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, 1996

                                      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,       I.R.S. Employer
File Number           Address, and Telephone Number        Identification No.

  1-11377                     CINERGY CORP.                    31-1385023
                         (A Delaware Corporation)
                         139 East Fourth Street
                         Cincinnati, Ohio  45202
                             (513) 381-2000

  1-1232          THE CINCINNATI GAS & ELECTRIC COMPANY        31-0240030
                         (An Ohio Corporation)
                         139 East Fourth Street
                         Cincinnati, Ohio  45202
                             (513) 381-2000

  1-3543                     PSI ENERGY, INC.                  35-0594457
                         (An Indiana Corporation)
                          1000 East Main Street
                        Plainfield, Indiana  46168
                              (317) 839-9611

  2-7793         THE UNION LIGHT, HEAT AND POWER COMPANY       31-0473080
                         (A Kentucky Corporation)
                         139 East Fourth Street
                         Cincinnati, Ohio  45202
                             (513) 381-2000

Securities registered pursuant to Section 12(b) of the Act:
                                                       Name of each exchange
     Registrant            Title of each class          on which registered	
Cinergy Corp.           Common Stock                   New York Stock Exchange

The Cincinnati Gas      Cumulative Preferred Stock 
  & Electric Company      4%                           New York Stock Exchange
                        Junior Subordinated            
                          Debentures 8.28%             New York Stock Exchange

PSI Energy, Inc.        Cumulative Preferred Stock     
                          4.32%, 4.16%, 6 7/8%,         
                            7.15%, and 7.44%           New York Stock Exchange
                        First Mortgage Bonds           
                          Series S and Y               New York Stock Exchange

The Union Light,        None
  Heat and Power
  Company
<PAGE>
Securities registered pursuant to Section 12(g) of the Act for Cinergy Corp., 
The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, 
Heat and Power Company:  None

Indicate by check mark whether all 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.  ( )

Requirements pursuant to Item 405 of Regulation S-K are not applicable for The 
Union Light, Heat and Power Company.

The Union Light, Heat and Power Company meets the conditions set forth in 
General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this 
Form 10-K with the reduced disclosure format specified in General Instruction 
I(2) of Form 10-K.

As of February 28, 1997, the aggregate market values of Cinergy Corp. Common 
Stock and PSI Energy, Inc. Cumulative Preferred Stock held by non-affiliates 
were $5.4 billion and $174 million, respectively.

Cinergy Corp. is the sole owner of the Common Stock of each of PSI Energy, 
Inc. and The Cincinnati Gas & Electric Company.  The Union Light, Heat and 
Power Company's Common Stock is wholly-owned by The Cincinnati Gas & Electric 
Company.

As of February 28, 1997, shares of Common Stock outstanding for each 
registrant were as listed:

              Company                                                Shares	
Cinergy Corp., par value $.01 per share                            157,679,129 
The Cincinnati Gas & Electric Company, par value $8.50 per share    89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share    53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share    585,333

                    DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement of Cinergy Corp. dated March 17, 1997, and the Information 
Statement of PSI Energy, Inc. dated March 24, 1997, are incorporated by 
reference into Part III of this report.

This combined Form 10-K is separately filed by Cinergy Corp., The Cincinnati 
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power 
Company.  Information contained herein relating to any individual registrant 
is filed by such registrant on its own behalf.  Each registrant makes no 
representation as to information relating to the other registrants.

<PAGE>
                                TABLE OF CONTENTS
 Item                                                                   Page
Number                                                                 Number

                                      PART I

  1      Business
           Organization . . . . . . . . . . . . . . . . . . . . . .       X
           CG&E . . . . . . . . . . . . . . . . . . . . . . . . . .       X
           ULH&P. . . . . . . . . . . . . . . . . . . . . . . . . .       X
           PSI. . . . . . . . . . . . . . . . . . . . . . . . . . .       X
           Investments. . . . . . . . . . . . . . . . . . . . . . .       X   
      
           Services . . . . . . . . . . . . . . . . . . . . . . . .      XX
           Customer, Sales, and Revenue Data. . . . . . . . . . . .      XX
           Financial Information by Business Segment. . . . . . . .      XX
           Regulation . . . . . . . . . . . . . . . . . . . . . . .      XX
           Regulatory Matters . . . . . . . . . . . . . . . . . . .      XX
           Power Supply . . . . . . . . . . . . . . . . . . . . . .      XX
           Fuel Supply. . . . . . . . . . . . . . . . . . . . . . .      XX
           Gas Supply . . . . . . . . . . . . . . . . . . . . . . .      XX
           Competition. . . . . . . . . . . . . . . . . . . . . . .      XX 
           Capital Requirements . . . . . . . . . . . . . . . . . .      XX
           Environmental Matters. . . . . . . . . . . . . . . . . .      XX
           Employees. . . . . . . . . . . . . . . . . . . . . . . .      XX
  2      Properties . . . . . . . . . . . . . . . . . . . . . . . .      XX
           CG&E . . . . . . . . . . . . . . . . . . . . . . . . . .      XX
           PSI. . . . . . . . . . . . . . . . . . . . . . . . . . .      XX
           ULH&P. . . . . . . . . . . . . . . . . . . . . . . . . .      XX
           Other Utility Subsidiaries . . . . . . . . . . . . . . .      XX
  3      Legal Proceedings
           Merger Litigation. . . . . . . . . . . . . . . . . . . .      XX
           WVPA Settlement Agreement. . . . . . . . . . . . . . . .      XX
           Enertech Litigation.. . . . . . . . . . . . .                 XX
4        Submission of Matters to a Vote of Security Holders. . . .      XX
         Executive Officers of the Registrant . . . . . . . . . . .      XX

                                     PART II

  5      Market for Registrant's Common Equity
           and Related Stockholder Matters. . . . . . . . . . . . .      XX
  6      Selected Financial Data. . . . . . . . . . . . . . . . . .      XX
  7      Management's Discussion and Analysis of Financial
           Condition and Results of Operations. . . . . . . . . . .      XX
         Index to Financial Statements and Financial Statement
           Schedules. . . . . . . . . . . . . . . . . . . . . . . .      XX
  8      Financial Statements and Supplementary Data. . . . . . . .      XX
  9      Changes in and Disagreements with Accountants on 
           Accounting and Financial Disclosure. . . . . . . . . . .     XXX

                                       PART III

 10      Directors and Executive Officers of the Registrant . . . .     XXX
 11      Executive Compensation . . . . . . . . . . . . . . . . . .     XXX
 12      Security Ownership of Certain Beneficial Owners 
           and Management . . . . . . . . . . . . . . . . . . . . .     XXX
 13      Certain Relationships and Related Transactions . . . . . .     XXX

                                      PART IV

 14      Exhibits, Financial Statement Schedules, and
           Reports on Form 8-K
             Financial Statements and Schedules . . . . . . . . . .     XXX   
                     Reports on Form 8-K. . . . . . . . . . . . . . . . . .   
  XXX
             Exhibits . . . . . . . . . . . . . . . . . . . . . . .     XXX
         Signatures . . . . . . . . . . . . . . . . . . . . . . . .     XXX
<PAGE>
                                    PART I

                               ITEM 1.  BUSINESS

Cinergy, CG&E, PSI, and ULH&P

Organization

Cinergy Corp., a Delaware corporation (Cinergy or Company), is a registered 
holding company under the Public Utility Holding Company Act of 1935 (PUHCA). 
Cinergy was created in the October 1994 merger of PSI Resources, Inc. 
(Resources) and The Cincinnati Gas & Electric Company (CG&E). The business 
combination was accounted for as a pooling of interests.  Following the 
merger, Cinergy became the parent holding company of PSI Energy, Inc. (PSI), 
previously Resources' utility subsidiary, CG&E, Cinergy Investments, Inc.   
(Investments) and Cinergy Services, Inc. (Services).

Cinergy's two utility subsidiaries, CG&E and PSI, account for the majority of 
Cinergy's revenues and total assets.

Cinergy, CG&E, and ULH&P

CG&E

CG&E, an Ohio corporation, is a combination electric and gas public utility 
company with five wholly-owned utility subsidiaries, The Union Light, Heat and 
Power Company (ULH&P), Miami Power Corporation (Miami), The West Harrison Gas 
and Electric Company, an Indiana corporation (West Harrison), KO Transmission 
Company (KO Transmission), and Lawrenceburg Gas Company, an Indiana 
corporation (Lawrenceburg).  In addition, CG&E has one wholly-owned non-
utility subsidiary, Tri-State Improvement Company (Tri-State).    

CG&E and its utility subsidiaries are engaged in the production, transmission, 
distribution, and sale of electric energy and/or the sale and transportation 
of natural gas in the southwestern portion of Ohio and adjacent areas in 
Kentucky and Indiana.  The area served with electricity, gas, or both covers 
approximately 3,000 square miles, has an estimated population of 1.8 million 
people, and includes the cities of Cincinnati and Middletown in Ohio, 
Covington and Newport in Kentucky, and Lawrenceburg in Indiana.  

KO Transmission, a Kentucky corporation, acquired an interest in an interstate 
natural gas pipeline in June 1996, to which CG&E was entitled as a result of a 
settlement with the Columbia Gas Transmission Corp.  KO Transmission is 
engaged in the transportation of natural gas in interstate commerce between 
Kentucky and Ohio. 

Tri-State, an Ohio corporation, is devoted to acquiring and holding property 
in Ohio, Kentucky, and Indiana for substations, electric and gas rights of 
way, office space, and other uses in CG&E's and its subsidiaries' operations.

ULH&P

ULH&P, a Kentucky corporation, is engaged in the transmission, distribution, 
and sale of electric energy and the sale and transportation of natural gas in 
northern Kentucky. The area served with electricity, gas, or both covers 
approximately 500 square miles, has an estimated population of 299,000 people, 
and includes the cities of Covington and Newport in Kentucky.

Cinergy and PSI

PSI

PSI, an Indiana corporation, is engaged in the production, transmission, 
distribution, and sale of electric energy in north central, central, and 
southern Indiana.  It serves an estimated population of two million people 
located in 69 of the state's 92 counties including the cities of Bloomington, 
Columbus, Kokomo, Lafayette, New Albany, and Terre Haute.     

PSI Energy Argentina, Inc., a wholly-owned subsidiary of PSI and an Indiana 
corporation (PSI Energy Argentina), was formed to invest in foreign utility 
companies.  PSI Energy Argentina is a member of a multinational consortium 
which has controlling ownership of Edesur S.A. (Edesur).  Edesur is an 
electricity-distribution network serving the southern half of Buenos Aires, 
Argentina.  Edesur provides distribution services to 2.1 million customers.  
PSI Energy Argentina owns a small equity interest in this project and provides 
operating and consulting services.

South Construction Company, Inc., a wholly-owned subsidiary of PSI and an 
Indiana corporation (South Construction), has been used solely to hold legal 
title to real estate and interests in real estate which are either not used 
and useful in the conduct of PSI's business (such as undeveloped real estate 
of PSI abutting a PSI office building) or which has some defect in title which 
is unacceptable to PSI.  Most of the real estate to which South Construction 
acquires title relates to PSI's utility business.

Cinergy

Investments

Investments, a Delaware corporation, is a non-utility subholding company that 
was formed to operate Cinergy's domestic non-utility and international 
businesses and interests.  Investments holds the following non-utility 
subsidiaries and interests, which are more fully described below:  Enertech 
Associates, Inc. (Enertech), formerly Power International, Inc. (Power 
International), formerly Enertech Associates International, Inc.; Cinergy 
Resources, Inc. (Cinergy Resources), formerly CG&E Resource Marketing, Inc.; 
CGE ECK, Inc.; Cinergy Technology, Inc. (Technology), formerly PSI 
Environmental Corp.; Cinergy Solutions, Inc. (Solutions); Cinergy Cooling 
Corp. (CoolCo); Cinergy UK, Inc. (Cinergy UK), formerly ME Holdings, Inc.; and 
Cinergy Capital & Trading, Inc. (Capital & Trading), formerly Wholesale Power 
Services, Inc.

Enertech was incorporated in Ohio in 1992 as a vehicle for CG&E to offer 
utility management consulting services and to pursue investment opportunities 
in energy-related areas, including demand-side management (DSM) services, 
consulting, energy and fuel brokering, engineering services, construction 
and/or operation of generation, cogeneration, and independent power production 
facilities, and project development.  In July 1994, Enertech acquired Beheer-
En Belegginsmaatschappij Bruwabel B.V. (Bruwabel) and its subsidiaries for the 
purpose of pursuing design, engineering, and development work involving energy 
privatization projects, primarily in the Czech Republic.  In June 1996, 
Investments sold what remained of its investment in Bruwabel and its 
subsidiaries and their assets, including the Vytopna Kromeriz Heating Plant 
which was acquired by Power Development s.r.o. in 1995.  (See Note 12(d) of 
the "Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data.")

Cinergy Resources, a Delaware corporation, was formed to hold CG&E's interest 
in U.S. Energy Partners, a gas marketing partnership that was dissolved 
effective September 1, 1995.  Upon dissolution, Cinergy Resources took its 
portion of the partnership assets to continue in the gas marketing business.  
Cinergy Resources competes with traditional, regulated local distribution 
companies by offering "merchant service" (i.e., acquiring natural gas for 
resale to end-use customers) and brokers gas to industrial and large 
commercial customers. 

Technology, an Indiana corporation, was created to manage certain existing 
technology-related investments of Cinergy, assess the market potential for 
technology-related product and service development opportunities, and form key 
alliances for technology-related product development.

Solutions, a Delaware corporation, was formed to market an array of energy-
related products and services and develop, acquire, own, and operate certain 
energy-related projects.  Solutions holds a 50% interest in Trigen-Cinergy 
Solutions LLC, a Delaware limited liability company, (Trigen-Cinergy).  
Trigen-Cinergy was formed to build, own, and operate cogeneration and 
trigeneration facilities for industrial plants, office buildings, shopping 
centers, hospitals, universities, and other major energy users that can 
benefit from combined heat and power production economies.  Trigen-Cinergy 
will also provide energy and asset management services, including fuel 
procurement, ancillary to its activities.  (See Note 1(e)(ii) of the "Notes to 
Financial Statements" in "Item 8.  Financial Statements and Supplementary 
Data.")

CoolCo, incorporated in Ohio in February 1996, was formed to engage in the 
district cooling business.  The City of Cincinnati awarded an exclusive 
franchise that permits CoolCo to construct, install, maintain, and operate a 
chilled water system in the downtown business district of Cincinnati, Ohio. 
Construction of such system began in the third quarter of 1996.
 
Cinergy UK, a Delaware corporation, was formed to hold Cinergy's 50% interest 
in Avon Energy Partners Holdings, an unlimited liability company, and its 
wholly owned subsidiary, Avon Energy Partners PLC, a limited liability company 
(collectively, Avon Energy).  During 1996, Avon Energy acquired all of the 
outstanding common stock of Midlands Electricity plc (Midlands), a United 
Kingdom (U.K.) regional electric company.  Midlands primarily distributes and 
supplies electricity to 2.2 million industrial, commercial, and residential 
customers. In addition, Midlands, together with its subsidiaries, generates 
power, supplies natural gas to industrial and commercial customers, and 
performs electrical contracting services.  (See Notes 1(e)(i) and 12(g) of the 
"Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data.")

PSI Recycling, Inc. (Recycling) is an Indiana corporation which recycled metal 
from CG&E and paper, metal, and other materials from PSI, its largest single 
supplier, and other sources.  Investments sold the assets of Recycling in 
August 1996.

Power Equipment Supply Co. (PESCO) was incorporated in Indiana to sell 
equipment and parts from a PSI generating plant which was canceled, the Marble 
Hill Nuclear Project.  PESCO also purchased equipment for resale, brokered 
equipment, and sold equipment on consignment for others.  PESCO discontinued 
operations in early 1996.

Capital & Trading, an Indiana corporation, was formed to engage in the 
business of marketing power, emission allowances, electricity futures, and 
related products and services and to provide consulting services in the 
wholesale power-related markets.  Capital & Trading will be devoted to 
marketing and brokering energy commodities to customers nationwide.

Cinergy, CG&E, PSI, and ULH&P

Services

Services, a Delaware corporation, is the service company for the Cinergy 
system, providing member companies with a variety of administrative, 
management, and support services.

Cinergy, CG&E, PSI, and ULH&P 

Customer, Sales, and Revenue Data

The number of customers served at year-end and the percent of operating 
revenues derived from the sale of electricity and the sale and transportation 
of natural gas for each registrant for 1996 are as follows:

                                                    Operating
                                Customers           Revenues    
Registrant                   Electric    Gas     Electric   Gas  

Cinergy and subsidiaries    1,391,938  450,047      84%     14%
CG&E and subsidiaries         729,391  450,047      75%     24%
PSI                           662,549    N/A        98%     N/A
ULH&P                         115,969   75,783      71%     28%

Cinergy's utilities' service territory spans 86 counties in Ohio, Indiana, and 
Kentucky and includes approximately 840 cities, towns, unincorporated 
communities, and adjacent rural areas, including municipal utilities and rural 
electric cooperatives.

The service territory of CG&E and its utility subsidiaries, including ULH&P, 
is heavily populated and characterized by a stable residential customer base 
and a diverse mix of industrial customers.  CG&E's and its utility 
subsidiaries' service territory spans 19 counties in Ohio, Indiana, and 
Kentucky (of which ULH&P serves six counties in Kentucky) and includes 
approximately 130 (44 for ULH&P) cities, towns, unincorporated communities, 
and adjacent rural areas, including municipal utilities and rural electric 
cooperatives.  The area served by PSI is a residential, agricultural, and 
widely diversified industrial territory.  PSI's service territory includes 
approximately 710 cities, towns, unincorporated communities, and adjacent 
rural areas, including municipal utilities and rural electric cooperatives.  
No one customer accounts for more than 5% of operating revenues for PSI, 5% of 
electric or gas operating revenues for CG&E and its utility subsidiaries, or 
10% of electric or gas operating revenues for ULH&P.  Sales of electricity and 
gas sales and transportation are affected by seasonal weather patterns, and, 
therefore, operating revenues and associated operating expenses are not 
distributed evenly during the year.

Cinergy, CG&E, and ULH&P

Financial Information by Business Segment

For financial information by business segment, see Note 15 of the "Notes to 
Financial Statements" in "Item 8.  Financial Statements and Supplementary 
Data."  For a discussion of the potential divestiture of CG&E's, including 
ULH&P's, gas operations, see Note 12(f) of the "Notes to Financial Statements" 
in "Item 8.  Financial Statements and Supplementary Data."
Regulation

Cinergy, CG&E, PSI, and ULH&P

Cinergy, its utility subsidiaries, and certain of its non-utility subsidiaries 
are subject to regulation by the Securities and Exchange Commission (SEC) 
under the Public Utilities Holding Company Act of 1935 (PUHCA) with respect 
to, among other things, issuances and sales of securities, acquisitions and 
sales of certain utility properties, acquisitions and retentions of interests 
in non-utility businesses, intrasystem sales of certain goods and services, 
the method of keeping accounts, and access to books and records.  In addition, 
the PUHCA generally limits registered holding companies to a single 
"integrated" public utility system, which the SEC traditionally has 
interpreted to prohibit a registered holding company, with limited exceptions, 
from owning both gas and electric properties.  (Refer to the information 
appearing under the captions "Repeal of the PUHCA" in the "Competitive 
Pressures" section and "Potential Divestiture of Gas Operations" in the 
"Regulatory Matters" section in "Item 7.  Management's Discussion and Analysis 
of Financial Condition and Results of Operations" and to Note 1(f) of the 
"Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data.")

CG&E, ULH&P, Miami, and PSI are each subject to regulation by the Federal 
Energy Regulatory Commission (FERC) under the Federal Power Act with respect 
to the classification of accounts, rates for wholesale sales of electricity, 
interconnection agreements, and acquisitions and sales of certain utility 
properties.  In addition, services by KO Transmission are rendered in 
accordance with terms and conditions and at rates contained in a gas tariff 
filed with the FERC.  Transportation of gas between CG&E and ULH&P is subject 
to regulation by the FERC under the Natural Gas Act.  

Cinergy, CG&E, and ULH&P

CG&E, as a public utility under the laws of Ohio, is also subject to 
regulation by the Public Utilities Commission of Ohio (PUCO) as to retail 
electric and gas rates, services, accounts, depreciation, issuance of 
securities, acquisitions and sales of certain utility properties, and in other 
respects as provided by Ohio law.  Rates within municipalities in Ohio are 
subject to original regulation by the municipalities.  The Ohio Power Siting 
Board, a division of the PUCO, has jurisdiction in Ohio over the location, 
construction, and initial operation of new electric generating facilities and 
certain electric and gas transmission lines presently utilized by CG&E.  As to 
retail rates and other matters, ULH&P is regulated by the Kentucky Public 
Service Commission (KPSC), and West Harrison and Lawrenceburg are regulated by 
the Indiana Utility Regulatory Commission (IURC).

Cinergy and PSI

PSI, as a public utility under the laws of Indiana, is also regulated by the 
IURC as to its retail rates, services, accounts, depreciation, issuance of 
securities, acquisitions and sales of certain utility properties, and in other 
respects as provided by Indiana law.  Prior to the construction, purchase, or 
lease of a facility used for the generation of electricity, a public utility 
in Indiana must obtain from the IURC a certificate of public convenience and 
necessity.  

Cinergy, CG&E, PSI, and ULH&P

Regulatory Matters

Refer to the information appearing under the caption "Regulatory Matters" in 
"Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations."

Power Supply

Cinergy, CG&E, PSI, and ULH&P

Cinergy and other utilities in an eight-state region are participating in the 
East Central Area Reliability Coordination Agreement for the purpose of 
coordinating the planning and operation of generating and transmission 
facilities to provide for maximum reliability of regional bulk power supply.  
(Refer to the information appearing under the caption "Cinergy's Response to 
the Changing Competitive Environment" in the "Competitive Pressures" section 
of "Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations" for a discussion of Cinergy's involvement in a 
coalition for operation of a regional transmission system.)

In addition to an intercompany tie between CG&E's and PSI's electric systems, 
Cinergy's electric system, which is operated by Services, is interconnected 
with the electric systems of Indiana Michigan Power Company, Columbus Southern 
Power Company, Ohio Power Company (all doing business as American Electric 
Power Company, Inc. (AEP)), Central Illinois Public Service Company, East 
Kentucky Power Cooperative, Hoosier Energy Rural Electric Cooperative, Inc., 
Indianapolis Power and Light Company, Kentucky Utilities Company, Louisville 
Gas & Electric Company (LG&E), Northern Indiana Public Service Company, 
Southern Indiana Gas and Electric Company, The Dayton Power and Light Company, 
and Ohio Valley Electric Corporation.  

Cinergy and PSI

PSI has a power supply relationship with Wabash Valley Power Association, Inc. 
(WVPA) and Indiana Municipal Power Agency (IMPA) through power coordination 
agreements.  WVPA and IMPA are also parties with PSI to a joint transmission 
and local facilities agreement.

Cinergy, CG&E, and ULH&P

ULH&P does not own or operate any electric generating facilities.  Its 
requirements for electric energy are purchased from CG&E at rates regulated by 
the FERC.

Fuel Supply

Cinergy 

Cinergy purchases approximately 25 million tons of coal annually for use by 
CG&E and PSI, which historically would rank Cinergy as the sixth largest 
utility coal purchaser in the United States.

Cinergy, CG&E, and PSI

A major portion of the coal required by CG&E and PSI is obtained through both 
long- and short-term coal supply agreements, with the remaining requirements 
purchased on the spot market.  The prices to be paid under most of these 
contracts are subject to adjustment.  In addition, some of these agreements 
include extension options and termination provisions pertaining to coal 
quality.  The coal delivered under these contracts is primarily from mines 
located in Indiana, Illinois, and Pennsylvania for PSI and Ohio, Kentucky, 
West Virginia, and Pennsylvania for CG&E.

CG&E and PSI monitor alternative sources to assure a continuing availability 
of economical fuel supplies.  The companies intend to maintain the practice of 
purchasing a portion of their coal requirements on the spot market and will 
continue to investigate the least cost coal options in connection with their 
compliance with the Clean Air Act Amendments of 1990 (CAAA) (see the 
information appearing under the caption "Environmental Issues" in "Item 7.  
Management's Discussion and Analysis of Financial Condition and Results of 
Operations").

The companies believe they will be able to obtain sufficient coal to meet 
future generating requirements.  However, both CG&E and PSI are unable to 
predict the extent to which coal availability and price may ultimately be 
affected by future environmental requirements.  Presently, CG&E and PSI expect 
the cost of coal to rise in the long run as the supply of more accessible and 
higher-grade coal diminishes and as mining, transportation, and other related 
costs continue an upward trend. 

Cinergy, CG&E, and ULH&P

Gas Supply

In 1996, CG&E and its utility subsidiaries, including ULH&P, purchased the 
majority of their natural gas supply (78%) from firm supply agreements, with 
remaining volumes purchased in the spot market.  These firm contracts feature 
dual levels of gas supply: base load for continuous supply for CG&E's and its 
utility subsidiaries' core requirements, and "swing" load, which is gas 
available on a daily basis to accommodate changes in demand.  CG&E pays 
reservation charges for firm base and swing supplies.  These charges guarantee 
delivery from the supplier during extreme weather and protect the supplier 
from fluctuations in daily prices associated with swing supplies.  

However, as the trend of industrial customers purchasing gas directly from 
producers and utilizing CG&E's facilities for transportation increases, CG&E 
and its subsidiaries seek to minimize contract commitment costs to firm 
suppliers, and reduce the amount of reservation charges paid to suppliers for 
firm supply.  Accordingly, CG&E and its subsidiaries anticipate purchasing 
approximately 50% of their gas supply in the spot market and only 50% from 
firm supply agreements in 1997. 

Gas purchased by CG&E and its subsidiaries is transported on interstate 
pipelines either directly to CG&E's and its subsidiaries' distribution 
systems, or it is injected into pipeline storage facilities for withdrawal and 
delivery in the future.  Most of CG&E's and its utility subsidiaries' gas 
supplies are sourced from the Gulf of Mexico coastal area.  CG&E and its 
subsidiaries have also obtained limited supply sourced from the Appalachian 
region and the mid-continent (Arkansas - Oklahoma) basin, and from methane gas 
recovered from an Ohio landfill.  Over the long term, natural gas is expected 
to retain its competitiveness with alternative fuels.  However, colder or 
warmer than normal winter weather conditions can cause significant price 
fluctuation. 

Cinergy, CG&E, PSI, and ULH&P

Competition

Refer to the information appearing under the caption "Competitive Pressures" 
in "Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations."

Cinergy, CG&E, PSI, and ULH&P

Capital Requirements

Refer to the information appearing under the caption "Capital Requirements" in 
"Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations."

Cinergy, CG&E, and PSI 

Environmental Matters

Environmental compliance construction expenditures for 1997 for Cinergy and 
its subsidiaries are forecasted to be as follows:


                    Registrant               Expenditures
                                            (in thousands)

                    CG&E and subsidiaries        $709 
                    PSI                           245 
                    Cinergy and subsidiaries     $954 

In addition, refer to the information appearing under the caption 
"Environmental Issues" in "Item 7.  Management's Discussion and Analysis of 
Financial Condition and Results of Operations."

Employees
     
Cinergy

The number of employees of Cinergy and its subsidiaries at December 31, 1996, 
was 7,973, of whom 4,678 belonged to bargaining units.  These bargaining unit 
employees were represented by labor agreements between CG&E and its 
subsidiaries, including ULH&P, or PSI and the applicable union organization.  
Of Cinergy's total employees, 3,019 employees were represented by the 
International Brotherhood of Electrical Workers (IBEW), 456 were represented 
by the United Steelworkers of America (USWA), and 1,203 were represented by 
the Independent Utilities Union (IUU).

Employees assigned to Services at December 31, 1996, totaled 2,798, of whom 
905 belonged to bargaining units.  These bargaining unit employees were 
represented by the labor agreements previously discussed.  Of Services' total 
employees, 477 were represented by the IUU, 7 were represented by the USWA, 
and 421 were represented by the IBEW (142 were represented by the agreement 
with PSI and 279 were represented by the agreement with CG&E).

Cinergy and CG&E

The number of employees of CG&E and its subsidiaries at December 31, 1996, was 
2,964, of whom CG&E employed 2,676, ULH&P employed 276, and Lawrenceburg 
employed 12.

CG&E and its subsidiaries have collective bargaining agreements with several 
union organizations.  Of CG&E's and its subsidiaries' total employees 726 
employees were represented by the IUU, 449 were represented by the USWA, and 
1,215 were represented by the IBEW.  The current contract between CG&E and the 
IUU will expire in April 2001.  CG&E and its subsidiaries have a contract with 
the USWA expiring May 15, 2002.  The IBEW contract expires April 1, 2001.

Cinergy and PSI

The number of employees of PSI at December 31, 1996, was 2,211, of whom 1,383 
were represented by the IBEW.

PSI's collective bargaining agreement with the IBEW will expire at the end of 
April 1999.

Cinergy and ULH&P

The number of employees of ULH&P at December 31, 1996, was 276, of whom 229 
belonged to bargaining units.  These bargaining unit employees were 
represented by the same labor agreements between CG&E and the applicable union 
organization.  Of ULH&P's total employees, 62 employees were represented by 
the IBEW, 102 were represented by the USWA, and 65 were represented by the 
IUU.

The current contract between ULH&P and the IUU will expire in April 2001.  
ULH&P has agreements with the USWA and IBEW that will expire May 15, 2002, and 
April 1, 2001, respectively.
<PAGE>

ITEM 2.  PROPERTIES

Cinergy, CG&E, PSI, and ULH&P

Substantially all utility plant is subject to the lien of each applicable 
company's first mortgage bond indenture.

In addition to the information discussed herein, refer to Note 13 of the 
"Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data."

Cinergy, CG&E, and PSI

At December 31, 1996, the Cinergy utility subsidiaries owned electric 
generating plants, or portions thereof in the case of jointly owned 
plants, with net capabilities (winter ratings) as shown in the following 
table:



<TABLE>
<CAPTION>
<C>                               <C>                     <C>           <C>          <C>

                                                                                           Net
                                                               Percent    Principal    Capability
         Plant Name                      Location             Ownership  Fuel Source  megawatts (mw)__
CG&E
Steam Electric Generating Plants:
Miami Fort Station (Units 5&6)     North Bend, Ohio        100.00%       Coal         243 
Miami Fort Station (Units 7&8)     North Bend, Ohio         64.00        Coal         640
W.C. Beckjord Station (Units 1-5)  New Richmond, Ohio      100.00        Coal         704
W.C. Beckjord Station (Unit 6)     New Richmond, Ohio       37.50        Coal         158 
J.M. Stuart Station                Aberdeen, Ohio           39.00*       Coal         913
Killen Station                     Adams County, Ohio       33.00*       Coal         198
Conesville Station                 Conesville, Ohio         40.00*       Coal         312
William H. Zimmer Generating 
  Station                          Moscow, Ohio             46.50        Coal         605
East Bend Station                  Boone County, Kentucky   69.00        Coal         414

Combustion Turbines:
Dicks Creek Station                Middletown, Ohio        100.00        Gas          172
Miami Fort Gas Turbine Station     North Bend, Ohio        100.00        Oil           78
W.C. Beckjord Gas Turbine Station  New Richmond, Ohio      100.00        Oil          245
Woodsdale Generating Station       Butler County, Ohio     100.00        Gas          564

PSI
Steam Electric Generating Plants:
Gibson Generating Station:
  (Units 1-4)                      Princeton, Indiana      100.00        Coal       2,532
  (Unit 5)                         Princeton, Indiana       50.05        Coal         313 
Wabash River Station               Terre Haute, Indiana    100.00        Coal         668
Cayuga Station                     Cayuga, Indiana         100.00        Coal       1,005
R.A. Gallagher Station             New Albany, Indiana     100.00        Coal         560
Edwardsport Station                Edwardsport, Indiana    100.00        Coal         160
Noblesville Station                Noblesville, Indiana    100.00        Coal          90

Combustion Turbines:
Cayuga Combustion Turbine          Cayuga, Indiana         100.00        Gas          120
Wabash River Coal Gasification
  Project                          Terre Haute, Indiana    100.00        Coal         262

Internal Combustion Units:
Connersville Peaking Station       Connersville, Indiana   100.00        Oil           98
Miami-Wabash Peaking Station       Wabash, Indiana         100.00        Oil          104
Cayuga Peaking Units               Cayuga, Indiana         100.00        Oil           11
Wabash River Peaking Units         Terre Haute, Indiana    100.00        Oil            8 

Hydroelectric Generating Station:
Markland Generating Station        Markland Dam, Ohio 
                                     River                 100.00        Water         45
<FN>
Station is not operated by CG&E.
</TABLE>
<PAGE>


Cinergy and CG&E

CG&E 

CG&E's 1996 peak load, which occurred on August 6 and was exclusive of off-
system transactions, was 4,452 mw.  For the period 1997 through 2006, peak 
load and kilowatt-hour (kwh) sales are each forecasted to have annual growth 
rates of 2%.  These forecasts reflect CG&E's load growth, alternative fuel 
choices, population growth, and housing starts.  These forecasts exclude an 
assessment of DSM, non-firm power transactions, and any potential off-system, 
long-term firm power sales.

As of December 31, 1996, CG&E's transmission system consisted of 388 circuit 
miles of 345,000 volt line, 618 circuit miles of 138,000 volt line, 520 
circuit miles of 69,000 volt line, and 116 circuit miles of lesser volt line, 
all within the states of Ohio and Kentucky.  In addition, as of December 31, 
1996, CG&E's distribution system consisted of 14,647 circuit miles, all within 
the state of Ohio.  As of the same date, CG&E's transmission substations had a 
combined capacity of 14,845,000 kilovolt-amperes, and the distribution 
substations had a combined capacity of 5,968,000 kilovolt-amperes.  A portion 
of CG&E's total transmission system is jointly owned, primarily in connection 
with its jointly owned electric generating units.

During 1996, almost all of the electricity generated by units owned by CG&E or 
in which it has an ownership interest was produced by coal-fired generating 
units.  Those units generate most of the electric requirements of CG&E and its 
utility subsidiaries.

CG&E owns two propane/air peakshaving plants.  Associated with these plants 
are two underground caverns, one with a seven million gallon capacity and one 
with an eight million gallon capacity.  Both plants and storage caverns are 
located in Ohio and are used primarily to augment CG&E's supply of natural gas 
during periods of peak demand and emergencies.  CG&E also owns natural gas 
distribution systems consisting of 5,632 miles of mains and service lines in 
southwestern Ohio.

Cinergy and PSI

PSI

PSI's 1996 peak load, which occurred on August 7 and was exclusive of off-
system transactions, was 5,227 mw.  For the period 1997 through 2006, peak 
load and kwh sales are each forecasted to have annual growth rates of 2%.  
These forecasts reflect PSI's load growth, alternative fuel choices, 
population growth, and housing starts.  These forecasts exclude an assessment 
of DSM, non-firm power transactions, and any potential off-system, long-term 
firm power sales.

As of December 31, 1996, PSI's transmission system consisted of 719 circuit 
miles of 345,000 volt line, 656 circuit miles of 230,000 volt line, 1,595 
circuit miles of 138,000 volt line, and 2,428 circuit miles of 69,000 volt 
line, all within the state of Indiana.  In addition, as of December 31, 1996, 
PSI's distribution system consisted of 19,486 circuit miles, all within the 
state of Indiana.  As of the same date, PSI's transmission substations had a 
combined capacity of 21,535,000 kilovolt-amperes, and the distribution 
substations had a combined capacity of 6,299,000 kilovolt-amperes.

During 1996, almost all of PSI's kwh production was obtained from coal-fired 
and hydroelectric generation.

Cinergy, CG&E, and ULH&P

ULH&P

As of December 31, 1996, ULH&P owned 104 circuit miles of 69,000 volt electric 
transmission line, an electric distribution system consisting of 2,510 circuit 
miles, and a gas distribution system consisting of 1,271 miles of mains and 
service lines in northern Kentucky.  ULH&P also owns a propane/air peakshaving 
plant, a seven million gallon capacity underground cavern for the storage of 
liquid propane, and related liquid propane feeder lines, located in northern 
Kentucky and adjacent to one of the gas lines that transports natural gas to 
CG&E.  The propane/air plant and cavern are used primarily to augment CG&E's 
and ULH&P's supply of natural gas during periods of peak demand and 
emergencies.

Cinergy and CG&E

Other Utility Subsidiaries

As of December 31, 1996, Lawrenceburg owned a gas distribution system 
consisting of 170 miles of mains and service lines in Indiana adjacent to the 
western part of CG&E's service area.  Lawrenceburg is connected with and sells 
gas at wholesale to the city of Aurora, Indiana, and is also connected within 
Indiana with the lines of Texas Gas Transmission Corporation and Texas Eastern 
Transmission Corporation.

As of December 31, 1996, West Harrison owned a small electric distribution 
system consisting of 10 circuit miles in Indiana adjacent to CG&E's service 
area.  As of the same date, Miami owned 40 miles of 138,000 volt transmission 
line connecting the lines of LG&E with those of CG&E.

As of December 31, 1996, KO Transmission owned a 32.67% interest in a 90-mile 
interstate natural gas pipeline.  KO Transmission transports gas from 
southeast Kentucky northward to the service territories of CG&E and ULH&P.


                         ITEM 3.  LEGAL PROCEEDINGS

Cinergy, CG&E, and PSI

Merger Litigation

Hearings before the United States Court of Appeals for the District of 
Columbia Circuit in connection with AEP's petition for review of the FERC's 
order approving the merger of CG&E and Resources to form Cinergy (Merger 
Order) concluded on March 18, 1997.  AEP has objected to the Merger Order 
alleging that the post-merger operations of Cinergy would require the use 
of AEP's transmission facilities on a continuous basis without 
compensation.  AEP contends that the FERC, in issuing the Merger Order, did 
not adequately evaluate the impact on AEP or whether the need to use AEP's 
transmission facilities would interfere with Cinergy achieving merger 
benefits.  In addition, AEP claims that the FERC failed to evaluate the 
extent to which the merged facilities' operations would be consistent with 
the integrated public utility concept of the PUHCA.  CG&E and PSI have 
intervened in this action.  While a decision in the appeal is expected by 
the end of 1997, Cinergy, CG&E, and PSI currently cannot predict the 
outcome.

Cinergy and PSI

Wabash Valley Power Association, Inc. Settlement Agreement
See Note 12(e) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data."

Cinergy, CG&E, and PSI

Enertech Litigation

See Note 12(d) of the "Notes to Financial Statements" in "Item 8.  
Financial Statements and Supplementary Data."

ULH&P

ULH&P has no material pending legal proceedings.

Cinergy, CG&E, PSI, and ULH&P

In addition to the above litigation, see " Regulatory Matters" in Item 7.  
Management's Discussion and Analysis of Financial Condition and Results of 
Operations" and "Notes 12(b), 12(c), and 12(f) of the "Notes to Financial 
Statements" in "Item 8.  Financial Statements and Supplementary Data."

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

Cinergy, CG&E, and PSI

None.

ULH&P

Omitted pursuant to instruction I(2)(c).
EXECUTIVE OFFICERS OF THE REGISTRANTS (at February 28, 1997)

                         Age at
                        Dec. 31,
         Name             1996          Office & Date Elected or in Job     

Cinergy, CG&E, and PSI

Jackson H. Randolph        66      Chairman of Cinergy, CG&E, and             
                                     PSI - 1995
                                   Chairman and Chief Executive Officer
                                     of Cinergy, CG&E, and PSI - 1994
                                   Chairman, President, and Chief Executive
                                     Officer of CG&E - 1993
                                   President and Chief Executive Officer
                                     of CG&E - 1986

James E. Rogers            49      Vice Chairman, President, and Chief        
                                     Executive Officer of Cinergy - 1995
                                   Vice Chairman and Chief Executive 
                                     Officer of CG&E and PSI - 1995
                                   Vice Chairman, President, and Chief 
                                     Operating Officer of Cinergy - 1994
                                   Vice Chairman and Chief Operating
                                     Officer of CG&E and PSI - 1994
                                   Chairman and Chief Executive Officer
                                     of Resources - 1993
                                   Chairman, President, and Chief Executive
                                     Officer of PSI - 1990
                               
Cheryl M. Foley            49      Vice President, General Counsel, and
                                     Secretary of CG&E - 1995
                                   Vice President, General Counsel, and
                                     Secretary of Cinergy - 1994
                                   Vice President, General Counsel, and
                                     Secretary of PSI and Resources - 1991
                                   Vice President and General Counsel of 
                                     Resources - 1990
                                  
Elizabeth K. Lanier 1/     45      Vice President and Chief of Staff - 1996
                                   Partner - Frost & Jacobs 2/ - 1984

J. Wayne Leonard           46      President, Energy Commodities Business Unit
                                     of Cinergy - 1996
                                   Group Vice President and Chief
                                     Financial Officer of CG&E and PSI - 1995
                                   Group Vice President and Chief Financial
                                     Officer of Cinergy - 1994
                                   Senior Vice President and Chief Financial
                                     Officer of PSI and Resources - 1992
                                   Vice President and Chief Financial 
                                     Officer of PSI and Resources - 1989

William L. Sheafer         53      Treasurer of Cinergy and PSI - 1994
                                   Treasurer of CG&E - 1987
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS (continued)

                         Age at
                        Dec. 31,
         Name             1996          Office & Date Elected or in Job     
                                 
Larry E. Thomas            51      President, Energy Delivery Business Unit
                                     of Cinergy - 1996
                                   Group Vice President and Chief             
                                     Transformation Officer of Cinergy, CG&E, 
                                     and PSI - 1995
                                   Group Vice President, Reengineering and
                                     Operations Services of CG&E and 
                                     PSI - 1995
                                   Group Vice President, Reengineering
                                     and Operations Services of Cinergy - 1994
                                   Senior Vice President and Chief Operations
                                     Officer of PSI - 1992
                                   Senior Vice President and Chief Operating
                                     Officer, Customer Operations of 
                                     PSI - 1990
                                   
Charles J. Winger          51      Comptroller of CG&E - 1995
                                   Comptroller of Cinergy - 1994
                                   Comptroller of Resources - 1988
                                   Comptroller of PSI - 1984

Cinergy and CG&E
                                  
William J. Grealis 3/      51      President, Energy Services Business Unit   
                                     of Cinergy - 1996
                                   President of CG&E - 1995 
                                   Vice President of Cinergy - 1995
                                   President, Gas Business Unit of CG&E - 1995
                                   President of Investments - 1995
                                   Partner - Akin, Gump, Strauss, Hauer
                                     & Feld 2/ - 1978 

Cinergy and PSI

John M. Mutz 4/            61      Vice President of Cinergy - 1995 
                                   President of PSI - 1994 
                                   President of Resources - 1993
                                   President - Lilly Endowment, Inc. 2/ - 1989

Cinergy

J. Joseph Hale, Jr.        47      Vice President of Cinergy - 1996 
                                   General Manager, Marketing
                                     Operations of CG&E - 1995
                                   President of Cinergy Foundation,  
                                     Inc. 5/ - 1992
                                   President - The Kaiser Group, 
                                     Inc. 2/ - 1989
<PAGE> 
EXECUTIVE OFFICERS OF THE REGISTRANTS (continued)

                         Age at
                        Dec. 31,
         Name             1996          Office & Date Elected or in Job     

M. Stephen Harkness        48      Vice President of Cinergy - 1996 
                                   Executive Vice President and Chief
                                     Operating Officer of Trigen-Cinergy
                                     Solutions LLC 6/ - 1996
                                   General Manager, Corporate Development
                                     and Financial Services of Cinergy - 1994 
                                   Treasurer of PSI and Resources - 1986

Jerry W. Liggett           55      Vice President of Cinergy - 1996 
                                   Senior Manager, Human Resources
                                     Strategy of Cinergy - 1995
                                   General Manager, Employee Relations,
                                     Compensation & Benefits of Cinergy - 1995 
                                   Executive Director, Human Resources
                                     of PSI and Resources - 1990

Michael M. Sample          44      Vice President of Cinergy - 1996 
                                   General Manager, International
                                     Investments of Cinergy - 1994
                                   Vice President, Government Affairs
                                     of PSI and Resources - 1991 
ULH&P

Omitted pursuant to instruction I(2)(c).

