between CH Energy Group, Inc. and Paul J. Ganci.
                            ((47); Exhibit (10) (iii) (16))

                  (iii) 17--Amendment, effective January 1, 2001, to Energy
                            Group's Long-Term Performance-Based Incentive Plan.
                            ((46); Exhibit (10)(iii)1)

                  (iii) 18--Amendment and Restatement, dated October 1, 2001, of
                            the Central Hudson Savings Incentive Plan.((47);
                            Exhibit (10) (iii) (18))

                  (iii) 19--Form of Trust Agreement, effective as of October 1,
                            2001, between Central Hudson and ING National Trust,
                            as successor Trustee


                                     E-20
<PAGE>

                            under the Central Hudson Savings Incentive Plan.
                            ((47); Exhibit (10) (iii)(19))

                  (iii) 20--Amendment No. 2, effective January 1, 2002, to
                            Energy Group's Long-Term Performance-Based Incentive
                            Plan. ((47); Exhibit (10) (iii) (20))

                  (iii) 21--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. ((47);
                            Exhibit (10) (iii) (21))

                  (iii) 22--Amendment to CH Energy Group, Inc. Directors and
                            Executives Deferred Compensation Plan effective July
                            1, 2002. ((47); Exhibit (10) (iii) (22))

                  (iii) 23--Amendment and restatement of CH Energy Group, Inc.
                            Supplementary Retirement Plan, effective July 1,
                            2001. ((47); Exhibit (10) (iii) (23))

                  (iii) 24--Amendment and restatement of Central Hudson Gas &
                            Electric Corporation Retirement Benefit Restoration
                            Plan effective June 22, 2001. ((47); Exhibit (10)
                            (iii) (24))

                  (iii) 25--Agreement, dated May 10, 2002, between CH Energy
                            Group, Inc. and Allan R. Page.

        (12)(i)-- CH Energy Group Statement showing the computation of the
                  ratio of earnings to fixed charges.

        (12)(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, 2002.


                                     E-21
<PAGE>


                              State or other             Name under which
                              Jurisdiction of            Subsidiary conducts
Name of Subsidiary            Incorporation              Business
------------------            --------------             -------------------

Central Hudson Gas                New York               Central Hudson Gas
& Electric Corporation                                   Electric Corporation

Phoenix Development               New York               Phoenix Development
Company, Inc.                                            Company, Inc.

Greene Point                      New York               Greene Point
Development Corporation                                  Development Corporation

Central Hudson                    New York               Central Hudson
Enterprises Corporation                                  Enterprises Corporation

SCASCO, Inc.                      Connecticut            SCASCO, Inc.

Prime Industrial                  New York               Prime Industrial Energy
Energy Services, Inc.                                    Services, Inc.

Griffith Energy                   New York               Griffith Energy
Services, Inc.                                           Services, Inc.


        (23) --   Consent of Experts:

                  (i)   Consent of PricewaterhouseCoopers LLP relating to Energy
                        Group.

                  (ii)  Consent of PricewaterhouseCoopers LLP relating to
                        Central Hudson.

        (24) --   Powers of Attorney:

                  (i)    -- 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 Paul J. Ganci.

                  (ii)   -- 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 Paul J. Ganci.

        (99) --   Additional Exhibits:


                                     E-22
<PAGE>


                  (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.
                            ((28); 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.
                            ((32); Exhibit 99(1))

                  (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 Agreement, subject to certain
                            modifications and conditions. ((34); 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. (35)


                                     E-23
<PAGE>

                  (i)   5-- Order of the Public Service Commission of the State
                            of New York, issued and effective December 20, 2000,
                            authorizing the transfer of the Danskammer Plant and
                            the Roseton Plant. ((45); Exhibit (99)(i)8)

                  (i)   6-- Order of the Public Service Commission of the State
                            of New York, issued and effective January 25, 2001,
                            clarifying prior Order relating to the approval of
                            the transfer of the Danskammer Plant and the Roseton
                            Plant. ((45); Exhibit (99)(i)9)

                  (i)   7-- Order of the PSC, issued and effective, October 26,
                            2001, authorizing asset transfers of the Nine Mile 2
                            Plant.((47); Exhibit (99)(i)(7))

                  (i)   8-- Order of the PSC, issued and effective, September
                            27, 2001, authorizing new revolving credit
                            facilities and a New Medium Term Note Program for
                            Central Hudson.((47); Exhibit (99)(i)(8))

                  (i)   9-- Order of the PSC, issued and effective October 25,
                            2001, establishing new rates for Central
                            Hudson.((47); Exhibit (99)(i)(9))

                  (i)   10--Order of the PSC, issued and effective October 3,
                            2002, authorizing the implementation of the Economic
                            Development Program.

                  (i)   11--Order of the PSC, 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.

The following are notes to the Exhibits listed above:

                  (1)       Incorporated herein by reference to Central Hudson's
                            Quarterly report on Form 10-Q for fiscal quarter
                            ended September 30, 1993 (File No. 1-3268).