Cinergy, CG&E, and PSI

None of the officers is related in any manner.  Executive officers of Cinergy 
are elected to the offices set opposite their respective names until the next 
annual meeting of the Board of Directors and until their successors shall have 
been duly elected and shall have been qualified.

1/  Prior to becoming Vice President effective June 1, 1996, Ms. Lanier 
was a partner in the law firm of Frost & Jacobs located in Cincinnati, 
Ohio.

2/  Non-affiliate of Cinergy.

3/  Prior to becoming President of Investments, Mr. Grealis was a 
partner in the Washington, D.C. law firm of Akin, Gump, Strauss, Hauer 
& Feld. In addition, prior to the merger, Mr. Grealis was President of 
PSI Investments, Inc. on an interim basis beginning in 1992.

4/  Prior to becoming President of Resources, Mr. Mutz was President of 
Lilly Endowment, Inc., a private philanthropic foundation located in 
Indianapolis, Indiana.

5/  An affiliated public benefit corporation organized and operating          
    exclusively for charitable purposes.

6/  Joint venture company formed by Cinergy and Trigen Energy Corporation.

<PAGE>
                                    PART II

	ITEM 5.  MARKET FOR REGISTRANT'S COMMON
	EQUITY AND RELATED STOCKHOLDER MATTERS

Cinergy, CG&E, PSI, and ULH&P

Cinergy's common stock is listed on the New York Stock Exchange and has 
unlisted trading privileges on the Boston, Chicago, Cincinnati, Pacific, and 
Philadelphia exchanges.  As of February 7, 1997, Cinergy's most recent 
dividend record date, there were 77,405 common shareholders of record. The 
following table shows the high and low sales prices per share, if applicable, 
and the dividends on common stock declared by Cinergy, CG&E, PSI, and ULH&P 
for the past two years:

                        Market Price (a)          Dividends Declared_____
                       High          Low     (per share)   (in thousands)

  1995
    Cinergy
      4th Quarter     31 1/8       27 3/4       .43
      3rd Quarter     27 7/8       25 1/4       .43
      2nd Quarter     27           24 5/8       .43
      1st Quarter     25 1/4       23 3/8       .43

    CG&E
      4th Quarter                                              56 600 (b)
      3rd Quarter                                              55 400 (b)
      2nd Quarter                                              55 900 (b)
      1st Quarter                                              51 650 (b)

    ULH&P
      4th Quarter                              6.00 (b)

  1996
    Cinergy
      4th Quarter     34 1/4       30 7/8       .45
      3rd Quarter     32           29 1/8       .43
      2nd Quarter     32           27 1/2       .43
      1st Quarter     32 1/8       28 1/4       .43

    CG&E
      4th Quarter                                              50 949 (b)
      3rd Quarter                                             239 909 (b)
      2nd Quarter                                              45 116 (b)
      1st Quarter                                              41 995 (b)

    PSI
      4th Quarter                                              29 713 (b)
      3rd Quarter                                              28 311 (b)
      2nd Quarter                                              28 165 (b)
      1st Quarter                                              25 887 (b)

    ULH&P
      4th Quarter                              8.50 (b)

(a)  Market price for CG&E, PSI, and ULH&P is not applicable.

(b)  All of CG&E's and PSI's dividends were paid to Cinergy and all of       
ULH&P's dividends were paid to CG&E.

See Note 2(b) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data" for a brief description of common dividend 
restrictions.

All CG&E and PSI common stock is held by Cinergy and all ULH&P common stock is 
held by CG&E; therefore, there is no public trading market for their common 
stock.

	ITEM 6.  SELECTED FINANCIAL DATA

Cinergy
                                      1996     1995    1994     1993     1992
	 
                                      (in millions, except per share amounts)

Operating revenues (1)               $3 243   $3 023   $2 888  $2 833   $2 613
Net income (1)                          335      347      191      63      271
Common stock
  Earnings per share (1) (5)           2.00     2.22     1.30     .43     1.91
  Dividends declared per share         1.74     1.72     1.50    1.46     1.39

Total assets (2)                      8 849    8 220    8 150   7 804    7 133
Cumulative preferred stock of 
  subsidiaries subject to mandatory
  redemption (3)                       -         160      210     210      210
Long-term debt (4)                    2 535    2 531    2 715   2 645    2 547
Long-term debt due within
  one year                              140      202       60    -          46
     
   CG&E
                                      1996     1995    1994     1993     1992 
                                                  (in millions)

Operating revenues (1)               $1 976   $1 848  $1 788   $1 752   $1 553
Net income (loss)(1)                    227      236     158       (9)     202

Total assets (2)                      4 967    5 197   5 182    5 144    4 802
Cumulative preferred stock subject
  to mandatory redemption (3)          -         160     210      210      210
Long-term debt (4)                    1 565    1 703   1 838    1 829    1 810
Long-term debt due within
  one year                              130      152    -        -           7

   PSI
                                      1996     1995     1994     1993     1992 
                                                   (in millions)

Operating revenues (1)               $1 332  $1 248   $1 114   $1 092   $1 066
Net income (1)                          126     146       82      125      107

Total assets (2)                      3 295   3 076    2 945    2 645    2 300
Long-term debt (4)                      970     828      878      816      737
Long-term debt due within 
  one year                               10      50       60     -          40

Cinergy, CG&E, and PSI

       (1)  See Notes 1 and 15 of the "Notes to Financial Statements" in 
            "Item 8.  Financial Statements and Supplementary Data."

(2)  See Notes 1(f) and 6 of the "Notes to Financial Statements" in 
(3)    "Item 
            8.  Financial Statements and Supplementary Data."

       (3)  See Note 3 of the "Notes to Financial Statements" in "Item 8. 
 
            Financial Statements and Supplementary Data."

       (4)  See Note 4 of the "Notes to Financial Statements" in "Item 8. 
            Financial Statements and Supplementary Data."

(5)  Includes costs incurred in 1996 by Cinergy of $.12 per share related 
     to the reacquisition of 90% of CG&E's preferred stock through a 
     tender offer.

In addition, see "Item 7.  Management's Discussion and Analysis of Financial 
Condition and Results of Operations" and Note 12 of the "Notes to Financial 
Statements" in "Item 8.  Financial Statements and Supplementary Data" for 
discussions of material uncertainties for Cinergy, CG&E, and PSI. 

ULH&P

Omitted pursuant to Instruction I(2)(a).
<PAGE>
             ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cinergy, CG&E, PSI, and ULH&P

CAUTIONARY STATEMENTS REGARDING FORWARD - LOOKING INFORMATION  Matters 
discussed in this "Item 7.  Management's Discussion and Analysis of Financial 
Condition and Results of Operations" reflect and elucidate the Companies' 
corporate vision of the future and, as a part of that, outline goals and 
aspirations, as well as specific projections.  These goals and projections are 
considered forward-looking statements and are based on management's beliefs, 
as well as certain assumptions made by management.  In addition to any 
assumptions and other factors that are referred to specifically in connection 
with these statements, other factors that could cause actual results to differ 
materially from those indicated in any forward-looking statements include, 
among others:

  Factors affecting utility operations such as unusual weather conditions; 
catastrophic weather-related damage; unscheduled generation outages; 
unusual maintenance or repairs; unanticipated changes to fossil fuel costs, 
gas supply costs, or availability constraints due to higher demand, 
shortages, transportation problems or other developments; environmental 
incidents; or electric transmission or gas pipeline system constraints.
 
  Increased competition in the electric and gas utility industries 
including effects of: industry restructuring; transmission system operation 
and/or administration; customer choice; and cogeneration.
 
  Regulatory factors such as unanticipated changes in rate-setting policies 
or procedures; recovery of investments made under traditional regulation, 
and the frequency and timing of rate increases.
 
  Financial or regulatory accounting principles or policies imposed by the 
Financial Accounting Standards Board (FASB), the Securities and Exchange 
Commission (SEC), the Federal Energy Regulatory Commission (FERC), state 
public utility commissions, state entities which regulate natural gas 
transmission, gathering and processing and similar entities with regulatory 
oversight.
 
  Economic conditions including inflation rates and monetary fluctuations.
 
  Changing market conditions and a variety of other factors associated with 
physical energy and financial trading activities including, but not limited 
to, price, basis, credit, liquidity, volatility, capacity, transmission, 
currency exchange, interest rate, and warranty risks.
 
  Availability or cost of capital, resulting from changes in: Cinergy and 
its subsidiaries, interest rates, and securities ratings or market 
perceptions of the utility industry and energy-related industries. 

  Employee workforce factors including changes in key executives, 
collective bargaining agreements with union employees, or work stoppages.
 
  Legal and regulatory delays and other obstacles associated with mergers, 
acquisitions, and investments in joint ventures.
 
  Costs and other effects of legal and administrative proceedings, 
settlements, investigations, claims, and other matters, including but not 
limited to those described in Note 12 of the "Notes to Financial 
Statements" in "Item 8.  Financial Statements and Supplementary Data."
 
  Changes in international, Federal, state, or local legislative 
requirements such as changes in tax laws or rates; environmental laws and 
regulations.

Cinergy and its subsidiaries undertake no obligation to publicly update or 
revise any forward-looking statements, whether as a result of changes in 
actual results, changes in assumptions, or other factors affecting such 
statements.

Cinergy, CG&E, PSI, and ULH&P

THE COMPANIES

Cinergy Corp., a Delaware corporation (Cinergy or Company) is a registered 
holding company under the Public Utility Holding Company Act of 1935 (PUHCA). 
Cinergy was created in the October 1994 merger of PSI Resources, Inc. 
(Resources) and The Cincinnati Gas & Electric Company (CG&E).  The business 
combination was accounted for as a pooling of interests.  Following the 
merger, Cinergy became the parent holding company of PSI Energy, Inc. (PSI), 
previously Resources' utility subsidiary, CG&E, Cinergy Investments, Inc. 
(Investments), and Cinergy Services, Inc.

FINANCIAL CONDITION

COMPETITIVE PRESSURES

Electric Utility Industry

Cinergy, CG&E, PSI, and ULH&P

Introduction  The changing competitive environment for energy services 
continues as the primary factor which will influence the future operations, 
structure, and profitability of Cinergy.  Changes in the industry include the 
convergence of gas and electricity as complementary energy sources, new 
emerging technologies, the commoditization of electric power, full competition 
in the wholesale power markets from both traditional electric utilities and 
new power marketers and brokers, and continuing pressure for "customer choice" 
by all classes of customers.  In addition, traditional investor owned 
utilities are becoming more diversified by using merger and acquisition 
strategies to support regional, national, and international market strategies. 
These merger and acquisition strategies include the combining of electric 
utilities with one another and cross-commodity combinations of electric 
utilities with gas transmission, distribution, and marketing companies.  

Pressures for Customer Choice  Extending choice to end-use customers, 
sometimes referred to as retail wheeling or retail access, will allow all 
customers within a particular utility's franchise service territory to 
"unbundle" their purchase decisions.  In effect, customers would be allowed to 
purchase power as a commodity directly from any available source and would buy 
delivery services (i.e., transmission and distribution) from the local 
utilities which own the power lines or from independent system operators (ISO) 
(see below).  Other value-added services beyond delivery to the customer's 
premises could potentially be provided by third-party energy services 
companies.  The regulatory and legislative reforms to facilitate customer 
choice are primarily driven by: (1) large industrial energy users' need to 
access lower cost power sources; (2) the continuing emergence of new 
technologies and new marketers to provide electric power; and (3) evidence 
from other previously regulated industries that wherever effective competition 
is feasible, it can yield both lower costs and a wider range of customer 
options and services as compared to traditional cost-of-service regulation.  
The genesis for the new competitors to the local franchise utilities was the 
enactment of the Energy Policy Act of 1992 (Energy Act), which granted the 
FERC authority to order wholesale transmission access.  As a result, in 1996, 
the FERC's order 888 (FERC Order 888) was implemented.  This order encourages 
full wholesale competition by requiring all utilities subject to the FERC's 
jurisdiction to make their transmission systems available to power buyers and 
sellers at prices comparable to those the transmission owner charges itself 
for comparable service.  These new competitors to the local franchise utility 
include power marketers, power brokers, and other utilities, who now have the 
ability to sell power in regional or national markets.  To date, the FERC has 
granted licenses to more than 200 power marketers, enabling these new 
competitors to sell wholesale power at market-based rates.  Cinergy was 
granted a power marketing license in December 1995.

Power brokers are intermediaries between buyers and sellers and do not take 
title to the power which they broker.  Power marketers conduct bulk power 
trades at market-based prices.  They manage owned generation and portfolios of 
power contracts, to which they have title, and package energy products for 
customers of bulk power, including price risk management contracts such as 
options on fixed-price energy and guaranteed fixed-price contracts.  Power 
marketers compete not only in price, but also on service, such as structuring, 
hedging services, and scheduling flexibility.    

The demands of industrial and commercial customers continue to drive 
deregulation into the legislative process in many states.  Four states, 
California, New Hampshire, Pennsylvania, and Rhode Island, enacted legislation 
in 1996 which will lead to total customer choice for power supply.  Several 
states have proposed legislation which is currently being debated in their 
respective legislatures and in most other states the complex technical and 
economic issues presented by deregulation and restructuring are being 
discussed and examined.  Among other things, states are considering the trade-
offs between achieving long-run economic efficiency and potential short-term 
wealth transfers between customers and shareholders or among customer groups, 
as well as the potential impact (if any) restructuring may have on state and 
local tax structures and socially desirable objectives such as clean air or 
energy efficiency.  In addition to legislative efforts to totally restructure 
the electric utility industry, several states have initiated pilot retail 
access programs which allow a limited number of retail customers the 
opportunity to shop for electricity among several suppliers.
 
The most contentiously debated issue has been how best to transition from the 
historical monopoly cost-of-service regulated environment to the competitive 
market-driven environment and who will bear the costs of past commitments made 
under the old order.  If the generation component of the industry was 
immediately brought to market and priced at competitive wholesale prices, it 
is likely many utilities would be unable to recover a large percentage of 
their fixed costs.  Other costs such as investments in energy efficiency 
(demand-side management (DSM) investments) could also become "stranded" (i.e., 
unrecoverable at competitive market prices) in this scenario.  The financial 
impact to the industry and each investor owned utility of alternative 
scenarios for a transition to a competitive market is highly dependent upon: 
(1) the speed of the transition and type of price regulation during the 
transition; (2) the ultimate clearing price for electricity in a competitive 
environment; and (3) customer behavior when afforded potentially lower-cost 
alternatives.  

Because of the complex nature of electric power flows, the variety of state-
by-state regulations and the potential inability or unwillingness to shut down 
high-cost, uneconomical generation facilities, such as nuclear, in a fully 
competitive environment, great uncertainty exists as to the time frame 
required for the future price of electricity in a commodity market to rise to 
long-run marginal cost (e.g., full cost of new resources) and, importantly, 
how close to short-term marginal cost (e.g., fuel and variable operating 
costs) prices may fall in the interim.  For example, Moody's Investors 
Service, Inc. (Moody's) has estimated the stranded investment issue for the 
industry at $136 billion (computed on a present value basis), while Standard 
and Poor's (S&P) has estimated a total exposure of between $10 billion and $26 
billion (6% and 16%, respectively) of total industry annual revenues.  The 
position that recovery of prudent past investments and commitments must be 
considered has received support at the FERC, in FERC Order 888, and in the 
four states which have enacted competition-related legislation (see further 
discussion herein).  

In addition either corporate separation and/or divestiture continues to be 
advocated by some constituents in order to protect against market power abuses 
which could result from one electric utility controlling large segments of 
generating capacity and transmission assets within a local or regional market. 
As a result, electric utilities could face substantial costs to restructure 
the corporate vertical integration in the delivery of electric power which 
exists today.  If legal separation is required, for example, first mortgage 
bond indentures may not allow for major asset dispositions by the electric 
utility.  In order to legally unbundle, the electric utility could be required 
to repurchase the outstanding debt under the indenture at substantial call 
premiums or pay similar fees to the bondholders in order to amend the bond 
indenture to allow for the unbundling. At a minimum, regulators will likely 
mandate functional unbundling of the generation, transmission, and 
distribution businesses.

In addition, electric utilities could also face substantial costs or 
competitive restrictions to comply with codes of conduct which are likely to 
be implemented by regulators to encourage fair competition among the many new 
competitors entering a market and the local franchise utility. 

Cinergy's Response to the Changing Competitive Environment  Cinergy continues 
to be an aggressive supporter of increased competition in the electric utility 
industry.  Cinergy believes competition would benefit electric customers 
individually and the economy as a whole.  At the same time, Cinergy possesses 
certain competitive advantages, such as low-cost generation, which could 
benefit shareholders in a deregulated environment.  However, these advantages 
could be substantially eroded by restrictive regulations which lag the 
development of a competitive market and which limit Cinergy's energy commodity 
and energy services business units' ability to preempt the competition in 
responding to the needs of customers or which result in pricing at the lower 
of cost or market for former "franchise" holding utilities.  As such, Cinergy 
will continue its leadership role in both state and Federal debates on 
industry reform.  

Cinergy believes there are two substantial impediments to realizing the 
potential efficiencies of competition in the generation component of the 
business: (1) resolving the issue of stranded costs associated with past 
utility commitments and (2) recognizing states' rights, concerns, and 
authority in regulating a product which flows in interstate commerce.  While 
Cinergy is among the lowest-cost producers nationwide and has been recognized 
by both Moody's and S&P as having minimal exposure to stranded investment, 
Cinergy nevertheless recognizes the legitimacy of the industry's argument for 
recovery of at least some of the costs associated with past commitments and 
the importance of resolving this issue in the interest of moving the debate to 
more important issues such as, how to achieve the potential economic 
efficiencies which competition offers and what regulatory and structural 
reforms are necessary to achieve those results.  Cinergy believes that even 
low-cost producers, under certain scenarios, could face difficult if not 
ruinous competition in an excess capacity market which was created at least in 
part by past government policies.  Cinergy has approximately $1 billion of 
regulatory assets (past costs incurred for which regulators have promised 
recovery from customers in the future) which could be at risk, at least in 
part, in some scenarios.  At the same time, regardless of certain regulatory 
actions or statements to the contrary, Cinergy believes full recovery of the 
industry's potential stranded investment is unrealistic to expect in a 
marketplace where certain customers can bypass stranded cost recovery 
mechanisms through self-generation (see Trigen Energy Corporation (Trigen) 
below), is politically infeasible, and is neither necessarily equitable nor 
efficient.  Cinergy believes the resolution of certain broad restructuring 
issues (e.g., market power, codes of conduct, universal service to customers, 
reliability standards, and certain tax consequences) must be addressed on a 
regional or national basis to prevent state-by-state disparity which could 
provide inequitable advantages to some competitors while unduly harming 
others' ability to compete in the marketplace.

During 1996, Cinergy has taken numerous steps to prepare itself not only for 
the changing environment, but to assure equity and consistency in the setting 
of rules and regulations in the various markets in which Cinergy competes, 
including the following:

  Cinergy and five other midwestern utilities formed a coalition to create 
and develop a multi-state transmission region operated by an ISO.  Since 
its formation, 18 additional midwestern transmission owners have joined the 
coalition.  The coalition is proposing a Midwest ISO which would ensure 
non-discriminatory open transmission access and system reliability, as well 
as, the development of a regional transmission tariff that helps eliminate 
the "pancaking" of transmission rates that occurs today when power is 
transmitted through multiple utility systems.  Cinergy believes the 
existence of ISO's will ease regulatory and customer concerns over the 
exercise of market power by transmission-owning utilities.
  Cinergy reorganized its electric operations into three strategic business 
units.  This functional unbundling separated Cinergy's electric utility 
business into an energy services business unit, an energy delivery business 
unit, and an energy commodities business unit.  Each of these separate 
business units will be responsible for expanding its business through, 
among other things, expansion of its markets and the offering of new 
products and services.  
  Cinergy acquired, through a joint venture, a 50% interest in Midlands 
Electricity plc (Midlands), an electricity distribution company located in 
the United Kingdom (U.K.).  In addition to diversifying Cinergy's 
distribution business into a foreign market, the U.K.'s advanced stage of 
opening its electricity market to competition will allow Cinergy to gain 
experience and knowledge of customer behavior in a competitive market prior 
to deregulation in its United States (U.S.) markets.
  Cinergy and Trigen formed a joint venture to develop and operate 
cogeneration and trigeneration energy facilities throughout the U.S. and 
Canada.  This will allow Cinergy to participate in the delivery of 
alternative low-cost energy solutions and technologies to its own franchise 
customers and to customers outside of its franchise territory.
  Cinergy was an active and successful participant in retail access pilot 
programs in Illinois, New Hampshire, New York, and Washington.  In 
addition, Cinergy intends to be an active participant in certain states' 
restructuring processes. 
  Cinergy's energy commodities business unit accelerated its marketing of 
power in the wholesale market (megawatt (mw) sales increased by more than 
80%).  Cinergy now has power marketing representation in all regions of the 
U.S.  In late 1996, Cinergy acquired exclusive rights to provide power to 
two midwestern electric cooperatives for the next five to seven years.
  Cinergy continued its business reengineering efforts, which were 
initiated in 1994.  These initiatives continue to streamline and make 
operations more efficient in order for Cinergy to become even more prepared 
to compete in a competitive environment.
  As discussed below, Cinergy worked with industrial groups and one other 
franchise utility in Indiana and is currently working with the other 
investor owned utilities in Ohio to propose customer choice legislation 
which properly considers the issues and trade-offs discussed above.

For an electric utility to be successful in a competitive environment, it is 
critical that regulatory reform keep pace with the market realities facing 
electric utilities and their customers not only in generation, but also 
transmission, distribution, and energy services activities.  Strict adherence 
to traditional, cost-based rate-of-return regulation will both significantly 
disadvantage a utility's ability to compete successfully to supply customer 
needs and result in a failure to realize the potential economic efficiencies 
from restructuring.  For example, performance-based regulation for those 
businesses which remain regulated would result in better economic incentives 
to control costs and likely add flexibility for the franchise utility in the 
transition to a fully competitive environment.

Federal Developments 

Open Access Transmission - FERC Orders 888 and 889  The Energy Act granted the 
FERC authority to order wholesale transmission access.  Acting on that 
authority, in April 1996, the FERC issued its final orders.  The final rules 
provide for mandatory filing of open access/comparability transmission 
tariffs, provide for functional unbundling of all services, require utilities 
to use the filed tariffs for their own bulk power transactions, establish an 
electronic bulletin board for transmission availability and pricing 
information, and establish a contract-based approach to recovering any 
potential stranded costs as a result of customer choice at the wholesale 
level.  The final rules became effective in July 1996.  PSI, CG&E, and its 
Kentucky subsidiary, The Union Light, Heat and Power Company (ULH&P) have made 
compliance filings with the FERC and are now operating under open 
access/comparability tariffs.

In adopting these rules, the FERC considered, but did not require, the 
divestiture of any facilities.  Additionally, ISO's will not be required; 
however, principles to guide the FERC's evaluation of ISO proposals are set 
forth to encourage their formation.

FERC Merger Policy  In December 1996, the FERC issued a policy statement 
setting forth new guidelines which address three key factors the FERC will 
consider in evaluating public utility mergers:  the effect on competition 
(i.e., market power); the effect on rates; and the effect on regulation.  The 
purpose of the policy statement is to ensure that mergers are consistent with 
the public interest and to provide greater certainty and expedition in the 
FERC's analysis of merger applications.  The new guidelines are in response to 
the continuing changes in the electric power industry and the regulation of 
the industry and are intended to accelerate the FERC approval process. 

A proposed merger's effect on market power will be determined by analyzing the 
merger candidates' share of the defined market (in terms of both geographic 
and product markets).  In cases where utilities may exercise market power, the 
guidelines encourage the utility to offer potential remedies such as turning 
over control of their transmission systems to an ISO or divesting themselves 
of generation assets.  With respect to effect on rates, estimates of future 
costs and benefits of the merger will no longer be required.  Instead, the 
utility should propose appropriate rate protections for its wholesale 
customers, such as open seasons for customers to terminate contracts, rate 
freezes, or rate reductions.

Repeal of the PUHCA  In 1995, the SEC endorsed recommendations for reform of 
the PUHCA.  The recommendations call for repeal and, pending repeal, 
significant administrative reform of the 61-year-old statute.  While the 
recommendation report offers three alternative approaches to repeal and 
legislative reform, the SEC's preferred option is repeal coupled with a 
transition period of one year or longer and a transfer of certain consumer-
protection provisions of the PUHCA to the FERC.

The report further recommends that, pending consideration of legislative 
options, the SEC take prompt administrative action, by rulemaking and on a 
case-by-case basis, to modernize and simplify regulation under the PUHCA, with 
particular reference to financing transactions, diversification into non-
utility businesses, utility mergers and acquisitions, and the PUHCA's 
"integration" standards.  In the latter regard, the report recommends a 
changed interpretation of the PUHCA to permit registered holding companies to 
own combination electric and gas utility companies, provided the affected 
states agree.  Subsequent to the issuance of the report, the SEC adopted rule 
changes exempting various types of financing transactions by utility and non-
utility subsidiaries of registered holding companies.  The SEC also proposed a 
rule which would exempt investments by registered systems in specified 
"energy-related companies," subject to certain conditions.  In February 1997, 
the rule was adopted substantially as proposed.

Since the release of the SEC's report, numerous bills were introduced in both 
houses of the U.S. Congress providing for the repeal or significant amendment 
of the PUHCA.  It is expected that similar bills addressing repeal of the 
PUHCA and industry restructuring will be introduced in Congress during 1997.  
Cinergy continues to support the repeal of the PUHCA, either as part of 
comprehensive reform of the electric industry or as separate legislation.	

Cinergy, CG&E, PSI, ULH&P

State Developments  While the pace of deregulation varies by state and region, 
nearly all states have initiated or taken part in formal or informal 
processes, held hearings, and/or passed legislation addressing retail 
wheeling, restructuring, competition, alternative regulation, or closely 
related issues. 

Cinergy and CG&E

Ohio	The Public Utilities Commission of Ohio (PUCO) continues to explore 
potential opportunities under the existing regulatory framework prior to 
embarking on a more fundamental restructuring which could lead to customer 
choice.  In April 1996, the PUCO approved a "buy-through" plan allowing large 
industrial customers with interruptible contracts to purchase electricity 
supplies from generators outside the host utility's service territory in order 
to avoid an interruption in their power supply.  Also, in December 1996, the 
PUCO issued its order and guidelines for a conjunctive electric service two-
year pilot program.  Under this program, different customer service locations 
in a service territory may be aggregated for cost of service, rate design, 
rate eligibility, and billing purposes.  CG&E has filed tariffs complying with 
the buy-through order, and will submit tariffs complying with the conjunctive 
electric service order, during the first quarter of 1997.

Both the interruptible buy-through plan and the conjunctive electric service 
guidelines were initially developed by The Ohio Electric Competition 
Roundtable (Roundtable).  The Roundtable, which was formed by the PUCO, 
continues to meet and is currently discussing competitive market structures, 
including universal service and unbundling.

The PUCO has approved long-term rate plans for two "at-risk," high-cost 
utilities, with both plans designed to improve the competitive position of the 
utilities by the end of each respective plan.  One plan involved a price cap, 
together with provisions allowing for accelerated depreciation and 
amortization of the utility's nuclear generation and regulatory assets while 
the second plan involved a rate increase and a recommendation from the PUCO 
that the utility develop a plan to reduce the carrying value of its regulatory 
and nuclear generation assets during the next five years.  Neither plan 
involved provisions for any type of customer choice. 

Finally, a retail wheeling and industry restructuring bill was introduced in 
the Ohio legislature during 1996.  The bill, which was not passed during the 
1996 legislative session, would have restructured the provision of electric 
service in Ohio, allowed all electric consumers to choose an alternative power 
supplier beginning in 1998, and permit utilities to recover "legitimate, 
verifiable, and fully mitigated costs."  A similar bill (House Bill 220) has 
been introduced in the 1997 legislative session.  Additionally, the state 
legislature has created a bipartisan joint study committee to make 
recommendations regarding customer choice legislation.  Cinergy is currently 
working with other investor owned utilities in Ohio to propose customer choice 
legislation and will continue its efforts to bring consumer groups and other 
stakeholders into the process.  Although Cinergy is aggressively pursuing 
customer choice legislation in Ohio, the time frame for passage of legislation 
providing for customer choice is uncertain due to the complex issues and 
numerous stakeholder interests involved.

Cinergy and PSI

Indiana  Enacted legislation allows the Indiana Utility Regulatory Commission 
(IURC) to approve utility alternative regulation proposals upon a showing 
that, among other things, traditional regulation in a particular service 
sector is no longer needed.  However, during 1996, the IURC did not approve 
the Company's limited customer choice pilot proposals which were included in a 
general rate case previously filed by PSI.  The IURC stated that any type of 
industry restructuring should be left to the state legislature.

Although no formal investigation into electric competition has been initiated, 
the IURC has continued to sponsor informal competition forums which are 
designed to develop a better understanding of issues related to expanding the 
competitive market on both the wholesale and retail levels.

In January 1997, customer choice legislation was introduced in the Indiana 
legislature.  The legislation was drafted by a coalition which included 
Cinergy, the Indiana Manufacturers Association, the Indiana Industrial Energy 
Consumers, Inc., and one other Indiana investor owned electric utility.  Under 
the proposed legislation, there would be a transition period from October 1, 
1999, through June 30, 2004, during which customers would have the right to 
choose their electric supplier.  Those customers not selecting a supplier 
would continue to buy their electric power from the franchise utility at a 
total "bundled" price.  The total bundled price would be frozen at the rate in 
effect as of July 1, 1999, subject to certain adjustments during the 
transition period, including limited adjustments for specific material cost 
changes and a downward trending of the retail electric production component of 
the total frozen price to the current statewide average.  Trending of the 
frozen price would not be applicable to those utilities, such as PSI, whose 
retail electric production price is currently below the statewide average.  
Those customers choosing a supplier would pay that supplier's open market 
price for power and would pay the franchise utility the portion of the bundled 
price applicable to transmission and distribution services, and an access 
charge (designed to compensate the franchise utility for its loss in revenues, 
if any, during the transition period, after giving effect to the revenues 
which would be realized by the franchise utility from sales of the power in 
the open market).  After June 30, 2004, all customers would continue to have 
the right to choose their supplier and would continue to pay the franchise 
utility for transmission and distribution services which would continue to be 
regulated as to price by the IURC.  The access charge would no longer be paid 
by any customer. 

The proposed legislation provides for each utility to file a transition plan 
with the IURC which would include, among other things, a proposed amortization 
period for regulatory asset balances as of the beginning of the transition 
period.  Recovery of regulatory assets during the transition period would be 
included in retail rates as a charge for transmission and distribution 
services.  However, any regulatory assets, as well as other stranded costs, at 
the end of the transition period which are applicable to retail electric 
production, would be the responsibility of the shareholders.

Although Cinergy is aggressively pursuing customer choice legislation in 
Indiana, the time frame for passage of legislation providing for customer 
choice is uncertain due to the complex issues and numerous stakeholder 
interests involved. 

Cinergy, CG&E, and ULH&P

Kentucky  There continues to be considerably less activity and interest in 
industry restructuring in Kentucky.  This situation is generally attributable 
to the fact that Kentucky is one of the lowest-cost states in the country for 
electric service.  During 1996, the Kentucky Public Service Commission (KPSC) 
began an informal investigation into alternative regulation by holding 
conferences addressing competition and soliciting input from interested 
parties to determine the appropriate approach to considering such regulation.

Cinergy, CG&E, PSI, and ULH&P

Other States  As illustrated by the above discussion of customer choice 
initiatives in the states where Cinergy holds franchise agreements, the 
Midwest, traditionally a low-cost region, has moved more slowly than the high-
cost regions of the country.  Michigan has a pilot retail wheeling program in 
place and the state's governor has submitted a restructuring plan which 
proposes the creation of an ISO by 1998 and direct access for new commercial 
and industrial load by 1997.  Illinois, which has pilot retail wheeling 
programs in place, has several retail access proposals supported by utilities 
and/or consumer groups which may be introduced in the state legislature during 
1997.

Outside the Midwest, California, New Hampshire, Pennsylvania, and Rhode 
Island, all of which are considered to be high-cost states, each enacted 
legislation during the year which will lead to complete retail competition 
over the next several years.  Several other states likely will enact or at 
least consider customer choice legislation in 1997.  Other states are pursuing 
restructuring plans and pilot retail wheeling experiments on a smaller scale 
to gain "real world" knowledge on the issues surrounding customer choice.

The California plan, for example, will simultaneously create an ISO, a 
wholesale power exchange, and direct access (customer choice) phased in over 
four years beginning January 1, 1998.  The plan further provides for a non-
bypassable competitive transition charge (CTC) on all retail customers to 
provide utilities the opportunity for recovery of their stranded costs by 
2002.  The California legislation also allows utilities to securitize a 
portion of their stranded cost recovery through the issuance of state-backed 
rate reduction bonds.  This will enable the utilities to receive the CTC in 
advance of payment by customers, thereby allowing for the repayment of higher-
cost debt with the proceeds from issuance of the lower-cost rate reduction 
bonds.  These cost savings will be used to fund decreases in customers' rates.

Legislation in New Hampshire and Rhode Island requires customer choice by 
1998.  Pennsylvania requires full competition in generation by 2001.  All 
three states' plans allow for at least partial stranded investment recovery 
during a transition period.  Pennsylvania will also have a structure for 
utilities to securitize their stranded investment recovery.

Cinergy

United Kingdom

Transition to full competition in the U.K.'s electric utility industry began 
with the industry's privatization in 1991.  When the industry was privatized, 
the generation, transmission, and regional distribution businesses were, in 
effect, unbundled into separate companies.  The regional distribution 
companies, including Midlands, own no transmission facilities and are limited 
as to the amount of generation they may own.  Third-party access to the 
transmission and local distribution systems was also put into place, enabling 
licensed suppliers to use these networks. 

Upon privatization, customers with a maximum demand of greater than one mw 
were allowed to buy electricity from any licensed supplier and, since 1994, 
choice of supplier has been available to all customers with a maximum demand 
above 100 kilowatts.  Beginning in 1998, choice of supplier will be permitted 
on a phased-in basis for all classes of customers.  The distribution and 
transmission portions of the industry will continue to be regulated.

Suppliers purchase their respective power requirements from a "pool" that was 
established as part of the overall industry privatization.  Generators bid 
volumes and prices into the pool, which then issues a series of next-day half-
hourly prices to meet expected demand.  Suppliers purchase their requirements 
under this system, but also have the ability to enter into "contracts for 
differences" (Cfds) with generators and others.  Cfds are used to avoid the 
uncertainties of pool prices, fix future obligations, and hedge at least 
portions of the risk of the pool system.

New entrants into the industry have been limited to independent power 
producers, who compete with the formerly state-run generators by using new, 
efficient technology such as gas-fired combined-cycle generation.  There have 
been no new major entrants into the supply business from outside of the 
industry.  However, it is believed that with full competition for all customer 
classes in 1998, new entrants, such as retailers, banks, or companies with 
strong consumer brand names may emerge into the supply business.

Approximately 30% of Midlands' revenues are related to the distribution 
business which remains a regulated monopoly.  In the supply business, Midlands 
has retained a significant number of its customers who have the ability to 
choose suppliers and at the same time has gained new customers outside of its 
franchise territory.  Midlands intends to actively pursue expansion of its 
customer base when all customers gain the ability to choose suppliers.
 
Cinergy, CG&E, PSI, and ULH&P

The Industry and Cinergy's Future - Others' Views  The major credit rating 
agencies continue to recognize the risk of the restructuring of the electric 
utility industry.  As discussed above, two major credit rating agencies have 
quantified their views of the potential stranded investment resulting from 
competition.  In an October 1996 report, a credit rating agency stated that 
credit ratings will remain volatile as individual companies reinvent 
themselves.  Despite these cautious views of the electric industry, Cinergy 
has received praise and some measure of optimism for its position in a more 
competitive environment.  At its last upgrading of Cinergy's operating 
subsidiaries' debt and preferred stock, in November 1995, Moody's expressed 
its opinion that Cinergy "will have no exposure to stranded costs" and that 
"Cinergy is expected to be a formidable competitor because of its low 
production costs."  In its July 1995 upgrade of Cinergy's operating 
subsidiaries' debt and preferred stock, S&P commented that "the business 
position evaluation of all the Cinergy operating units is now high average" 
reflecting "low electric production costs, efficient coal-fired equipment, 
relatively low rates, a well-positioned gas operation, the absence of nuclear 
challenges, a healthy service territory, and a balanced capital structure."  
In October 1996, The Energy Daily presented its annual Corporate Leadership 
Award to Cinergy, for "the aggressive example it has set in moving forward 
with industry reform" and for Cinergy having "led the search for new and 
imaginative concepts in the reengineering of the industry."

Certain sell-side equity analysts continue to rank Cinergy highly as a utility 
possessing a strong competitive profile and aggressive and forward-looking 
management with some considering Cinergy prepared to outperform the market in 
the competitive arena.  In particular, in a recent study of global competition 
in various industries, Cinergy was one of nine energy companies world-wide 
which were identified as most likely to prosper in the more competitive 
environment of the coming decade. 

Cinergy believes these opinions further support its position that its 
competitive strategy and agenda will be successful.

Cinergy, CG&E, and ULH&P

Gas Utility Industry

Order 636  In 1992, the FERC issued order 636 (Order 636) which restructured 
operations between interstate gas pipelines and their customers for gas sales 
and transportation services.  Order 636 mandated changes in the way CG&E and 
its utility subsidiaries purchase gas supplies and contract for transportation 
and storage services, resulting in increased risks in meeting the gas demands 
of their customers.

CG&E and its utility subsidiaries have responded to the supply risks and 
opportunities of Order 636 by introducing innovations to their supply 
strategy.  These innovations include: contracting with major producers and 
marketers for firm gas supply agreements with flexible, market-sensitive 
pricing; marketing short-term unused pipeline capacity and storage gas to 
other companies throughout the country through use of electronic bulletin 
boards; and restructuring their allotment of interstate pipeline capacity 
among delivering pipelines.  

Order 636 also allowed pipelines to recover from customers, including CG&E and 
its utility subsidiaries, transition costs incurred in complying with the 
order.  In July 1994, the PUCO issued an order approving a stipulation between 
CG&E and its residential and industrial customer groups providing for recovery 
of these pipeline transition costs.  CG&E is presently recovering its Order 
636 transition costs pursuant to a PUCO-approved tariff.  CG&E's utility 
subsidiaries, including ULH&P, recover such costs through their gas cost 
recovery mechanisms.

Customer Choice  In a January 1996 filing in Ohio, CG&E proposed to initiate a 
pilot program which would allow residential customers the ability to choose 
their gas supplier and have CG&E transport the gas for them.  The proposed 
pilot would extend to residential customers the choice that has been available 
for several years to large-volume commercial and industrial customers.  The 
PUCO did not approve CG&E's pilot program as filed but directed CG&E to meet 
with interested parties and refine the program in accordance with certain 
guidelines specified by the PUCO.  CG&E expects to file a modified plan, as 
directed by the PUCO, in the second quarter of 1997.

House Bill 476 (HB 476)  In June 1996, HB 476 was signed into law in Ohio.  HB 
476 addresses regulatory reform of the natural gas industry at the state level 
and thus is an extension of Order 636 for local distribution companies.  HB 
476, among other things, provides that natural gas commodity sales services 
may be exempted from PUCO regulation and that the PUCO allow alternative 
ratemaking methodologies in connection with other regulated services.  The 
PUCO issued final rules under the new law in March 1997.

Cinergy, CG&E, PSI, and ULH&P

Substantial Accounting Implications  

Historically, regulated utilities have applied the provisions of Statement of 
Financial Accounting Standards No. 71, Accounting for the Effects of Certain 
Types of Regulation (Statement 71).  The accounting afforded regulated 
utilities in Statement 71 is based on the fundamental premise that rates 
authorized by regulators allow recovery of a utility's costs in its 
generation, transmission, and distribution operations.  These principles have 
allowed the deferral of costs (i.e., regulatory assets) based on assurances of 
a regulator as to the future recoverability of the costs in rates charged to 
customers.  Certain criteria must be met for the continued application of the 
provisions of Statement 71, including regulated rates designed to recover the 
specific utility's costs.  Failure to satisfy the criteria in Statement 71 
would eliminate the basis for recognition of regulatory assets.  

The provisions of Statement of Financial Accounting Standards No. 121, 
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets 
to Be Disposed Of (Statement 121), became effective in January 1996 for 
Cinergy.  Statement 121, which addresses the identification and measurement of 
asset impairments for all enterprises, is particularly relevant for electric 
utilities as a result of the potential for deregulation of the generation 
component of the business.  Statement 121 requires the recognition of 
impairment losses on long-lived assets when book values exceed expected future 
cash flows.  In addition, Statement 121 imposes a stricter criterion for 
recognition of regulatory assets by requiring that future recovery be probable 
at each balance sheet date.

Based on Cinergy's current regulatory orders and the regulatory environment in 
which it currently operates, the recognition of its regulatory assets as of 
December 31, 1996, is fully supported.  In addition, the application of the 
provisions of Statement 121 did not have an effect on reported amounts for 
regulatory assets and other long-lived assets at December 31, 1996.

The ultimate outcome of the changing competitive environment could result in 
Cinergy discontinuing the application of Statement 71 for its generation, 
transmission, and/or distribution businesses.  As a result, regardless of 
whether such previously deferred costs would be recoverable (i.e., covered by 
revenues) in a competitive environment, Cinergy would be required to write-off 
the portion of any regulatory asset for which sufficient regulatory assurance 
of future recovery no longer exists.  In addition, the outcome of applying the 
provisions of Statement 121 could change significantly as a result of future 
competitive pressures and the type of restructuring of the electric utility 
industry to which Cinergy will be subjected.

Cinergy intends to continue its pursuit of competitive strategies which 
mitigate the potential impact of these issues on the financial condition of 
the Company.

Cinergy, CG&E, PSI, and ULH&P

SECURITIES RATINGS  

The current ratings provided by the major credit rating agencies; Duff & 
Phelps Credit Rating Co. (D&P), Fitch Investors Service, LP (Fitch), Moody's, 
and S&P are included in the following table:

                               D&P         Fitch      Moody's     S&P	

CG&E
  Secured Debt                  A-           A-         A3         A-
  Senior Unsecured Debt        BBB+      Not rated     Baa1       BBB+
  Junior Unsecured Debt        BBB       Not rated     Baa2       BBB+
  Preferred Stock              BBB          BBB+       baa1       BBB+

PSI
  Secured Debt                  A-           A          A3         A-
  Unsecured Debt               BBB+          A-        Baa1       BBB+
  Preferred Stock              BBB          BBB+       baa1       BBB+

ULH&P
  Secured Debt                  A-       Not rated      A3         A-
  Unsecured Debt            Not rated    Not rated     Baa1       BBB+

These securities ratings may be revised or withdrawn at any time, and each 
rating should be evaluated independently of any other rating.

REGULATORY MATTERS

Cinergy and PSI

Indiana 

IURC Orders - PSI's Retail Rate Proceeding and DSM Proceeding  In September 
1996, the IURC issued an order (September 1996 Order) approving an overall 
average retail rate increase for PSI of 7.6% ($75.7 million annually).  PSI 
had requested a retail rate increase of 10.5% ($104.8 million annually).  
Among other things, the IURC authorized the inclusion in rates of the costs of 
a 262-mw clean coal power generating facility located at Wabash River 
Generating Station (Clean Coal Project) and the costs of a scrubber at Gibson 
Generating Station.  The order also reflects a return on common equity of 
11.0%, before the 100 basis points additional common equity return allowed as 
a merger savings sharing mechanism in the IURC's February 1995 order (February 
1995 Order) discussed further herein, with an 8.21% overall rate of return on 
net original cost rate base.  The difference between the Company's request and 
the authorized increase is primarily related to return on common equity and 
the deferral to a separate proceeding of an increase in the level of recovery 
of DSM costs, as discussed below.

In October 1996, The Office of the Utility Consumer Counselor (UCC) and the 
Citizens Action Coalition of Indiana, Inc. (CAC) filed a Joint Petition for 
Reconsideration and Rehearing of the September 1996 Order with the IURC.  The 
principal issues raised by the UCC and CAC are the fair value rate of return 
and the cut-off date for the inclusion of costs to achieve merger savings in 
retail rates.  PSI has filed a response in opposition and cannot predict what 
action the IURC may take with respect to the requested rehearing and 
reconsideration.

A settlement agreement between PSI and certain intervenors in a proceeding 
established to review PSI's current and proposed DSM programs was approved by 
the IURC in December 1996.  The settlement agreement allows PSI to recover $35 
million per year over the next four years, which is designed to recover all 
previously incurred, but as yet unrecovered, DSM costs and all costs related 
to satisfying remaining commitments associated with a previous DSM settlement 
agreement, together with carrying costs thereon, through a non-bypassable 
charge in PSI's retail rates.  The new agreement also authorizes PSI to spend 
up to $8 million annually on ongoing DSM programs through the year 1999 and to 
collect such amounts currently in retail rates.

February 1995 Order - Retail Rate Proceeding and Merger Savings Allocation 
Plan  The IURC's February 1995 Order approved a settlement agreement between 
PSI and certain intervenors authorizing PSI to increase retail rates $33.6 
million before credits to base rates of $4.4 million in 1995 and an additional 
$2.2 million and $2.4 million in 1996 and 1997, respectively, to reflect the 
sharing with customers of non-fuel operation and maintenance expense merger 
savings (Non-fuel Merger Savings). 

Additionally, the February 1995 Order provides PSI an opportunity to earn up 
to an additional 100 basis points above the common equity return authorized in 
the September 1996 Order until December 31, 1997.  In order to be eligible for 
such additional earnings, PSI must meet certain performance-related standards. 
PSI currently meets these standards, which are measured in conjunction with 
quarterly fuel adjustment clause filings.  After December 31, 1997, the 100 
basis point increment to the authorized common equity return will be phased 
out ratably over a twelve-month period.

Effective with this order, PSI began recovering carrying costs on certain 
environmental-related projects while under construction and prior to the date 
of an order reflecting such projects in rates.  Through this mechanism, 
revenues were increased by $9 million, $18 million, and $2 million on an 
annual basis in February 1995, March 1995, and January 1996, respectively.

Coal Contract Buyout Costs  In August 1996, PSI entered into a coal supply 
agreement with Eagle Coal Company (Eagle) for the supply of approximately 
three million tons of coal per year.  The agreement, which terminates December 
31, 2000, provides for a buyout fee of $179 million (including interest) to be 
included in the price of coal to PSI over the term of the contract.  This fee 
represents the costs to Eagle of the buyout of the coal supply agreement 
between PSI and Exxon Coal and Minerals Company.  The retail jurisdictional 
portion of the buyout charge, excluding the portion applicable to joint 
owners, will be recovered through the quarterly fuel adjustment clause, with 
carrying costs on unrecovered amounts, through December 2002.  PSI has also 
filed a petition at the FERC for recovery of the wholesale jurisdictional 
portion of the buyout costs through the wholesale fuel adjustment clause.  
Generally, the FERC will allow recovery if the utility can demonstrate there 
will be net benefits to customers during the buyout cost recovery period.  The 
FERC is expected to issue an order on PSI's petition during 1997.  PSI cannot 
predict what action the FERC may take with respect to this petition.  (See 
Note 1(i) of the "Notes to Financial Statements" in Item 8. "Financial 
Statements and Supplementary Data.")

Cinergy and CG&E

Ohio 

PUCO Order - CG&E's Gas Rate Proceeding  In December 1996, the PUCO issued an 
order (December 1996 Order) approving an overall average increase in gas 
revenues for CG&E of 2.5% ($9.3 million annually).  CG&E had requested a rate 
increase of 7.8% ($26.2 million annually).  The PUCO established an overall 
rate of return of 9.7%, including a return on common equity of 12.0%.  In 
developing this return on common equity, the PUCO considered, among other 
things, CG&E's efforts to reduce costs and increase operating efficiency and 
its proposals to allow residential customers to choose their natural gas 
supplier.  The PUCO disallowed certain of CG&E's requests, including the 
requested working capital allowance, recovery of certain capitalized 
information systems development costs, and certain merger-related costs.  
These disallowances resulted in a pretax charge to earnings during the fourth 
quarter of $20 million ($15 million net of taxes or 10 cents per share).  
CG&E's request for a rehearing on the disallowed information systems costs and 
other aspects of the order was denied.  CG&E has until April 14, 1997 to 
appeal these issues to the Supreme Court of Ohio.

Other  In April 1994, the PUCO issued an order approving a settlement 
agreement among CG&E, the PUCO Staff, the Office of the Ohio Consumers' 
Counsel, and other intervenors which resolved outstanding issues related to 
the merger and the PUCO's May 1992 order which established a rate phase-in 
plan for the Wm. H. Zimmer Generating Station (Zimmer).  As a result of this 
order, the rate phase-in plan, which granted annual increases in electric 
revenues of $37.8 million, $38.8 million, and $39.8 million in May 1992, 1993, 
and 1994, respectively, remained unchanged.  Additionally, as part of this 
settlement, CG&E agreed to a moratorium on increases in base electric rates 
until January 1, 1999 (except under certain circumstances).  In return, CG&E 
is allowed to retain all PUCO electric jurisdictional Non-fuel Merger Savings 
until 1999.

Consistent with the provisions of the settlement agreement and the December 
1996 Order, CG&E expensed merger transaction costs and costs to achieve merger 
savings (Merger Costs) applicable to its PUCO jurisdiction of $32 million, $5 
million, and $41 million (including $6 million as a result of the December 
1996 Order) in 1994, 1995, and 1996, respectively.  CG&E and its utility 
subsidiaries are deferring the non-PUCO jurisdictional portion of Merger Costs 
for future recovery in customer rates.

Additionally, in December 1996, the PUCO issued an order applicable to CG&E's 
DSM programs.  The order requires CG&E to spend up to one-half of the annual 
$5 million currently included in retail rates on PUCO-sanctioned low-income 
residential programs.  The remaining portion of the $5 million is to be 
applied to the recovery of DSM cost deferrals.  CG&E's participation in the 
low-income programs will be a factor considered by the PUCO in setting future 
rates of return and approving competitive transition plans.

Cinergy, CG&E, and ULH&P

Kentucky  In exchange for the KPSC's support of the merger, in May 1994, ULH&P 
accepted the KPSC's request for an electric rate moratorium commencing after 
ULH&P's next retail rate case (which has not yet been filed) and extending to 
January 1, 2000.  In addition, the KPSC has authorized concurrent recovery of 
costs related to various DSM programs of ULH&P.

ULH&P is deferring its portion of Merger Costs for future recovery in 
customers' rates.

KPSC Order  In July 1996, the KPSC issued an order authorizing a decrease in 
ULH&P's electric rates of approximately $1.8 million annually to reflect a 
reduction in the cost of electricity purchased from CG&E.

Cinergy, CG&E, and ULH&P

Potential Divestiture of Gas Operations  Under the PUHCA, the divestiture of 
CG&E's gas operations may be required.  In its order approving the merger, the 
SEC reserved judgment over Cinergy's ownership of the gas operations for a 
period of three years.  As previously discussed in the "Competitive Pressures" 
section, in June 1995, the SEC endorsed recommendations for reform/repeal of 
the PUHCA, including allowing registered holding companies to own combination 
electric and gas utility companies, provided the affected states agree.  It is 
expected that legislation addressing repeal of the PUHCA and industry 
restructuring will be introduced in Congress during 1997.

Regardless of the outcome of the proposals to reform/repeal the PUHCA, Cinergy 
believes it has a justifiable basis for retention of its gas operations and 
will continue its pursuit of SEC approval.  If divestiture is ultimately 
required, the SEC has historically allowed companies sufficient time to 
accomplish divestitures in a manner that protects shareholder value.

ENVIRONMENTAL ISSUES  

Cinergy, CG&E, and PSI

Clean Air Act Amendments of 1990 (CAAA)  The 1990 revisions to the Clean Air 
Act require reductions in both sulfur dioxide and nitrogen oxide emissions 
from utility sources.  Reductions of these emissions are to be accomplished in 
two phases.  Compliance under Phase I was required by January 1, 1995, and 
Phase II compliance is required by January 1, 2000.  To achieve the sulfur 
dioxide reduction objectives of the CAAA, emission allowances have been 
allocated by the United States Environmental Protection Agency (EPA) to 
affected sources (e.g., Cinergy's electric generating units).  Each allowance 
permits one ton of sulfur dioxide emissions.  The CAAA allows compliance to be 
achieved on a national level, which provides companies the option to achieve 
this compliance by reducing emissions and/or purchasing emission allowances.  

Cinergy's operating strategy for Phase I is based upon the compliance plans 
developed by PSI and CG&E and approved by the IURC and the PUCO.  All required 
modifications to Cinergy's generating units to implement the compliance plans 
were completed prior to January 1, 1995.

To comply with Phase II sulfur dioxide emission requirements, Cinergy's 
current strategy includes a combination of switching to lower-sulfur coal 
blends and utilizing an emission allowance banking strategy.  This cost-
effective strategy will allow Cinergy to meet Phase II sulfur dioxide 
reduction requirements while maintaining optimal flexibility to meet changes 
in output due to increased customer choice as well as potentially significant 
future environmental requirements.  Cinergy intends to utilize an emission 
allowance banking strategy to the extent a viable emission allowance market 
exists.  However, the availability and economic value of emission allowances 
over the long term is still uncertain.  In the event the market price for 
emission allowances or lower-sulfur coal increases substantially from the 
current forecast, Cinergy could be forced to consider high capital cost 
options. 

To meet nitrogen oxide reductions required by Phase II, Cinergy may install 
additional low-nitrogen oxide burners on certain affected units in addition to 
the use of a system-wide nitrogen oxide emission averaging strategy.
Cinergy is forecasting CAAA compliance capital expenditures of $27 million 
during the 1997 through 2001 period.  Of these forecasted expenditures, $15 
million relates to CG&E and $12 million relates to PSI.  These expenditures 
are included in the amounts provided in the "Capital Requirements" section 
herein.  In addition, operating costs may increase due to higher fuel costs 
(e.g., higher-quality, lower-sulfur coal; increased use of natural gas) and 
maintenance expenses. 

Global Climate Change  Some scientists, environmentalists, and policymakers 
continue to express concern about the potential for climate change from 
increasing amounts of greenhouse gases released as by-products of burning 
fossil fuel and other industrial processes.  However, significant uncertainty 
exists concerning increased greenhouse gas concentrations and their effect on 
the global climate system.  Cinergy's plan for managing the potential risk and 
uncertainty of climate change includes: (1) implementing cost effective 
greenhouse gas emission reduction and offsetting activities; (2) encouraging 
the use of alternative fuels for transportation vehicles (a major source of 
greenhouse gases); (3) funding research of more efficient and alternative 
electric generating technologies; (4) funding research to better understand 
the causes and consequences of climate change; and (5) encouraging a global 
discussion of the issues and how best to manage them.  Cinergy believes that 
voluntary programs, such as the United States Department of Energy Climate 
Challenge Program, which Cinergy joined in 1995, can successfully limit 
greenhouse gas emissions. 

Air Toxics  The air toxics provisions of the CAAA exempted fossil-fueled steam 
utility plants from mandatory reduction of 189 listed air toxics until the EPA 
completes a study.  In October 1996, the EPA issued its final interim report 
indicating these emissions create little risk to public health.  A final 
report, including further assessments on mercury emissions, is expected at a 
later date.  If additional air toxics regulations are issued, the cost of 
compliance could be significant.  Cinergy cannot predict the outcome or the 
effects of this EPA study. 

Ambient Air Standards  The EPA is proceeding with two programs aimed at 
assuring clean air.  As required by the CAAA, the EPA is reviewing the 
adequacy of the ozone and particulate matter National Ambient Air Quality 
Standards (NAAQS) to protect human health.  Preliminary proposals indicate the 
EPA's intent is to make the standards more stringent, thus designating more 
areas as non-attainment.  The EPA has stated its intent to issue final rules 
by summer 1997.  At the same time, the EPA has published its intent to notify 
certain states that their State Implementation Plans (SIPs) need to be 
modified in order for existing non-attainment areas to more rapidly reach 
attainment with the current ozone standard.  Even states in attainment of the 
NAAQS could be required to reduce emissions if they are determined to impact 
non-attainment areas in other states.  The specific affected states and 
proposed ozone precursor reductions are to be proposed this spring and 
finalized later in the year.  Since the new NAAQS levels are not yet final and 
the studies of long-range pollution transport have not been completed, Cinergy 
cannot predict the outcome or effect of the proposed NAAQS and SIP 
modifications.

Cinergy, CG&E, PSI, and ULH&P

Other  As more fully discussed in Note 12(b)(ii) of the "Notes to Financial 
Statements" in "Item 8.  Financial Statements and Supplementary Data", PSI has 
received notification from Indiana Gas Company, Inc. (IGC) and Northern 
Indiana Public Service Company (NIPSCO) alleging PSI is a Potentially 
Responsible Party under the Comprehensive Environmental Response, Compensation 
and Liability Act with respect to certain manufactured gas plant (MGP) sites. 

PSI has not assumed any responsibility to reimburse IGC or NIPSCO for their 
costs of investigating and remediating MGP sites, with the exception of a site 
at Shelbyville, Indiana, for which the costs are not material.  It is 
premature, at this time, to predict the nature, extent, and ultimate costs of, 
or PSI's responsibility for, environmental investigations and remediations at 
MGP sites owned or previously owned by PSI or its predecessors.  Information 
available to PSI regarding the current status of investigation and/or 
remediation at the sites identified in IGC's claim indicates PSI's potential 
exposure to probable and reasonably estimable liabilities associated with 
these MGP sites would not be material to its financial condition or results of 
operations.  However, further investigation and remediation activities at 
these sites and the additional sites identified in NIPSCO's claim may indicate 
that the potential liability for MGP sites could be material.  

Refer to Note 12(b) and (c) of the "Notes to Financial Statements" in "Item 8. 
Financial Statements and Supplementary Data" for a more detailed discussion of 
the status of certain environmental issues.

CAPITAL REQUIREMENTS

CONSTRUCTION AND OTHER INVESTING ACTIVITIES

Cinergy, CG&E, PSI, and ULH&P

Construction expenditures for the Cinergy system are forecasted to be 
approximately $345 million for 1997, and over the next five years (1997 
through 2001), are forecasted to be approximately $1.7 billion.  Of these 
projected expenditures, approximately $170 million and $817 million relate to 
CG&E (including $19 million and $111 million for ULH&P) and $175 million and 
$908 million relate to PSI, for 1997, and over the next five years, 
respectively.  Substantially all of these expenditures are for capital 
improvements to and expansion of Cinergy's operating facilities. 

Cinergy's 1995 Form 10-K, as amended, and CG&E's, PSI's, and ULH&P's 1995 Form 
10-K, reflected forecasted capital expenditures of $2.1 billion ($1.1 billion 
for CG&E, including $102 million for ULH&P, and $1.0 billion for PSI) for the 
period 1996-2000.  That amount included expenditures for investments in new 
generation of $520 million ($285 million for CG&E and $235 million for PSI) 
over the five-year period.  Cinergy is no longer forecasting investments in 
new generating facilities under the belief that excess supply in the market 
will continue to exist at least through the transition to full customer 
choice.  However, Cinergy is in the process of securing options to purchase 
power in order to assure the necessary resources are available to meet its 
franchise obligations during the transition (see further discussion in 
"Competitive Pressures" section).  If deregulation of the generation component 
of the electric utility industry does not occur in the manner or in the time 
frame anticipated, and depending on capacity constraints, franchise demand 
requirements, and the regulatory requirements dictated for Integrated Resource 
Planning, Cinergy could be forced to make capital investments in new 
generating facilities in excess of $100 million annually in lieu of relying 
upon the existing market for its energy needs.  (All forecasted amounts are in 
nominal dollars and reflect assumptions as to the economy, capital markets, 
construction programs, legislative and regulatory actions, frequency and 
timing of rate increases, and other related factors, all or any of which may 
change significantly.)

Cinergy

As discussed in the "Competitive Pressures" section, during 1996, Cinergy 
acquired a 50% interest in Midlands.  Cinergy and GPU, Inc. (GPU) formed Avon 
Energy Partners Holdings (Avon Energy), a 50%/50% joint venture, and acquired 
the outstanding common stock of Midlands through Avon Energy's wholly-owned 
subsidiary for approximately $2.6 billion.  Cinergy and GPU have each invested 
approximately $500 million in Avon Energy.  Cinergy funded its investment 
through its credit facility.  Avon Energy funded the remainder of the purchase 
price through the issuance of non-recourse debt (see Note 1(e)(i) of the 
"Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data").

In the fourth quarter of 1996, Cinergy and Trigen formed a joint venture, 
Trigen-Cinergy Solutions LLC (Trigen-Cinergy).  Cinergy expects to invest up 
to $100 million and to provide guaranties of debt and other obligations in an 
aggregate amount not to exceed $250 million at any one time with respect to 
energy-related products and services, including those undertaken by Trigen-
Cinergy.  (See the "Competitive Pressures" section herein.) 

Cinergy

Cinergy's net cash used in investing activities was $832 million in 1996, 
compared to $330 million and $528 million in 1995 and 1994, respectively.  The 
increase in 1996 was primarily attributable to Cinergy's investment in 
Midlands.

CG&E and ULH&P

CG&E and its subsidiaries' net cash used in investing activities was $156 
million in 1996 (including $19 million for ULH&P), compared to $147 million 
and $196 million in 1995 and 1994 (including $19 million and $20 million for 
ULH&P), respectively.  The increase in 1996 was primarily attributable to an 
increase in the amount of DSM expenditures.

PSI

PSI's net cash used in investing activities was $163 million in 1996, compared 
to $203 million and $331 million in 1995 and 1994, respectively.  The decrease 
in 1996 was primarily attributable to an increase in the amortization of DSM 
deferrals as a result of the September 1996 Order.

OTHER COMMITMENTS

Cinergy, CG&E, PSI, and ULH&P

Securities Redemptions  Mandatory redemptions of long-term debt total $492 
million ($371 million for CG&E and its subsidiaries, including $20 million for 
ULH&P, and $121 million for PSI) during the period 1997 through 2001.  Cinergy 
will continue to evaluate opportunities for the refinancing of outstanding 
securities beyond mandatory redemption requirements.

Maintenance and replacement fund provisions contained in CG&E's, PSI's, and 
ULH&P's first mortgage bond indentures require cash payments, bond 
retirements, or pledges of unfunded property additions each year based on an 
amount related to the net revenues of the respective company.

Cinergy and CG&E

Preferred Stock Tender Offer  During the third quarter of 1996, Cinergy 
commenced an offer to purchase any and all outstanding shares of preferred 
stock of CG&E.  The total cost of the tender for these preferred shares ($194 
million) was funded from short-term borrowings and the liquidation of certain 
short-term investments.  Through the tender, approximately 90% of the 
outstanding preferred stock of CG&E was retired.  At the same time, a 
restrictive covenant as to the amount of unsecured debt which could be issued 
by CG&E was eliminated.  The resulting premium on the reacquisition of 
preferred stock of $18 million (including fees paid to tender agents) is shown 
as a reduction from net income for purposes of determining net income and 
earnings per share applicable to common stock. 

Cinergy, CG&E, PSI, and ULH&P

Year 2000 Costs  Cinergy, like most owners of computer software, will be 
required to modify significant portions of its software so that it will 
function properly in the year 2000.  Preliminary estimates of the total costs 
to be incurred prior to 2000 range from $12 million to $17 million.  
Maintenance or modification costs will be expensed as incurred, while the 
costs of new software will be capitalized and amortized over the software's 
useful life.

CAPITAL RESOURCES

Cinergy, CG&E, PSI, and ULH&P

Cinergy, CG&E and its subsidiaries (including ULH&P), and PSI forecast that 
their need for external funds during the 1997 through 2001 period will 
primarily be for the refinancing of existing securities.  (This forecast 
reflects nominal dollars and assumptions as to the economy, capital markets, 
construction programs, legislative and regulatory actions, frequency and 
timing of rate increases, and other related factors, all or any of which may 
change significantly.)  

INTERNAL FUNDS

Cinergy, CG&E, PSI, and ULH&P

General  Currently, the majority of Cinergy's revenues and corresponding cash 
flows are derived from cost-of-service regulated operations.  As previously 
discussed in the "Competitive Pressures" section, Cinergy believes the 
generation component of the electric utility industry will ultimately be 
deregulated.  However, the timing and nature of the deregulation and 
restructuring of the industry is uncertain.  In the interim, revenues provided 
by cost-of-service regulated operations are anticipated to continue as the 
primary source of funds for Cinergy.  As a result of its low-cost position and 
market strategy, over the long term, Cinergy believes it will be successful in 
a more competitive environment.  However, as the industry becomes more 
competitive, future cash flows from Cinergy's operations could be subject to a 
higher degree of volatility than under the present regulatory structure.  

Cinergy

For the year ended December 31, 1996, Cinergy's cash provided from operating 
activities was $816 million compared to $703 million in 1995 and $441 million 
in 1994.  The increase in 1996 was primarily due to CG&E's and ULH&P's sales 
of accounts receivables during 1996.  The increase was offset, in part, by 
PSI's payment of $80 million in accordance with a 1989 settlement agreement 
between PSI and Wabash Valley Power Association, Inc. (WVPA).  (See Notes 6 
and 12(e) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

CG&E and ULH&P

For the year ended December 31, 1996, CG&E and its subsidiaries' cash provided 
from operating activities was $676 million (including $42 million for ULH&P) 
compared to $441 million in 1995 (including $37 million for ULH&P) and $447 
million (including $33 million for ULH&P) in 1994.  The increase in 1996 was 
primarily due to CG&E's and ULH&P's sales of accounts receivable during 1996. 
(See Note 6 of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

PSI

For the year ended December 31, 1996, PSI's cash provided from operating 
activities was $228 million compared to $257 million in 1995 and $42 million 
in 1994.  The decrease in 1996 reflects PSI's payment of $80 million in 
accordance with a 1989 settlement agreement between PSI and WVPA.  (See Note 
12(e) of the "Notes to Financial Statements" in "Item 8.  Financial Statements 
and Supplementary Data.")

PSI

Contribution from Parent Company

In December 1994, Cinergy publicly issued approximately 7.1 million shares of 
common stock.  The net proceeds of approximately $160 million were contributed 
to the equity capital of PSI for general corporate purposes, including 
repayment of short-term indebtedness incurred for construction financing.

Cinergy, CG&E, PSI, and ULH&P

Merger Savings  As previously discussed in the "Regulatory Matters" section, 
PSI and CG&E currently have regulatory orders in effect which provide 
mechanisms for the retention of a portion of net Non-fuel Merger Savings.

COMMON STOCK

Cinergy

During 1996, 1995, and 1994, Cinergy issued 15 thousand, 2.6 million, and 2.8 
million shares, respectively, of common stock pursuant to its dividend 
reinvestment and stock purchase plan and various stock-based employee plans.  
Cinergy purchased 1.2 million outstanding shares on the open market to satisfy 
substantially all of its 1996 obligations under these plans.  Cinergy plans to 
continue using market purchases of common stock to satisfy all or at least a 
portion of its obligations under these plans. 

In October 1996, Cinergy increased the quarterly dividend by approximately 5% 
to 45 cents per share of common stock.  

LONG-TERM DEBT

Cinergy, CG&E, PSI, and ULH&P

As of December 31, 1996, CG&E, PSI, and ULH&P had state regulatory authority 
for long-term debt issuances of $250 million, $87 million, and $40 million, 
respectively.  Regulatory approval to issue additional amounts of securities 
will be requested as needed.

SHORT-TERM DEBT

Cinergy, CG&E, PSI, and ULH&P

Cinergy's subsidiaries had regulatory authority to borrow up to $838 million 
($438 million for CG&E and its subsidiaries, including $35 million for ULH&P, 
and $400 million for PSI) as of December 31, 1996.  In connection with this 
authority, unsecured lines of credit (Committed Lines) have been established 
which permit borrowings of up to $280 million ($80 million for CG&E and $200 
million for PSI), of which $181 million ($65 million for CG&E and $116 million 
for PSI) remained unused at December 31, 1996.  CG&E and PSI also have the 
capability to issue commercial paper which must be supported by Committed 
Lines of the respective company.  Neither CG&E nor PSI issued commercial paper 
in 1996 and none remained outstanding as of December 31, 1996.  Additionally, 
pursuant to this authority, additional short-term borrowings with various 
banks are arranged on an "as offered" basis.  

To better manage cash and working capital requirements, Cinergy's utility 
subsidiaries, including CG&E, PSI, and ULH&P, participate in a money pooling 
arrangement.  Under this money pooling arrangement, Cinergy system companies 
with surplus short-term funds, whether from internal or external sources, 
provide short-term loans to other system companies at rates that reflect (1) 
the actual costs of the external borrowing and/or (2) the costs of the 
internal funds which are set at the 30-day Federal Reserve "AA" industrial 
commercial paper rate.  The SEC's approval of the money pool, pursuant to the 
PUHCA, extends through May 31, 1997.  In March 1997, Cinergy's utility 
subsidiaries, including CG&E, PSI, and ULH&P and other Cinergy system 
companies, which participate in the money pooling arrangement, filed an 
application with the SEC under the PUHCA requesting reauthorization of the 
money pool through December 31, 2002.

Cinergy

Cinergy has established a $600 million credit facility, which expires in May 
2001, of which $91 million remained unused as of December 31, 1996.  This new 
credit facility was established, in part, to fund the acquisition of Midlands 
through Avon Energy and its wholly-owned subsidiary ($500 million has been 
designated for this purpose) with the remaining portion available for general 
corporate purposes.  The prior $100 million credit facility, which would have 
expired in September 1997, has been terminated. 

In addition, Cinergy U.K., a subsidiary of Investments, which holds Cinergy's 
50% investment in Avon Energy, entered into a $40 million non-recourse credit 
agreement, of which $27 million is outstanding as of December 31, 1996.  This 
new credit agreement was also used to fund the acquisition of Midlands.

Cinergy has borrowed approximately $500 million under the two agreements to 
fund its equity investment in Avon Energy.

Net cash used in financing activities totaled $110 thousand for 1996, as 
compared to $410 million for 1995 and a source of $147 million for 1994.  The 
change in cash flow from financing activities for 1996 primarily resulted from 
Cinergy borrowing under its credit facility to fund the acquisition of 
Midlands.

CG&E and ULH&P

CG&E and its subsidiaries' net cash used in financing activities totaled $521 
million (including $23 million for ULH&P) for 1996, as compared to $339 
million (including $17 million for ULH&P) for 1995 and $203 million (including 
$14 million for ULH&P) for 1994.  The change in cash flow from financing 
activities for 1996 was primarily attributable to CG&E's payments of common 
stock dividends to Cinergy during 1996.

PSI

PSI's net cash used in financing activities totaled $77 million for 1996, as 
compared to $45 million for 1995 and a source of $291 million for 1994.  The 
change in cash flow from financing activities for 1996 was primarily 
attributable to PSI's payments of common stock dividends to Cinergy during 
1996.

SALE OF ACCOUNTS RECEIVABLE

Cinergy, CG&E, PSI, and ULH&P

In January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on a 
revolving basis, undivided percentage interests in certain of their accounts 
receivable up to an aggregate maximum of $350 million, of which $246 million 
($164 million by CG&E and its subsidiaries, including $23 million by ULH&P, 
and $82 million by PSI) has been sold as of December 31, 1996.  PSI had a 
similar agreement, which expired in January 1996, to sell up to $90 million of 
its accounts receivable. 

FINANCIAL DERIVATIVES

Cinergy, CG&E, PSI, and ULH&P

As discussed in Notes 8(a) and 16(b) of the "Notes to Financial Statements" in 
"Item 8.  Financial Statements and Supplementary Data," Cinergy and its 
subsidiaries use forward foreign exchange contracts and currency swaps to 
hedge exposures to fluctuations in foreign currency exchange rates, and 
interest rate swap agreements to lower funding costs and reduce exposures to 
fluctuations in interest rates.

POWER MARKETING AND TRADING

Cinergy, CG&E, and PSI

As discussed in the "Competitive Pressures" section, Cinergy has functionally 
reorganized its electric operations into three strategic business units, 
including an energy commodities business unit.  The energy commodities 
business unit includes Cinergy's power marketing and trading function, which 
was formally established in 1995 and was the natural successor of CG&E's and 
PSI's existing bulk power operations.

At present, the competitive electric power market is dominated by a small 
number of large participants (primarily utilities and a few power marketers), 
trading liquidity is limited, and pricing is not transparent.  Similar to the 
development of natural gas markets, the market for trading electricity is 
expected to develop rapidly and Cinergy plans to be a major participant.

At December 31, 1996, Cinergy's trading book principally consisted of physical 
contracts with fixed pricing.  The majority of these physical contracts are 
fixed-price forward-purchase and sales contracts, which require settlement by 
physical delivery of electricity.  During 1996, Cinergy also began entering 
into option contracts which, to the extent the options are exercised, are also 
settled with physical delivery of electricity.  Contracts requiring settlement 
in cash were not significant during 1996.

These transactions give rise to market risk, which represents the potential 
adverse impact of changes in the market value of a particular commitment.  As 
Cinergy continues to develop its power marketing and trading business (and due 
to its substantial investment in generating assets), its potential exposure to 
movements in the price of electricity and other energy commodities will become 
greater.

Credit risk represents to the risk of loss which would occur as a result of 
nonperformance by counterparties pursuant to the terms of their contractual 
obligations.  As the competitive electric power market expands, counterparties 
will increasingly include new market entrants, such as other power marketers, 
brokers, and commodities traders.  This increased level of new market 
entrants, as well as competitive pressures on the utility market participants, 
could increase Cinergy's exposure to credit risk.  

As Cinergy expands its power marketing and trading business, in addition to 
increased exposure to market and credit risks, it will also be subject to 
increased earnings volatility.  Cinergy has established a risk management 
function and is implementing risk management policies and procedures to manage 
its exposure to market and credit risks.

ACCOUNTING CHANGES

Cinergy, CG&E, PSI, and ULH&P

The FASB has issued Statement of Financial Accounting Standards No. 125, 
Accounting for Transfers and Servicing of Financial Assets and Extinguishments 
of Liabilities (Statement 125). Statement 125, which is effective for 
transactions occurring after December 31, 1996, provides consistent standards 
for distinguishing transfers of financial assets that are sales from transfers 
that are secured borrowings.  Based on the terms of CG&E's, PSI's, and ULH&P's 
current securitization agreement with respect to their sales of accounts 
receivables, the application of the provisions of Statement 125 will not 
significantly affect the companies financial statements.  Costs to service the 
receivables sold are not material.  (See Note 6 of the "Notes to Financial 
Statements" in "Item 8.  Financial Statements and Supplementary Data.")

INFLATION

Cinergy, CG&E, PSI, and ULH&P

Over the past several years, the rate of inflation has been relatively low.  
Cinergy believes that the recent inflation rates do not materially affect its 
results of operations or financial condition.  However, under existing 
regulatory practice, only the historical cost of plant is recoverable from 
customers.  As a result, cash flows designed to provide recovery of historical 
plant costs may not be adequate to replace plant in future years.

DIVIDEND RESTRICTIONS

Cinergy, CG&E, and PSI

See Note 2(b) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data."

RESULTS OF OPERATIONS

Cinergy, CG&E, PSI, and ULH&P

Reference is made to "ITEM 8.  Financial Statements and Supplementary Data."
<PAGE>
        Index to Financial Statements and Financial Statement Schedules

                                                                  Page Number
Financial Statements

  Cinergy, CG&E, PSI, and ULH&P
     Report of Independent Public Accountants. . . . . . . .          XX
  Cinergy
     Consolidated Statements of Income for the
       three years ended December 31, 1996. . . . . . . . .           XX
     Consolidated Balance Sheets at
       December 31, 1996 and 1995 . . . . . . . . . . . . .           XX
     Consolidated Statements of Changes in
       Common Stock Equity for the three years
       ended December 31, 1996. . . . . . . . . . . . . . .           XX
     Consolidated Statements of Cash Flows
       for the three years ended December 31, 1996. . . . .           XX
     Results of Operations. . . . . . . . . . . . . . . . .           XX
  CG&E
     Consolidated Statements of Income for the
       three years ended December 31, 1996. . . . . . . . .           XX
     Consolidated Balance Sheets at
       December 31, 1996 and 1995 . . . . . . . . . . . . .           XX
     Consolidated Statements of Changes in
       Common Stock Equity for the three years
       ended December 31, 1996. . . . . . . . . . . . . . .           XX
     Consolidated Statements of Cash Flows
       for the three years ended December 31, 1996. . . . .           XX
     Results of Operations. . . . . . . . . . . . . . . . .           XX
  PSI
     Consolidated Statements of Income for the
       three years ended December 31, 1996. . . . . . . . .           XX
     Consolidated Balance Sheets at
       December 31, 1996 and 1995 . . . . . . . . . . . . .           XX
     Consolidated Statements of Changes in
       Common Stock Equity for the three years
       ended December 31, 1996. . . . . . . . . . . . . . .           XX
     Consolidated Statements of Cash Flows
       for the three years ended December 31, 1996. . . . .           XX
     Results of Operations. . . . . . . . . . . . . . . . .           XX
  ULH&P
     Statements of Income for the three years ended
       December 31, 1996. . . . . . . . . . . . . . . . . .           XX
     Balance Sheets at December 31, 1996 and 1995 . . . . .           XX
     Statements of Changes in Common Stock Equity
       for the three years ended December 31, 1996. . . . .           XX
     Statements of Cash Flows for the three years
       ended December 31, 1996. . . . . . . . . . . . . . .           XX
     Results of Operations. . . . . . . . . . . . . . . . .           XX

  Notes to Financial Statements . . . . . . . . . . . . . .           XX
<PAGE>
Index to Financial Statements and Financial Statement Schedules (cont.)

                                                                  Page Number
Financial Statement Schedules

     Schedule II - Valuation and Qualifying Accounts 
       Cinergy . . . . . . . . . . . . . . . . . . . . . .           XXX
       CG&E. . . . . . . . . . . . . . . . . . . . . . . .           XXX
       PSI . . . . . . . . . . . . . . . . . . . . . . . .           XXX
       ULH&P . . . . . . . . . . . . . . . . . . . . . . .           XXX


The information required to be submitted in schedules other than those 
indicated above has been included in the balance sheets, the statements of 
income, related schedules, the notes thereto, or omitted as not required by 
the Rules of Regulation S-X.
<PAGE>
             ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Cinergy Corp., The Cincinnati Gas & Electric 
Company, PSI Energy, Inc., and The Union Light, Heat and Power Company:

We have audited the financial statements of Cinergy Corp. (a Delaware 
Corporation), The Cincinnati Gas & Electric Company (an Ohio Corporation), PSI 
Energy, Inc. (an Indiana Corporation), and The Union Light, Heat and Power 
Company (a Kentucky Corporation), as of December 31, 1996 and 1995, and for 
each of the three years in the period ended December 31, 1996, as listed in 
the index on page 48.  These financial statements and the schedules referred 
to below are the responsibility of management.  Our responsibility is to 
express an opinion on these financial statements and schedules based on our 
audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance 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.  An audit 
also includes assessing the accounting principles used and significant 
estimates made by management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide a reasonable basis 
for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Cinergy Corp., The Cincinnati 
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power 
Company as of December 31, 1996 and 1995, and the results of their operations 
and their cash flows for each of the three years in the period ended December 
31, 1996, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic 
financial statements taken as a whole.  The supplemental financial statement 
schedules listed in the index on page 49 pursuant to Item 14, are presented 
for purposes of complying with the Securities and Exchange Commission's Rules 
and Regulations under the Securities Exchange Act of 1934 and are not a 
required part of the basic financial statements.  The supplemental financial 
statement schedules have been subjected to the auditing procedures applied in 
our audits of the basic financial statements and, in our opinion, are fairly 
stated in all material respects in relation to the basic financial statements 
taken as a whole.




Arthur Andersen LLP
Cincinnati, Ohio,
January 29, 1997
<PAGE
Cinergy Corp.
  and Subsidiaries
<PAGE


<TABLE>
<CAPTION>
                                    CINERGY CORP.

                          CONSOLIDATED STATEMENTS OF INCOME

                                           1996           1995           1994
                                        (in thousands, except per share amounts)
<S>                                    <C>            <C>            <C>
Operating Revenues 
  Electric                              $2 768 706     $2 612 579     $2 446 049
  Gas                                      474 034        410 852        442 398
                                         3 242 740      3 023 431      2 888 447

Operating Expenses
  Fuel used in electric production         713 250        716 754        712 993
  Gas purchased                            249 116        206 250        248 293
  Purchased and exchanged power            158 838         47 632         49 082
  Other operation                          598 434        520 590        549 152
  Maintenance                              193 908        182 180        200 959
  Depreciation                             282 763        279 759        294 395
  Amortization of phase-in deferrals        13 598          9 091           -    
  Post-in-service deferred operating
    expenses - net                          (1 509)        (2 500)        (5 998)
  Phase-in deferred depreciation              -              -            (2 161)
  Income taxes (Note 11)                   218 269        221 429        154 494
  Taxes other than income taxes            257 815        255 533        243 716
                                         2 684 482      2 436 718      2 444 925

Operating Income                           558 258        586 713        443 522

Other Income and Expenses - Net
  Allowance for equity funds used 
    during construction                      1 225          1 964          6 201
  Post-in-service carrying costs             1 223          3 186          9 780
  Phase-in deferred return                   8 372          8 537         15 351
  Equity in earnings of unconsolidated
    subsidiary (Note 1(e))                  25 430           -              -
  Income taxes (Note 11)                    19 536          7 358         12 922
  Other - net                              (40 464)        (3 051)       (33 789)
                                            15 322         17 994         10 465

Income Before Interest and Other Charges   573 580        604 707        453 987

Interest and Other Charges
  Interest on long-term debt               190 617        213 911        219 248
  Other interest                            31 169         20 826         20 370
  Allowance for borrowed funds used
    during construction                     (6 183)        (8 065)       (12 332)
  Preferred dividend requirements of
    subsidiaries                            23 180         30 853         35 559
                                           238 783        257 525        262 845

Net Income                              $  334 797     $  347 182     $  191 142
Costs of Reacquisition of Preferred
    Stock of Subsidiary (Note 3(b))        (18 391)          -              -  _
Net Income Applicable to Common Stock   $  316 406     $  347 182     $  191 142

Average Common Shares Outstanding          157 678        156 620        147 426

Earnings Per Common Share       
  Net income                                 $2.12          $2.22          $1.30
  Costs of reacquisition of preferred
    stock of subsidiary (Note 3(b))           (.12)           -              - _
  Net income applicable to
    common stock                             $2.00          $2.22          $1.30

Dividends Declared Per Common Share          $1.74          $1.72          $1.50
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS

                                                            December 31
                                                         1996          1995_
                                                       (dollars in thousands)
<S>                                                 <C>            <C>
Utility Plant - Original Cost
  In service
    Electric                                         $8 809 786     $8 617 695
    Gas                                                 713 829        680 339
    Common                                              185 255        183 422
                                                      9 708 870      9 481 456
  Accumulated depreciation                            3 591 858      3 367 401
                                                      6 117 012      6 114 055
  Construction work in progress                         172 614        135 852
      Total utility plant                             6 289 626      6 249 907

Current Assets
  Cash and temporary cash investments                    19 327         35 052
  Restricted deposits                                     1 721          2 336
  Accounts receivable less accumulated provision
    for doubtful accounts of $10,618 in 1996 and
    $10,360 in 1995 (Note 6)                            199 361        371 150
  Materials, supplies, and fuel - at average cost
    Fuel for use in electric production                  71 730        122 409
    Gas stored for current use                           32 951         21 493
    Other materials and supplies                         80 292         85 076
  Property taxes applicable to subsequent year          123 580        116 822
  Prepayments and other                                  37 049         32 347
                                                        566 011        786 685

Other Assets
  Regulatory assets (Note 1(f))
    Amounts due from customers - income taxes           377 194        423 493
    Post-in-service carrying costs and deferred 
      operating expenses                                186 396        187 190
    Coal contract buyout costs                          138 171           -   
    Deferred demand-side management costs               134 742        129 400
    Phase-in deferred return and depreciation            95 163        100 388
    Deferred merger costs                                93 999         56 824
    Unamortized costs of reacquiring debt                70 518         73 904
    Other                                                72 483         74 911
  Investment in unconsolidated
    subsidiary (Note 1(e))                              592 660           -
  Other                                                 231 551        137 362
                                                      1 992 877      1 183 472

                                                     $8 848 514     $8 220 064
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                              CINERGY CORP.