                                     E-24
<PAGE>

                  (2)       Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K/A for the fiscal year
                            ended December 31, 1992 (File No. 1-3268).

                  (3)       Incorporated herein by reference to Central Hudson's
                            Registration Statement No. 2-65127.

                  (4)       [Reserved]

                  (5)       [Reserved]

                  (6)   (a) Incorporated herein by reference to Prospectus
                            Supplement Dated May 28, 1992 (To Prospectus Dated
                            April 13, 1992) relating to $125,000,000 principal
                            amount of First Mortgage Bonds, designated Secured
                            Medium-Term Notes, Series A, and to the Prospectus
                            Dated April 13, 1992 relating to $125,000,000
                            principal amount of Central Hudson's debt securities
                            attached thereto, as filed with the Securities and
                            Exchange Commission pursuant to Rule 424(b)(5) under
                            the Securities Act of 1933, in connection with
                            Registration Statement No. 33-46624.

                        (b) Incorporated herein by reference to Pricing
                            Supplement No. 2, Dated June 4, 1992 (To Prospectus
                            Dated April 13, 1992, as supplemented by a
                            Prospectus Supplement Dated May 28, 1992), as filed
                            with the Securities and Exchange Commission pursuant
                            to Rule 424(b)(3) under the Securities Act of 1933
                            in connection with Registration Statement No.
                            33-46624.

                        (c) Incorporated herein by reference to Pricing
                            Supplement No. 3, Dated June 4, 1992 (To Prospectus
                            Dated April 13, 1992, as supplemented by a
                            Prospectus Supplement Dated May 28, 1992), as filed
                            with the Securities and Exchange Commission pursuant
                            to Rule 424(b)(3) under the Securities Act of 1933
                            in connection with Registration Statement No.
                            33-46624.


                                     E-25
<PAGE>

                        (d) Incorporated herein by reference to Pricing
                            Supplement No. 4, Dated August 20, 1992 (To
                            Prospectus Dated April 13, 1992, as supplemented by
                            a Prospectus Supplement Dated May 28, 1992), as
                            filed with the Securities and Exchange Commission
                            pursuant to Rule 424(b)(3) under the Securities Act
                            of 1933 in connection with Registration Statement
                            No. 33-46624.

                        (e) Incorporated herein by reference to Pricing
                            Supplement No. 5, Dated August 20, 1992 (To
                            Prospectus Dated April 13, 1992, as supplemented by
                            a Prospectus Supplement Dated May 28, 1992), as
                            filed with the Securities and Exchange Commission
                            pursuant to Rule 424(b)(3) under the Securities Act
                            of 1933 in connection with Registration Statement
                            No. 33-46624.

                        (f) Incorporated herein by reference to Pricing
                            Supplement No. 7, Dated July 26, 1993 (To Prospectus
                            Dated April 13, 1992, as supplemented by a
                            Prospectus Supplement Dated May 28, 1992), as filed
                            with the Securities and Exchange Commission pursuant
                            to Rule 424(b)(3) under the Securities Act of 1933
                            in connection with Registration Statement No.
                            33-46624.

                  (7)       Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K, dated May 27, 1992 (File
                            No. 1-3268).

                  (8)   (a) Incorporated herein by reference to 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 to the
                            Prospectus Dated April 13, 1992, relating to
                            $125,000,000 principal amount of Central Hudson's
                            debt securities attached thereto, as filed with the
                            Securities and Exchange Commission pursuant to Rule
                            424(b)(5) under the Securities Act of 1933, in
                            connection with Registration Statement No. 33-46624.


                                     E-26
<PAGE>

                        (b) Incorporated herein by reference to Pricing
                            Supplement No. 1, Dated June 26, 1992 (To Prospectus
                            Dated April 13, 1992, as supplemented by a
                            Prospectus Supplement Dated May 28, 1992), as filed
                            with the Securities and Exchange Commission pursuant
                            to Rule 424(b)(3) under the Securities Act of 1933
                            in connection with Registration Statement No.
                            33-46624.

                  (9)       [Reserved]

                  (10)  (a) Incorporated herein by reference to 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.

                        (b) Incorporated herein by reference to 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.

                  (11)      Incorporated herein by reference to Central Hudson's
                            Registration Statement No. 2-50276.

                  (12)      Incorporated herein by reference to Central Hudson's
                            Registration Statement No. 2-54690.


                                      E-27
<PAGE>

                  (13)      (a) Incorporated herein by reference to Prospectus
                            Supplement, dated March 20, 2002 (to Prospectus
                            dated March 14, 2002), relating to $100,000,000
                            principal amount Medium-Term Notes, Series D, of
                            Central Hudson, and the Prospectus, dated 14, 2002,
                            relating to said $100,000,000 principal amount of
                            debt securities, attached thereto, as filed with the
                            Securities and Exchange Commission pursuant to Rule
                            424 (b) under the Securities Act of 1933 in
                            connection with Registration Statement No.
                            333-83542.