CAPITALIZATION AND LIABILITIES

                                                                           December 31
                                                         1996          1995_
                                                       (dollars in thousands)
<C>                                                 <C>            <C>
Common Stock Equity (Note 2)
  Common stock - $.01 par value;
    authorized shares - 600,000,000;
    outstanding shares - 157,679,129 in 1996
    and 157,670,141 in 1995                          $    1 577     $    1 577
  Paid-in capital                                     1 590 735      1 597 050
  Retained earnings                                     992 273        950 216
  Cumulative foreign currency 
    translation adjustment                                 (131)          -  _
      Total common stock equity                       2 584 454      2 548 843

Cumulative Preferred Stock of Subsidiaries 
  (Note 3)
  Not subject to mandatory redemption                   194 232        227 897
  Subject to mandatory redemption                          -           160 000

Long-term Debt (Note 4)                               2 534 978      2 530 766
      Total capitalization                            5 313 664      5 467 506

Current Liabilities
  Long-term debt due within one year (Note 4)           140 000        201 900
  Notes payable (Note 5)                                713 617        165 800
  Accounts payable                                      305 420        268 139
  Litigation settlement (Note 12(e))                       -            80 000
  Accrued taxes                                         323 059        317 185
  Accrued interest                                       55 590         55 995
  Other                                                 114 653         57 202
                                                      1 652 339      1 146 221

Other Liabilities
  Deferred income taxes (Note 11)                     1 146 263      1 120 900
  Unamortized investment tax credits                    175 935        185 726
  Accrued pension and other postretirement
    benefit costs (Notes 9 and 10)                      263 319        171 771
  Other                                                 296 994        127 940
                                                      1 882 511      1 606 337 
Commitments and Contingencies (Note 12)
                                                     $8 848 514     $8 220 064
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY


                                                                             Cumulative 
                                                                              Foreign 
                                                                              Currency
                                     Common      Paid-in       Retained      Translation        Total Common
                                      Stock      Capital       Earnings      Adjustment         Stock Equity
                         (dollars in thousands)
<S>                                 <C>        <C>            <C>              <C>             <C>
Balance December 31, 1993            $1 453     $1 312 426     $ 907 802        $ -             $2 221 681
Net income                                                       191 142                           191 142
Issuance of 9,830,042 shares of
  common stock                           99        227 882                                         227 981
Common stock issuance expenses                      (5 225)                                         (5 225)
Dividends on common stock (see
  page 52 for per share amounts)                                (221 362)                         (221 362)
Other                                                  575          (521)                               54

Balance December 31, 1994             1 552      1 535 658       877 061                         2 414 271
Net income                                                       347 182          -                347 182
Issuance of 2,472,103 shares of
  common stock - net                     25         60 343                                          60 368
Common stock issuance expenses                        (229)                                           (229)
Dividends on common stock (see 
  page 52 for per share amounts)                                (268 851)                         (268 851)
Other                                                1 278        (5 176)                           (3 898)

Balance December 31, 1995             1 577      1 597 050       950 216          -              2 548 843
Net income                                                       334 797                           334 797
Issuance of 8,988 shares of
  common stock - net                                   311                                             311
Dividends on common stock (see   
  page 52 for per share amounts)                                (274 358)                         (274 358)
Translation adjustments                                                          (131)                (131)
Costs of reacquisition of 
  preferred stock of subsidiary                                  (18 391)                          (18 391)
Other                                               (6 626)            9         ____               (6 617)

Balance December 31, 1996            $1 577     $1 590 735     $ 992 273        $(131)          $2 584 454
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                        CINERGY CORP.

                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         1996          1995        1994
                                                                  (in thousands)
<S>                                                  <C>           <C>         <C>
Operating Activities
  Net income                                          $ 334 797     $ 347 182   $ 191 142
  Items providing (using) cash currently:
    Depreciation                                        282 763       279 759     294 395
    Deferred income taxes and investment
      tax credits - net                                  47 912        28 411      30 926
    Allowance for equity funds used during 
      construction                                       (1 225)       (1 964)     (6 201)
    Regulatory assets - net                                 280         1 026     (58 165)
    Changes in current assets and current
      liabilities
        Restricted deposits                                (358)       (1 035)     10 046
        Accounts receivable, net of reserves
          on receivables sold                           132 749       (71 641)     40 550
        Materials, supplies, and fuel                    44 005        51 214     (45 949)
        Accounts payable                                 37 281         1 672      (8 191)
        Advance under accounts receivable purchase
          agreement                                        -             -        (49 940)
        Litigation settlement                           (80 000)         -           -
        Accrued taxes and interest                        5 469        56 635       5 753
    Other items - net                                    12 416        12 136      36 890

        Net cash provided by operating activities       816 089       703 395     441 256
 
Financing Activities
  Issuance of common stock                                  311        60 139     222 756
  Issuance of long-term debt                            174 817       344 280     420 935
  Funds on deposit from issuance of long-term debt          973         9 987      27 897
  Retirement of preferred stock of subsidiaries        (212 487)      (93 466)    (40 426)
  Redemption of long-term debt                         (237 183)     (398 833)   (313 682)
  Change in short-term debt                             547 817       (63 100)     51 186
  Dividends on common stock                            (274 358)     (268 851)   (221 362)

        Net cash provided by (used in) financing
          activities                                       (110)     (409 844)    147 304

Investing Activities
  Construction expenditures (less allowance for 
    equity funds used during construction)             (323 013)     (324 905)   (480 533)
  Deferred demand-side management costs - net            (5 342)      (25 273)    (47 268)
  Investment in unconsolidated subsidiary              (503 349)         -           -    
  Equity investments in Argentine utilities                -           19 799        -    
    
        Net cash used in investing activities          (831 704)     (330 379)   (527 801)

Net increase (decrease) in cash and temporary
  cash investments                                      (15 725)      (36 828)     60 579
Cash and temporary cash investments at beginning 
  of period                                              35 052        71 880      11 121
Cash and temporary cash investments at end of
  period                                              $  19 327     $  35 052   $  71 880

Supplemental Disclosure of Cash Flow Information
  Cash paid during the year for:
    Interest (net of amount capitalized)              $ 207 393     $ 218 357   $ 211 163
    Income taxes                                        141 917       140 189      96 680
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>

RESULTS OF OPERATIONS - CINERGY

Kilowatt-Hour (kwh) Sales 

Cinergy's total kwh sales in 1996, as compared to 1995, increased 11.0% 
reflecting an increase in sales to all customer classes.  Increased activity 
in Cinergy's power marketing and trading operations led to higher non-firm 
power sales for resale.  The increase in retail sales which reflects a higher 
average number of residential and commercial customers was partially offset by 
the return to more normal weather in 1996.  The increase in industrial sales 
was due to growth in the primary metals sector.  

As compared to 1994, total kwh sales in 1995 increased 4.1% reflecting higher 
sales to all retail customer classes.  Contributing significantly to this 
increase were higher residential and commercial sales due to warmer weather 
during the 1995 summer cooling season and colder weather during the fourth 
quarter of 1995.  Additionally, increased sales to industrial customers, 
reflecting growth in the primary metals and chemicals sectors, contributed to 
the increased kwh sales level.  These increases were offset, in part, by a 
decline in non-firm power sales for resale.  

Total kwh sales increased 2.8% in 1994, as compared to 1993, due, in large 
part, to non-firm power sales for resale, reflecting third-party, short-term 
power sales to other utilities through PSI's system and direct power sales by 
PSI to other utilities.  This increase was partially offset by CG&E's reduced 
power sales to other utilities in 1994.  Also significantly contributing to 
the total kwh sales levels were increased sales to industrial customers.  This 
increase reflected growth in the primary metals and transportation equipment 
sectors.  Commercial sales increased due, in part, to new customers.  A 
decrease in residential sales resulted from the milder weather experienced 
during the third and fourth quarters of 1994.

Year-to-year changes in kwh sales for each major class of customers are shown 
below:
 
                                         Increase (Decrease) from Prior Year

                                             1996        1995       1994_
   Retail
     Residential                             2.4%        5.8%      (1.7)%
     Commercial                              1.3         4.3        1.9
     Industrial                              3.3         4.6        4.6

   Total retail                              2.4         4.9        1.6

   Sales for resale   
     Firm power obligations                 10.5         1.7        2.5
     Non-firm power transactions            82.0        (1.3)      14.4

   Total sales for resale                   59.6         (.4)      10.5

   Total sales                              11.0         4.1        2.8 

Cinergy currently forecasts a 2% annual compound growth rate in kwh sales over 
the 1997 through 2001 period.  This forecast does not reflect the effects of 
DSM programs and excludes non-firm power sales for resale and any potential 
new off-system, long-term firm power sales.

Thousand Cubic Feet (Mcf) Sales and Transportation 

Mcf gas sales and transportation volumes increased 8.4%, as compared to 1995. 
Colder weather in the first quarter of 1996 and cooler than normal weather 
early in the second quarter of 1996 led to increased gas sales to residential 
and commercial customers.  Also contributing to the increase in total sales 
was an increase in the number of residential and commercial customers.  
Industrial sales decreased and gas transported increased as customers 
continued to purchase gas directly from suppliers using transportation 
services provided by CG&E.  The increase in transportation volumes mainly 
reflects demand for gas transportation services in the primary metals sector.

Total gas sales and transportation volumes increased 8.6% in 1995, as compared 
to 1994.  Increased sales to residential customers, resulting from colder 
weather during the fourth quarter of 1995 and an increase in the number of 
customers, contributed to the higher sales levels.  Additionally, increases in 
commercial and industrial transportation volumes, which resulted from 
customers electing to purchase gas directly from suppliers, more than offset 
declines in industrial and commercial sales.  The increased transportation 
volumes mainly reflect industrial demand for gas transportation services in 
the primary metals, food products, and paper products sectors. 

The milder weather experienced in 1994 contributed to a decrease in 
residential and commercial gas sales volumes and led to the decrease in total 
Mcf sales and transportation of 1.2%, as compared to 1993.  An increase in gas 
transportation volumes to industrial customers, mainly in the primary metals 
sector, partially offset this decrease.

Year-to-year changes in Mcf sales for each major class of customers and Mcf 
transportation volumes are shown below:
 
                                         Increase (Decrease) from Prior Year

                                              1996       1995        1994 _

   Retail
     Residential                               3.6%      10.5%      (10.2)% 
     Commercial                                7.8       (2.0)       (1.5)
     Industrial                              (13.3)     (26.6)       (9.9)

   Total sales                                 2.1        1.5        (6.7)

   Gas transported                            19.8       24.4        13.9

   Total gas sold and transported              8.4        8.6        (1.2)

Operating Revenues 

ELECTRIC OPERATING REVENUES

The $156 million (6.0%) increase in 1996 electric operating revenues, as 
compared to 1995, is due, in large part, to the increase in kwh sales as 
previously discussed.  Also contributing to the increase was the effect of 
PSI's 7.6% retail rate increase approved in the September 1996 Order, as well 
as a full year's effect of PSI's 4.3% retail rate increase approved in the 
February 1995 Order and PSI's 1.9% increase for carrying costs on construction 
work in progress property which was approved by the IURC in March 1995.  These 
rate increases were offset by the return of approximately $10 million to PSI's 
customers in accordance with the February 1995 Order, which requires all 
retail operating income above a certain level to be refunded to customers, the 
operation of CG&E's fuel adjustment clauses reflecting a lower average cost of 
fuel used in electric production, and a decrease in ULH&P's electric rates 
reflecting a reduction in the cost of electricity purchased from CG&E.

Higher retail kwh sales, PSI's electric rate increases which became effective 
in February 1995 and March 1995, and a full year's effect of CG&E's electric 
rate increase which became effective in May 1994, significantly contributed to 
the $167 million (6.8%) increase in electric operating revenues for 1995, when 
compared to 1994. 

Electric operating revenues increased $82 million (3.5%) in 1994, as compared 
to 1993, as a result of CG&E's electric rate increases which became effective 
in May 1993, August 1993, and May 1994, PSI's increased kwh sales, and the 
effects of PSI's $31 million refund to retail customers accrued in June 1993 
as a result of the settlement of an April 1990 IURC order.  

An analysis of electric operating revenues for the past three years is shown 
below:

                                                  1996       1995      1994_
                                                    (dollars in millions)  

Previous year's electric                          
  operating revenues                             $2 613     $2 446    $2 364
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                           (1)        54        32
    Sales for resale 
      Firm power obligations                         (4)        (1)        1
      Non-firm power transactions                     -          4         - 
  Total change in price per kwh                      (5)        57        33

  Kwh sales
    Retail                                           56        109        34
    Sales for resale
      Firm power obligations                          9          1         2
      Non-firm power transactions                    94         (1)       14
  Total change in kwh sales                         159        109        50

  Other                                               2          1        (1)

Current year's electric 
  operating revenues                             $2 769     $2 613    $2 446

GAS OPERATING REVENUES

The increasing trend of industrial customers purchasing gas directly from 
producers and utilizing CG&E facilities to transport the gas (see the "Mcf 
Sales and Transportation" section) continues to put downward pressure on gas 
operating revenues.  When Cinergy sells gas, the sales price reflects the cost 
of gas purchased by Cinergy to support the sale plus the costs to deliver the 
gas.  When gas is transported, Cinergy does not incur any purchased gas costs 
but delivers gas the customer has purchased from other sources.  Since 
providing transportation services does not necessitate recovery of gas 
purchased costs, the revenue per Mcf transported is less than the revenue per 
Mcf sold.  As a result, a higher relative volume of gas transported to gas 
sold translates into lower gas operating revenues.  

Gas operating revenues increased $63 million (15.4%), as compared to 1995.  
This increase is attributable to the increase in gas sales and transportation 
volumes.  Also contributing to the increase was the operation of fuel 
adjustment clauses reflecting a higher cost of gas purchased.

In 1995, gas operating revenues declined $32 million (7.1%), as compared to 
1994, as a result of the aforementioned trend toward increased transportation 
services and the operation of fuel adjustment clauses reflecting a lower 
average cost of gas purchased.

Gas operating revenues decreased $27 million (5.7%) in 1994, as compared to 
1993, due to the operation of fuel adjustment clauses which reflected a lower 
average cost of gas purchased during the latter part of 1994 and a reduction 
in total volumes sold and transported.

Operating Expenses

FUEL

Fuel Used in Electric Production Electric fuel costs, Cinergy's largest 
operating expense, remained relatively constant in 1996, showing less than a 
1% decrease when compared to 1995. 

An analysis of fuel costs for the past three years is shown below:    

                                                     1996      1995     1994
                                                      (dollars in millions)

Previous year's fuel expense                         $717      $713     $733
Increase (Decrease) due to change in:
  Price of fuel                                        (6)      (25)     (39) 
  Kwh generation                                        2        29       19

Current year's fuel expense                          $713      $717     $713

Gas Purchased  Gas purchased increased $43 million (20.8%), as compared to 
1995 due to an increase in volumes purchased and a higher average cost per Mcf 
of gas purchased, as previously discussed.

In 1995, gas purchased expense decreased $42 million (16.9%), as compared to 
1994, primarily reflecting a decline in the average cost per Mcf of gas 
purchased.

A reduction in the average cost per Mcf of gas purchased and lower volumes 
purchased contributed to the decline in gas purchased expense of $33 million 
(11.6%) in 1994, as compared to 1993.

PURCHASED AND EXCHANGED POWER

Purchased and exchanged power increased $111 million, as compared to 1995.  
The increase primarily reflects increased purchases of non-firm power for 
resale to others as a result of increased activity in Cinergy's power 
marketing and trading operations.
  
The increase in purchased and exchanged power of $13 million (35.6%) in 1994, 
as compared to 1993, reflected an increase in third-party, short-term power 
sales to other utilities through PSI's system and increased purchases of other 
non-firm power by PSI primarily to serve its own load.  

OTHER OPERATION

Other operation increased $78 million (15.0%) in 1996, as compared to 1995.  
This increase is due to a number of factors, including increased 
administrative and general expenses reflecting, in part, charges of $35 
million for voluntary early retirement and severance programs and charges 
totaling $6 million related to the December 1996 Order.  In addition, an 
increase of $7 million in production expenses associated with the operations 
of the Clean Coal Project contributed to the increase.

In 1995, other operation expenses decreased $29 million (5.2%), as compared to 
1994.  Charges of $62 million in 1994 for Merger Costs and other expenditures 
which cannot be recovered from customers under the merger savings sharing 
mechanisms authorized by regulators significantly contributed to the decrease. 
In addition, emphasis on achieving merger savings and other cost reductions 
led to lower operating costs for 1995.  These decreases were partially offset 
by the recognition of postretirement benefit costs on an accrual basis, an 
increase in the ongoing level of DSM expenses, and the amortization of 
deferred postretirement benefit costs, deferred Merger Costs, and deferred DSM 
costs, all of which are being recovered in revenues pursuant to the February 
1995 Order.

Other operation expenses increased $105 million (23.7%) in 1994, as compared 
to 1993, due to a number of factors including the previously discussed charges 
of $62 million, fuel litigation expenses of $8 million incurred by PSI, and 
increased electric production and distribution expenses.

MAINTENANCE

An increase of $12 million (6.4%) in maintenance costs, as compared to 1995, 
is primarily attributable to increased maintenance associated with the Clean 
Coal Project which began commercial operation in November 1995.  Increased 
transmission and distribution expenses also contributed to the higher level of 
maintenance expense.

Maintenance costs decreased $19 million (9.3%) in 1995, as compared to 1994, 
primarily due to improved scheduling of routine maintenance on electric 
generating units.  Lower maintenance costs on gas and electric distribution 
facilities also contributed to this decrease.

Increased maintenance on a number of PSI's generating stations and the initial 
costs of PSI's new distribution line clearing program resulted in increased 
maintenance expenses of $8 million (4.2%) in 1994, as compared to 1993. 

DEPRECIATION

In 1995, depreciation expense decreased $15 million (5.0%), when compared to 
1994, due in large part to the adoption of lower depreciation rates for PSI 
effective in March 1995.  This decrease was partially offset by the effect of 
additions to utility plant.

Depreciation expense increased $16 million (5.6%) in 1994, as compared to 
1993, primarily as a result of additions to electric utility plant.

POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET

Post-in-service deferred operating expenses - net reflect various deferrals of 
depreciation, operation and maintenance expenses (exclusive of fuel costs), 
and property taxes on certain generating units and other utility plant from 
the in-service date until the related plant is reflected in retail rates, net 
of amortization of these deferrals as they are recovered through retail rates. 
(See Note 1(h) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

PHASE-IN DEFERRED DEPRECIATION AND RETURN AND AMORTIZATION OF PHASE-IN
  DEFERRALS

Phase-in deferred depreciation, phase-in deferred return, and amortization of 
phase-in deferrals reflect the PUCO-ordered phase-in plan for Zimmer.  (See 
Note 1(k) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

TAXES OTHER THAN INCOME TAXES

Taxes other than income taxes increased $12 million (4.8%) in 1995 and $15 
million (6.5%) in 1994, primarily due to increased property taxes resulting 
from a greater investment in taxable property and higher property tax rates.

Other Income and Expenses - Net

POST-IN-SERVICE CARRYING COSTS

Post-in-service carrying costs reflect the deferral of carrying costs on 
certain generating units and other utility plant from the in-service date 
until the related plant is reflected in retail rates.  (See Note 1(h) of the 
Notes to Consolidated Financial Statements).

OTHER - NET

The change in other - net of $37 million, as compared to 1995, is due to a 
number of factors including $4 million of interest received in 1995 on an 
income tax refund related to prior years, charges totaling $14 million 
associated with the December 1996 Order, expenses associated with CG&E's and 
ULH&P's sales of accounts receivables in 1996, and the effect of a $10 million 
gain in 1995 on the sale of Cinergy's investment in an Argentine utility.  

The $31 million change in other - net in 1995, as compared to 1994, is due in 
part to interest on the income tax refund and the $10 million gain discussed 
above and charges of $17 million in 1994 for merger-related and other 
expenditures which cannot be recovered from customers. 

In 1994, other - net increased $9 million, as compared to 1993, primarily as a 
result of the write-off during 1993 of $22 million related to the defense 
against the IPALCO Enterprises, Inc. hostile takeover attempt.  The increase 
was offset, in part, by the charges in 1994 of $17 million previously 
discussed.

Interest and Other Charges

INTEREST ON LONG-TERM DEBT

Interest on long-term debt decreased $23 million (10.9%), as compared to 1995, 
due to the refinancing and redemptions of long-term debt by CG&E, PSI, and 
ULH&P during 1995 and 1996.

OTHER INTEREST

Other interest increased $10 million (49.7%), as compared to 1995, primarily 
reflecting increased interest expense on short-term borrowings used to fund 
Cinergy's investment in Avon Energy.

PREFERRED DIVIDEND REQUIREMENTS OF SUBSIDIARIES

Preferred dividend requirements of subsidiaries decreased $8 million (24.9%), 
as compared to 1995.  The decrease was primarily attributable to the 
reacquisition of approximately 90% of the outstanding preferred stock of CG&E, 
pursuant to Cinergy's tender offer (see Note 3(b) of the Notes to Financial 
Statements).
<PAGE>
The Cincinnati Gas & Electric Company 
and subsidiaries
<PAGE>

<TABLE>
<CAPTION>
                         THE CINCINNATI GAS & ELECTRIC COMPANY

                           CONSOLIDATED STATEMENTS OF INCOME

                                           1996           1995           1994
                                                     (in thousands)
<S>                                    <C>            <C>            <C>
Operating Revenues 
  Electric
    Non-affiliated companies            $1 458 828     $1 407 119     $1 341 120
    Affiliated companies                    43 180         30 104          4 667
  Gas         
    Non-affiliated companies               474 034        410 852        442 398
    Affiliated companies                         7           -              -  _
  Total operating revenues               1 976 049      1 848 075      1 788 185

Operating Expenses
  Fuel used in electric production         349 197        327 353        325 470
  Gas purchased                            249 116        206 250        248 293
  Purchased and exchanged power
    Non-affiliated companies                46 333         13 870         12 349
    Affiliated companies                    21 921         42 575          8 583
  Other operation                          330 169        291 874        336 030
  Maintenance                               96 205         94 688        106 810
  Depreciation                             160 951        158 986        156 676
  Amortization of phase-in deferrals        13 598          9 091           -    
  Post-in-service deferred operating
    expenses - net                           3 290          3 290          3 290
  Phase-in deferred depreciation              -              -            (2 161)
  Income taxes (Note 11)                   145 075        136 386        104 128
  Taxes other than income taxes            207 904        203 680        197 381
                                         1 623 759      1 488 043      1 496 849

Operating Income                           352 290        360 032        291 336

Other Income and Expenses - Net
  Allowance for equity funds
    used during construction                 1 225          1 790          1 971
  Phase-in deferred return                   8 372          8 537         15 351
  Income taxes (Note 11)                     9 139          4 587          6 619
  Other - net                              (21 296)         4 221         (6 726)
                                            (2 560)        19 135         17 215

Income Before Interest                     349 730        379 167        308 551

Interest                  
  Interest on long-term debt               123 616        143 334        150 386
  Other interest                             2 793          3 486          2 831
  Allowance for borrowed funds 
    used during construction                (3 859)        (3 854)        (2 977)
                                           122 550        142 966        150 240

Net Income                                 227 180        236 201        158 311
Preferred Dividend Requirement              10 643         17 673         22 377
Costs of Reacquisition of
  Preferred Stock (Note 3(b))               18 391           -              -___
Net Income Applicable to
  Common Stock                          $  198 146     $  218 528     $  135 934
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    THE CINCINNATI GAS & ELECTRIC COMPANY

                         CONSOLIDATED BALANCE SHEETS

ASSETS

                                                            December 31           
                                                         1996          1995       
                                                       (dollars in thousands)
<S>                                                 <C>            <C>
Utility Plant - Original Cost
  In service
    Electric                                         $4 631 605     $4 564 711    
    Gas                                                 713 829        680 339    
    Common                                              185 255        183 422    
                                                      5 530 689      5 428 472    
  Accumulated depreciation                            1 868 579      1 730 232    
                                                      3 662 110      3 698 240    
  Construction work in progress                          95 984         77 661    
      Total utility plant                             3 758 094      3 775 901    

Current Assets
  Cash and temporary cash investments                     5 120          6 612    
  Restricted deposits                                     1 171          1 144    
  Notes receivable from affiliated companies             31 740         24 715    
  Accounts receivable less accumulated
    provision for doubtful accounts of $9,178 in
    1996 and $9,615 in 1995 (Note 6)                    117 912        292 493    
  Accounts receivable from affiliated companies           2 453         17 162    
  Materials, supplies, and fuel - at average cost
    Fuel for use in electric production                  29 865         40 395    
    Gas stored for current use                           32 951         21 493    
    Other materials and supplies                         52 023         55 388    
  Property taxes applicable to subsequent year          123 580        116 822    
  Prepayments and other                                  32 433         30 572    
                                                        429 248        606 796    

Other Assets
  Regulatory assets (Note 1(f))
    Amounts due from customers - income taxes           344 126        397 155    
    Post-in-service carrying costs and deferred 
      operating expenses                                141 492        148 316    
    Phase-in deferred return and depreciation            95 163        100 388    
    Deferred demand-side management costs                33 534         19 158    
    Deferred merger costs                                17 709         14 538    
    Unamortized costs of reacquiring debt                38 439         39 428    
    Other                                                19 545         41 025    
  Other                                                  89 908         54 691    
                                                        779 916        814 699    

                                                     $4 967 258     $5 197 396    
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          THE CINCINNATI GAS & ELECTRIC COMPANY

CAPITALIZATION AND LIABILITIES

                                                            December 31           
                                                         1996          1995       
                                                       (dollars in thousands)
<S>                                                 <C>            <C>
Common Stock Equity (Note 2)
  Common stock - $8.50 par value;
    authorized shares - 120,000,000;
    outstanding shares - 89,663,086 in 1996
    and 1995                                         $  762 136     $  762 136    
  Paid-in capital                                       536 276        339 101    
  Retained earnings                                     247 403        427 226    
      Total common stock equity                       1 545 815      1 528 463    

Cumulative Preferred Stock (Note 3)
  Not subject to mandatory redemption                    21 146         40 000    
  Subject to mandatory redemption                          -           160 000    

Long-term Debt (Note 4)                               1 565 108      1 702 650    
      Total capitalization                            3 132 069      3 431 113    

Current Liabilities
  Long-term debt due within one year (Note 4)           130 000        151 500    
  Notes payable (Note 5)                                 30 488           -       
  Notes payable to affiliated companies                     103           -       
  Accounts payable                                      166 064        138 735    
  Accounts payable to affiliated companies               12 726         20 468    
  Accrued taxes                                         267 841        250 189    
  Accrued interest                                       30 570         31 299    
  Other                                                  32 191         40 409    
                                                        669 983        632 600    

Other Liabilities
  Deferred income taxes (Note 11)                       767 085        795 385    
  Unamortized investment tax credits                    123 185        129 372    
  Accrued pension and other postretirement
    benefit costs (Notes 9 and 10)                      165 282        117 641    
  Other                                                 109 654         91 285    
                                                      1 165 206      1 133 683    
Commitments and Contingencies (Note 12)
                                                     $4 967 258     $5 197 396    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        THE CINCINNATI GAS & ELECTRIC COMPANY

             CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

                                     Common      Paid-in       Retained     Total Common
                                      Stock      Capital       Earnings     Stock Equity
                                                 (dollars in thousands)
<S>                                <C>          <C>          <C>            <C>
Balance December 31, 1993           $748 528     $314 218     $ 456 511      $1 519 257
Net income                                                      158 311         158 311
Issuance of 1,601,003 shares of
  common stock                        13 608       23 142                        36 750
Common stock issuance expenses                        (39)                          (39)
Dividends on preferred stock                                    (22 377)        (22 377)
Dividends on common stock                                      (158 970)       (158 970)
Other                                                 553          (513)             40

Balance December 31, 1994            762 136      337 874       432 962       1 532 972
Net income                                                      236 201         236 201 
Dividends on preferred stock                                    (17 673)        (17 673)
Dividends on common stock                                      (219 550)       (219 550)
Other                                               1 227        (4 714)         (3 487)

Balance December 31, 1995            762 136      339 101       427 226       1 528 463
Net income                                                      227 180         227 180 
Dividends on preferred stock                                    (10 643)        (10 643)
Dividends on common stock                                      (377 969)       (377 969)
Contribution from parent company                  197 207                       197 207
Costs of reacquisition of 
  preferred stock                                               (18 391)        (18 391)
Other                                                 (32)                          (32)

Balance December 31, 1996           $762 136     $536 276     $ 247 403      $1 545 815
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           THE CINCINNATI GAS & ELECTRIC COMPANY

                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         1996         1995         1994
                                                                  (in thousands)
<S>                                                  <C>           <C>         <C>
Operating Activities
  Net income                                          $ 227 180     $ 236 201   $ 158 311
  Items providing (using) cash currently
    Depreciation                                        160 951       158 986     156 676
    Deferred income taxes and investment
      tax credits - net                                  18 929        26 938      13 680
    Allowance for equity funds used during 
      construction                                       (1 225)       (1 790)     (1 971)
    Regulatory assets - net                              34 761        16 654     (21 248)
    Changes in current assets and current
      liabilities
        Restricted deposits                                 (27)       (1 046)         22
        Accounts and notes receivable, net of
          reserves on receivables sold                  156 182       (65 350)     43 145
        Materials, supplies, and fuel                     2 437        14 039      21 202
        Accounts payable                                 19 587        38 386      (8 093)
        Accrued taxes and interest                       16 923        21 935       8 211
    Other items - net                                    39 843        (4 105)     77 462

        Net cash provided by operating activities       675 541       440 848     447 397
 
Financing Activities
  Issuance of common stock                                 -             -         36 711
  Issuance of long-term debt                               -          344 280     311 957
  Retirement of preferred stock                            -          (93 450)    (40 400)
  Redemption of long-term debt                         (162 583)     (338 378)   (313 522)
  Change in short-term debt                              30 591       (14 500)    (16 500)
  Dividends on preferred stock                          (10 643)      (17 673)    (22 377)
  Dividends on common stock                            (377 969)     (219 550)   (158 970)

        Net cash used in financing activities          (520 604)     (339 271)   (203 101)

Investing Activities
  Construction expenditures (less allowance for 
    equity funds used during construction)             (142 053)     (138 325)   (189 954)
  Deferred demand-side management costs - net           (14 376)       (9 156)     (6 396)
 
        Net cash used in investing activities          (156 429)     (147 481)   (196 350)
 
Net increase (decrease) in cash and temporary
  cash investments                                       (1 492)      (45 904)     47 946
Cash and temporary cash investments at beginning 
  of period                                               6 612        52 516       4 570
Cash and temporary cash investments at end of
  period                                              $   5 120     $   6 612   $  52 516

Supplemental Disclosure of Cash Flow Information
  Cash paid during the year for:
    Interest (net of amount capitalized)              $ 117 848     $ 137 892   $ 142 380
    Income taxes                                        109 034        79 769      88 639
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>


RESULTS OF OPERATIONS - CG&E

Kwh Sales

CG&E's total kwh sales increased 10.6% in 1996, as compared to 1995, 
reflecting an increase in sales to all customer classes. The increase to 
retail sales which reflects a higher average number of residential and 
commercial customers was partially offset by the return to more normal weather 
in 1996.  The increase in industrial sales was due to growth in the primary 
metals sector.  Increased activity in Cinergy's power marketing and trading 
operations led to higher non-firm power sales for resale. 

Kwh sales for 1995 increased 15.3% over 1994, reflecting increased sales to 
all customer classes.  Significantly contributing to this increase were higher 
non-firm power sales for resale primarily due to increased sales to PSI, as a 
result of the coordination of CG&E's and PSI's electric dispatch systems.  
Higher residential and commercial sales resulted primarily from warmer weather 
during the 1995 summer cooling season and colder weather during the fourth 
quarter of 1995.  Additionally, increased sales to industrial customers were 
mainly attributable to growth in the primary metals and chemicals sectors.

CG&E's total kwh sales in 1994, as compared to 1993, decreased 1.2%, due in 
large part to reduced power sales to other utilities in 1994 and decreased 
residential sales resulting from milder weather experienced during the third 
and fourth quarters of 1994.  This decrease was partially offset by increased 
kwh sales to industrial customers reflecting growth in the primary metals and 
machinery sectors.

Year-to-year changes in kwh sales for each major class of customers are shown 
below:
 
                                   Increase (Decrease) from Prior Year

                                       1996       1995       1994 
   Retail
     Residential                        4.7%       3.8%     (2.0)%
     Commercial                         2.3        3.4       2.3
     Industrial                         3.4        3.9       4.3

   Total retail                         3.3        3.8       1.1

   Sales for resale   
     Firm power obligations             3.7        6.3       1.7
     Non-firm power transactions       51.7      211.8     (29.3)

   Total sales for resale              48.1      172.6     (24.9)

   Total sales                         10.6       15.3      (1.2)

CG&E currently forecasts a 2% annual compound growth rate in kwh sales over 
the 1997 through 2001 period.  This forecast does not reflect the effects of 
DSM programs and excludes non-firm power sales for resale and any potential 
new off-system, long-term firm power sales.

Mcf Sales and Transportation

Mcf gas sales and transportation volumes increased 8.4%, as compared to 1995. 
Colder weather in the first quarter of 1996 and cooler than normal weather 
early in the second quarter of 1996 led to increased gas sales to residential 
and commercial customers.  Also contributing to the increase in total sales 
was an increase in the number of residential and commercial customers.  
Industrial sales decreased and gas transported increased as customers 
continued to purchase gas directly from suppliers using transportation 
services provided by CG&E.  The increase in transportation volumes mainly 
reflects demand for gas transportation services in the primary metals sector.

Total gas sales and transportation volumes increased 8.6% in 1995, as compared 
to 1994.  Increased sales to residential customers, resulting from colder 
weather during the fourth quarter of 1995 and an increase in the number of 
customers, contributed to the higher sales levels.  Additionally, increases in 
commercial and industrial transportation volumes, which resulted from 
customers electing to purchase gas directly from suppliers, more than offset 
declines in industrial and commercial sales.  The increased transportation 
volumes mainly reflect industrial demand for gas transportation services in 
the primary metals, food products, and paper products sectors.

The milder weather experienced in 1994 contributed to a decrease in 
residential and commercial gas sales volumes and led to the decrease in total 
Mcf sales and transportation of 1.2%, as compared to 1993.  An increase in gas 
transportation volumes to industrial customers, mainly in the primary metals 
sector, partially offset this decrease.

Year-to-year changes in Mcf sales for each major class of customers and Mcf 
transportation volumes are shown below:
 
                                 Increase (Decrease) from Prior Year

                                     1996        1995         1994

   Retail
     Residential                      3.6 %      10.5 %    (10.2)%
     Commercial                       7.8        (2.0)      (1.5)
     Industrial                     (13.3)      (26.6)      (9.9)

   Total sales                        2.1         1.5       (6.7)

   Gas transported                   19.8        24.4       13.9

   Total gas sold and transported     8.4         8.6       (1.2)

Operating Revenues

ELECTRIC OPERATING REVENUES

The $65 million (4.5%) increase in 1996 electric operating revenues, as 
compared to 1995, is due, in large part, to the increase in kwh sales as 
previously discussed. This increase was partially offset by the operation of 
fuel adjustment clauses reflecting a lower average cost of fuel used in 
electric production.

Electric operating revenues increased $91 million (6.8%) in 1995, as compared 
to 1994.  This increase reflects the higher kwh sales, as previously discussed 
and a full year's effect of CG&E's electric rate increase which became 
effective in May 1994.  This increase was partially offset by the operation of 
fuel adjustment clauses reflecting a lower average cost of fuel used in 
electric production.

CG&E's electric rate increases which became effective in May 1993, August 
1993, and May 1994 substantially contributed to the increase in electric 
operating revenues of $63 million (4.9%) in 1994, as compared to 1993.  
An analysis of electric operating revenues for the past three years is shown 
below:

                                          1996      1995       1994_
                                               (in millions)  
Previous year's electric                          
  operating revenues                     $1 437    $1 346     $1 282
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                  (13)      (10)        55
    Sales for resale 
      Firm power obligations                  -         1          -
      Non-firm power transactions           (10)       (9)         3
  Total change in price per kwh             (23)      (18)        58

  Kwh sales
    Retail                                   44        49         14
    Sales for resale
      Firm power obligations                  1         1          -
      Non-firm power transactions            41        60         (9)
  Total change in kwh sales                  86       110          5   
 
  Other                                       2        (1)         1
Current year's electric 
  operating revenues                     $1 502    $1 437     $1 346

GAS OPERATING REVENUES

The increasing trend of industrial customers purchasing gas directly from 
producers and utilizing CG&E facilities to transport the gas (see the "Mcf 
Sales and Transportation" section) continues to put downward pressure on gas 
operating revenues.  When CG&E sells gas, the sales price reflects the cost of 
gas purchased by CG&E to support the sale plus the costs to deliver the gas.  
When gas is transported, CG&E does not incur any purchased gas costs but 
delivers gas the customer has purchased from other sources.  Since providing 
transportation services does not necessitate recovery of gas purchased costs, 
the revenue per Mcf transported is less than the revenue per Mcf sold.  As a 
result, a higher relative volume of gas transported to gas sold translates 
into lower gas operating revenues.  

Gas operating revenues increased $63 million (15.4%)as compared to 1995.  
This increase is attributable to the increase in gas sales and transportation 
volumes.  Also contributing to the increase was the operation of fuel 
adjustment clauses reflecting a higher cost of gas purchased.

In 1995, gas operating revenues declined $32 million (7.1%), as compared to 
1994, as a result of the aforementioned trend toward increased transportation 
services and the operation of fuel adjustment clauses reflecting a lower 
average cost of gas purchased.

Gas operating revenues decreased $27 million (5.7%)in 1994, as compared to 
1993, due to the operation of fuel adjustment clauses which reflected a lower 
average cost of gas purchased during the latter part of 1994 and a reduction 
in total volumes sold and transported.

Operating Expenses

FUEL

Fuel Used in Electric Production  Electric fuel costs increased $22 million 
(6.7%) in 1996, when compared to 1995.  

An analysis of fuel costs for the past three years is shown below:    

                                              1996      1995     1994
                                                   (in millions)

Previous year's fuel expense                  $327      $325     $333
Increase (Decrease) due to change in:
  Price of fuel                                 (4)      (20)      (9)
  Kwh generation                                26        22        1

Current year's fuel expense                   $349      $327     $325

Gas Purchased  
Gas purchased increased $43 million (20.8%), as compared to 1995, due to an 
increase in volumes purchased and a higher average cost per Mcf of gas 
purchased, as previously discussed.

In 1995, gas purchased expense decreased $42 million (16.9%), as compared to 
1994, primarily reflecting a decline in the average cost per Mcf of gas 
purchased.

A reduction in the average cost per Mcf of gas purchased and lower volumes 
purchased contributed to the decline in gas purchased expense of $33 million 
(11.6%) in 1994, as compared to 1993.

PURCHASED AND EXCHANGED POWER

Purchased and exchanged power increased $12 million (20.9%), as compared to 
1995.  The increase primarily reflects increased purchases of non-firm power 
for resale to others as a result of increased activity in Cinergy's power 
marketing and trading operations.

Purchased and exchanged power costs increased $36 million in 1995, as compared 
to 1994, reflecting increased purchases from PSI resulting from the 
coordination of PSI's and CG&E's electric dispatch systems.  These increases 
were partially offset by a decline in third-party, short-term power sales to 
other utilities.

OTHER OPERATION

Other operation increased $38 million (13.1%) in 1996, as compared to 1995.  
This increase is attributable to higher administrative and general expenses 
reflecting, in part, charges of $30 million for voluntary early retirement and 
severance programs and charges totaling $6 million related to the December 
1996 Order.  The increase is partially offset by a decrease in electric 
distribution expenses. 

In 1995, other operation expenses decreased $44 million (13.1%), as compared 
to 1994.  Charges of $52 million in 1994 for Merger Costs and other 
expenditures which cannot be recovered from customers under the merger savings 
sharing mechanism authorized by the PUCO significantly contributed to the 
decrease.  In addition, emphasis on achieving merger savings and other cost 
reductions led to lower operating costs for 1995.  The decrease was partially 
offset by the write-off of obsolete inventory in December 1995.

Other operation expenses increased $79 million (30.5%) in 1994, as compared to 
1993, due to a number of factors including the previously discussed charges of 
$52 million and increased electric production and distribution expenses.

MAINTENANCE

The decrease in maintenance expense of $12 million (11.3%) in 1995, as 
compared to 1994, was primarily attributable to improved scheduling of routine 
maintenance on electric generating units.  Lower maintenance costs on gas and 
electric distribution facilities also contributed to the decline.

POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET

Post-in-service deferred operating expenses - net reflect various deferrals of 
depreciation, operation and maintenance expenses (exclusive of fuel costs), 
and property taxes on certain generating units and other utility plant from 
the in-service date until the related plant is reflected in retail rates, net 
of amortization of these deferrals as they are recovered through retail rates. 
(See Note 1(h) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

PHASE-IN DEFERRED DEPRECIATION AND RETURN AND AMORTIZATION OF PHASE-IN 
  DEFERRALS

Phase-in deferred depreciation, phase-in deferred return, and amortization of 
phase-in deferrals reflect the PUCO-ordered phase-in plan for Zimmer.  (See 
Note 1(k) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

TAXES OTHER THAN INCOME TAXES

Taxes other than income taxes increased $6 million (3.2%) in 1995, and $14 
million (7.6%) in 1994, primarily due to increased property taxes resulting 
from a greater investment in taxable property and higher property tax rates.

Other Income and Expenses - Net

OTHER - NET

The change in other - net of $26 million in 1996, as compared to 1995, is due 
to a number of factors including $4 million of interest received in 1995 on an 
income tax refund related to prior years, charges totaling $14 million 
associated with the December 1996 Order, and expenses associated with CG&E's 
and ULH&P's sales of accounts receivables in 1996.  

The increase in other - net of $11 million in 1995, as compared to 1994, is 
due in part to interest on the income tax refund discussed above and charges 
of $12 million in 1994 for merger-related and other expenditures which cannot 
be recovered from customers. 

Interest and Other Charges

Interest on Long-term Debt

Interest on long-term debt decreased $20 million (13.8%), as compared to 1995, 
due to the refinancing and redemptions of long-term debt in 1996 and 1995.

PREFERRED DIVIDEND REQUIREMENT
Preferred dividend requirements decreased $7 million (39.8%), as compared to 
1995.  The decrease was primarily attributable to the reacquisition of 
approximately 90% of the outstanding preferred stock of CG&E, pursuant to 
Cinergy's tender offer (see Note 3(b) of the "Notes to Financial Statements" 
in "Item 8.  Financial Statements and Supplementary Data").

CG&E's preferred dividend requirement decreased $5 million (21.0%) for 1995, 
as compared to 1994.  The decrease was attributable to the early redemption of 
400,000 shares of $100 par value, 9.28% Series Cumulative Preferred Stock in 
April 1994, along with the early redemption of 400,000 and 500,000 shares of 
$100 par value Cumulative Preferred Stock, 7.44% Series and 9.15% Series, 
respectively, on July 1, 1995.
<PAGE>
PSI Energy, Inc.
and Subsidiaries
<PAGE>

<TABLE>
<CAPTION>
                                   PSI ENERGY, INC.