                            (b) Incorporated herein by reference to Pricing
                            Supplement No. 1, dated March 25, 2002 (to
                            Prospectus dated March 14, 2002, as supplemented by
                            a Prospectus Supplement dated March 20, 2002) filed
                            with the Securities and Exchange Commission pursuant
                            to Rule 424 (b) (2) under Securities Act of 1933 in
                            connection with Registration Statement No.
                            333-83542.

                            (c) Incorporated herein by reference to Pricing
                            Supplement No. 2 dated March 25, 2002 (to Prospectus
                            dated March 14, 2002, as supplemented by a
                            Prospectus Supplement dated March 20, 2002) 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.
                            333-83542.

                  (14)      [Reserved]

                  (15)      [Reserved]

                  (16)      [Reserved]

                  (17)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1987 (File No. 1-3268).

                  (18)      Incorporated herein by reference to Central Hudson's
                            Quarterly Report on Form 10-Q for the


                                     E-28
<PAGE>

                            fiscal quarter ended September 30, 1993 (File No.
                            1-3268).

                  (19)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1990 (File No. 1-3268).

                  (20)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1991 (File No. 1-3268).

                  (21)      Incorporated herein by reference to Central Hudson's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended September 30, 1992 (File No. 1-3268).

                  (22)      [Reserved]

                  (23)      Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K, dated May 15, 1987 (File
                            No. 1-3268).

                  (24)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1993 (File No. 1-3268).

                  (25)      Incorporated herein by reference to Central Hudson's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended June 30, 1994 (File No. 1-3268).

                  (26)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1994 (File No. 1-3268).

                  (27)      [Reserved]

                  (28)      Incorporated herein by reference to Central Hudson's
                            Quarterly Report on Form 10-Q for the


                                     E-29
<PAGE>

                            fiscal quarter ended September 30, 1995 (File No.
                            1-3268).

                  (29)      [Reserved]

                  (30)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1996 (File No. 1-3268).

                  (31)      [Reserved]

                  (32)      Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K, dated January 7, 1998
                            (File No. 1-3268).

                  (33)      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 (File
                            No. 1-3268).

                  (34)      Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K, dated February 10, 1998
                            (File No. 1-3268).

                  (35)      Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K, dated July 24, 1998
                            (File No. 1-3268).

                  (36)  (a) Incorporated herein by reference to 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
                            to the Prospectus Dated January 7, 1999, relating to
                            $110,000,000 principal amount of Central Hudson's
                            debt securities attached thereto, 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 Nos.
                            333-65597 and 33-56349.

                        (b) Incorporated herein by reference to Pricing
                            Supplement No. 1, Dated January 12, 1999 (To


                                     E-30
<PAGE>

                            Prospectus Dated January 7, 1999, as supplemented by
                            a Prospectus Supplement Dated January 8, 1999), as
                            filed with the Securities and Exchange Commission
                            pursuant to Rule 424(b)(3) under the Securities Act
                            of 1933 in connection with Registration Statement
                            Nos. 333-65597 and 33-56349.

                  (37)      Incorporated herein by reference to Energy Group's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1998 (File No. 333-52797).

                  (38)      Incorporation herein by reference to Central
                            Hudson's Quarterly Report on Form 10-Q for the
                            fiscal quarter ended June 30, 1999 (File No.
                            1-3268).

                  (39)      Incorporated herein by reference to Central Hudson's
                            Current Report on Form 8-K dated December 15, 1999
                            (File No. 1-3268)

                  (40)      Incorporated herein by reference to Central Hudson's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1998 (File No. 1-3268).

                  (41)      Incorporated herein by reference to Energy Group's
                            Annual Report on Form 10-K for the fiscal year ended
                            December 31, 1999 (File No. 333-52797).

                  (42)      Incorporated herein by reference to Energy Group's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended March 31, 2000 (File No. 0-30512).

                  (43)      Incorporated herein by reference to Energy Group's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended June 30, 2000 (File No. 0-30512).

                  (44)      Incorporated herein by reference to Energy Group's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended September 30, 2000 (File No. 0-30512).


                                     E-31
<PAGE>

                  (45)      Incorporated herein by reference to Energy Group's
                            Annual Report, on Form 10-K, for the fiscal year
                            ended December 31, 2000 (File No. 0-30512).

                  (46)      Incorporated herein by reference to Energy Group's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended March 31, 2001 (File No. 0-30512).

                  (47)      Incorporated herein by reference to Energy Group's
                            Annual Report on Form 10-K, for the fiscal year
                            ended December 31, 2001 (File No. 0-30512)

                  (48)      Incorporated herein by reference to Energy Group's
                            Quarterly Report on Form 10-Q for the fiscal quarter
                            ended September 30, 2002 (File No. 0-30512).

                  (49)      Incorporated herein by reference to Energy Group's
                            Annual Report on Form 10-K, for the fiscal year
                            ended December 31, 2002 (File No. 0-30512)


                                     E-32