                          CONSOLIDATED STATEMENTS OF INCOME


                                           1996           1995           1994
                                                     (in thousands)
<S>                                    <C>            <C>            <C>
Operating Revenues 
  Non-affiliated companies              $1 309 878     $1 205 460     $1 104 929
  Affiliated companies                      22 084         42 575          8 583
                                         1 331 962      1 248 035      1 113 512

Operating Expenses
  Fuel                                     364 053        389 401        387 523
  Purchased and exchanged power
    Non-affiliated companies               112 505         33 762         36 733
    Affiliated companies                    43 343         30 104          4 667
  Other operation                          268 478        228 508        213 122
  Maintenance                               97 703         87 492         94 149
  Depreciation                             121 812        120 773        137 719
  Post-in-service deferred operating
    expenses - net                          (4 799)        (5 790)        (9 288)
  Income taxes (Note 11)                    73 194         85 043         50 366
  Taxes other than income taxes             49 911         51 853         46 335
                                         1 126 200      1 021 146        961 326

Operating Income                           205 762        226 889        152 186

Other Income and Expenses - Net
  Allowance for equity funds  
    used during construction                  -               174          4 230
  Post-in-service carrying costs             1 223          3 186          9 780
  Income taxes (Note 11)                    (3 997)           941         (1 312)
  Other - net                                1 878         (3 188)        (7 893)
                                              (896)         1 113          4 805

Income Before Interest                     204 866        228 002        156 991

Interest                  
  Interest on long-term debt                67 001         70 577         68 862
  Other interest                            14 511         15 821         15 292
  Allowance for borrowed funds   
    used during construction                (2 324)        (4 211)        (9 355)
                                            79 188         82 187         74 799

Net Income                                 125 678        145 815         82 192

Preferred Dividend Requirement              12 537         13 180         13 182

Net Income Applicable to Common Stock   $  113 141     $  132 635     $   69 010
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

                                                            December 31          
                                                         1996          1995      
                                                       (dollars in thousands)
<S>                                                 <C>            <C>
Electric Utility Plant - Original Cost
  In service                                         $4 178 181     $4 052 984   
  Accumulated depreciation                            1 723 279      1 637 169   
                                                      2 454 902      2 415 815   
  Construction work in progress                          76 630         58 191   
      Total electric utility plant                    2 531 532      2 474 006  

Current Assets
  Cash and temporary cash investments                     2 911         15 522   
  Restricted deposits                                       550          1 187   
  Notes receivable from affiliated companies                  3           -      
  Accounts receivable less accumulated provision
    for doubtful accounts of $1,269 in 1996 and
    $468 in 1995 (Note 6)                                74 289         73 419   
  Accounts receivable from affiliated companies           4 016         20 568   
  Materials, supplies, and fuel - at average cost
    Fuel                                                 41 865         82 014   
    Other materials and supplies                         28 268         29 462   
  Prepayments and other                                   3 184          1 234   
                                                        155 086        223 406   

Other Assets
  Regulatory assets (Note 1(f))
    Amounts due from customers - income taxes            33 068         26 338    
    Post-in-service carrying costs and deferred 
      operating expenses                                 44 904         38 874    
    Coal contract buyout costs                          138 171           -       
    Deferred demand-side management costs               101 208        110 242    
    Deferred merger costs                                76 290         42 286    
    Unamortized costs of reacquiring debt                32 079         34 476    
    Other                                                52 938         33 886    
  Other                                                 129 667         92 056    
                                                        608 325        378 158    

                                                     $3 294 943     $3 075 570    
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                        PSI ENERGY, INC.

CAPITALIZATION AND LIABILITIES

                                                             December 31            
                                                         1996          1995       
                                                       (dollars in thousands)
<S>                                                 <C>            <C>
Common Stock Equity (Note 2)
  Common stock - without par value; $.01 stated
    value; authorized shares - 60,000,000;
    outstanding shares - 53,913,701 in 1996 and 1995 $      539     $      539    
  Paid-in capital                                       402 947        403 253    
  Retained earnings                                     626 089        625 275    
      Total common stock equity                       1 029 575      1 029 067    

Cumulative Preferred Stock (Note 3)
  Not subject to mandatory redemption                   173 086        187 897    

Long-term Debt (Note 4)                                 969 870        828 116    
      Total capitalization                            2 172 531      2 045 080    

Current Liabilities
  Long-term debt due within one year (Note 4)            10 000         50 400    
  Notes payable (Note 5)                                147 129        165 800    
  Notes payable to affiliated companies                  13 186         32 731    
  Accounts payable                                      114 330        116 817    
  Accounts payable to affiliated companies               12 850           -       
  Litigation settlement (Note 12(e))                       -            80 000    
  Accrued taxes                                          73 206         65 851    
  Accrued interest                                       24 045         24 696    
  Other                                                  17 107         16 000    
                                                        411 853        552 295    

Other Liabilities
  Deferred income taxes (Note 11)                       372 997        331 876    
  Unamortized investment tax credits                     52 750         56 354    
  Accrued pension and other postretirement
    benefit costs (Notes 9 and 10)                       98 037         54 130    
  Other                                                 186 775         35 835    
                                                        710 559        478 195    
Commitments and Contingencies (Note 12)
                                                     $3 294 943     $3 075 570    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                     PSI ENERGY, INC.

                CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

                                     Common      Paid-in      Retained      Total Common
                                      Stock      Capital      Earnings      Stock Equity
                                                     (dollars in thousands)
<S>                                  <C>        <C>           <C>            <C>
Balance December 31, 1993             $539       $229 288      $483 242       $  713 069
Net income                                                       82 192           82 192
Dividends on preferred stock                                    (13 182)         (13 182)
Dividends on common stock                                       (59 142)         (59 142)
Contribution from parent company                  159 999                        159 999
Other                                                  22            (7)              15

Balance December 31, 1994              539        389 309       493 103          882 951
Net income                                                      145 815          145 815 
Dividends on preferred stock                                    (13 181)         (13 181)
Contribution from parent company                   13 926                         13 926
Other                                                  18          (462)            (444)

Balance December 31, 1995              539        403 253       625 275        1 029 067

Net income                                                      125 678          125 678 
Dividends on preferred stock                                    (12 629)         (12 629)
Dividends on common stock                                      (112 076)        (112 076)
Other                                                (306)         (159)            (465)

Balance December 31, 1996             $539       $402 947      $626 089       $1 029 575
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

PSI ENERGY, INC.

                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        1996      1995           1994                                             
                                                             (in thousands)
<S>                                                  <C>       <C>           <C>
Operating Activities
  Net income                                          $125 678  $ 145 815     $  82 192
  Items providing (using) cash currently:
    Depreciation                                       121 812    120 773       137 719
    Deferred income taxes and investment
      tax credits - net                                 29 925      5 201        24 127   
    Allowance for equity funds used during 
      construction                                        -          (174)       (4 230)
    Regulatory assets - net                            (34 481)   (15 628)      (36 917)
    Changes in current assets and current
      liabilities
        Restricted deposits                               (336)        16        10 024
        Accounts receivable                              2 722    (57 926)       (7 404)
        Income tax refunds                                -          -           28 900
        Materials, supplies, and fuel                   41 343     31 748       (66 697)
        Accounts payable                                10 363    (25 958)       (1 318)
        Advance under accounts receivable 
          purchase agreement                              -          -          (49 940)
        Litigation settlement                          (80 000)      -             -
        Accrued taxes and interest                       6 704     34 078        (2 928)
    Other items - net                                    3 813     18 714       (71 554)

        Net cash provided by operating activities      227 543    256 659        41 974

Financing Activities
  Issuance of long-term debt                           174 817       -          108 978
  Funds on deposit from issuance of long-term debt         973      9 987        27 897
  Retirement of preferred stock                        (15 116)       (16)          (26)
  Redemption of long-term debt                         (74 600)   (60 455)         (160)
  Change in short-term debt                            (38 216)     4 958        66 872
  Dividends on preferred stock                         (12 629)   (13 181)      (13 182)
  Dividends on common stock                           (112 076)      -          (59 142)
  Capital contribution from parent company                -        13 926       159 999

        Net cash provided by (used in) financing
          activities                                   (76 847)   (44 781)      291 236

Investing Activities
  Construction expenditures (less allowance for 
    equity funds used during construction)            (172 341)  (186 580)     (290 579)
  Deferred demand-side management costs - net            9 034    (16 117)      (40 872)

        Net cash used in investing activities         (163 307)  (202 697)     (331 451)

Net increase (decrease) in cash and temporary
  cash investments                                     (12 611)     9 181         1 759 
Cash and temporary cash investments at beginning 
  of period                                             15 522      6 341         4 582
Cash and temporary cash investments at end of
  period                                              $  2 911  $  15 522     $   6 341

Supplemental Disclosure Of Cash Flow Information
  Cash paid during the year for:
    Interest (net of amount capitalized)              $ 76 655  $  80 465     $  67 150
    Income taxes                                        37 048     60 148         8 162
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>

RESULTS OF OPERATIONS - PSI

Kwh Sales

PSI's total kwh sales increased 11.0% in 1996, as compared to 1995.  Increased 
activity in Cinergy's power marketing and trading operations led to higher 
non-firm power sales for resale.  The increase in retail sales which reflects 
a higher average number of residential and industrial customers was partially 
offset by the return to more normal weather in 1996.  The increase in 
industrial sales was due to growth in the primary metals and transportation 
equipment sectors.

As compared to 1994, total kwh sales in 1995 increased 6.3%, reflecting 
increased sales to all customer classes.  Contributing significantly to this 
increase were higher residential and commercial sales due to warmer weather 
during the 1995 summer cooling season, colder weather during the fourth 
quarter of 1995, and an increase in the number of residential and commercial 
customers.  Increased sales to industrial customers, reflecting growth in the 
primary metals, chemicals, and food products sectors, also contributed to the 
increased kwh sales level.  This increase also reflects higher non-firm power 
sales for resale resulting from an increase in sales to CG&E reflecting the 
coordination of PSI's and CG&E's electric dispatch systems.

Total kwh sales increased 6.3% in 1994, as compared to 1993, due, in large 
part, to non-firm power sales for resale, reflecting third party, short-term 
power sales to other utilities through PSI's system and direct power sales by 
PSI to other utilities.  Also contributing to the total kwh sales levels were 
increased sales to industrial customers.  This increase reflected growth in 
the primary metals and transportation equipment sectors.  A decrease in 
residential sales resulted from the milder weather experienced during the 
third and fourth quarters of 1994.

Year-to-year changes in kwh sales for each major class of customers are shown 
below:
 
                                         Increase (Decrease) from Prior Year

                                             1996        1995       1994
   Retail
     Residential                               - %        7.9%      (1.4)%
     Commercial                               0.4         5.2        1.4
     Industrial                               3.3         5.1        4.9

   Total retail                               1.5         6.0        2.0

   Sales for resale   
     Firm power obligations                  11.4         1.1        2.6
     Non-firm power transactions             51.6        10.2       33.5

   Total sales for resale                    40.2         7.4       22.4

   Total sales                               11.0         6.3        6.3 

PSI currently forecasts a 2% annual compound growth rate in kwh sales over the 
1997 through 2001 period.  This forecast does not reflect the effects of DSM 
programs and excludes non-firm power sales for resale and any potential new 
off-system, long-term firm power sales.
Operating Revenues

Operating revenues increased $84 million (6.7%) in 1996, as compared to 1995, 
due, in large part, to the increase in kwh sales as previously discussed.  
Also contributing to the increase was the effect of a 7.6% retail rate 
increase approved in the September 1996 Order, as well as a full year's effect 
of a 4.3% retail rate increase approved in the February 1995 Order and a 1.9% 
increase for carrying costs on construction work in progress (CWIP) property 
which was approved by the IURC in March 1995.  Partially offsetting these 
increases was the return of approximately $10 million to customers in 
accordance with the February 1995 Order, which requires all retail operating 
income above a certain level to be refunded to customers.

Higher kwh sales and electric rate increases which became effective in 
February 1995 and March 1995 significantly contributed to the $135 million 
(12.1%) increase in operating revenues for 1995, when compared to 1994.  

Operating revenues increased $21 million (1.9%) in 1994, as compared to 1993, 
as a result of increased kwh sales, the effects of a $31 million refund to 
retail customers accrued in June 1993 as a result of the settlement of an 
April 1990 IURC order, and increased fuel costs.  Partially offsetting these 
increases were the 1.5% retail rate reduction resulting from a December 1993 
IURC order and the return of approximately $9 million to customers in 
connection with certain provisions of Indiana law which limit the level of 
retail operating income as determined in quarterly fuel adjustment clause 
proceedings.  

An analysis of operating revenues for the past three years is shown below:

                                                    1996       1995     1994
                                                          (in millions)  

Previous year's operating revenues                 $1 248     $1 114   $1 092
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                              8         68      (23)
    Sales for resale 
      Firm power obligations                           (3)        (1)       2
      Non-firm power transactions                    -             1     -_ _
  Total change in price per kwh                         5         68      (21)

  Kwh sales
    Retail                                             16         55       18
    Sales for resale
      Firm power obligations                            8          1        2
      Non-firm power transactions                      55          9       23
  Total change in kwh sales                            79         65       43 

  Other                                              -             1     - __

Current year's operating revenues                  $1 332     $1 248   $1 114

Operating Expenses

FUEL

Fuel costs, PSI's largest operating expense, decreased approximately $25 
million (6.5%) in 1996, when compared to 1995.  

An analysis of fuel costs for the past three years is shown below:

                                                     1996      1995     1994
                                                          (in millions)

Previous year's fuel expense                         $389      $387     $400 
Increase (Decrease) due to change in:
  Price of fuel                                        (2)       (5)     (30) 
  Kwh generation                                      (23)        7       17

Current year's fuel expense                          $364      $389     $387

PURCHASED AND EXCHANGED POWER

Purchased and exchanged power increased $92 million in 1996, as compared to 
1995.  This increase primarily reflects increased purchases of non-firm power 
for resale to others as a result of increased activity in Cinergy's power 
marketing and trading operations and increased purchases from CG&E as a result 
of the coordination of PSI's and CG&E's electric dispatch systems.

Purchased and exchanged power increased $22 million (54.3%) in 1995, as 
compared to 1994, reflecting increased purchases from CG&E as a result of the 
coordination of PSI's and CG&E's electric dispatch systems.  These increases 
were partially offset by a decline in third party, short-term power sales to 
other utilities.

Purchased and exchanged power increased $17 million (70.6%) in 1994, as 
compared to 1993, reflecting an increase in third party, short-term power 
sales to other utilities through PSI's system and increased purchases of other 
non-firm power by PSI primarily to serve its own load.  

OTHER OPERATION

Other operation expenses increased approximately $40 million (17.5%) in 1996, 
as compared to 1995.  This increase was due to a number of factors, including 
an increase related to the ongoing level and amortization of DSM expenses and 
an increase in production expenses associated with the operations of the Clean 
Coal Project, all of which are being recovered in revenues pursuant to the 
February 1995 and September 1996 Orders.  Charges related to voluntary early 
retirement and severance programs and increased transmission costs also 
contributed to the higher level of other operation expenses.

In 1995, other operation expenses increased $15 million (7.2%), as compared to 
1994.  This increase was due to a number of factors, including the recognition 
of postretirement benefit costs on an accrual basis, an increase in the 
ongoing level of DSM expenses, and the amortization of deferred postretirement 
benefit costs, deferred Merger Costs, and deferred DSM costs, all of which are 
being recovered in revenues pursuant to the February 1995 Order.  These 
increases were partially offset by charges of $10 million in 1994 for 
severance benefits to former officers of PSI which cannot be recovered from 
customers under the merger savings sharing mechanisms authorized by the IURC. 
In addition, emphasis on achieving merger savings and other cost reductions 
also partially offset the increase in other operation expenses.

Other operation expenses increased $26 million (14.2%) in 1994, as compared to 
1993, due to a number of factors including the previously discussed charges of 
$10 million and fuel litigation expenses of $8 million.
MAINTENANCE

An increase of $10 million (11.7%) in maintenance costs as compared to 1995 is 
primarily attributable to increased maintenance associated with the Clean Coal 
Project which began commercial operation in November 1995.  Increased 
transmission and distribution costs also contributed to the higher level of 
maintenance expenses.

Maintenance costs decreased $7 million (7.1%) in 1995, as compared to 1994, 
primarily due to improved scheduling of routine maintenance on generating 
units and lower maintenance costs on transmission and distribution facilities.

Increased maintenance on a number of PSI's generating stations and the initial 
costs of a new distribution line clearing program resulted in increased 
maintenance expenses of $10 million (12.1%) in 1994 when compared to 1993.

DEPRECIATION

In 1995, depreciation expense decreased $17 million (12.3%), when compared to 
1994, due in large part to the adoption of lower depreciation rates effective 
in March 1995.  This decrease was partially offset by the effect of additions 
to utility plant.

Additions to electric utility plant led to increases in depreciation expense 
of $11 million (8.6%) in 1994 as compared to 1993.

POST-IN-SERVICE DEFERRED OPERATING EXPENSES - NET

Post-in-service deferred operating expenses - net reflect the deferral of 
depreciation on certain major projects, primarily environmental in nature,  
from the in-service date until the related projects are reflected in retail 
rates, net of amortization of these deferrals as they are recovered.  (See 
Note 1(h) of the "Notes to Financial Statements" in "Item 8.  Financial 
Statements and Supplementary Data.")

TAXES OTHER THAN INCOME TAXES

Taxes other than income taxes increased $6 million (11.9%) in 1995, as 
compared to 1994, primarily due to increased property taxes resulting from a 
greater investment in taxable property.

Other Income and Expenses - Net

ALLOWANCE FOR EQUITY FUNDS USED DURING CONSTRUCTION

In 1995, allowance for equity funds used during construction decreased $4 
million (95.9%), as compared to 1994, primarily due to a decrease in the 
average balance of CWIP.

A decrease of $7 million (62.1%) in allowance for equity funds used during 
construction in 1994, as compared to 1993, was due to an increase in 
borrowings of short-term debt which resulted in a decrease in the equity rate.

POST-IN-SERVICE CARRYING COSTS

Post-in-service carrying costs reflect the deferral of carrying costs on 
certain major projects, primarily environmental in nature, from the in-service 
date until the related projects are reflected in retail rates.  (See Note 1(h) 
of the "Notes to Financial Statements" in "Item 8.  Financial Statements and 
Supplementary Data.")

Interest

INTEREST ON LONG-TERM DEBT

Interest on long-term debt decreased $4 million (5.1%) in 1996, as compared to 
1995, due to the redemption of $135 million of long-term debt during the 
period from August 1995 through December 1996.

ALLOWANCE FOR BORROWED FUNDS USED DURING CONSTRUCTION

Allowance for borrowed funds used during construction decreased $2 million 
(44.8%) in 1996, as compared to 1995.  This decrease is primarily attributable 
to a decrease in the average balance of CWIP resulting from the Clean Coal 
Project being completed at the end of 1995.

Allowance for borrowed funds used during construction decreased $5 million 
(55.0%) in 1995, as compared to 1994, primarily as a result of a decrease in 
the average balance of CWIP which was partially offset by an increase in the 
debt component of the AFUDC rate.
<PAGE>
The Union Light, Heat and Power Company
<PAGE>

<TABLE>
<CAPTION>
                     THE UNION LIGHT, HEAT AND POWER COMPANY

                                 STATEMENTS OF INCOME

                                           1996           1995           1994 
                                                      (in thousands)
<S>                                     <C>            <C>            <C>
Operating Revenues 
  Electric                               $190 900       $187 180       $177 564
  Gas                                      76 868         70 288         71 971
                                          267 768        257 468        249 535
Operating Expenses
  Electricity purchased from parent
    company for resale                    143 839        142 308        134 887
  Gas purchased                            41 185         36 745         40 508
  Other operation                          30 934         30 712         32 289
  Maintenance                               4 997          4 580          5 473
  Depreciation                             11 909         11 438         10 644
  Income taxes (Note 11)                    9 834          7 887          5 342
  Taxes other than income taxes             4 036          3 968          4 002
                                          246 734        237 638        233 145

Operating Income                           21 034         19 830         16 390

Other Income and Expenses - Net
  Allowance for equity funds used 
    during construction                        (8)            71             78
  Income taxes (Note 11)                     (352)           (44)            56
  Other - net                              (1 417)             6            236
                                           (1 777)            33            370

Income Before Interest                     19 257         19 863         16 760

Interest                  
  Interest on long-term debt                4 016          7 161          8 161
  Other interest                              703            728            395
  Allowance for borrowed funds used
    during construction                       (58)          (198)          (183)
                                            4 661          7 691          8 373

Net Income                               $ 14 596       $ 12 172       $  8 387

<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   THE UNION LIGHT, HEAT AND POWER COMPANY

                                BALANCE SHEETS

ASSETS

                                                            December 31            
                                                         1996          1995        
                                                       (dollars in thousands)
<S>                                                   <C>            <C>
Utility Plant - Original Cost
  In service
    Electric                                           $195 053       $188 508     
    Gas                                                 148 203        140 604     
    Common                                               19 285         19 068     
                                                        362 541        348 180     
  Accumulated depreciation                              122 310        112 812     
                                                        240 231        235 368     
  Construction work in progress                           9 050          7 863     
      Total utility plant                               249 281        243 231     

Current Assets
  Cash and temporary cash investments                     1 197          1 750     
  Notes receivable from affiliated companies                100           -        
  Accounts receivable less accumulated provision
    for doubtful accounts of $1,024 in 1996 and
    $1,035 in 1995 (Note 6)                              12 763         37 895     
  Accounts receivable from affiliated companies             620           -        
  Materials, supplies, and fuel - at average cost
    Gas stored for current use                            6 351          4 513     
    Other materials and supplies                            716          1 215     
  Property taxes applicable to subsequent year            2 600          2 350     
  Prepayments and other                                     370            485     
                                                         24 717         48 208     
Other Assets
  Regulatory assets (Note 1(f))
    Deferred merger costs                                 5 218          1 785     
    Unamortized costs of reacquiring debt                 3 764          2 526     
    Other                                                 2 357          2 548     
  Other                                                   5 146          1 499     
                                                         16 485          8 358     

                                                       $290 483       $299 797     
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         THE UNION LIGHT, HEAT AND POWER COMPANY

CAPITALIZATION AND LIABILITIES

                                                            December 31       
                                                         1996          1995   
                                                       (dollars in thousands)
<S>                                                   <C>            <C>
Common Stock Equity (Note 2)
  Common stock - $15.00 par value;
    authorized shares - 1,000,000;
    outstanding shares - 585,333 in 1996
    and 1995                                           $  8 780       $  8 780    
  Paid-in capital                                        18 839         18 839    
  Retained earnings                                      92 484         82 863    
      Total common stock equity                         120 103        110 482    

Long-term Debt (Note 4)                                  44 617         54 377    
      Total capitalization                              164 720        164 859    

Current Liabilities
  Long-term debt due within one year (Note 4)              -            15 000    
  Notes payable to affiliated companies                  30 649         23 043    
  Accounts payable                                       12 018         11 814    
  Accounts payable to affiliated companies               16 771         21 665    
  Accrued taxes                                           1 014          1 993    
  Accrued interest                                        1 284          1 549    
  Other                                                   5 248          4 748    
                                                         66 984         79 812    

Other Liabilities
  Deferred income taxes (Note 11)                        33 463         23 728    
  Unamortized investment tax credits                      4 797          5 079    
  Accrued pension and other postretirement
    benefit costs (Notes 9 and 10)                       12 983         12 202    
  Income taxes refundable through rates                   5 121          4 717    
  Other                                                   2 415          9 400    
                                                         58 779         55 126    
Commitments and Contingencies (Note 12)
                                                       $290 483       $299 797    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                         THE UNION LIGHT, HEAT AND POWER COMPANY

                      STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

                                     Common      Paid-in       Retained     Total Common
                                      Stock      Capital       Earnings     Stock Equity
                                                    (dollars in thousands)
<S>                                 <C>         <C>           <C>            <C>
Balance December 31, 1993            $8 780      $18 839       $69 327        $ 96 946
Net income                                                       8 387           8 387
Dividends on common stock                                       (3 511)         (3 511)

Balance December 31, 1994             8 780       18 839        74 203         101 822
Net income                                                      12 172          12 172
Dividends on common stock                                       (3 512)         (3 512)

Balance December 31, 1995             8 780       18 839        82 863         110 482
Net income                                                      14 596          14 596
Dividends on common stock                                       (4 975)         (4 975)

Balance December 31, 1996            $8 780      $18 839       $92 484        $120 103

<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          THE UNION LIGHT, HEAT AND POWER COMPANY

                                  STATEMENTS OF CASH FLOWS

                                                         1996          1995        1994
                                                                  (in thousands)
<S>                                                   <C>           <C>         <C>
Operating Activities
  Net income                                           $ 14 596      $ 12 172    $  8 387
  Items providing (using) cash currently:
    Depreciation                                         11 909        11 438      10 644
    Deferred income taxes and investment
      tax credits - net                                   9 857           652       2 042
    Allowance for equity funds used during 
      construction                                            8           (71)        (78)
    Regulatory assets                                    (1 500)          170      (1 615)
    Changes in current assets and current
      liabilities
        Accounts and notes receivable, net
          of reserves on receivables sold                20 758        (4 003)      8 801
        Materials, supplies, and fuel                    (1 339)        1 894       1 043
        Accounts payable                                 (4 690)       11 824      (2 377)
        Accrued taxes and interest                       (1 244)       (1 457)      3 307
    Other items - net                                    (6 804)        4 262       2 780

        Net cash provided by operating activities        41 551        36 881      32 934
 
Financing Activities
  Issuance of long-term debt                               -           14 704        -  
  Redemption of long-term debt                          (26 083)      (37 036)       -  
  Change in short-term debt                               7 606         8 543    (10 500)
  Dividends on common stock                              (4 975)       (3 512)     (3 511)

        Net cash used in financing activities           (23 452)      (17 301)    (14 011)
  
Investing Activities
  Construction expenditures (less allowance for 
    equity funds used during construction)              (18 652)      (18 901)    (20 329)

        Net cash used in investing activities           (18 652)      (18 901)    (20 329)
       
Net increase (decrease) in cash and temporary
  cash investments                                         (553)          679      (1 406)
Cash and temporary cash investments at beginning 
  of period                                               1 750         1 071       2 477
Cash and temporary cash investments at end of
  period                                               $  1 197      $  1 750    $  1 071

Supplemental Disclosure of Cash Flow Information
  Cash paid during the year for:
    Interest (net of amount capitalized)               $  4 667      $  8 121    $  8 281
    Income taxes                                          1 240         7 727       4 714
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>


RESULTS OF OPERATIONS - ULH&P

Kwh Sales

In 1996, ULH&P's total kwh sales increased 5.8% as compared to 1995, 
reflecting increased sales to all customer classes.  The increase in retail 
sales, which reflects a higher average number of residential and commercial 
customers, was partially offset by the return to more normal weather in 1996. 
 The increased industrial sales primarily reflect growth in the food products 
sector.

ULH&P's total kwh sales in 1995, as compared to 1994, increased 7.2% 
reflecting increased sales to all customer classes.  The increase in 
residential and commercial kwh sales was due to warmer weather during the 1995 
summer cooling season and colder weather during the fourth quarter of 1995 and 
an increase in the average number of customers.  The increased industrial 
sales primarily reflect growth in the primary metals sector.

Total kwh sales increased 2.8% in 1994, as compared to 1993, primarily due to 
increased retail sales to commercial and industrial customers.  Industrial 
sales reflected a higher level of economic activity, including growth in the 
primary metals, industrial machinery, food products, and rubber and plastic 
products sectors.  The increase in commercial sales was due, in part, to new 
customers.  A decrease in residential sales resulted from the milder weather 
experienced during the third and fourth quarters of 1994.

ULH&P currently forecasts a 3% annual compound growth rate in kwh sales over 
the 1997 through 2001 period.  This forecast does not reflect the effects of 
DSM programs and excludes any potential new off-system, long-term firm power 
sales.

Mcf Sales and Transportation

Mcf gas sales and transportation volumes increased 6.6%, as compared to 1995. 
Colder weather in the first quarter of 1996, cooler than normal weather early 
in the second quarter of 1996, and increases in the average number of 
customers led to increased sales to residential and commercial customers. This 
increase was partially offset by a decrease in industrial sales as customers 
continued to purchase gas directly from suppliers using transportation 
services provided by ULH&P.  The increase in transportation volumes mainly 
reflects demand for gas transportation services in the chemicals and primary 
metals sectors.

Total gas sales and transportation volumes increased 8.6% in 1995, as compared 
to 1994.  The colder weather during the fourth quarter of 1995 primarily 
attributed to the increase in residential and commercial sales.  These 
increases were partially offset by a decline in industrial sales resulting 
from customers electing to purchase directly from suppliers, creating 
additional demand for transportation services.  The increased transportation 
volumes mainly reflect industrial demand for gas transportation services in 
the paper products sector.

The milder weather experienced in 1994 contributed to a decrease in 
residential gas sales volumes and led to the decrease in total Mcf sales and 
transportation of 4.3%, as compared to 1993.  The increase in gas 
transportation more than offset the decrease in industrial sales volumes and 
was attributable to additional demand for gas transportation services by 
industrial customers mainly in the primary metals, paper products, and food 
products sectors.

Operating Revenues

ELECTRIC OPERATING REVENUES

Electric operating revenues increased $3.7 million (2.0%) in 1996, $9.6 
million (5.4%) in 1995, and $1.9 million (1.1%) in 1994.  These increases 
reflect higher kwh sales, as previously discussed.  Partially offsetting the 
1996 increase was a lower average cost of electricity purchased due, in part, 
to an order issued by the Kentucky Public Service Commission (KPSC) on July 3, 
1996 (July 1996 Order).  The July 1996 Order authorized a decrease in electric 
rates, retroactive to July 3, 1995, reflecting a reduction in the cost of 
electricity purchased from CG&E.

GAS OPERATING REVENUES

The increasing trend of industrial customers purchasing gas directly from 
producers and utilizing ULH&P facilities to transport the gas (see the "Mcf 
Sales and Transportation" section) continues to put downward pressure on gas 
operating revenues.  When ULH&P sells gas, the sales price reflects the cost 
of gas purchased by ULH&P to support the sale plus the costs to deliver the 
gas.  When gas is transported, ULH&P does not incur any purchased gas costs 
but delivers gas the customer has purchased from other sources.  Since 
providing transportation services does not necessitate recovery of gas 
purchased costs, the revenue per Mcf transported is less than the revenue per 
Mcf sold.  As a result, a higher relative volume of gas transported to gas 
sold translates into lower gas operating revenues.

Gas operating revenues increased $6.6 million (9.4%) in 1996, as compared to 
1995.  The increase was primarily attributable to the operation of the fuel 
adjustment clause reflecting an increase in the cost of gas purchased and an 
increase in total volumes sold and transported.  

In 1995, gas operating revenues declined $1.7 million (2.3%), as compared to 
1994 as a result of the aforementioned trend toward increased transportation 
services and the operation of fuel adjustment clauses reflecting a lower 
average cost of gas purchased.  

Gas operating revenues decreased $3.8 million (5.0%) in 1994, as compared to 
1993, primarily as a result of a decline in total volumes sold and transported 
of 4.3%.  This decrease was partially offset by the effect of a gas rate 
increase which became effective in mid-1993.

Operating Expenses

ELECTRICITY PURCHASED FROM PARENT COMPANY FOR RESALE

Electricity purchased increased $7.4 million (5.5%) in 1995, as compared to 
1994, due to an increase in volumes purchased. 

GAS PURCHASED

Gas purchased increased $4.4 million (12.1%) in 1996, as compared to 1995, due 
to an increase in volumes purchased and a higher average cost per Mcf of gas 
purchased, as previously discussed.

In 1995, gas purchased expense decreased $3.8 million (9.3%) from 1994 
primarily due to a 13.7% decrease in the average cost per Mcf of gas 
purchased. 

Gas purchased expense in 1994 decreased $2.9 million (6.6%) due to a 5.2% 
decrease in volumes purchased.

OTHER OPERATION

In 1995, other operation expense decreased $1.6 million (4.9%), as compared to 
1994, due, in part, to decreased gas and electric distribution expenses and 
decreased gas production expenses.

Other operation expense in 1994 increased $1.9 million (6.2%), as compared to 
1993, due primarily to increased gas and electric distribution expenses and 
increased wages and benefits.

MAINTENANCE

Maintenance expenses increased $.4 million (9.1%) as compared to 1995, 
primarily as a result of increased transmission and distribution costs.

Maintenance expense decreased $.9 million (16.3%) and $.8 million (12.7%) in  
1995 and 1994, respectively,  primarily as a result of reduced maintenance 
costs on gas and electric distribution facilities.

DEPRECIATION

Depreciation expense increased $.8 million (7.5%) in 1995, as compared to 
1994, primarily due to additions to electric and gas plant in service.  

The increase in 1994 of $.8 million (8.5%) was due to increases in depreciable 
plant in service and a full year's effect of the adoption of higher 
depreciation rates on gas and common plant in accordance with a KPSC rate 
order issued in 1993.

OTHER INCOME AND EXPENSES - NET

Other - Net

The decrease in other - net of $1.4 million in 1996, as compared to 1995, is 
primarily attributable to expenses associated with the sales of accounts 
receivables in 1996.  

INTEREST AND OTHER CHARGES

Interest on Long-term Debt

Interest on long-term debt decreased $3.1 million (43.9%) as compared to 1995 
due to the redemption of $25 million and $35 million of long-term debt in 1996 
and 1995, respectively.
<PAGE.
NOTES TO FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

Cinergy, CG&E, PSI, and ULH&P

(a)   Consolidation Policy  The accompanying Financial Statements include the 
accounts of Cinergy Corp., a Delaware corporation (Cinergy or Company), and 
its wholly-owned subsidiaries.  Investments in business entities in which the 
Company does not have control, but has the ability to exercise significant 
influence over operating and financial policies (generally, 20% to 50% 
ownership) are accounted for using the equity method.  All significant 
intercompany transactions and balances have been eliminated.
 
Cinergy, CG&E, PSI, and ULH&P
 
(b)  Nature of Operations  Cinergy is a registered holding company under the 
Public Utility Holding Company Act of 1935 (PUHCA).  Cinergy's subsidiaries 
are The Cincinnati Gas & Electric Company (CG&E), PSI Energy, Inc. (PSI), 
Cinergy Investments, Inc. (Investments), and Cinergy Services, Inc. 
(Services).  CG&E, an Ohio combination electric and gas utility, and its five 
wholly-owned utility subsidiaries (including The Union Light, Heat and Power 
Company, a Kentucky combination electric and gas utility (ULH&P)) are 
primarily engaged in the production, transmission, distribution, and sale of 
electric energy and/or the sale and transportation of natural gas in the 
southwestern portion of Ohio and adjacent areas in Kentucky and Indiana.  PSI, 
an Indiana electric utility and previously PSI Resources, Inc.'s (Resources) 
utility subsidiary, is engaged in the production, transmission, distribution, 
and sale of electric energy in north central, central, and southern Indiana.  
Investments, a Delaware corporation, is a non-utility subholding company that 
was formed to hold and operate Cinergy's non-utility businesses and interests. 
Investments' principal activities include investments in Midlands Electricity 
plc (Midlands) and Trigen-Cinergy Solutions LLC (Trigen-Cinergy) (see Note 
1(e) for a further discussion of these investments).  Services, a Delaware 
corporation, is the service company for the Cinergy system, providing member 
companies with a variety of administrative, management, and support services. 
The majority of Cinergy's operating revenues are derived from the sale of 
electricity and the sale and transportation of natural gas.
 
Cinergy, CG&E, PSI, and ULH&P
 
(c)  Management's Use of Estimates  The preparation of financial statements in 
conformity with generally accepted accounting principles (GAAP) requires 
management to make estimates and assumptions that affect the reported amounts 
of assets and liabilities.  Estimates are also required with respect to the 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period.  Actual results could differ from those estimates.  (See 
Note 12.)
 
Cinergy, CG&E, PSI, and ULH&P
 
(d)  Merger  Cinergy was created in the October 1994 merger of Resources and 
CG&E.  At merger consummation, each outstanding share of common stock of 
Resources and CG&E was exchanged for 1.023 shares and one share, respectively, 
of Cinergy common stock, resulting in the issuance of approximately 148 
million shares of Cinergy common stock, par value $.01 per share.  The 
outstanding preferred stock and debt securities of CG&E, its utility 
subsidiaries, and PSI were not affected by the merger.  The merger was 
accounted for as a pooling of interests, and the Financial Statements, along 
with the related notes, are presented as if the merger was consummated as of 
the beginning of the earliest period presented.

Resources' and CG&E's consolidated operating revenues and net income for the 
nine months ended September 30, 1994, were as follows:

                             Resources     CG&E   Eliminations(i)   Cinergy
                                             (in millions)

Nine months ended September
  30, 1994 (unaudited)
    Operating revenues         $844(ii)   $1 363      $(7)          $2 200(ii)
    Net income                   60          146        -              206


 (i)   Eliminations of intercompany sales of electric power.
(ii)   Reflects reclassifications from previously reported amounts to conform 
       to the 1996 presentation.

Cinergy

(e)  Investment in Unconsolidated Subsidiaries
	(i)  Midlands  In May 1996, Cinergy and GPU, Inc. (GPU), a Pennsylvania 
corporation, entered into a 50%/50% joint venture agreement and formed Avon 
Energy Partners Holdings (Avon Energy), incorporated in London, England.  Avon 
Energy, through a wholly-owned subsidiary, immediately began acquiring the 
outstanding common stock of Midlands, a United Kingdom (U.K.) regional 
electric company.  During the third quarter of 1996, Avon Energy completed the 
acquisition of substantially all of the outstanding common stock of Midlands. 
The total consideration paid by Avon Energy was approximately 1.7 billion 
pounds sterling ($2.6 billion at then existing currency exchange rates).  The 
funds for the acquisition were obtained from Cinergy's and GPU's investment in 
Avon Energy of approximately 330 million pounds sterling each ($500 million 
each), with the remainder being obtained by Avon Energy through the issuance 
of non-recourse debt.  Cinergy has used dollar denominated debt to fund its 
entire investment in Avon Energy.  As a result of the allocation of the 
purchase price, Avon Energy has recorded goodwill of approximately 1.4 billion 
pounds sterling ($2 billion) in connection with its acquisition of Midlands.  
The goodwill is being amortized on a straight-line basis over 40 years.  (See 
Note 12(g) regarding a contingency with respect to the investment in 
Midlands.)
Cinergy accounts for its investment in Avon Energy using the equity method of 
accounting.  For the year ended December 31, 1996, Cinergy's 50% share of the 
equity in earnings of Avon Energy was approximately $25 million.

The pro forma financial information presented below assumes 100% of Midlands 
was acquired on the first day of the indicated period.  The pro forma 
adjustments include recognition of equity in the estimated earnings of Avon 
Energy, an adjustment for interest expense on debt associated with Cinergy's 
investment in Avon Energy, and related income taxes.  The estimated earnings 
of Avon Energy include the historical earnings of Midlands prior to its 
acquisition by Avon Energy, adjusted for the estimated effect of purchase 
accounting (including the amortization of goodwill) and conversion to United 
States (U.S.) GAAP, interest expense on debt issued by Avon Energy associated 
with the acquisition, and related income taxes.  The equity in earnings of 
Avon Energy has been converted from pounds sterling to dollars using the 
average exchange rate for 1996 of $1.53/  and 1995 of $1.58/ .

               			    Year Ended                 Year Ended
                          December 31, 1996          December 31, 1995
                          Net       Earnings         Net      Earnings
                        Income    Per Share(1)     Income   Per Share(1) 
                            (in millions, except per share amounts)

Cinergy                  $335       $2.00(2)        $347       $2.22
Pro forma adjustments:
  Equity in earnings
    of Avon Energy         20                         50
  Interest expense        (14)                       (34)
  Income taxes              6                         16 
Pro forma results        $347       $2.08           $379       $2.42

(1)  Based on the average number of common shares outstanding for the period.

(2)  Earnings per share after a charge of $.12 per share for the cost of 
     reacquiring preferred stock of CG&E through a tender offer.

The following selected financial information for Avon Energy was prepared from 
Avon Energy's books and records, which are maintained in accordance with U.K. 
GAAP and denominated in pounds sterling.  This selected financial information 
has been converted to U.S. GAAP and dollars.

  Assets                                  December 31, 1996
                                            (in millions)

    Property, plant, and equipment               $1 586
    Current assets                                  651
    Other assets                                  2 564

      Total assets                               $4 801

  Capitalization and Liabilities

    Total common shareholders' equity            $1 184
    Long-term debt                                1 834
    Current liabilities                           1 783

      Total capitalization and             
        liabilities                              $4 801
    Cinergy's investment in Avon Energy          $  593

                                     Year Ended December 31, 1996
                                             (in millions)

    Operating revenues                           $1 132
    Operating profit                                101
    Net income                                   $   50
    Cinergy's equity in earnings of Avon Energy  $   25

(ii)  Trigen-Cinergy  In December 1996, Cinergy and Trigen Energy Corporation, 
a Delaware corporation, formed a joint venture, Trigen-Cinergy.  The joint 
venture company will build, own, and operate cogeneration and trigeneration 
facilities for industrial plants, office buildings, shopping centers, 
hospitals, universities, and other major energy users that can benefit from 
combined heat and power production economies.  It will also provide energy and 
asset management services, including fuel procurement, ancillary to the joint 
venture company's activities.
 
Cinergy, CG&E, PSI, and ULH&P

(f)  Regulation  Cinergy, its utility subsidiaries (CG&E, together with its 
subsidiaries, and PSI), and certain of its non-utility subsidiaries are 
subject to regulation by the Securities and Exchange Commission (SEC) under 
the PUHCA.  Cinergy's utility subsidiaries are also subject to regulation by 
the Federal Energy Regulatory Commission (FERC) and the state utility 
commissions of Ohio, Kentucky, and Indiana.  The accounting policies of 
Cinergy's utility subsidiaries conform to the accounting requirements and 
ratemaking practices of these regulatory authorities and to GAAP, including 
the provisions of Statement of Financial Accounting Standards No. 71, 
Accounting for the Effects of Certain Types of Regulation (Statement 71).

Under the provisions of Statement 71, regulatory assets represent probable 
future revenue associated with deferred costs to be recovered from customers 
through the ratemaking process.  The following regulatory assets of PSI and 
CG&E and its utility subsidiaries are reflected in the Balance Sheets as of 
December 31:

                                      1996                     1995__ _______
                               PSI  CG&E 1/  Cinergy    PSI   CG&E 1/ Cinergy 
                                                (in millions)

Amounts due from customers -
  income taxes                $ 33   $344    $  377    $ 27   $397    $  424
Post-in-service carrying
  costs and deferred 
  operating expenses            45    141       186      39    148       187
Coal contract buyout costs     138     -        138      -      -         -
Deferred demand-side 
  management (DSM) costs       102     33       135     110     19       129
Phase-in deferred return 
  and depreciation              -      95        95      -     100       100
Deferred merger costs           76     18        94      42     15        57
Unamortized costs of 
  reacquiring debt              32     39        71      34     40        74
Coal gasification 
  services expenses             25     -         25      -      -         -
Other                           28     20        48      34     41        75

  Total                       $479   $690    $1 169    $286   $760    $1 046

1/  Includes $11 million and $7 million related to ULH&P at December 31, 1996
    and 1995, respectively.

PSI has previously received regulatory orders authorizing the recovery of $408 
million of its total regulatory assets at December 31, 1996.  CG&E has 
previously received regulatory orders authorizing the recovery of $651 million 
(including $4 million for UHL&P) of its total regulatory assets at December 
31, 1996.  Both PSI and CG&E (including ULH&P) will request recovery of 
additional amounts in future proceedings, which could include proceedings, if 
any, related to transition to customer choice in each applicable jurisdiction. 
 

See Note 1(g), (h), (i), (j), (k), (l), (m), and (n) for additional 
information regarding amounts due from customers - income taxes, post-in-
service carrying costs and deferred operating expenses, coal contract buyout 
costs, deferred DSM costs, phase-in deferred return and depreciation, deferred 
merger costs, costs of reacquiring debt, and coal gasification services 
expenses, respectively.

Certain criteria must be met for the continued application of the provisions 
of Statement 71, including regulated rates designed to recover the specific 
utility's costs.  Failure to satisfy the criteria in Statement 71 would 
eliminate the basis for recognition of regulatory assets.

The provisions of Statement of Financial Accounting Standards No. 121, 
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets 
to Be Disposed Of (Statement 121), became effective in January 1996 for 
Cinergy.  Statement 121, which addresses the identification and measurement of 
asset impairments for all enterprises, is particularly relevant for electric 
utilities as a result of the potential for deregulation of the generation 
component of the business.  Statement 121 requires the recognition of 
impairment losses on long-lived assets when book values exceed expected future 
cash flows.  In addition, Statement 121 imposes a stricter criterion for 
recognition of regulatory assets by requiring that future recovery be probable 
at each balance sheet date.

Based on Cinergy's current regulatory orders and the regulatory environment in 
which it currently operates, the recognition of its regulatory assets as of 
December 31, 1996, is fully supported.  In addition, the application of the 
provisions of Statement 121 did not have an effect on reported amounts for 
regulatory assets and long-lived assets at December 31, 1996.  

The ultimate outcome of the changing competitive environment discussed in the 
"Competitive Pressures" section of "Item 7.  Management's Discussion and 
Analysis of Financial Condition and Results of Operations," including the 
potential for customer choice legislation discussed below, could result in 
Cinergy discontinuing the application of Statement 71 for its generation, 
transmission, and/or distribution businesses.  As a result, regardless of 
whether such previously deferred costs would be recoverable (i.e., covered by 
revenues) in a competitive environment, Cinergy would be required to write-off 
the portion of any regulatory asset for which sufficient regulatory assurance 
of future recovery no longer exists.  In addition, the outcome of applying the 
provisions of Statement 121 could change significantly as a result of future 
competitive pressures and the effect on Cinergy of the restructuring of the 
electric utility industry.

In January 1997, customer choice legislation was introduced in the Indiana 
legislature.  Under the proposed legislation, there would be a transition 
period from October 1, 1999, through June 30, 2004, during which customers 
would have the right to choose their electric supplier.  Those customers not 
selecting a supplier would continue to buy their electric power from the 
franchise utility at a total "bundled" price.  The total bundled price would 
be frozen at the rate in effect as of July 1, 1999, subject to certain 
adjustments during the transition period, including limited adjustments for 
specific material cost changes and a downward trending of the retail electric 
production component of the total frozen price to the current statewide 
average.  Trending of the frozen price would not be applicable to those 
utilities, such as PSI, whose retail electric production price is currently 
below the statewide average.  Those customers choosing a supplier would pay 
that supplier's open market price for power and would pay the franchise 
utility the portion of the bundled price applicable to transmission and 
distribution services, and an access charge (designed to compensate the 
franchise utility for its loss in revenues, if any, during the transition 
period, after giving effect to the revenues which would be realized by the 
franchise utility from sales of the power in the open market).  After June 30, 
2004, all customers would continue to have the right to choose their supplier 
and would continue to pay the franchise utility for transmission and 
distribution services which would continue to be regulated as to price by the 
Indiana Utility Regulatory Commission (IURC).  The access charge would no 
longer be paid by any customer.  

The proposed legislation provides for each utility to file a transition plan 
with the IURC which would include, among other things, a proposed amortization 
period for regulatory asset balances as of the beginning of the transition 
period.  Recovery of regulatory assets during the transition period would be 
included in retail rates as a charge for transmission and distribution 
services.  However, any regulatory assets, as well as other stranded costs, at 
the end of the transition period which are applicable to retail electric 
production, would be the responsibility of the shareholders.

Customer choice legislation has also been introduced during 1997 in the Ohio 
legislature.  The proposed legislation is similar to legislation introduced in 
1996 which is discussed in the "Competitive Pressures" section of "Item 7.  
Management's Discussion and Analysis of Financial Condition and Results of 
Operations."

Although Cinergy is aggressively pursuing customer choice legislation in 
Indiana and Ohio, the time frame for passage of legislation providing for 
customer choice is uncertain due to the complex issues and numerous 
stakeholder interests involved.

Cinergy, CG&E, PSI, and ULH&P

(g)  Federal and State Income Taxes  Deferred tax assets and liabilities are 
recognized for the expected future tax consequences of existing differences 
between the financial reporting and tax reporting bases of assets and 
liabilities.  Investment tax credits utilized to reduce Federal income taxes 
payable have been deferred for financial reporting purposes and are being 
amortized over the useful lives of the property which gave rise to such 
credits.

Income tax provisions reflected in customer rates are regulated by the various 
regulatory commissions overseeing the regulated business operations of PSI, 
CG&E, and CG&E's utility subsidiaries.  Deferred income taxes not reflected in 
rates charged to customers are recovered from customers as paid.  The future 
revenues associated with these amounts are reflected in the accompanying 
Financial Statements as a regulatory asset.  Conversely, to the extent 
deferred income taxes recovered in rates exceed amounts payable in future 
periods, such amounts are reflected in the accompanying Financial Statements 
as "Income taxes refundable through rates" on the basis of their probable 
repayment in future years.

Cinergy, CG&E, and PSI

(h)  Post-in-service Carrying Costs and Deferred Operating Expenses  CG&E  
received various orders from the Public Utilities Commission of Ohio (PUCO) 
which permitted the deferral of carrying costs and non-fuel operating expenses 
(including depreciation) for the Wm. H. Zimmer Generating Station (Zimmer) and 
Woodsdale Generating Station (Woodsdale) units.  Effective with the dates of 
the PUCO's orders reflecting the units in customer rates, the deferrals of 
post-in-service carrying costs are being recovered over the lives of the 
applicable units and the deferred non-fuel operating expenses are being 
recovered over a 10-year period. 

PSI received authority from the IURC for the accrual of the debt component of 
carrying costs (to the extent not recovered currently in retail rates) and the 
deferral of depreciation expense on certain major projects, primarily 
environmental in nature, including a 262-megawatt clean coal power generating 
facility located at the Wabash River Generating Station (Clean Coal Project) 
and a scrubber at Gibson Generating Station (Gibson).  In a February 1995 
order (February 1995 Order) and a September 1996 order (September 1996 Order), 
the IURC authorized the recovery of deferred costs incurred prior to August 
31, 1995, over the remaining lives of the related assets.  Deferrals incurred 
after this date will be requested for recovery in future proceedings, which 
could include proceedings, if any, related to transition to customer choice.

Cinergy and PSI

(i)  Coal Contract Buyout Costs  In August 1996, PSI entered into a coal 
supply agreement with Eagle Coal Company (Eagle) for the supply of 
approximately three million tons of coal per year.  The agreement, which 
terminates December 31, 2000, provides for a buyout fee of $179 million 
(including interest) to be included in the price of coal to PSI over the term 
of the contract.  This fee represents the costs to Eagle of the buyout of the 
coal supply agreement between PSI and Exxon Coal and Minerals Company.  The 
retail jurisdictional portion of the buyout charge, excluding the portion 
applicable to joint owners, will be recovered through the quarterly fuel 
adjustment clause, with carrying costs on unrecovered amounts, through 
December 2002.  PSI has also filed a petition at the FERC for recovery of the 
wholesale jurisdictional portion of the buyout costs through the wholesale 
fuel adjustment clause.  Generally, the FERC will allow recovery if the 
utility can demonstrate there will be net benefits to customers during the 
buyout cost recovery period.  The FERC is expected to issue an order on PSI's 
petition during 1997.  PSI cannot predict what action the FERC may take with 
respect to this petition.

Cinergy, CG&E, PSI, and ULH&P

(j)  DSM  A settlement agreement between PSI and certain intervenors in a 
proceeding established to review PSI's current and proposed DSM programs was 
approved by the IURC in December 1996.  The settlement agreement allows PSI to 
recover $35 million per year over the next four years, which is designed to 
recover all previously incurred, but as yet unrecovered, DSM costs and all 
costs related to satisfying remaining commitments associated with a previous 
DSM settlement agreement, together with carrying costs thereon, through a non-
bypassable charge in PSI's retail rates.  The new agreement also authorizes 
PSI to spend up to $8 million annually on ongoing DSM programs through the 
year 1999 and to collect such amounts currently in retail rates.

Additionally, in December 1996, the PUCO issued an order applicable to CG&E's 
DSM programs.  The order requires CG&E to spend up to one-half of the annual 
$5 million currently included in retail rates on PUCO-sanctioned low-income 
residential programs.  The remaining portion of the $5 million is to be 
applied to the recovery of DSM cost deferrals.  CG&E's participation in the 
low-income programs will be a factor considered by the PUCO in setting future 
rates of return and approving competitive transition plans.  

In addition, the Kentucky Public Service Commission (KPSC) has authorized 
concurrent recovery of costs related to various DSM programs of ULH&P.

Cinergy and CG&E

(k)  Phase-in Deferred Return and Depreciation  In the first three years of a 
rate phase-in plan for Zimmer, included in a May 1992 order (May 1992 Order) 
by the PUCO, rates charged to customers did not fully recover depreciation 
expense and return on investment.  In accordance with the provisions of the 
May 1992 Order, this deficiency has been recognized as a regulatory asset and 
is being recovered over a seven-year period which began in May 1995.

Cinergy, CG&E, PSI, and ULH&P

(l)  Merger Costs  CG&E and its utility subsidiaries have deferred the non-
PUCO jurisdictional portion of merger transaction costs and costs to achieve 
merger savings (collectively, Merger Costs) incurred through December 31, 
1996, for future recovery in customer rates.  

In accordance with the February 1995 Order and the September 1996 Order, PSI 
has deferred Merger Costs incurred through October 31, 1996, and is recovering 
approximately $40 million of these deferrals in retail rates over a 10-year 
period.  The September 1996 Order also provides for a "true-up" in a future 
regulatory proceeding to reflect recovery of the difference between the costs 
being recovered in retail rates and the actual costs incurred through October 
31, 1996.

CG&E and PSI completed voluntary workforce reduction and severance programs in 
1996 and 1994.  The pretax costs of these programs and the related accounting 
were as follows: 

                         1996 Programs           1994 Programs
                                     (in millions)

                      CG&E 1/       PSI       CG&E 1/       PSI

Costs expensed          $30		$ 5		$15         $ -
Costs deferred            9	       33           2          11 
                        $39         $38         $17         $11

1/  Includes $2 million and $1 million related to ULH&P for the 1996 Programs
    and 1994 Programs, respectively.

The above amounts reflect approximately $61 million ($31 million for CG&E and 
$30 million for PSI) and $16 million (for CG&E) for 1996 and 1994, 
respectively, of costs associated with additional pension benefits further 
discussed in Note 9.

Cinergy, CG&E, PSI, and ULH&P

(m)  Debt Discount, Premium, and Issuance Expenses and Costs of Reacquiring 
Debt  Debt discount, premium, and issuance expenses on outstanding long-term 
debt of Cinergy's utility subsidiaries are amortized over the lives of the 
respective issues.

In accordance with established ratemaking practices, Cinergy's utility 
subsidiaries have deferred costs (principally call premiums) from the 
reacquisition of long-term debt and are amortizing such amounts over periods 
ranging from one to 24 years (five to 24 years for CG&E and its subsidiaries, 
one to 16 years for PSI, and 12 to 24 years for ULH&P).

Cinergy and PSI

(n)  Coal Gasification Services Expenses  In November 1995, upon commercial 
operation of the Clean Coal Project, PSI and Destec Energy, Inc. (Destec) 
began a 25-year contractual agreement for the provision of coal gasification 
services.  The agreement requires PSI to pay Destec a base monthly fee 
including certain monthly operating expenses.  Over the next five years (1997 
through 2001), the base monthly fees and expenses are expected to total $186 
million.  PSI received authorization in the September 1996 Order for the 
inclusion of the costs of the Clean Coal Project in retail rates.  PSI also 
received authorization to defer, for subsequent recovery in retail rates, the 
base monthly fees and expenses incurred prior to the effective date of the 
September 1996 Order.

Cinergy, CG&E, PSI, and ULH&P

(o)  Utility Plant  Utility plant is stated at the original cost of 
construction, which includes an allowance for funds used during construction 
(AFUDC) and a proportionate share of overhead costs.  Construction overhead 
costs include salaries, payroll taxes, fringe benefits, and other expenses. 

Substantially all utility plant is subject to the lien of each applicable 
company's first mortgage bond indenture.

Cinergy, CG&E, PSI, and ULH&P

(p)  AFUDC  Cinergy's utility subsidiaries capitalize AFUDC, a non-cash income 
item, which is defined in the regulatory system of accounts prescribed by the 
FERC as including "the net cost for the period of construction of borrowed 
funds used for construction purposes and a reasonable rate on other funds when 
so used."  AFUDC accrual rates were as follows and are compounded semi-
annually:

                                            1996    1995    1994_

         Cinergy average                     7.1%    7.9%    6.9%
         CG&E and its utility
           subsidiaries average              8.7     8.8     9.1
         ULH&P average                       8.8     7.0     5.9
         PSI average                         5.4     7.0     6.4

Cinergy, CG&E, PSI, and ULH&P

(q)  Depreciation and Maintenance  Provisions for depreciation are determined 
by using the straight-line method applied to the cost of depreciable plant in 
service.  The rates are based on periodic studies of the estimated service 
lives and net cost of removal of the properties.  The average depreciation 
rates for utility plant are:

                                             1996    1995    1994_

         PSI                                 3.0%    3.1%    3.8%
         CG&E and its utility subsidiaries
           Electric                          2.9     2.9     2.9
           Gas                               2.8     2.8     2.8
           Common                            3.0     3.4     3.4
         ULH&P
           Electric                          3.3     3.3     3.3
           Gas                               3.1     3.1     3.1
           Common                            5.1     5.1     5.1

In accordance with the February 1995 Order, revised depreciation rates for PSI 
were implemented in March 1995.  This change, excluding the effect of 
additions to utility plant, resulted in a decrease in annual depreciation 
expense of approximately $30 million.

For Cinergy's utility subsidiaries, maintenance and repairs of property units 
and replacements of minor items of property are charged to maintenance 
expense.  The costs of replacements of property units are capitalized.  The 
original cost of the property retired and the related costs of removal, less 
salvage recovered, are charged to accumulated depreciation.

Cinergy, CG&E, PSI, and ULH&P

(r)  Operating Revenues and Fuel Costs  Cinergy's utility subsidiaries 
recognize revenues for electric and gas service rendered during the month, 
which include revenues for sales unbilled at the end of each month.  The costs 
of electricity and gas purchased and the cost of fuel used in electric 
production are expensed as recovered through revenues, and any portion of 
these costs recoverable or refundable in future periods is deferred in the 
accompanying Balance Sheets.  PSI's recovery of fuel costs is subject to a 
determination that such recovery will not result in PSI earning a return in 
excess of that allowed in the September 1996 Order.  This earnings test is in 
accordance with the settlement agreement approved in the February 1995 Order 
and the Indiana statute in effect at the time of the settlement agreement.

Cinergy, CG&E, and ULH&P

(s)  Order 636  In 1992, the FERC issued order 636 (Order 636) which 
restructured operations between interstate gas pipelines and their customers 
for gas sales and transportation services.  Order 636 also allowed pipelines 
to recover from customers, including CG&E and its utility subsidiaries,  
transition costs incurred in complying with the order.  In July 1994, the PUCO 
issued an order approving a stipulation between CG&E and its residential and 
industrial customer groups providing for recovery of these pipeline transition 
costs.  CG&E is presently recovering its Order 636 transition costs pursuant 
to a PUCO-approved tariff.  CG&E's utility subsidiaries, including ULH&P, 
recover such costs through their gas cost recovery mechanisms.  These costs 
are deferred as incurred by CG&E and its utility subsidiaries and amortized as 
recovered from customers.

Cinergy, CG&E, PSI, and ULH&P

(t)  Statements of Cash Flows  All temporary cash investments with maturities 
of three months or less, when acquired, are reported as cash equivalents.  See 
Notes 3(b) and 8(a)(i) for information concerning non-cash financing and 
investing transactions during 1996.

Cinergy

(u)  Translation of Foreign Currency  All assets and liabilities reported in 
the balance sheets of foreign subsidiaries whose functional currency is other 
than the U.S. dollar are translated at year end exchange rates; income and 
expense are translated at the average exchange rate prevailing during the 
month the respective transactions occur.  Translation gains and losses are 
accumulated as a separate component of common stock equity. 

Cinergy, CG&E, PSI, and ULH&P

(v)  Reclassification  Certain amounts in the 1994 and 1995 Financial 
Statements have been reclassified to conform to the 1996 presentation.

2.  Common Stock

(a)  Changes in Common Stock Outstanding

Cinergy

The following table reflects the shares of Cinergy common stock reserved for 
issuance at December 31, 1996, and shares issued in 1996, 1995, and 1994 for 
the Company's stock-based plans, including previous plans of Resources and 
CG&E.  Shares issued prior to merger consummation have been adjusted for 
Resources' merger conversion ratio of 1.023.

                                  Shares
                                Reserved at            Shares Issued         
                               Dec. 31, 1996    1996       1995       1994

401(k) Savings Plans             6 469 373       -       1 222 379  1 458 631

Dividend Reinvestment and
  Stock Purchase Plan            1 798 486       -         935 711  1 127 881

Directors' Deferred 
  Compensation Plan                200 000       -            -            77

Performance Shares Plan            771 301        492       28 207     27 116

Employee Stock Purchase 
  and Savings Plan               1 932 384       -           1 010    140 039

Stock Option Plan                4 580 996     15 007      403 997     25 575

1996 Long-term Incentive
  Compensation Plan              7 000 000       -            -          -  

In addition to the issuances of common stock shown in the above table, 
Resources issued 1,118,671 shares of common stock in 1993 to the trustee of 
its two Master Trust Agreements as required as a result of the announcement of 
the merger.  Prior to consummation of the merger in October 1994, Resources 
issued an additional 16,518 shares to the trustee and distributed 98,400 
shares (reflected in the above table as shares issued in 1994) to participants 
of certain benefit plans.  As a result of the merger consummation, in December 
1994, Cinergy retired the remaining 1,036,789 shares held by the trustee.

In December 1994, Cinergy publicly issued 7,089,000 shares of common stock 
under a shelf registration statement for the sale of up to eight million 
shares.  In addition, upon consummation of the merger, Cinergy awarded five 
shares of common stock to all non-officer employees for additional issuances 
under this shelf registration statement of 43,605 shares and 10 shares in 1994 
and 1995, respectively.

Cinergy retired 6,511 and 119,211 shares of common stock in 1996 and 1995 
respectively, primarily representing shares tendered as payment for the 
exercise of previously granted stock options.

CG&E

CG&E issued 1,601,003 shares of common stock in 1994 (prior to the merger) for 
its stock-based compensation and dividend reinvestment plans.  After merger 
consummation, the common stock issued to CG&E's 401(k) Savings Plans is 
Cinergy common stock rather than CG&E common stock, and CG&E's Dividend 
Reinvestment and Stock Purchase Plan was merged into and replaced by Cinergy's 
Dividend Reinvestment and Stock Purchase Plan.

ULH&P

All of ULH&P's common stock is held by CG&E.

Cinergy, CG&E, and PSI

(b)  Dividend Restrictions  Cinergy owns all of the common stock of CG&E and 
PSI.  The ability of Cinergy to pay dividends to holders of its common stock 
is principally dependent on the ability of CG&E and PSI to pay common 
dividends to Cinergy.  CG&E and PSI cannot purchase or otherwise acquire for 
value or pay dividends on their common stock if dividends are in arrears on 
their preferred stock.  The amount of common stock dividends that each company 
can pay also may be limited by certain capitalization and earnings 
requirements.  Currently, these requirements do not impact the ability of 
either company to pay dividends on common stock.

Cinergy

(c)  Stock-based Compensation Plans  Cinergy has four stock-based compensation 
plans, the Stock Option Plan, the Performance Shares Plan, the Employee Stock 
Purchase and Savings Plan, and the 1996 Long-term Incentive Compensation Plan. 
The Stock Option Plan, the Performance Shares Plan, and the Employee Stock 
Purchase and Savings Plan succeeded similar plans of Resources.  Accordingly, 
information reported in the ensuing sections has been adjusted for Resources' 
merger conversion ratio of 1.023 as appropriate.  Effective January 1, 1997, 
Cinergy implemented the 1996 Long-term Incentive Compensation Plan and ceased 
accrual of incentive compensation under the Performance Shares Plan as of 
December 31, 1996.  No stock-based awards were made under the 1996 Long-term 
Incentive Compensation Plan as of December 31, 1996.

Cinergy accounts for its stock-based compensation plans under Accounting 
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, 
under which stock option-type awards are recorded at intrinsic value.  For 
1996, 1995, and 1994, compensation cost related to Cinergy's stock-based 
compensation plans, before income taxes, recognized in the Consolidated 
Statements of Income was $2 million, $1 million, and $1 million, respectively. 
Net income and earnings per share for 1996 and 1995, assuming compensation 
cost for these plans had been determined at fair value, consistent with the 
provisions of Statement of Financial Accounting Standards No. 123, Accounting 
for Stock-Based Compensation (Statement 123), would have been as follows:

                                         1996              1995
                                 (in millions, except per share amounts)

Net income - as reported                 $335              $347
           - pro forma                   $334              $346

Earnings per share - as reported         $2.00             $2.22
                   - pro forma           $1.99             $2.21

In accordance with the provisions of Statement 123, in estimating the pro 
forma amounts, the fair value method of accounting was not applied to options 
granted prior to January 1, 1995.  As a result, the pro forma effect on net 
income and earnings per share may not be representative of future years.  In 
addition, the pro forma amounts reflect certain assumptions used in estimating 
fair values.  These fair value assumptions are described under each applicable 
plan discussion below.

  (i)  Stock Option Plan  The Cinergy Stock Option Plan is designed to align 
executive compensation with shareholder interests.  Under the Stock Option 
Plan, incentive and non-qualified stock options, stock appreciation rights 
(SARs), and SARs in tandem with stock options may be granted to key employees, 
officers, and outside directors.  Options are granted at the fair market value 
of the shares on the date of grant.  Options vest over five years at a rate of 
20% per year and expire 10 years from the date of grant.  All options granted 
prior to November 1993, but not previously vested, became vested upon approval 
of the merger by Resources' shareholders.  The total number of shares of 
common stock available under the Stock Option Plan may not exceed 5,000,000 
shares.  No stock options may be granted under the plan after October 24, 
2004.

Stock Option Plan activity for 1996, 1995, and 1994 is summarized as follows 
(no SARs have been granted under this plan):

<TABLE>
<CAPTION>
                                         1996                  1995                  1994        
                                            Weighted              Weighted              Weighted
                                             Average               Average               Average
                                            Exercise              Exercise              Exercise
                                    Number    Price       Number    Price       Number    Price
<S>                              <C>         <C>       <C>         <C>       <C>         <C>
Outstanding, beginning of year    3 652 956   $22.47    2 409 453   $19.74    1 047 528   $15.45

  Granted                           220 000    29.75    1 672 500    24.91    1 387 500    22.88
  Exercised                        (604 706)   18.87     (403 997)   16.16      (25 575)   13.96
  Forfeited                            -         -        (25 000)   24.31     ____-         -
 
Outstanding, end of year          3 268 250   $23.93    3 652 956    22.47    2 409 453   $19.74

Exercisable, end of year            897 750   $20.93      895 456   $17.47    1 021 953   $15.48

Weighted average fair value of
  options granted during the year        $3.07                 $2.41                 $1.94
</TABLE>

The fair values of options granted were estimated as of the date of grant 
using a Black-Scholes option pricing model.  The weighted averages for the 
assumptions used in determining the fair values of options granted were as 
follows:

                                    1996            1995            1994

Risk-free interest rate             6.3%            7.3%            7.5%
Expected dividend yield             5.8%            6.9%            7.4%
Expected lives                      6.5 yrs.        6.5 yrs.        6.5 yrs.
Expected common stock variance      1.8%            1.8%            1.7%

Price ranges, along with certain other information, for options outstanding 
under the Stock Option Plan at December 31, 1996, are as follows:

                            Outstanding                      Exercisable      
                            Weighted    Weighted                    Weighted
                             Average     Average                     Average
  Exercise                  Exercise   Contractual                  Exercise
 Price Range       Number     Price       Life            Number      Price

$13.14 - $17.35    313 650    $15.36      2.9 yrs.        313 650     $15.36
$22.88 - $25.19  2 519 600    $23.69      8.0 yrs.        291 751     $22.87
$28.44 - $31.56    435 000    $29.29      9.0 yrs.        292 349     $24.99

  (ii)  Performance Shares Plan  Cinergy's Performance Shares Plan is a long-
term incentive plan developed to reward officers and other key employees for 
achieving corporate and individual goals.  Under the Performance Shares Plan, 
participants are granted contingent shares of common stock.  A percentage of 
these contingent shares is earned with respect to each participant based on 
the level of goal attainment at the completion of a performance cycle.  
Performance cycles consist of overlapping four-year periods, beginning every 
two years.  Previous performance cycles of Resources became performance cycles 
under the Cinergy Performance Shares Plan.  Awards earned under the 
Performance Shares Plan are paid in two installments:  one-half of the award 
is paid in the year immediately following the end of the performance cycle and 
one-half of the award is paid in the subsequent year.  The most recently 
commenced four-year performance cycle under the Performance Shares Plan began 
January 1, 1996, and was scheduled to end December 31, 1999.  As previously 
discussed, Cinergy implemented the 1996 Long-term Incentive Compensation Plan 
effective January 1, 1997, and ceased accrual of incentive compensation under 
the Performance Shares Plan as of December 31, 1996.  The total number of 
shares of common stock available under this plan may not exceed 800,000 
shares.

The following table provides certain information regarding contingent shares 
granted under the Performance Shares Plan for the performance cycle which 
began January 1, 1996:

                                                           1996_
Number of contingent shares granted                      166 280
Fair value at date of grant (dollars in thousands)        $3 508
Weighted average per share amounts                        $24.47

The fair values of contingent shares and weighted average per share amounts 
are measured at the market price of a share of common stock as if it were 
vested and issued on the date of grant, adjusted for expected forfeitures and 
the estimated present value of dividends foregone during the related 
performance cycle.
  (iii)  Employee Stock Purchase and Savings Plan  Cinergy's Employee Stock 
Purchase and Savings Plan allows essentially all full-time, regular employees 
to purchase shares of common stock pursuant to a stock option feature.  Under 
the Employee Stock Purchase and Savings Plan, after-tax funds are withheld 
from a participant's compensation during a 26-month offering period and are 
deposited in an interest-bearing account.  At the end of the offering period, 
participants may apply amounts deposited in the account, plus interest, toward 
the purchase of shares of common stock at a purchase price equal to the fair 
market value of a share of common stock on the first date of the offering 
period, less five percent.  Any funds not applied toward the purchase of 
shares are returned to the participant.  A participant may elect to terminate 
participation in the plan at any time.  Participation also will terminate if 
the participant's employment with Cinergy ceases.  Upon termination of 
participation, all funds, including interest, are returned to the participant 
without penalty.  The most recently completed offering period ended December 
31, 1996.  The purchase price under this offering was $21.7312.  A new 
offering period began January 1, 1997, and will end February 28, 1999.  The 
purchase price under this offering is $31.825.  The total number of shares of 
common stock available under the Employee Stock Purchase and Savings Plan may 
not exceed 2,000,000.

Employee Stock Purchase and Savings Plan activity for 1996, 1995, and 1994 is 
summarized as follows:

<TABLE>
<CAPTION>

                                         1996                  1995                  1994_______
                                            Weighted              Weighted              Weighted
                                             Average               Average               Average
                                            Exercise              Exercise              Exercise
                                    Number    Price       Number    Price       Number    Price
<S>                                <C>       <C>         <C>       <C>         <C>       <C>
Outstanding, beginning of year      490 787   $21.73      217 604   $21.73      175 299   $17.64

  Granted                              -         -        328 362    21.73      219 335    21.73
  Exercised                        (414 284)   21.73       (1 010)   21.73     (140 039)   17.65
  Forfeited                         (76 503)   21.73      (54 169)   21.73      (36 991)   17.83

Outstanding, end of year               -      $  -        490 787   $21.73      217 604   $21.73

Weighted average fair value of
  options granted during the year        $ -                   $2.42                 $1.97
</TABLE>


The fair values of options granted were estimated as of the date of grant 
using a Black-Scholes option pricing model.  The weighted averages for the 
assumptions used in determining the fair values of options granted were as 
follows:

                                       1995            1994

Risk-free interest rate                7.7%            6.8%     
Expected dividend yield                7.3%            7.4%     
Expected lives                         2.0 yrs.        2.2 yrs. 
Expected common stock variance         1.7%            1.7%     

  (iv)  1996 Long-term Incentive Compensation Plan  In 1996, Cinergy adopted 
and shareholders approved a new incentive compensation plan, the 1996 Long-
term Incentive Compensation Plan.  Under the 1996 Long-term Incentive 
Compensation Plan, certain key employees may be granted stock options, SARs, 
restricted stock, cash awards, performance shares, performance awards, 
dividend equivalents, and other stock-based awards.  As previously mentioned, 
no stock-based awards were made under the 1996 Long-term Incentive 
Compensation Plan as of December 31, 1996; however, in January 1997, 348,056 
performance-based restricted shares subject to specified target performance 
objectives and 330,100 stock options at an option price of $33.50 per share 
were granted to certain key employees.  Stock options awarded under the 1996 
Long-term Incentive Compensation Plan are granted at the fair market value of 
the shares on the date of grant and may not have a purchase term of more than 
10 years from the date of grant.  The number of shares of common stock to be 
awarded under the 1996 Long-term Incentive Compensation Plan is limited in the 
aggregate to 7,000,000 shares.

3.  Preferred Stock of Subsidiaries

Cinergy, CG&E, and PSI

(a)  Schedule of Cumulative Preferred Stock


<TABLE>
<CAPTION>
                                                                                December 31
CG&E                                                                          1996        1995
<S>                                                                        <C>         <C>
  Authorized 6,000,000 shares                                              (dollars in thousands)
  Not subject to mandatory redemption
    Par value $100 per share - outstanding
      4%     Series   169,835 shares in 1996 and 270,000 shares 
             in 1995                                                        $ 16 984    $ 27 000
      4 3/4% Series    41,621 shares in 1996 and 130,000 shares in 1995        4 162      13 000
          Total                                                               21 146      40 000

  Subject to mandatory redemption
    Par value $100 per share - outstanding
      7 7/8% Series   800,000 shares in 1995                                    -         80 000
      7 3/8% Series   800,000 shares in 1995                                ____-___      80 000
          Total                                                                 -        160 000
PSI
  Not subject to mandatory redemption
    Par value $25 per share - authorized 5,000,000 shares - outstanding
      4.32%  Series   169,162 shares in 1996 and 1995                          4 229       4 229
      4.16%  Series   148,763 shares in 1996 and 1995                          3 719       3 719
      7.44%  Series 3,408,712 shares in 1996 and 4,000,000 shares in 1995     85 218     100 000
    Par value $100 per share - authorized 5,000,000 shares - outstanding 
      3 1/2% Series    40,567 shares in 1996 and 40,843 shares in 1995         4 056       4 085
      6 7/8% Series   600,000 shares in 1996 and 1995                         60 000      60 000
      7.15%  Series   158,640 shares in 1996 and 1995                         15 864      15 864
          Total                                                              173 086     187 897

Total - Cinergy
Total not subject to mandatory redemption                                   $194 232    $227 897
Total subject to mandatory redemption                                       $   -       $160 000
</TABLE>



Cinergy, CG&E, and PSI

(b)  Changes in Cumulative Preferred Stock Outstanding  Changes in cumulative 
preferred stock outstanding during 1996, 1995, and 1994, were as follows:

                                                     
                                                     Shares         Par
                                                     Retired       Value_   
                                                                (dollars in
                                                                 thousands)
1996
  Not subject to mandatory redemption
    Par value $100 per share
      CG&E
        4%     Series                                 100 165      $10 016 
        4 3/4% Series                                  88 379        8 838 
	   PSI
        3 1/2% Series                                     276           29 
    Par value $25 per share
      PSI
        7.44%  Series                                 591 288       14 782    
 
  Subject to mandatory redemption
    Par value $100 per share
      CG&E
        7 7/8% Series                                 800 000       80 000 
        7 3/8% Series                                 800 000       80 000 

1995
  Not subject to mandatory redemption
    Par value $100 per share
      CG&E
        7.44 % Series                                 400 000      $40 000 
      PSI
        3 1/2% Series                                     329           32 
  Subject to mandatory redemption
    Par value $100 per share
      CG&E
        9.15 % Series                                 500 000       50 000 

1994
  Not subject to mandatory redemption
    Par value $100 per share
      CG&E
        9.28 % Series                                 400 000      $40 000
      PSI
        3 1/2% Series                                     598           60  

Cinergy and CG&E

During the third quarter of 1996, Cinergy commenced an offer to purchase any 
and all outstanding shares of preferred stock of CG&E.  Cinergy purchased 
1,788,544 shares of preferred stock and made a capital contribution to CG&E of 
all the shares it acquired and CG&E canceled the shares.  The cost of 
reacquiring the preferred stock, totaling $18 million, represents the 
difference between the par value of the preferred stock purchased and the 
price paid (including fees paid to tender agents) and is reflected as a charge 
to "Retained Earnings" in the Consolidated Statements of Changes in Common 
Stock Equity and as a deduction from "Net Income" in the Consolidated 
Statements of Income for purposes of determining net income and earnings per 
share applicable to common stock for Cinergy.  The 4 3/4% Series no longer 
meets listing requirements of the New York Stock Exchange (NYSE) and has been 
delisted.

                                                                              
  
Cinergy, CG&E, PSI, and ULH&P

4.  Long-term Debt 

(a)  Schedule of Long-term Debt (excluding amounts due within one year)

<TABLE>
<CAPTION>
                                                                               December 31
                                                                            1996          1995
CG&E and Subsidiaries                                                     (dollars in thousands)
<S>                                                                    <C>           <C>
  CG&E
    First Mortgage Bonds
       5 7/8% Series due July 1, 1997                                   $     -       $   30 000
       6 1/4% Series due September 1, 1997                                    -          100 000
        5.80% Series due February 15, 1999                                 110 000       110 000
       7 3/8% Series due May 1, 1999                                        50 000        50 000
       7 3/8% Series due November 1, 2001                                   60 000        60 000
       7 1/4% Series due September 1, 2002                                 100 000       100 000
       8 1/8% Series due August 1, 2003                                     60 000        60 000
        6.45% Series due February 15, 2004                                 110 000       110 000
        8.95% Series due December 15, 2021                                 100 000       100 000
       8 1/2% Series due September 1, 2022                                 100 000       100 000
        7.20% Series due October 1, 2023                                   300 000       300 000
        5.45% Series due January 1, 2024 (Pollution Control)                46 700        46 700
       5 1/2% Series due January 1, 2024 (Pollution Control)                48 000        48 000
          Total first mortgage bonds                                     1 084 700     1 214 700

    Pollution Control Notes
      Variable rate due August 1, 2013 and December 1, 2015                100 000       100 000
      Variable rate due September 1, 2030                                   84 000        84 000
        6.50% due November 15, 2022                                         12 721        12 721
          Total pollution control notes                                    196 721       196 721

    Other Long-term Debt
        6.90% Debentures due June 1, 2025
           (Redeemable at the option of the holders on June 1, 2005)       150 000       150 000
        8.28% Junior subordinated debentures due July 1, 2025              100 000       100 000
          Total other long-term debt                                       250 000       250 000

    Unamortized Premium and Discount - Net                                 (12 130)      (14 348)
          Total - CG&E                                                   1 519 291     1 647 073

  ULH&P
    First Mortgage Bonds
       6 1/2% Series due August 1, 1999                                     20 000        20 000 
           8% Series due October 1, 2003                                    10 000        10 000 
       9 1/2% Series due December 1, 2008                                     -           10 000 
          Total first mortgage bonds                                        30 000        40 000 

    Other Long-term Debt
        7.65% Debentures due July 15, 2025                                  15 000        15 000 

    Unamortized Premium and Discount - Net                                    (383)         (623)
          Total - ULH&P                                                     44 617        54 377 

  Lawrenceburg Gas Company (Lawrenceburg)
    First Mortgage Bonds
       9 3/4% Series due October 1, 2001                                     1 200         1 200 
          Total - CG&E and subsidiaries                                 $1 565 108    $1 702 650

PSI
  First Mortgage Bonds   
    Series S,       7%, due January 1, 2002                             $   26 429    $   26 429
    Series Y,   7 5/8%, due January 1, 2007                                 24 140        24 140
    Series BB,  6 5/8%, due March 1, 2004 (Pollution Control)                 -            5 000
    Series NN,   7.60%, due March 15, 2012 (Pollution Control)              35 000        35 000
    Series QQ,  8 1/4%, due June 15, 2013 (Pollution Control)               23 000        23 000
    Series TT,  7 3/8%, due March 15, 2012 (Pollution Control)              10 000        10 000
    Series UU,  7 1/2%, due March 15, 2015 (Pollution Control)              14 250        14 250
    Series YY,   5.60%, due February 15, 2023 (Pollution Control)           29 945        29 945
    Series ZZ,  5 3/4%, due February 15, 2028 (Pollution Control)           50 000        50 000
    Series AAA, 7 1/8%, due February 1, 2024                                50 000        50 000
          Total first mortgage bonds                                       262 764       267 764

  Secured Medium-term Notes
    Series A, 6.65% to 8.88%, due January 3, 1997 to June 1, 2022          290 000       300 000
    Series B, 5.22% to 8.26%, due September 17, 1998
      to August 22, 2022                                                   230 000       230 000
    (Series A and B, 7.66% weighted average interest rate
       and 15 year weighted average remaining life) 
         Total secured medium-term notes                                   520 000       530 000

  Pollution Control Notes
    5 3/4%, due December 15, 1997 to December 15, 2003                        -           19 200
    Variable rate due January 1, 2014 and March 1, 2019                     24 600          -___
         Total pollution control notes                                      24 600        19 200

  Other Long-term Debt
    Series 1994A Promissory Note, non-interest bearing,
      due January 3, 2001                                                   19 825        19 825
    6.25%, due December 15, 2005                                      
      (Notes are callable and/or putable on December 15, 1998)              50 000          -
    6.35% Debentures due November 15, 2006
      (Redeemable in whole or in part at the option of the 
         holders on November 15, 2000)                                     100 000          -___
         Total other long-term debt                                        169 825        19 825

  Unamortized Premium and Discount - Net                                    (7 319)       (8 673)
         Total - PSI                                                    $  969 870    $  828 116 

Total - Cinergy 
  First Mortgage Bonds                                                  $1 378 664    $1 523 664
  Secured Medium-term Notes                                                520 000       530 000 
  Pollution Control Notes                                                  221 321       215 921 
  Other Long-term Debt                                                     434 825       284 825 
  Unamortized Premium and Discount - Net                                   (19 832)      (23 644)
         Total long-term debt                                           $2 534 978    $2 530 766
</TABLE>


(b)  Mandatory Redemption and Other Requirements  Long-term debt maturities 
for the next five years are as follows:

                    Cinergy and      CG&E and
                    Subsidiaries   Subsidiaries        PSI          ULH&P
                                          (in millions)

     1997               $140           $130           $ 10           $ -
     1998                 35             -              35             -
     1999                186            180              6            20
     2000                 31             -              31             -
     2001                100             61             39             -
                        $492           $371           $121           $20

Maintenance and replacement fund provisions contained in CG&E's, PSI's, and 
ULH&P's first mortgage bond indentures require cash payments, bond 
retirements, or pledges of unfunded property additions each year based on an 
amount related to the net revenues of the respective company.

5.  Notes Payable 

Cinergy, CG&E, PSI, and ULH&P

Cinergy's subsidiaries had regulatory authority to borrow up to $838 million 
($438 million for CG&E and its subsidiaries, including $35 million for ULH&P, 
and $400 million for PSI) as of December 31, 1996.  In connection with this 
authority, unsecured lines of credit (Committed Lines) have been established 
which permit borrowings of up to $280 million ($80 million for CG&E and $200 
million for PSI), of which $181 million ($65 million for CG&E and $116 million 
for PSI) remained unused at December 31, 1996.  CG&E and PSI also have the 
capability to issue commercial paper which must be supported by Committed 
Lines of the respective company.  Neither CG&E nor PSI issued commercial paper 
in 1996 and none remained outstanding as of December 31, 1996.  Additionally, 
pursuant to this authority, additional short-term borrowings with various 
banks are arranged on an "as offered" basis (Uncommitted Lines).

Amounts outstanding under the Committed Lines would become immediately due 
upon an event of default which includes non-payment, default under other 
agreements governing company indebtedness, bankruptcy, or insolvency.  Certain 
of the Uncommitted Lines have similar default provisions.  The Committed Lines 
are maintained by commitment fees.  Commitment fees for the Committed Lines 
were immaterial during the 1994 through 1996 period.  

To better manage cash and working capital requirements, Cinergy's utility 
subsidiaries, including CG&E, PSI, and ULH&P, participate in a money pooling 
arrangement.  Under this money pooling arrangement, Cinergy system companies 
with surplus short-term funds, whether from internal or external sources, 
provide short-term loans to other system companies at rates that reflect (1) 
the actual costs of the external borrowing and/or (2) the costs of the 
internal funds which are set at the 30-day Federal Reserve "AA" industrial 
commercial paper rate.  The SEC's approval of the money pool, pursuant to the 
PUHCA, extends through May 31, 1997.  (See Note 16 for an event subsequent to 
the date of the auditor's report.)

Additionally, Cinergy has established a $600 million credit facility, which 
expires in May 2001, of which $91 million remained unused as of December 31, 
1996.  This new credit facility was established, in part, to fund the 
acquisition of Midlands through Avon Energy and its wholly-owned subsidiary 
($500 million has been designated for this purpose) with the remaining portion 
available for general corporate purposes.  The prior $100 million credit 
facility, which would have expired in September 1997, has been terminated.

In addition, Cinergy U.K., a subsidiary of Investments, which holds Cinergy's 
50% investment in Avon Energy, entered into a $40 million non-recourse credit 
agreement, of which $27 million is outstanding as of December 31, 1996.  This 
new credit agreement was also used to fund the acquisition of Midlands.

The weighted average interest rates on short-term borrowings outstanding at 
December 31, 1996 and 1995, were as follows:

                                               1996         1995_    

             Cinergy and subsidiaries          5.96%        5.97%
             CG&E                              5.98          -
             PSI                               5.97         5.97

Cinergy, CG&E, PSI, and ULH&P

6.  Sale of Accounts Receivable 

In January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on a 
revolving basis, undivided percentage interests in certain of their accounts 
receivable up to an aggregate maximum of $350 million, of which $246 million 
has been sold as of December 31, 1996.  Of this amount, $164 million, has been 
sold by CG&E, including $23 million sold by ULH&P, and $82 million has been 
sold by PSI.  Accounts receivable on the Consolidated Balance Sheets of 
Cinergy, CG&E, and PSI and the Balance Sheet of ULH&P are net of the amounts 
sold at December 31, 1996.  PSI had a similar agreement, which expired in 
January 1996, to sell up to $90 million of its accounts receivable.  Accounts 
receivable on the Consolidated Balance Sheets of Cinergy and PSI are net of 
$90 million sold at December 31, 1995.  

7.  Leases

Cinergy, CG&E, PSI, and ULH&P

(a)  Operating Leases  Cinergy and its subsidiaries have entered into 
operating lease agreements covering various facilities and properties, 
including office space and computer, communications, and transportation 
equipment.  Total rental payments on operating leases for each of the past 
three years were as follows:

                                      1996       1995       1994
                                            (in millions)
      Cinergy and subsidiaries         $31        $36        $36
      CG&E and subsidiaries             18         22         22
      PSI                               13         14         14
      ULH&P                              2          5          5

Future minimum lease payments required under operating leases with remaining, 
non-cancelable lease terms in excess of one year as of December 31, 1996, are 
as follows:

                   Cinergy and          CG&E and
                   Subsidiaries       Subsidiaries       PSI        ULH&P*
                                (in millions, ULH&P in thousands)

      1997            $ 31                $12            $11          $24
      1998              23                  7              8           12
      1999              16                  6              5            -
      2000              10                  5              3            -
      2001               7                  4              2            -
   After 2001           19                 18              1            -
                      $106                $52            $30          $36

* Excludes amounts applicable to CG&E's non-cancelable leases allocated to 
  ULH&P. 

Cinergy and CG&E

(b)  Capital Lease  In November 1996, CG&E entered into a sale-leaseback 
agreement for certain equipment at Woodsdale.  The lease is a capital lease 
with an initial lease term of five years.  At the end of the initial lease 
term, the lease may be renewed at mutually agreed upon terms or the equipment 
may be repurchased by CG&E at the original sale amount.  The monthly lease 
payment, comprised of interest only, is based on the applicable London 
Interbank Offered Rate (LIBOR) and, therefore, the capital lease obligation 
will not be amortized over the initial lease term.  The property under the 
capital lease is depreciated at the same rate as if the property were still 
owned by CG&E.  CG&E recorded a capital lease obligation of $22 million, which 
represented the net book value of the equipment at the beginning of the lease.

8.  Financial Instruments

Cinergy, CG&E, and PSI

(a)  Financial Derivatives  Cinergy has entered into financial derivative 
contracts for the purposes described below.

  (i) Forward Exchange Hedging Activity  Cinergy has hedged its pound 
sterling denominated investment in Midlands through forward exchange 
contracts.  Translation losses on these contracts have been recorded in the 
cumulative foreign currency translation adjustment which is reported as a 
separate component of common stock equity in the Consolidated Financial 
Statements. The contract existing at December 31, 1996, required Cinergy to 
exchange 330 million pounds sterling for $500 million.  The estimated fair 
value ($65 million) of this contract, which is based on the cost that would 
have been incurred to terminate the contract at December 31, 1996, has been 
reflected in "Current Liabilities - Other" in the Consolidated Balance 
Sheets.  (See Note 16 for an event subsequent to the date of the auditor's 
report.)

  (ii)  Interest Rate Risk Management  Cinergy and its subsidiaries enter 
into interest rate swaps to lower funding costs and reduce exposures to 
fluctuations in interest rates.  Under these interest rate swaps, Cinergy 
and its subsidiaries agree with counterparties to exchange, at specified 
intervals, the difference between fixed-rate and floating-rate interest 
amounts calculated on an agreed notional principal amount.  At December 31, 
1996, PSI had two interest rate swap agreements outstanding with notional 
amounts of $100 million each.  One contract, with a four-year term 
beginning in November 1996, requires PSI to pay a floating rate and receive 
a fixed rate.  The second contract, with a six-month term beginning in May 
1997, requires PSI to pay a fixed rate and receive a floating rate. In each 
case the floating rate is based on the applicable LIBOR.  The interest 
differential paid or received is recognized in the Consolidated Statements 
of Income as a component of interest expense.  The fair values of the 
interest rate swap agreements at December 31, 1996, were not significant.

Cinergy, CG&E, PSI, and ULH&P

(b)  Fair Value of Other Financial Instruments  The estimated fair values of 
Cinergy's and its subsidiaries' other financial instruments were as follows 
(this information does not purport to be a valuation of the companies as a 
whole):

                                        December 31            December 31
                                           1996                   1995       
                                    Carrying   Fair        Carrying    Fair
                                     Amount    Value        Amount     Value_
                                        (in millions; ULH&P in thousands)
Financial Instruments

Cinergy and Subsidiaries
  First mortgage bonds and
    other long-term debt (includes
    amounts due within one year)    $ 2 675   $ 2 676      $ 2 733    $ 2 837
  Cumulative preferred stock of 
    subsidiary - subject to 
    mandatory redemption               -         -             160        163

CG&E and Subsidiaries
  First mortgage bonds and
    other long-term debt (includes
    amounts due within one year)    $ 1 695   $ 1 688      $ 1 855    $ 1 912
  Cumulative preferred stock - 
    subject to mandatory redemption    -         -             160        163

PSI
  First mortgage bonds and
    other long-term debt (includes
    amounts due within one year)    $   980   $   988      $   878    $   925

ULH&P
  First mortgage bonds and
    other long-term debt (includes
    amounts due within one year)    $44 617   $44 668      $69 377    $72 804


The following methods and assumptions were used to estimate the fair values of 
each major class of financial instruments:

Cash and temporary cash investments, restricted deposits, and notes payable  
Due to the short period to maturity, the carrying amounts reflected on the 
Balance Sheets approximate fair values.

First mortgage bonds and other long-term debt  The fair values of long-term 
debt issues were estimated based on the latest quoted market prices or, if not 
listed on the NYSE, on the present value of future cash flows.  The discount 
rates used approximate the incremental borrowing costs for similar 
instruments.

Cumulative preferred stock - subject to mandatory redemption  The aggregate 
fair value of preferred stock subject to mandatory redemption was based on the 
latest closing prices quoted on the NYSE for each series or, if no trades 
occurred during the period, on the present value of future cash flows using 
discount rates that approximate the incremental borrowing costs for similar 
instruments.

Cinergy, CG&E, PSI, and ULH&P

(c)  Concentrations of Credit Risk  Credit risk represents the risk of loss 
which would occur as a result of nonperformance by counterparties pursuant to 
the terms of their contractual obligations with the Company.  Concentrations 
of credit risk relate to significant customers or counterparties, or groups of 
customers or counterparties, possessing similar economic or industry 
characteristics that would cause their ability to meet contractual obligations 
to be similarly affected by changes in economic or other conditions.  The 
Company does not have a significant loss exposure to any individual customer 
or counterparty.

Concentration of credit risk with respect to Cinergy's trade accounts 
receivable from electric and gas retail customers is limited due to Cinergy's 
large number of customers and diversified customer base of residential, 
commercial, and industrial customers.  Sales for resale customers on Cinergy's 
electric system include traditional electric cooperatives and municipalities 
with which CG&E and PSI have long-standing relationships.  Contracts for sales 
of electricity for resale outside of Cinergy's system are principally with 
other investor owned utilities, electric cooperatives, municipalities, and a 
few large power marketers.  The majority of these contracts are for terms of 
one year or less.  While no significant exposure to any one counterparty 
exists at December 31, 1996, as discussed in the "Power Marketing and Trading" 
section of "Item 7.  Management's Discussion and Analysis of Financial 
Condition and Results of Operations," Cinergy's exposure to credit risk could 
increase as the competitive market for electricity expands.

Potential exposure to credit risk also exists from Cinergy's use of financial 
derivatives such as forward foreign exchange contracts, currency swaps, and 
interest rate swaps.  Because these financial instruments are transacted only 
with highly rated financial institutions, Cinergy does not anticipate 
nonperformance by any of the counterparties.

9.  Pension Plans

Cinergy, CG&E, PSI, and ULH&P

The defined benefit pension plans of Cinergy's subsidiaries cover 
substantially all employees meeting certain minimum age and service 
requirements.  Plan benefits are determined under a final average pay formula 
with consideration of years of participation, age at retirement, and the 
applicable average Social Security wage base or benefit amount.  

The funding policies of the operating subsidiaries are to contribute annually 
to the plans an amount which is not less than the minimum amount required by 
the Employee Retirement Income Security Act of 1974 and not more than the 
maximum amount deductible for income tax purposes.  Contributions applicable 
to the 1996, 1995, and 1994 plan years were $7 million, $18 million, and $4 
million, respectively.  Of these amounts, CG&E and its subsidiaries 
contributed $7 million for each of the 1996 and 1995 plan years.  There were 
no contributions made for the 1994 plan year by CG&E and its subsidiaries. 
PSI's contributions were $11 million and $4 million, for the 1995 and 1994 
plan years, respectively.  There were no contributions made for the 1996 plan 
year by PSI.  The plans' assets consist of investments in equity and fixed 
income securities.  

Cinergy

Cinergy's pension cost for 1996, 1995, and 1994 included the following 
components:
                                                    1996     1995     1994  
                                                        (in millions)

Benefits earned during the period                  $ 21.2   $ 18.5   $ 19.4
Interest accrued on projected 
  benefit obligations                                61.6     61.4     54.9
Actual (return) loss on plans' assets               (75.6)  (119.3)     8.0
Net amortization and deferral                        17.3     61.1    (66.3)

Net periodic pension cost                          $ 24.5   $ 21.7   $ 16.0 

CG&E and ULH&P

CG&E's and its subsidiaries' (including ULH&P's) pension cost for 1996, 1995, 
and 1994 included the following components:
                                                    1996     1995     1994  
                                                        (in millions)

Benefits earned during the period                  $ 11.2   $  9.8   $ 10.7
Interest accrued on projected 
  benefit obligations                                38.6     38.8     35.1
Actual (return) loss on plans' assets               (53.8)   (71.9)     5.6
Net amortization and deferral                        19.3     35.5    (43.2)

Net periodic pension cost                          $ 15.3   $ 12.2   $  8.2 

PSI

PSI's pension cost for 1996, 1995, and 1994 included the following components:

                                                    1996     1995     1994  
                                                        (in millions)

Benefits earned during the period                  $ 10.0   $  8.7   $  8.7
Interest accrued on projected 
  benefit obligation                                 23.0     22.6     19.8
Actual (return) loss on plan assets                 (21.8)   (47.4)     2.4
Net amortization and deferral                        (2.0)    25.6    (23.1)

Net periodic pension cost                          $  9.2   $  9.5   $  7.8 

Cinergy, CG&E, PSI, and ULH&P

During 1996 and 1994, CG&E and its subsidiaries (including ULH&P) recognized 
an additional $31 million and $16 million, respectively, of accrued pension 
cost in accordance with Statement of Financial Accounting Standards No. 88, 
Employers' Accounting for Settlements and Curtailments of Defined Benefit 
Pension Plans and for Termination Benefits (Statement 88).  Additionally, 
during 1996, PSI recognized an additional $30 million of accrued pension cost 
in accordance with Statement 88.  These amounts represent the costs associated 
with additional benefits extended in connection with voluntary workforce 
reduction programs (see Note 1(l)).


                                                  1996         1995        1994
Actuarial Assumptions:
For determination of projected benefit
  obligations 
    Discount rate                                 8.00%        7.50%       8.50%
    Rate of increase in future compensation
      PSI                                         5.00         4.50        5.50
      CG&E and subsidiaries                       5.00         4.50        5.50

For determination of pension cost
  Rate of return on plans' assets
      PSI                                         9.00         9.00        9.00
      CG&E and subsidiaries                       9.00         9.50        9.50

Cinergy

The following table reconciles the plans' funded status with amounts recorded 
in the Consolidated Financial Statements.  Under the provisions of Statement 
of Financial Accounting Standards No. 87, Employers' Accounting for Pensions 
(Statement 87), certain assets and obligations of the plans are deferred and 
recognized in the Consolidated Financial Statements in subsequent periods.

<TABLE>
<CAPTION>
                                    1996                          1995			
                             Plans'        Plan's          Plans'        Plan's    
                         Assets Exceed   Accumulated   Assets Exceed   Accumulated 
                          Accumulated     Benefits      Accumulated     Benefits   
                            Benefits    Exceed Assets     Benefits    Exceed Assets
                                               (in millions)
<S>                        <C>            <C>            <C>            <C>
Actuarial present value 
  of benefits
    Vested benefits         $(423.1)       $(241.6)       $(376.9)       $(227.3)  
    Non-vested benefits       (33.5)         (10.1)         (35.1)         (16.0)  

      Accumulated benefit
        obligations          (456.6)        (251.7)        (412.0)        (243.3)  

    Effect of future 
      compensation 
      increases              (121.7)         (53.3)        (120.3)         (53.2)  

      Projected benefit 
        obligations          (578.3)        (305.0)        (532.3)        (296.5)  

Plans' assets at fair value   531.6          234.1          500.6          220.0   

Projected benefit 
  obligations in excess of 
  plans' assets               (46.7)         (70.9)         (31.7)         (76.5)  

Remaining balance of plans'
  net assets existing at 
  date of initial application 
  of Statement 87 to be 
  recognized as a reduction  
  of pension cost in future 
  periods                      (6.7)          (3.1)          (7.7)          (3.4)  

Unrecognized net gain  
  resulting from experience 
  different from that 
  assumed and effects of 
  changes in assumptions      (48.4)         (28.1)         (14.1)          (1.3)  

Prior service cost not 
  yet recognized in net 
  periodic pension cost        33.6           23.2           35.2           16.8   

Accrued pension cost at 
  December 31               $ (68.2)       $ (78.9)       $ (18.3)       $ (64.4)  
</TABLE>


CG&E and ULH&P

The following table reconciles the plans' funded status with amounts recorded 
in the Consolidated Financial Statements of CG&E.  Under the provisions of 
Statement 87, certain assets and obligations of the plans are deferred and 
recognized in the Financial Statements in subsequent periods.

<TABLE>
<CAPTION>
                                    1996                          1995			
                             Plan's        Plan's          Plan's        Plan's    
                         Assets Exceed   Accumulated   Assets Exceed   Accumulated 
                          Accumulated     Benefits      Accumulated     Benefits   
                            Benefits    Exceed Assets     Benefits    Exceed Assets
                                               (in millions)
<S>                        <C>            <C>            <C>            <C>
Actuarial present value 
  of benefits
    Vested benefits         $(160.3)       $(241.6)       $(138.3)       $(227.3)  
    Non-vested benefits       (17.0)         (10.1)         (25.5)         (16.0)  

      Accumulated benefit
        obligations          (177.3)        (251.7)        (163.8)        (243.3)  

    Effect of future 
      compensation 
      increases               (53.2)         (53.3)         (54.8)         (53.2)  

      Projected benefit 
        obligations          (230.5)        (305.0)        (218.6)        (296.5)  

Plans' assets at fair 
  value                       223.3          234.1          209.3          220.0   

Projected benefit 
  obligations in excess of 
  plans' assets                (7.2)         (70.9)          (9.3)         (76.5)  

Remaining balance of plans'
  net assets existing at 
  date of initial application 
  of Statement 87 to be 
  recognized as a reduction  
  of pension cost in future 
  periods                      (2.4)          (3.1)          (2.7)          (3.4)  

Unrecognized net gain  
  resulting from experience 
  different from that 
  assumed and effects of 
  changes in assumptions      (40.1)         (28.1)         (18.9)          (1.3)  

Prior service cost not 
  yet recognized in net 
  periodic pension cost        16.1           23.2           19.5           16.8   

Accrued pension cost at 
  December 31               $ (33.6)       $ (78.9)       $ (11.4)       $ (64.4)  
</TABLE>

PSI

The following table reconciles the plan's funded status with amounts recorded 
in the Consolidated Financial Statements of PSI.  Under the provisions of 
Statement 87, certain assets and obligations of the plan are deferred and 
recognized in the Consolidated Financial Statements in subsequent periods.

                                              1996       1995    
                                               (in millions)
Actuarial present value of benefits
  Vested benefits                           $(262.8)   $(238.6) 
  Non-vested benefits                         (16.5)      (9.6)   

    Accumulated benefit obligation           (279.3)    (248.2) 

  Effect of future compensation
    increases                                 (68.5)     (65.5) 

    Projected benefit obligation             (347.8)    (313.7) 

Plan's assets at fair value                   308.3      291.3  

Projected benefit obligation in
  excess of plan's assets                     (39.5)     (22.4) 

Remaining balance of plan's net
  assets existing at date of initial
  application of Statement 87 to be
  recognized as a reduction of
  pension cost in future periods               (4.3)      (5.0) 

Unrecognized net (gain) loss resulting 
  from experience different from that 
  assumed and effects of changes in 
  assumptions                                  (8.3)       4.8 

Prior service cost not yet recognized
  in net periodic pension cost                 17.5       15.7  

Accrued pension cost     
  at December 31                            $ (34.6)   $  (6.9)  

10.  Other Postretirement Benefits  

Cinergy, CG&E, PSI, and ULH&P

Cinergy provides certain health care and life insurance benefits to retired 
employees and their eligible dependents.  The health care benefits include 
medical coverage, dental coverage, and prescription drugs.  The health care 
benefits provided are subject to certain limitations, such as deductibles and 
co-payments.  Additionally, all employees must meet minimum age and service 
requirements to be eligible for these postretirement benefits.  Prior to 
January 1, 1997, CG&E and PSI employees were covered under separate plans.  
Effective January 1, 1997, all Cinergy active employees are eligible to 
receive essentially the same postretirement health care benefits.  Certain 
classes of employees, based on age, as well as all retirees, have been 
grandfathered under benefit provisions in place prior to January 1, 1997.  
Neither CG&E and its subsidiaries nor PSI currently pre-fund their obligations 
for these postretirement benefits; however, PSI, in connection with the 
settlement which resulted in the February 1995 Order, agreed to begin pre-
funding.  Implementation of pre-funding is subject to the outcome of 
negotiations with The Office of the Utility Consumer Counselor and approval by 
the IURC.

Postretirement benefit cost for 1996, 1995, and 1994 included the following 
components:

Cinergy

                                              Health     Life      
                                               Care    Insurance  Total
                                                     (in millions) 
1996
Benefits earned during the period             $ 5.7      $ .1     $ 5.8
Interest accrued on Accumulated Post-
  retirement Benefit Obligation (APBO)         16.5       2.2      18.7
Net amortization and deferral                    .3        -         .3
Amortization of transition obligations          8.1        .3       8.4

Net periodic postretirement benefit cost      $30.6      $2.6     $33.2

1995
Benefits earned during the period             $ 4.4      $ .1     $ 4.5
Interest accrued on APBO                       15.6       2.2      17.8
Amortization of transition obligations          8.1        .3       8.4

Net periodic postretirement benefit cost      $28.1      $2.6     $30.7

1994
Benefits earned during the period             $ 5.2      $ .2     $ 5.4
Interest accrued on APBO                       13.8       2.2      16.0
Net amortization and deferral                    .1        -         .1
Amortization of transition obligations          8.1        .3       8.4

Net periodic postretirement benefit cost      $27.2      $2.7     $29.9


CG&E and ULH&P

                                              Health     Life      
                                               Care    Insurance  Total
                                                     (in millions) 
1996
Benefits earned during the period              $ .7      $ .1     $  .8
Interest accrued on APBO                        4.9       2.0       6.9
Amortization of transition obligation           2.6        .4       3.0

Net periodic postretirement benefit cost       $8.2      $2.5     $10.7

1995
Benefits earned during the period              $ .4      $ .1     $  .5
Interest accrued on APBO                        4.5       2.0       6.5
Amortization of transition obligation           2.6        .4       3.0

Net periodic postretirement benefit cost       $7.5      $2.5     $10.0

1994
Benefits earned during the period              $ .9      $ .1     $ 1.0
Interest accrued on APBO                        3.9       2.0       5.9
Amortization of transition obligation           2.6        .4       3.0

Net periodic postretirement benefit cost       $7.4      $2.5     $ 9.9

PSI

                                              Health     Life      
                                               Care    Insurance  Total
                                                     (in millions) 
1996
Benefits earned during the period             $ 5.0      $ -      $ 5.0
Interest accrued on APBO                       11.6        .2      11.8
Net amortization and deferral                    .3        -         .3
Amortization of transition obligation           5.5       (.1)      5.4

Net periodic postretirement benefit cost      $22.4      $ .1     $22.5

1995
Benefits earned during the period             $ 4.0      $ -      $ 4.0
Interest accrued on APBO                       11.1        .2      11.3
Amortization of transition obligation           5.5       (.1)      5.4

Net periodic postretirement benefit cost      $20.6      $ .1     $20.7

1994
Benefits earned during the period             $ 4.3      $ .1     $ 4.4
Interest accrued on APBO                        9.9        .2      10.1
Net amortization and deferral                    .1        -         .1 
Amortization of transition obligation           5.5       (.1)      5.4

Net periodic postretirement benefit cost      $19.8      $ .2     $20.0

Cinergy, CG&E, PSI, and ULH&P

The following table reconciles the APBO of the health care and life insurance 
plans with amounts recorded in the Financial Statements.  Under the provisions 
of Statement of Financial Accounting Standards No. 106, Employers' Accounting 
for Postretirement Benefits Other Than Pensions certain obligations of the 
plans are deferred and recognized in the Financial Statements in subsequent 
periods.

Cinergy
                                               Health      Life       
                                                Care     Insurance   Total_
                                                       (in millions)
1996
Actuarial present value of benefits
  Fully eligible active plan participants     $ (13.7)    $ (1.6)   $ (15.3)
  Other active plan participants                (49.8)      (1.5)     (51.3)
  Retirees and beneficiaries                   (118.0)     (26.4)    (144.4)
    Projected APBO                             (181.5)     (29.5)    (211.0)
Unamortized transition obligations               75.4         .4       75.8
Unrecognized net loss (gain) resulting from 
  experience different from that assumed
  and effects of changes in assumptions          19.5        (.5)      19.0
Accrued postretirement benefit obligations    
  at December 31, 1996                        $ (86.6)    $(29.6)   $(116.2)

1995
Actuarial present value of benefits
  Fully eligible active plan participants     $ (11.7)    $ (1.1)   $ (12.8)
  Other active plan participants               (112.0)      (2.7)    (114.7)
  Retirees and beneficiaries                    (99.2)     (26.4)    (125.6)
    Projected APBO                             (222.9)     (30.2)    (253.1)
Unamortized transition obligations              137.1         .7      137.8
Unrecognized prior service cost                   (.3)        -         (.3)
Unrecognized net loss resulting from 
  experience different from that assumed
  and effects of changes in assumptions          26.1         .5       26.6
Accrued postretirement benefit obligations    
  at December 31, 1995                        $ (60.0)    $(29.0)   $ (89.0)

Increasing the health care cost trend rate by one percentage point in each 
year would increase the APBO by approximately $21 million and $37 million for 
1996 and 1995, respectively, and the aggregate of the service and interest 
cost components of the postretirement benefit cost for each of 1996, 1995, and 
1994 by approximately $4 million, $3 million, and $4 million, respectively.

CG&E and ULH&P

                                               Health      Life       
                                                Care     Insurance    Total_
                                                       (in millions)
1996
Actuarial present value of benefits
  Fully eligible active plan participants     $ (10.8)    $ (1.6)    $ (12.4)
  Other active plan participants                (24.2)      (1.3)      (25.5)
  Retirees and beneficiaries                    (28.7)     (23.6)      (52.3)
    Projected APBO                              (63.7)     (26.5)      (90.2)
Unamortized transition obligation                24.5        2.5        27.0 
Unrecognized prior service cost                    -          .3          .3 
Unrecognized net loss (gain) resulting from 
  experience different from that assumed
  and effects of changes in assumptions          11.5       (1.4)       10.1 
Accrued postretirement benefit obligation  
  at December 31, 1996                        $ (27.7)    $(25.1)    $ (52.8)

1995
Actuarial present value of benefits
  Fully eligible active plan participants     $  (2.7)    $  (.9)    $  (3.6)
  Other active plan participants                (32.0)      (2.0)      (34.0)
  Retirees and beneficiaries                    (30.5)     (24.5)      (55.0)
    Projected APBO                              (65.2)     (27.4)      (92.6)
Unamortized transition obligation                43.4        2.9        46.3
Unrecognized net loss resulting from 
  experience different from that assumed
  and effects of changes in assumptions           4.4         .1         4.5
Accrued postretirement benefit obligation  
  at December 31, 1995                        $ (17.4)    $(24.4)    $ (41.8)


Increasing the health care cost trend rate by one percentage point in each 
year would increase the APBO by approximately $7 million and $13 million for 
1996 and 1995 respectively, and the aggregate of the service and interest cost 
components of the postretirement benefit cost by approximately $1 million for 
1996, 1995, and 1994.

PSI

                                               Health      Life       
                                                Care     Insurance   _Total_
                                                       (in millions)
1996
Actuarial present value of benefits
  Fully eligible active plan participants     $  (2.9)    $   -      $  (2.9)
  Other active plan participants                (25.6)       (.2)      (25.8)
  Retirees and beneficiaries                    (89.3)      (2.8)      (92.1)
    Projected APBO                             (117.8)      (3.0)     (120.8)
Unamortized transition obligation                50.9       (2.1)       48.8
Unrecognized prior service cost                    -         (.3)        (.3)
Unrecognized net loss resulting from 
  experience different from that assumed
  and effects of changes in assumptions           8.0         .9         8.9
Accrued postretirement benefit obligation  
  at December 31, 1996                        $ (58.9)    $ (4.5)    $ (63.4)

1995
Actuarial present value of benefits
  Fully eligible active plan participants     $  (9.0)    $  (.2)    $  (9.2)
  Other active plan participants                (80.0)       (.7)      (80.7)
  Retirees and beneficiaries                    (68.7)      (1.9)      (70.6)
    Projected APBO                             (157.7)      (2.8)     (160.5)
Unamortized transition obligation                93.7       (2.2)       91.5
Unrecognized prior service cost                   (.3)        -          (.3)
Unrecognized net loss resulting from 
  experience different from that assumed
  and effects of changes in assumptions          21.7         .4        22.1
Accrued postretirement benefit obligation  
  at December 31, 1995                        $ (42.6)    $ (4.6)    $ (47.2)

Increasing the health care cost trend rate by one percentage point in each 
year would increase the APBO by approximately $14 million and $24 million for 
1996 and 1995, respectively, and the aggregate of the service and interest 
cost components of the postretirement benefit cost for each of 1996, 1995, and 
1994 by approximately $3 million, $2 million, and $3 million, respectively.

Cinergy, CG&E, PSI, and ULH&P

The following assumptions were used to determine the APBO:

                                          1996          1995          1994___
    Discount rate                         8.00%         7.50%         8.50%

    Health care cost trend rate, 
      gradually declining to 5%        
        CG&E and subsidiaries          7.00-9.00%   8.00-11.00%   9.00-12.00%
        PSI                            7.00-9.00    8.00-10.00    8.00-12.00
   
    Year ultimate trend rates achieved
        CG&E and subsidiaries             2004          2002          2002
        PSI                               2004          2007          2007


11.  Income Taxes 

Cinergy

Cinergy complies with the provisions of Statement of Financial Accounting 
Standards No. 109, Accounting for Income Taxes (Statement 109).  Statement 109 
requires recognition of deferred tax assets and liabilities for the expected 
future tax consequences of existing differences between the financial 
reporting and tax reporting bases of assets and liabilities.

The significant components of Cinergy's net deferred income tax liability at 
December 31, 1996, and 1995, are as follows: 

                                                        1996           1995__ 
                                                           (in millions)

Deferred Income Tax Liability
  Utility plant                                       $1 042.1       $  981.8
  Unamortized costs of reacquiring debt                   23.5           28.8
  Deferred operating expenses
    and carrying costs                                    86.2           86.6
  Amounts due from customers - income taxes              129.5          143.4
  Deferred DSM costs                                      43.5           47.3 
  Investment in unconsolidated subsidiary                 13.5             -
  Other                                                   46.2           36.4
    Total deferred income tax liability                1 384.5        1 324.3

Deferred Income Tax Asset
  Unamortized investment tax credits                      63.9           67.5
  Litigation settlement                                     -            29.8
  Deferred fuel costs                                     12.0           13.0
  Accrued pension and other benefit costs                 60.4           43.3
  Other                                                  101.9           49.8 
    Total deferred income tax asset                      238.2          203.4 

Net Deferred Income Tax Liability                     $1 146.3       $1 120.9

CG&E

CG&E and its subsidiaries comply with the provisions of Statement 109.  
Statement 109 requires recognition of deferred tax assets and liabilities for 
the expected future tax consequences of existing differences between the 
financial reporting and tax reporting bases of assets and liabilities.

The significant components of CG&E's net deferred income tax liability at 
December 31, 1996, and 1995, are as follows:

                                                         1996           1995  
                                                            (in millions)

Deferred Income Tax Liability
  Utility plant                                         $671.6         $663.8 
  Unamortized costs of reacquiring debt                   11.2           14.2
  Deferred operating expenses
    and carrying costs                                    73.5           76.2
  Amounts due from customers - income taxes              120.7          139.8
  Deferred DSM costs                                       6.0            5.6
  Other                                                   40.9           25.5 
    Total deferred income tax liability                  923.9          925.1

Deferred Income Tax Asset
  Unamortized investment tax credits                      43.9           46.1
  Deferred fuel costs                                      5.8            8.1
  Accrued pension and other benefit costs                 31.4           28.7
  Other                                                   75.7           46.8 
    Total deferred income tax asset                      156.8          129.7 

Net Deferred Income Tax Liability                       $767.1         $795.4

PSI

PSI and its subsidiaries comply with the provisions of Statement 109.  
Statement 109 requires recognition of deferred tax assets and liabilities for 
the expected future tax consequences of existing differences between the 
financial reporting and tax reporting bases of assets and liabilities.

The significant components of PSI's net deferred income tax liability at 
December 31, 1996, and 1995, are as follows:

                                                         1996           1995_
                                                            (in millions)

Deferred Income Tax Liability
  Electric utility plant                                $370.5         $315.7
  Unamortized costs of reacquiring debt                   12.3           14.6
  Amounts due from customers - income taxes                8.8            3.6
  Deferred operating expenses
    and accrued carrying costs                            12.7           12.5
  Deferred DSM costs                                      37.5           41.7
  Other                                                    4.9            9.4
    Total deferred income tax liability                  446.7          397.5

Deferred Income Tax Asset
  Unamortized investment tax credits                      20.0           21.4
  Litigation settlement                                     -            29.8
  Accrued pension and other benefit costs                 29.0           15.6
  Deferred fuel costs                                      6.2            4.9
  Other                                                   18.5           (6.1)
    Total deferred income tax asset                       73.7           65.6 

Net Deferred Income Tax Liability                       $373.0         $331.9

ULH&P

ULH&P complies with the provisions of Statement of Statement 109.  Statement 
109 requires recognition of deferred tax assets and liabilities for the 
expected future tax consequences of existing differences between the financial 
reporting and tax reporting bases of assets and liabilities.

The significant components of ULH&P's net deferred income tax liability at 
December 31, 1996, and 1995, are as follows:

                                                         1996          1995  
                                                           (in thousands)

Deferred Income Tax Liability
  Utility plant                                        $33 872       $32 104 
  Unamortized costs of reacquiring debt                    996         1 034
  Deferred fuel costs                                    5 459           -  
  Other                                                  3 732         2 817 
    Total deferred income tax liability                 44 059        35 955

Deferred Income Tax Asset
  Unamortized investment tax credits                     1 946         2 060
  Amounts due to customers - income taxes                2 067         1 904
  Deferred fuel costs                                      -           1 822
  Accrued pension and other benefit costs                2 482         2 365
  Other                                                  4 101         4 076 
    Total deferred income tax asset                     10 596        12 227 

Net Deferred Income Tax Liability                      $33 463       $23 728

Cinergy, CG&E, PSI, and ULH&P

Cinergy and its subsidiaries will participate in the filing of a consolidated 
Federal income tax return for the year ended December 31, 1996.  The current 
tax liability is allocated among the members of the group pursuant to a tax 
sharing agreement consistent with Rule 45(c) of the PUHCA.

A summary of Federal and state income taxes charged (credited) to income and 
the allocation of such amounts is as follows:

Cinergy
                                                   1996      1995      1994_
                                                        (in millions)

Current Income Taxes
  Federal                                         $143.4    $175.3    $104.1
  State                                              7.5      10.4       6.5
      Total current income taxes                   150.9     185.7     110.6

Deferred Income Taxes
  Federal
    Depreciation and other utility plant-
      related items                                 61.6      53.8      62.2
    Property taxes                                    -         -      (13.3)
    DSM costs                                       (1.9)     12.0      14.5 
    Pension and other benefit costs                (28.2)    (21.8)    (12.4)
    Litigation settlement                           26.2        -         - 
    Fuel costs                                       8.8        .3       (.7)
    Other items - net                              (15.4)     (7.5)    (11.6)
      Total deferred Federal income taxes           51.1      36.8      38.7

  State                                              6.5       1.7       2.7 
      Total deferred income taxes                   57.6      38.5      41.4

Investment Tax Credits - Net                        (9.8)    (10.1)    (10.4)

      Total Income Taxes                          $198.7    $214.1    $141.6

Allocated to:
  Operating income                                $218.2    $221.4    $154.5
  Other income and expenses - net                  (19.5)     (7.3)    (12.9)
                                                  $198.7    $214.1    $141.6

CG&E

                                                    1996      1995      1994_
                                                         (in millions)

Current Income Taxes
  Federal                                          $115.5    $102.4    $ 82.3
  State                                               1.5       2.5       1.5
      Total current income taxes                    117.0     104.9      83.8

Deferred Income Taxes
  Federal
    Depreciation and other utility plant-
      related items                                  36.6      33.9      42.9
    Property taxes                                     -         -      (11.3)
    Pension and other benefit costs                 (17.0)    (10.7)     (8.4)
    Fuel costs                                       10.8       6.3      (1.4)
    Other items - net                                (7.5)     (2.6)     (2.6)
      Total deferred Federal income taxes            22.9      32.1      19.2

  State                                               2.2        .8        .6
      Total deferred income taxes                    25.1      32.9      19.8

Investment Tax Credits - Net                         (6.2)     (6.0)     (6.1)

      Total Income Taxes                           $135.9    $131.8    $ 97.5

Allocated to:
  Operating income                                  145.0    $136.4    $104.1
  Other income and expenses - net                    (9.1)     (4.6)     (6.6)
                                                   $135.9    $131.8    $ 97.5 
 
PSI

                                                    1996      1995      1994 
                                                         (in millions)

Current Income Taxes
  Federal                                          $41.3     $71.4     $22.0
  State                                              6.0       7.5       5.5 
      Total current income taxes                    47.3      78.9      27.5

Deferred Income Taxes
  Federal
    Depreciation and other electric utility
      plant-related items                           25.0      19.9      19.2
    DSM costs                                       (2.5)      8.4      12.6
    Pension and other benefit costs                (11.2)    (11.1)     (1.8) 
    Litigation settlement                           26.2        -         -
    Fuel costs                                      (2.0)     (6.0)       .7
    Other items - net                               (6.3)     (3.0)     (4.4)
      Total deferred Federal income taxes           29.2       8.2      26.3
 
  State                                              4.3       1.1       2.2
      Total deferred income taxes                   33.5       9.3      28.5

Investment Tax Credits - Net                        (3.6)     (4.1)     (4.3)

      Total Income Taxes                           $77.2     $84.1     $51.7
 
Allocated to:
  Operating income                                 $73.2     $85.0     $50.4
  Other income and expenses - net                    4.0       (.9)      1.3
                                                   $77.2     $84.1     $51.7

ULH&P
                                                     1996     1995      1994_
                                                          (in thousands)

Current Income Taxes
  Federal                                          $   416   $5 955   $2 746
  State                                                (87)   1 324      498
      Total current income taxes                       329    7 279    3 244

Deferred Income Taxes
  Federal
    Depreciation and other utility plant-
      related items                                  1 506    1 382    1 727 
    Pension and other benefit costs                   (277)    (381)    (349)
    Fuel costs                                       6 111     (534)      23
    Uncollectible accounts - net                      (119)     (16)     300
    Unamortized costs of reacquiring debt              458      808       -   
    Other items - net                                  410     (540)     (20)
      Total deferred Federal income taxes          $ 8 089      719    1 681

  State
    Depreciation and other utility plant-
      related items                                    425      390      656 
    Fuel costs                                       1 570     (137)      - 
    Other items - net                                   55      (35)      (8)
      Total deferred state income taxes              2 050      218      648  

      Total deferred income taxes                   10 139      937    2 329  

Investment Tax Credits - Net                          (282)    (285)    (287)

      Total Income Taxes                           $10 186   $7 931   $5 286  

Allocated to:
  Operating income                                 $ 9 834   $7 887   $5 342  
  Other income and expenses - net                      352       44      (56)
                                                   $10 186   $7 931   $5 286  

Cinergy, CG&E, PSI, and ULH&P

Federal income taxes, computed by applying the statutory Federal income tax 
rate to book income before Federal income tax, are reconciled to Federal 
income tax expense reported in the Statements of Income for each registrant as 
follows:

Cinergy
                                                 1996       1995       1994_ 
                                                       (in millions)

Statutory Federal income tax provision          $181.8     $192.2     $113.2 
Increases (Reductions) in taxes resulting from:
  Amortization of investment tax credits          (9.8)     (10.1)     (10.4)
  Depreciation and other utility plant-
    related differences                           14.1        9.0       13.5
  Preferred dividend requirements of
    subsidiaries                                   8.5       10.8       12.4
  Foreign tax credit                             (11.1)        -          -
  Other - net                                      1.2         .1        3.7
Federal income tax expense                      $184.7     $202.0     $132.4 

CG&E

Statutory Federal income tax provision          $125.8     $127.6      $88.8
Increases (Reductions) in taxes resulting from:
  Amortization of investment tax credits          (6.2)      (6.0)      (6.1)
  Depreciation and other utility plant-
    related differences                           11.7        9.0        8.2
  Preferred dividends                               -         6.2        7.8
  Other - net                                       .9       (8.3)      (3.3)
Federal income tax expense                      $132.2     $128.5      $95.4 

PSI

                                                 1996       1995       1994  
                                                        (in millions)

Statutory Federal income tax provision          $ 67.4     $ 77.5     $ 44.2
Increases (Reductions) in taxes resulting from:
  Amortization of investment tax credits          (3.6)      (4.1)      (4.3)
  Other - net                                      3.1        2.1        4.1
Federal income tax expense                      $ 66.9     $ 75.5     $ 44.0

ULH&P
                                                 1996       1995       1994_ 
                                                       (in thousands)

Statutory Federal income tax provision          $7 987     $6 496     $4 385
Increases (Reductions) in taxes resulting from:
  Amortization of investment tax credits          (283)      (285)      (287)
  Depreciation and other utility plant-
    related differences                            358        219        138 
Other - net                                        161        (41)       (96)
Federal income tax expense                      $8 223     $6 389     $4 140

12.  Commitments and Contingencies

(a)  Construction 

Cinergy, CG&E, PSI, and ULH&P

Cinergy will have commitments in connection with its forecasted construction 
programs.  Aggregate expenditures for Cinergy's construction program for the 
1997 through 2001 period are currently forecasted to be $1.7 billion.  Of 
these projected expenditures, approximately $817 million relates to CG&E and 
its subsidiaries, including $111 million for ULH&P, and $908 million relates 
to PSI.

 (b)  Manufactured Gas Plant (MGP) Sites 

Cinergy, CG&E, PSI, and ULH&P

     (i)  General  Prior to the 1950s, gas was produced at MGP sites through a 
process that involved the heating of coal and/or oil.  The gas produced from 
this process was sold for residential, commercial, and industrial uses.

Cinergy and PSI

     (ii)  PSI  Coal tar residues, related hydrocarbons, and various metals 
associated with MGP sites have been found at former MGP sites in Indiana, 
including, but not limited to, Shelbyville and Lafayette, two sites previously 
owned by PSI.  PSI has identified at least 21 MGP sites which it or its 
predecessors previously owned, including 19 it sold in 1945 to Indiana Gas and 
Water Company, Inc. (now Indiana Gas Company, Inc. (IGC)), including the 
Shelbyville and Lafayette sites.  IGC has informed PSI of the basis for its 
claim that PSI, as a Potentially Responsible Party (PRP) under the 
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 
should contribute to IGC's response costs related to investigating and 
remediating contamination at 18 of the 19 MGP sites which PSI sold to IGC 
(excluding the Shelbyville site).  

The Shelbyville site has been the subject of an investigation and cleanup 
enforcement action by the Indiana Department of Environmental Management 
(IDEM) against IGC and PSI.  Without admitting liability, PSI and IGC have 
conducted an investigation and remediation activities at the Shelbyville site. 
Recently, PSI and IGC submitted a proposed agreed order to IDEM relative to 
the Shelbyville site, which, if accepted by IDEM, will result in a 
determination of whether the activities previously undertaken at the site are 
sufficient to adequately protect human health and the environment.  PSI and 
IGC are sharing the costs of the Shelbyville site, and based upon 
environmental investigations and remediation completed to date, PSI believes 
that any further required investigation and remediation for this site will not 
have a material adverse effect on its financial condition or results of 
operations. 

In 1992, the IDEM issued an order to IGC, naming IGC as a PRP as defined in 
the CERCLA, which requires investigation and remediation of the Lafayette MGP 
site.  IGC entered into an agreed order with the IDEM for the removal of MGP 
contamination at that site.  

During 1995, PSI received notification from Northern Indiana Public Service 
Company (NIPSCO) alleging PSI is a PRP under the CERCLA with respect to 
contamination associated with MGP sites previously owned and/or operated by 
both PSI and NIPSCO (or their predecessors).  The notification included seven 
sites, five of which PSI acquired from NIPSCO and subsequently sold to IGC.  
The other two sites are located in Goshen and Warsaw, Indiana.  Recently, 
NIPSCO demanded that PSI reimburse NIPSCO for its costs incurred to date 
(approximately $400,000) for investigating the Goshen MGP site as well as 
costs to be incurred by NIPSCO for remediation of that site, estimated by 
NIPSCO to be as high as $3 million.  PSI is investigating this claim.

PSI has placed its insurance carriers on notice of IGC's and NIPSCO's claims.

IGC and PSI have entered into negotiations regarding IGC's claim; however, it 
is premature, at this time, to predict the nature, extent, and ultimate costs 
of, or PSI's responsibility for, environmental investigations and remediations 
at MGP sites owned or previously owned by PSI.  Information available to PSI 
regarding the current status of investigation and/or remediation at the sites 
identified in IGC's claim indicates PSI's potential exposure to probable and 
reasonably estimable liabilities associated with these MGP sites would not be 
material to its financial condition or results of operations.  However, 
further investigation and remediation activities at these sites and the 
additional sites identified in NIPSCO's claim may indicate that the potential 
liability for MGP sites could be material.  

In May 1995, the IURC denied IGC's request for recovery of costs incurred in 
complying with Federal, state, and local environmental regulations related to 
MGP sites in which IGC has an interest, including sites acquired from PSI.  
IGC appealed this decision, which IGC contended was contrary to decisions made 
by other state utility commissions with respect to this issue.  In January 
1997, the Indiana Court of Appeals (Court of Appeals) affirmed the IURC's 
decision denying IGC's request for recovery of MGP costs.  IGC has petitioned 
the Indiana Supreme Court to review the Court of Appeals decision.  The IURC 
granted PSI's motion establishing a sub-docket to PSI's last retail rate 
proceeding, in which the IURC issued an order in September 1996, to consider 
its request for rate recovery of any MGP site-related costs it may incur.  PSI 
is unable to predict the extent to which it will be able to recover through 
rates any MGP site investigation and remediation costs ultimately incurred.  

Cinergy, CG&E, and ULH&P

     (iii)  CG&E and its Utility Subsidiaries  Lawrenceburg, a wholly-owned 
subsidiary of CG&E, also has a MGP site.  In May 1995, Lawrenceburg and the 
IDEM reached an agreement to include the Lawrenceburg MGP site in the IDEM's 
voluntary cleanup program.  Lawrenceburg implemented a remediation plan, and, 
on September 20, 1996, received a certificate of completion on the cleanup 
from the IDEM.  The total costs incurred for the cleanup program in 1995 and 
1996 and expected to be incurred in 1997, are approximately $280,000. 

CG&E and its utility subsidiaries are aware of other potential sites where MGP 
activities may have occurred at some time in the past.  None of these sites is 
known to present a risk to the environment.  Except for the Lawrenceburg site, 
neither CG&E nor its utility subsidiaries have undertaken responsibility for 
investigating other potential MGP sites.

Cinergy and CG&E

(c)  United Scrap Lead Site  The United States Environmental Protection Agency 
(EPA) alleges that CG&E is a PRP under the CERCLA liable for cleanup of the 
United Scrap Lead site in Troy, Ohio.  CG&E was one of approximately 200 
companies so named.  CG&E believes it is not a PRP and should not be 
responsible for cleanup of the site.  Under the CERCLA, CG&E could be jointly 
and severally liable for costs incurred in cleaning up the site, estimated by 
the EPA to be $27 million, of which CG&E estimates its portion to be 
immaterial to its financial condition or results of operations.

Cinergy, CG&E, and PSI

(d)  Enertech Associates, Inc. (Enertech) Litigation  On October 25, 1995, a 
suit was filed in the Federal District Court for the Southern District of Ohio 
by three former employees of Enertech, formerly named Power International, 
Inc., a subsidiary of Investments, naming as defendants Enertech, Cinergy, 
Investments, CG&E, PSI, James E. Rogers, and William J. Grealis.  (Mr. Rogers 
and/or Mr. Grealis are officers and/or directors of the foregoing companies.) 
The lawsuit, which stems from the termination of employment of the three 
former employees, alleges that they entered into employment contracts with 
Enertech based on the opportunity to participate in potential profits from 
future investments in energy projects in central and eastern Europe.  The suit 
alleges causes of action based upon, among other theories, breach of contract 
related to the events surrounding the termination of their employment and 
fraud and misrepresentation related to the level of financial support for 
future projects.  The suit alleges compensatory damages of $154 million based 
upon assumed future success of potential future investments and punitive 
damages of three times that amount.  All defendants are vigorously defending 
against the charges based upon meritorious defenses. Cinergy, CG&E, and PSI 
are currently unable to predict the outcome of this litigation.

Cinergy and PSI

(e)   Wabash Valley Power Association, Inc. (WVPA)  In February 1989, PSI and 
WVPA entered into a settlement agreement to resolve all claims related to 
Marble Hill, a nuclear project canceled in 1984.  Implementation of the 
settlement agreement was contingent upon a number of events, including the 
conclusion of WVPA's bankruptcy proceeding and certain regulatory approvals.  
In December 1996, following the resolution of issues associated with WVPA's 
bankruptcy proceeding, PSI, on behalf of itself and its officers, paid $80 
million on behalf of WVPA to the Rural Utilities Service (RUS) and the 
National Rural Utilities Cooperative Finance Corporation (CFC).  The $80 
million obligation, net of insurance proceeds, other credits, and applicable 
income tax effects, was charged to income in 1988.  On January 2, 1997, an 
order dismissing the WVPA litigation against PSI and its officers with 
prejudice was entered by the United States District Court for the Southern 
District of Indiana.  

In accordance with the terms of the settlement agreement, PSI will enter into 
a take-or-pay power supply agreement for the sale of firm power to WVPA.  The 
difference between revenues received from WVPA and costs of the power supplied 
under the power supply agreement (the Margin) will be paid annually to the RUS 
and CFC to satisfy a $90 million obligation.  To the extent the Margin is 
insufficient to satisfy the obligation, the deficiency would be recognized as 
a loss by PSI.  Implementation of the take-or-pay power supply agreement is 
subject to completion of negotiations with the RUS regarding the rate of 
interest and other payment terms and approval by the FERC of the power supply 
agreement.

Cinergy, CG&E, and ULH&P

(f)  Potential Divestiture of Gas Operations  Under the PUHCA, the divestiture 
of CG&E's gas operations may be required.  In its order approving the merger, 
the SEC reserved judgment over Cinergy's ownership of the gas operations for a 
period of three years.  In June 1995, the SEC endorsed recommendations for 
reform/repeal of the PUHCA, including allowing registered holding companies to 
own combination electric and gas utility companies, provided the affected 
states agree.  It is expected that legislation addressing repeal of the PUHCA 
and industry restructuring will be introduced in Congress during 1997.
 
Regardless of the outcome of the proposals to reform/repeal the PUHCA, Cinergy 
believes it has a justifiable basis for retention of its gas operations and 
will continue its pursuit of SEC approval.  If divestiture is ultimately 
required, the SEC has historically allowed companies sufficient time to 
accomplish divestitures in a manner that protects shareholder value.  (See 
Note 15 for financial information by business segment.)  

Cinergy

(g)  Windfall Profits Levy  As of December 31, 1996, a contingency involving 
Midlands, which existed as of the date of its acquisition by Avon Energy, 
remains unresolved.  Certain members of the British Parliament are calling for 
a windfall profits levy against businesses which had previously been owned and 
operated by the government.  The manner in which this levy would be calculated 
and paid, as well as which privatized companies would be included in such a 
levy remain unclear, although it is almost certain that companies such as 
Midlands would be included.  Because of the uncertainty surrounding this 
issue, as of December 31, 1996, no liability for the levy has been recorded by 
either Midlands or Avon Energy.

General elections in Great Britain are required to be held no later than May 
1997.  If those individuals calling for the windfall profits levy gain control 
of government in the general elections, it is probable that Midlands and Avon 
Energy will have sufficient information to determine the form of the levy, 
quantify the amount, and determine the appropriate accounting treatment during 
the second quarter of 1997.  Although the total amount to be raised by such a 
levy has not been quantified by those suggesting it, estimates of the amount 
made by members of the British press and financial community have ranged from 
3 billion to 5 billion pounds sterling (approximately $5 billion to $9 
billion).  These same estimates have indicated Midlands' apportionment to be 
in the range of 60 million to 210 million pounds sterling (approximately $100 
million to $350 million), depending on the manner in which the levy is 
calculated and which companies are included in the levy.

Cinergy, CG&E, and PSI

13.  Jointly Owned Plant 

PSI is a joint owner of Gibson Unit 5 with WVPA and the Indiana Municipal 
Power Agency (IMPA).  Additionally, PSI is a co-owner with WVPA and IMPA of 
certain transmission property and local facilities.  These facilities 
constitute part of the integrated transmission and distribution systems which 
are operated and maintained by PSI.  CG&E, Columbus Southern Power Company, 
and The Dayton Power and Light Company have constructed electric generating 
units and related transmission facilities on varying common ownership bases.  
The Consolidated Statements of Income reflect PSI's and CG&E's portions of all 
operating costs associated with the commonly owned facilities.

PSI's and CG&E's investments in jointly owned plant are as follows:

<TABLE> 
<CAPTION>
                                                          1996					
                                            Utility Plant   Accumulated    Construction
                                 Share       in Service     Depreciation  Work in Progress
                                                 (dollars in millions)
<S>                             <C>          <C>              <C>             <C>
PSI
Production
  Gibson (Unit 5)                50.05%       $  206           $ 92            $ 1
Transmission and local 
  facilities                     94.22         1 824            635             43

CG&E
Production
  Miami Fort Station
    (Units 7 and 8)              64              208            111              1
  W.C. Beckjord Station
    (Unit 6)                     37.5             41             24              -
  J.M. Stuart Station            39              269             11              4
  Conesville Station
    (Unit 4)                     40               72             35              2
  Zimmer                         46.5          1 215            204              2
  East Bend Station              69              331            157              1
  Killen Station                 33              186             81              -
Transmission                  Various             62             30              -
</TABLE>


14.  Quarterly Financial Data (unaudited)

Cinergy

		Operating	Operating	 Net	Earnings
Quarter Ended	Revenues 	 Income  	Income   Per Share
		 (in millions, except per share amounts)

1996
March 31                 $  884        $169       $110     $ .70
June 30                     717         113         56(a)    .35(a)
September 30                766         150         98       .51(b)  
December 31                 876         126         71(a)    .44(a) 
  Total                  $3 243        $558       $335(a)  $2.00(a)(b)  

1995
March 31                 $  808        $163       $102     $ .65
June 30                     666         120         60       .39
September 30                765         169        109       .69  
December 31                 784         135         76       .49 
  Total                  $3 023        $587       $347     $2.22 

(a)  In 1996, Cinergy recognized charges to earnings of approximately $55 
million ($38 million, net of taxes or 24 cents per share) primarily for 
charges related to voluntary early retirement and severance programs and 
disallowances associated with the PUCO's December 1996 Order in CG&E's 
gas rate proceeding.  Of these charges, approximately $11 million, net of 
taxes or 7 cents per share, was recognized in the second quarter, and 
approximately $27 million, net of taxes or 17 cents per share, was 
recognized in the fourth quarter.  Of the total $55 million charge, $41 
million is reflected in "Operating Expenses - Other operation" and $14 
million is reflected in "Other Income and Expenses - Net."

(b)  In the third quarter of 1996, Cinergy incurred costs of $18 million 
or 12 cents per share related to the reacquisition of 90% of CG&E's 
preferred stock through a tender offer.  (See Note 3(b).) 

CG&E

                              Operating       Operating           Net
Quarter Ended                 Revenues         Income           Income
                                            (in millions)   

1996
March 31                       $  575           $120             $ 92
June 30                           437             69(a)            39(a)
September 30                      431             90               62  
December 31                       533             73(a)            34(a)
  Total                        $1 976           $352             $227 

1995
March 31                       $  525           $109             $ 77
June 30                           393             71               40
September 30                      435             98               69  
December 31                       495             82               50 
  Total                        $1 848           $360             $236

(a)  In 1996, CG&E recognized charges to earnings of approximately $50 
million ($35 million, net of taxes) primarily for charges related to 
voluntary early retirement and severance programs and disallowances 
associated with the PUCO's December 1996 Order in CG&E's gas rate 
proceeding.  Of these charges, approximately $10 million, net of taxes, 
was recognized in the second quarter, and approximately $25 million, net 
of taxes, was recognized in the fourth quarter.  Of the total $50 million 
charge, $36 million is reflected in "Operating Expenses - Other 
operation" and $14 million is reflected in "Other Income and Expenses - 
Net."


PSI

                              Operating       Operating          Net
Quarter Ended                 Revenues         Income           Income
                                            (in millions)   

1996
March 31                       $  328           $ 50             $ 27
June 30                           290             44(a)            25(a)
September 30                      348             61               43     
December 31                       366             51(a)            31(a)
  Total                        $1 332           $206             $126 

1995
March 31                       $  299           $ 53             $ 33
June 30                           290             49               29
September 30                      343             70               50
December 31                       316             55               34    
  Total                        $1 248           $227             $146 

(a)  In 1996, PSI recognized charges to earnings of approximately $5 
million ($3 million, net of taxes) primarily for charges related to 
voluntary early retirement and severance programs.  Of these charges, 
approximately $1 million, net of taxes, was recognized in the second 
quarter, and approximately $2 million, net of taxes, was recognized in 
the fourth quarter.  The $5 million charge is reflected in "Operating 
Expenses - Other operation."

15.  Financial Information by Business Segment     

Cinergy
                                                   Operating
                  Operating  Operating   Income   Provision for   Construction
Year Ended        Revenues    Income      Taxes   Depreciation    Expenditures
                                      (in millions)
1996
  Electric          $2 769     $520       $204        $260            $276 
  Gas                  474       38         14          23              32
Total               $3 243     $558       $218        $283            $308 

1995
  Electric          $2 612     $548       $209        $258            $286
  Gas                  411       39         12          22              36
Total               $3 023     $587       $221        $280            $322
                         
1994 
  Electric          $2 446     $416       $146        $274            $432 
  Gas                  442       28          8          20              42
Total               $2 888     $444       $154        $294            $474

                                                        December 31
                                             1996          1995          1994_
                                                       (in millions)        
Property, Plant, and Equipment - net
  Electric                                  $5 737        $5 718        $5 680
  Gas                                          553           532           519
                                             6 290         6 250         6 199
Other Corporate Assets                       2 559         1 970         1 951
    Total Assets                            $8 849        $8 220        $8 150

For a discussion of the potential divestiture of CG&E's, including ULH&P's, 
gas operations, see Note 12(f).

CG&E
                                                    Operating
                  Operating  Operating   Income   Provision for   Construction
Year Ended        Revenues    Income      Taxes   Depreciation    Expenditures
                                      (in millions)
1996
  Electric          $1 502     $314       $131        $138            $109 
  Gas                  474       38         14          23              32
Total               $1 976     $352       $145        $161            $141 

1995
  Electric          $1 437     $321       $124        $137            $101
  Gas                  411       39         12          22              36
Total               $1 848     $360       $136        $159            $137
                         
1994 
  Electric          $1 346     $263       $ 96        $137            $138 
  Gas                  442       28          8          20              42
Total               $1 788     $291       $104        $157            $180

CG&E Continued

                                                       December 31
                                            1996          1995          1994_
                                                      (in millions)       
Property, Plant, and Equipment - net
  Electric                                 $3 205        $3 244        $3 277
  Gas                                         553           532           519
                                            3 758         3 776         3 796
Other Corporate Assets                      1 209         1 421         1 386
    Total Assets                           $4 967        $5 197        $5 182

For a discussion of the potential divestiture of CG&E's, including ULH&P's, 
gas operations, see Note 12(f).

ULH&P

                                                   Operating
                Operating  Operating  Income     Provision for   Construction
Year Ended      Revenues    Income     Taxes     Depreciation    Expenditures
                                   (in thousands)
1996
  Electric      $190 900    $12 558    $5 644       $ 6 935        $ 9 571 
  Gas             76 868      8 476     4 190         4 974          9 073 
    Total       $267 768    $21 034    $9 834       $11 909        $18 644    
     

1995
  Electric      $187 180    $11 425    $4 500       $ 6 679        $10 909
  Gas             70 288      8 405     3 387         4 759          8 063
    Total       $257 468    $19 830    $7 887       $11 438        $18 972
                         
1994 
  Electric      $177 564    $ 9 736    $3 007       $ 6 213        $12 127 
  Gas             71 971      6 654     2 335         4 431          8 277
    Total       $249 535    $16 390    $5 342       $10 644        $20 404

                                                      December 31
                                           1996          1995           1994  
                                                    (in thousands)
Property, Plant, and Equipment - net
  Electric                               $142 490      $138 482      $134 508
  Gas                                     106 791       104 749       102 340
                                          249 281       243 231       236 848
Other Corporate Assets                     41 202        56 566        50 280
    Total Assets                         $290 483      $299 797      $287 128

For a discussion of the potential divestiture of ULH&P's gas operations, see 
Note 12(f).

16.  Subsequent Events (unaudited)

(a) Money Pool  In March 1997, Cinergy's utility subsidiaries, including CG&E, 
PSI, and ULH&P and other Cinergy system companies, which participate in the 
money pooling arrangement, filed an application with the SEC under the PUHCA 
requesting reauthorization of the money pool through December 31, 2002.  (See 
Note 5.)

(b) Forward Exchange Hedging Activity  In February 1997, Cinergy entered into 
a five year currency swap for the purpose of hedging its pound sterling 
denominated investment in Midlands.  This transaction closed out the forward 
exchange contract in existence at December 31, 1996.  (See Note 8(a)(i).)

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

Cinergy, CG&E, PSI, and ULH&P

None.

                                    PART III

        ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

Board of Directors

Cinergy

Reference is made to Cinergy Corp.'s, a Delaware corporation (Cinergy or 
Company) 1997 Proxy Statement with respect to identification of directors and 
their current principal occupations.  

CG&E

The directors of The Cincinnati Gas & Electric Company (CG&E) at February 28, 
1997, included:

Jackson H. Randolph  Mr. Randolph, age 66, is Chairman of CG&E.  He has served 
as a director of CG&E since 1983, and his current term as director expires 
April 16, 1997.

James E. Rogers  Mr. Rogers, age 49, is Vice Chairman and Chief Executive 
Officer of CG&E.  He has served as a director of CG&E since October 24, 1994, 
and his current term as director expires April 16, 1997.

William J. Grealis  Mr. Grealis, age 51, is President of CG&E.  He has served 
as a director of CG&E since September 1, 1995, and his current term expires 
April 16, 1997.

PSI

Reference is made to PSI Energy, Inc.'s (PSI) 1997 Information Statement with 
respect to identification of directors and their current principal 
occupations.  

ULH&P

Omitted pursuant to Instruction I(2)(c).

Executive Officers

Cinergy, CG&E, and PSI

The information included in Part I of this report on pages 17 through 19 under 
the caption "Executive Officers of the Registrants" is referenced in reliance 
upon General Instruction G to Form 10-K and Instruction 3 to Item 401(b) of 
Regulation S-K.

ULH&P

Omitted pursuant to Instruction I(2)(c).

ITEM 11.  EXECUTIVE COMPENSATION

Cinergy

Reference is made to Cinergy's 1997 Proxy Statement with respect to executive 
compensation.

CG&E

Reference is made to Cinergy's 1997 Proxy Statement with respect to executive 
compensation, except as to information pertaining to the compensation of 
directors and to the performance graph, which information is set forth below.

Compensation of Directors

Directors who are not employees (the "non-employee directors") receive an 
annual retainer fee of $8,000 plus a fee of $1,000 for each CG&E board of 
directors' meeting attended; however, any non-employee director of CG&E who 
also serves as a non-employee director of Cinergy or any of its affiliates 
shall neither receive such annual retainer fee, nor any compensation for 
attendance at any CG&E board meeting that is held concurrently or consecutively 
with a meeting of the board of directors of Cinergy.  Directors who are also 
employees of Cinergy or any of its subsidiaries (Messrs. Randolph, Rogers, and 
Grealis) will receive no remuneration for their services as directors.

Under Cinergy's Directors' Deferred Compensation Plan, each non-employee 
director of Cinergy or any of its subsidiaries may defer fees and have them 
accrued either in cash or in units representing shares of Cinergy common stock. 
If deferred in such units, the stock will be distributed to the director at the 
time of retirement from the appropriate board.  Amounts deferred in cash will 
be paid at the same time.

Under Cinergy's Retirement Plan for Directors, non-employee directors with 
five or more years of service will receive annual retirement compensation in 
an amount equal to the annual Cinergy board retainer fee in effect at the time 
of termination of service as a director, plus the product of the fee paid for 
attendance at a Cinergy board meeting multiplied by five.  Retirement 
compensation is paid for as many years as the director served on the Cinergy 
board.  This plan covers non-employee directors serving on the boards of 
directors of Cinergy, Services, CG&E, or PSI.  Prior service by non-employee 
directors of CG&E, PSI, or Resources is credited under this plan.

Performance Graph

The following line graph compares the cumulative total shareholder return of 
the common stock of CG&E with the cumulative total returns during the same 
time period of the Standard & Poor's (S&P) Electric Utilities Index and the 
S&P 500 Stock Index.  The graph tracks performance from January 1, 1992, 
through October 24, 1994, the final trading date of CG&E's common stock.  The 
graph assumes a $100 investment on January 1, 1992, and reinvestment of all 
dividends.

[Omitted is a line graph illustrating the following data.]


                               1/1/92    1/1/93    1/1/94    10/24/94

CG&E Common Stock             $100.00   $ 99.50   $117.20     $103.10

S&P Electric Utilities Index  $100.00   $105.90   $119.20     $ 98.40

S&P 500 Stock Index           $100.00   $107.60   $118.40     $119.50

PSI

Reference is made to PSI's 1997 Information Statement with respect to 
executive compensation.

ULH&P

Omitted pursuant to Instruction I(2)(c).

             ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                             OWNERS AND MANAGEMENT

Cinergy

Reference is made to Cinergy's 1997 Proxy Statement with respect to security 
ownership of certain beneficial owners and management.

CG&E

Cinergy owns all the outstanding shares of common stock of CG&E.  Pursuant to 
Section 13(d) of the Securities Exchange Act of 1934, a beneficial owner of a 
security is any person who directly or indirectly has or shares voting or 
investment power over such security. No person or group is known by management 
of CG&E to be the beneficial owner of more than 5% of CG&E's class of 
cumulative preferred stock as of December 31, 1996.  

CG&E's directors and executive officers did not beneficially own any shares of 
any series of the class of CG&E's cumulative preferred stock as of December 
31, 1996.  The beneficial ownership of Cinergy's common stock held by each 
director and named executive officer as of December 31, 1996 is set forth in 
the following table.

                                                    Amount and Nature
               Name of Beneficial Owner(1)       of Beneficial Ownership (2)

               William J. Grealis                    22,710  shares
               J. Wayne Leonard                      96,651  shares
               Jackson H. Randolph                  129,893  shares
               James E. Rogers                      218,171  shares
               Larry E. Thomas                       88,441  shares

               All directors and executive          736,563  shares (2)
               officers as a group           (representing 0.47% of the class)

(1)    No individual listed beneficially owned more than 0.14% of the 
outstanding shares of Cinergy common stock.
(2)    Includes shares which there is a right to acquire within 60 days 
pursuant to the exercise of stock options in the following amounts:  Mr. 
Grealis - 15,887; Mr. Leonard - 77,611; Mr. Randolph - 50,000; Mr. 
Rogers - 95,629; Mr. Thomas - 54,104; and all directors and executive 
officers as a group - 414,861.
PSI

Reference is made to PSI's 1997 Information Statement with respect to security 
ownership of certain beneficial owners and management.

ULH&P

Omitted pursuant to Instruction I(2)(c).

          ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Cinergy, CG&E, and PSI

None.

ULH&P

Omitted pursuant to Instruction I(2)(c).
 
                                       PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Financial Statements and Schedules.

Cinergy, CG&E, PSI, and ULH&P

Refer to the page captioned "Index to Financial Statements and Financial 
Statement Schedules", pages 48 and 49 of this report, for an index of the 
financial statements and financial statement schedules included in this 
report.

(b)  Reports on Form 8-K.

Cinergy, CG&E, PSI, and ULH&P

None

Copies of the documents listed below which are identified with an asterisk (*) 
have heretofore been filed with the SEC and are incorporated herein by 
reference and made a part hereof.  Exhibits identified with a pound sign (#) 
are being filed herewith by the registrant identified in the exhibit 
discussion below and are incorporated herein by reference with respect to any 
other designated registrant.  Exhibits not so identified are filed herewith

  Exhibit
Designation                     Nature of Exhibit_______________

Cinergy

   3-a          *Certificate of Incorporation of Cinergy Corp., 
a Delaware corporation (Cinergy or Company).  
(Exhibit to Cinergy's 1993 Form 10-K in File No. 
1-11377.)

   3-b          *By-laws of Cinergy as amended January 25, 1996. 
 (Exhibit to Cinergy's Form U-1 Declaration filed 
February 23, 1996, in File No. 70-8807.)  

  Exhibit
Designation                     Nature of Exhibit_______________

CG&E

   3-c          *Amended Articles of Incorporation of The 
Cincinnati Gas & Electric Company (CG&E) effective 
October 23, 1996.  (Exhibit to CG&E's September 
30, 1996, Form 10-Q in File No. 1-1232.)

   3-d          *Regulations of CG&E as amended, adopted April 
25, 1996.  (Exhibit to CG&E's March 31, 1996, Form 
10-Q in File No. 1-1232.)

PSI

   3-e          *Amended Articles of Consolidation of PSI 
Energy, Inc. (PSI), as amended to April 20, 1995. 
 (Exhibit to PSI's June 30, 1995, Form 10-Q in 
File No. 1-3543.)

   3-f          *By-laws of PSI, as amended October 22, 1996. 
(Exhibit to PSI's September 30, 1996, Form 10-Q in 
File No. 1-3543.)

ULH&P

   3-g          *Restated Articles of Incorporation made 
effective May 7, 1976.  (Exhibit to The Union 
Light, Heat and Power Company's (ULH&P) Form 8-K, 
May 1976.)

   3-h          *By-laws of ULH&P as amended, adopted May 8, 
1996.  (Exhibit to ULH&P's March 31, 1996,
1997.  Form 10-Q in File No. 2-7793.)

Cinergy and PSI

   4-a          *Original Indenture (First Mortgage Bonds) dated 
September 1, 1939, between PSI and The First 
National Bank of Chicago, as Trustee (Exhibit A-
Part 3 in File No. 70-258), and LaSalle National 
Bank as Successor Trustee (Supplemental Indenture 
dated March 30, 1984).
 
   4-b          *Nineteenth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated 
January 1, 1972.  (Exhibit to File No. 2-42545.)

   4-c          *Twenty-third Supplemental Indenture between PSI 
and The First National Bank of Chicago dated 
January 1, 1977.  (Exhibit to File No. 2-57828.)


  Exhibit
Designation                     Nature of Exhibit_______________

   4-d          *Twenty-fifth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated 
September 1, 1978.  (Exhibit to File No. 2-62543.)

   4-e          *Twenty-seventh Supplemental Indenture between 
PSI and The First National Bank of Chicago dated 
March 1, 1979.  (Exhibit to File No. 2-63753.)

   4-f          *Thirty-fifth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated March 
30, 1984.  (Exhibit to PSI's 1984 Form 10-K in 
File No. 1-3543.)

   4-g          *Thirty-ninth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated March 
15, 1987.  (Exhibit to PSI's 1987 Form 10-K in 
File No. 1-3543.)

   4-h          *Forty-first Supplemental Indenture between PSI 
and The First National Bank of Chicago dated June 
15, 1988.  (Exhibit to PSI's 1988 Form 10-K in 
File No. 1-3543.)

   4-i          *Forty-second Supplemental Indenture between PSI 
and The First National Bank of Chicago dated 
August 1, 1988.  (Exhibit to PSI's 1988 Form 10-K 
in File No. 1-3543.)
 
   4-j          *Forty-fourth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated March 
15, 1990.  (Exhibit to PSI's 1990 Form 10-K in 
File No. 1-3543.)

   4-k          *Forty-fifth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated March 
15, 1990.  (Exhibit to PSI's 1990 Form 10-K in 
File No. 1-3543.)

   4-l          *Forty-sixth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated June 
1, 1990.  (Exhibit to PSI's 1991 Form 10-K in File 
No. 1-3543.)
 
   4-m          *Forty-seventh Supplemental Indenture between 
PSI and The First National Bank of Chicago dated 
July 15, 1991.  (Exhibit to PSI's 1991 Form 10-K 
in File No. 1-3543.)

   4-n          *Forty-eighth Supplemental Indenture between PSI 
and The First National Bank of Chicago dated July 
15, 1992.  (Exhibit to PSI's 1992 Form 10-K in 
File No. 1-3543.)

  Exhibit
Designation                     Nature of Exhibit_______________

   4-o          *Forty-ninth Supplemental Indenture between 
                 PSI and The First National Bank of Chicago 
                 dated February 15, 1993.  (Exhibit to PSI's 
                 1992 Form 10-K in File No. 1-3543.)

   4-p          *Fiftieth Supplemental Indenture between PSI and 
The First National Bank of Chicago dated February 
15, 1993.  (Exhibit to PSI's 1992 Form 10-K in 
File No. 1-3543.)

4-q          *Fifty-first Supplemental Indenture between PSI and 
The First National Bank of Chicago dated February 
1, 1994.  (Exhibit to PSI's 1993 Form 10-K in File 
No. 1-3543.)

   4-r          *Indenture (Secured Medium-term Notes, Series 
A), dated July 15, 1991, between PSI and The First 
National Bank of Chicago, as Trustee. (Exhibit to 
PSI's Form 10-K/A, Amendment No. 2, dated July 15, 
1993, in File No. 1-3543.)

   4-s          *Indenture (Secured Medium-term Notes, Series 
B), dated July 15, 1992, between PSI and The First 
National Bank of Chicago, as Trustee. (Exhibit to 
PSI's Form 10-K/A, Amendment No. 2, dated July 15, 
1993, in File No. 1-3543.)

   4-t          *Loan Agreement between PSI and the City of 
Princeton, Indiana dated as of November 7, 1996.  
(Exhibit to PSI's September 30, 1996, Form 10-Q in 
File No. 1-3543.)

   4-u          #Loan Agreement between PSI and the City of 
Princeton, Indiana dated as of February 1, 1997.  
(Exhibit to Cinergy's 1996 Form 10-K in File No. 
1-11377.)

   4-v          #Indenture dated November 15, 1996, between PSI 
and The Fifth Third Bank, as Trustee. (Exhibit to 
Cinergy's 1996 Form 10-K in File No. 1-11377.)


   4-w          #First Supplemental Indenture (6.35% due 2006) 
dated November 15, 1996, between PSI and The Fifth 
Third Bank, as Trustee. (Exhibit to Cinergy's 1996 
Form 10-K in File No. 1-11377.)


   4-x          #Second Supplemental Indenture (6.25% due 2005) 
dated December 15, 1996, between PSI and The Fifth 
Third Bank, as Trustee. (Exhibit to Cinergy's 1996 
Form 10-K in File No. 1-11377.)


Exhibit
Designation                     Nature of Exhibit_______________

   4-y       *Original Indenture (First Mortgage Bonds) between 
CG&E and The Bank of New York (as Trustee) dated 
as of August 1, 1936.  (Exhibit to CG&E's 
Registration Statement No. 2-2374.)

   4-z       *Tenth Supplemental Indenture between CG&E and The 
Bank of New York dated as of July 1, 1967.  
(Exhibit to CG&E's Registration Statement No. 2-
26549.)
 
   4-aa      *Eleventh Supplemental Indenture between CG&E and 
The Bank of New York dated as of May 1, 1969.  
(Exhibit to CG&E's Registration Statement No. 2-
32063.)

   4-bb         *Thirteenth Supplemental Indenture between CG&E 
and The Bank of New York dated as of November 1, 
1971.  (Exhibit to CG&E's Registration Statement 
No. 2-41974.)

   4-cc         *Fourteenth Supplemental Indenture between CG&E 
and The Bank of New York dated as of November 2, 
1972.  (Exhibit to CG&E's Registration Statement 
No. 2-60961.)

   4-dd         *Fifteenth Supplemental Indenture between CG&E 
and The Bank of New York dated as of August 1, 
1973.  (Exhibit to CG&E's Registration Statement 
No. 2-60961.)

   4-ee         *Thirty-second Supplemental Indenture between 
CG&E and The Bank of New York dated as of December 
15, 1991.  (Exhibit to CG&E's Registration 
Statement No. 33-45115.)

   4-ff         *Thirty-third Supplemental Indenture between 
CG&E and The Bank of New York dated as of 
September 1, 1992.  (Exhibit to CG&E's 
Registration Statement No. 33-53578.)

   4-gg         *Thirty-fourth Supplemental Indenture between 
CG&E and The Bank of New York dated as of October 
1, 1993.  (Exhibit to CG&E's September 30, 1993, 
Form 10-Q in File No. 1-1232.)
 

  Exhibit
Designation                     Nature of Exhibit_______________

   4-hh         *Thirty-fifth Supplemental Indenture between 
CG&E and The Bank of New York dated as of January 
1, 1994.  (Exhibit to CG&E's Registration 
Statement No. 33-52335.)

   4-ii         *Thirty-sixth Supplemental Indenture between 
CG&E and The Bank of New York dated as of February 
15, 1994.  (Exhibit to CG&E's Registration 
Statement No. 33-52335.)

   4-jj         #Thirty-seventy Supplemental Indenture between 
CG&E and The Bank of New York dated as of October 
4, 1996.  (Exhibit to Cinergy's 1996 Form 10-K in 
File No. 1-11377.)

   4-kk         *Loan Agreement between CG&E and County of 
Boone, Kentucky dated as of February 1, 1985.  
(Exhibit to CG&E's 1984 Form 10-K in File No. 1-
1232.)


   4-ll         *Loan Agreement between CG&E and State of Ohio 
Air Quality Development Authority dated as of 
December 1, 1985.  (Exhibit to CG&E's 1985 Form 
10-K in File No. 1-1232.)

   4-mm         *Loan Agreement between CG&E and State of Ohio 
Air Quality Development Authority dated as of 
December 1, 1985.  (Exhibit to CG&E's 1985 Form 
10-K in File No. 1-1232.)
  
   4-nn         *Repayment Agreement between CG&E and The Dayton 
Power and Light Company dated as of December 23, 
1992.  (Exhibit to CG&E's 1992 Form 10-K in File 
No. 1-1232.)

   4-oo         *Loan Agreement between CG&E and State of Ohio 
Water Development Authority dated as of January 1, 
1994.  (Exhibit to CG&E's 1993 Form 10-K in File 
No. 1-1232.)

   4-pp         *Loan Agreement between CG&E and State of Ohio 
Air Quality Development Authority dated as of 
January 1, 1994.  (Exhibit to CG&E's 1993 Form 10-
K in File No. 1-1232.)

   4-qq         *Loan Agreement between CG&E and County of 
Boone, Kentucky dated as of January 1, 1994. 
(Exhibit to CG&E's 1993 Form 10-K in File No. 1-
1232.)
   
  Exhibit
Designation                     Nature of Exhibit_______________

   4-rr         *Original Indenture (Unsecured Debt Securities) 
between CG&E and The Fifth Third Bank dated as of 
May 15, 1995.  (Exhibit to CG&E's Form 8-A dated 
July 24, 1995, in File No. 1-1232.)

   4-ss         *First Supplemental Indenture between CG&E and 
The Fifth Third Bank dated as of June 1, 1995.  
(Exhibit to CG&E's June 30, 1995, Form 10-Q in 
File No. 1-1232.)

   4-tt         *Second Supplemental Indenture between CG&E and 
The Fifth Third Bank dated as of June 30, 1995.  
(Exhibit to CG&E's Form 8-A dated July 24, 1995, 
in File No. 1-1232.)

   4-uu         *Loan Agreement between CG&E and the State of 
Ohio Air Quality Development Authority dated as of 
September 13, 1995.  (Exhibit to CG&E's September 
30, 1995, Form 10-Q in File No. 1-1232.)

   4-vv         *Loan Agreement between CG&E and the State of
                 Ohio Air Quality Development Authority dated as 
                 of September 13, 1995.  (Exhibit to CG&E's 
                 September 30, 1995, Form 10-Q in File No. 
                 1-1232.)

Cinergy, CG&E, and ULH&P

   4-ww         *Original Indenture (First Mortgage Bonds) 
between ULH&P and The Bank of New York dated as of 
February 1, 1949.  (Exhibit to ULH&P's 
Registration Statement No. 2-7793.)

   4-xx         *Fifth Supplemental Indenture between ULH&P and 
The Bank of New York dated as of January 1, 1967. 
 (Exhibit to CG&E's Registration Statement No. 2-
60961.)

   4-yy         *Seventh Supplemental Indenture between ULH&P 
xand The Bank of New York dated as of October 1, 
1973.  (Exhibit to CG&E's Registration Statement 
No. 2-60961.)

   4-zz         *Eighth Supplemental Indenture between ULH&P and 
The Bank of New York dated as of December 1, 1978. 
 (Exhibit to CG&E's Registration Statement No. 2-
63591.)


  Exhibit
Designation                     Nature of Exhibit_______________

   4-aaa        *Thirteenth Supplemental Indenture between ULH&P 
and The Bank of New York dated as of August 1, 
1992.  (Exhibit to ULH&P's 1992 Form 10-K in File 
No. 2-7793.)

   4-bbb        *Original Indenture (Unsecured Debt 
Securities) between ULH&P and the Fifth Third 
Bank dated as of July 1, 1995.  (Exhibit to 
ULH&P's June 30, 1995, Form 10-Q in File No. 2-
7793)

   4-ccc        *First Supplemental Indenture between ULH&P 
and The Fifth Third Bank dated as of July 15, 
(Exhibit to ULH&P's June 30, 1995, Form 10-Q 
in File No. 2-7793.)
   
Cinergy, CG&E, and PSI

   10-a         *+Amended and Restated Employment Agreement 
dated October 24, 1994, among CG&E, Cinergy Corp. 
(an Ohio corporation), Cinergy (a Delaware 
corporation), PSI Resources, Inc., PSI, and 
Jackson H. Randolph.  (Exhibit to Cinergy's 1994 
Form 10-K in File No. 1-11377.)

   10-b         *+Amended and Restated Employment Agreement 
dated July 2, 1993, among PSI Resources, Inc., 
PSI, CG&E, Cinergy, Cinergy Sub, Inc., and James 
E. Rogers, Jr.  (Exhibit to Cinergy's Amendment 
No. 3 to Form S-4, filed October 8, 1993.)
   
   10-c         *+First Amendment to Amended and Restated 
Employment Agreement dated December 12, 1995, 
retroactively effective to October 24, 1994, 
amended and restated July 2, 1993, among Cinergy, 
Cinergy Services, Inc. (Services), CG&E, PSI, and 
James E. Rogers. (Exhibit to Cinergy's, 1995 Form 
10-K in File No. 1-11377.)

   10-d         *+Employment Agreement dated January 1, 1995, 
among Cinergy, CG&E, Services, Investments, PSI, 
and William J. Grealis. (Exhibit to Cinergy's 1994 
Form 10-K in File No. 1-11377.)

   10-e        *+Employment Agreement dated October 24, 1994, 
among Cinergy, Services, CG&E, PSI, and Larry E. 
Thomas. (Exhibit to Cinergy's 1995 Form 10-K in 
File No. 1-11377.)
  Exhibit
Designation                     Nature of Exhibit_______________

   10-f        *+First Amendment to Employment Agreement dated 
October 24, 1994, among Cinergy, Services, CG&E, 
PSI, and Larry E. Thomas. (Exhibit to Cinergy's 
1995 Form 10-K in File No. 1-11377.)

   10-g        *+Employment Agreement dated October 24, 1994, 
among Cinergy, Services, CG&E, PSI, and J. Wayne 
Leonard.  (Exhibit to Cinergy's 1995 Form 10-K in 
File No. 1-11377.)

   10-h        *+First Amendment to Employment Agreement dated 
October 24, 1994, among Cinergy, Services, CG&E, 
PSI, and J. Wayne Leonard. (Exhibit to Cinergy's 
1995 Form 10-K in File No. 1-11377.)

   10-I        *+Employment Agreement dated October 24, 1994, 
among Cinergy, Services, CG&E, PSI, and Cheryl M. 
Foley. (Exhibit to Cinergy's, 1995 Form 10-K in 
File No. 1-11377.)

   10-j        *+First Amendment to Employment Agreement dated 
October 24, 1994, among Cinergy, Services, CG&E, 
PSI, and Cheryl M. Foley. (Exhibit to Cinergy's 
1995 Form 10-K in File No. 1-11377.)

   10-k        #+Employment Agreement dated June 1, 1996, among 
Cinergy, Services, CG&E, PSI, and Elizabeth K. 
Lanier.  (Exhibit to Cinergy's 1996 Form 10-K in 
File No. 1-11377.)
 
Cinergy and PSI

   10-l        #PSI Union Employees' 401(k) Savings Plan, 
amended and restated December 17, 1996, with 
various effective dates.  (Exhibit to Cinergy's 
1996 Form 10-K in File No. 1-11377.)

   10-m         #PSI Employees' 401(k) Savings Plan, amended and 
restated December 17, 1996, with various effective 
dates.  (Exhibit to Cinergy's 1996 Form 10-K in 
File No. 1-11377.)

   10-n         *+First Amendment to the PSI Union Employees' 
401(k) Savings Plan, dated December 31, 1995. 
(Exhibit to Cinergy's 1995 Form 10-K in File No. 
1-11377.)
  

  Exhibit
Designation                     Nature of Exhibit_______________

   10-o         *+First Amendment to the PSI Employees' 401(k) 
Savings Plan, dated December 31, 1995. (Exhibit to 
Cinergy's 1995 Form 10-K in File No. 1-11377.)

   10-p         *+Employment Agreement dated October 4, 1993, 
among Cinergy, PSI, and John M. Mutz. (Exhibit to 
PSI Resources, Inc.'s September 30, 1993, Form 10-
Q, File No. 1-9941.)

   10-q          +First Amendment to Employment Agreement dated 
August 30, 1996, among Cinergy, PSI, and John M. 
Mutz.

   10-r         *+Deferred Compensation Agreement, effective as 
of January 1, 1992, between Cinergy and James E. 
Rogers, Jr.  (Exhibit to PSI's Form 10-K/A in File 
No. 1-3543, Amendment No. 1, dated April 29, 
1993.)

   10-s         *+Split Dollar Life Insurance Agreement, 
effective as of January 1, 1992, between Cinergy 
and James E. Rogers, Jr.  (Exhibit to PSI's Form 
10-K/A in File No. 1-3543, Amendment No. 1, dated 
April 29, 1993.)

   10-t         *+First Amendment to Split Dollar Life Insurance 
Agreement between Cinergy and James E. Rogers, 
Jr. dated December 11, 1992.  (Exhibit to PSI's 
Form 10-K/A in File No. 1-3543, Amendment No. 1, 
dated April 29, 1993.) 

   10-u         *+PSI Supplemental Retirement Plan amended and 
restated December 16, 1992, retroactively 
effective January 1, 1989.  (Exhibit to PSI's 1992 
Form 10-K in File No. 1-3543.)

   10-v         *+PSI Excess Benefit Plan, formerly named the 
Supplemental Pension Plan, amended and restated 
December 16, 1992, retroactively effective January 
1, 1989.  (Exhibit to PSI's 1992 Form 10-K in File 
No. 1-3543.)

Cinergy and CG&E

   10-w         #CG&E Deferred Compensation and Investment Plan, 
as amended, retroactively effective January 1, 
1995.  (Exhibit to Cinergy's 1996 Form 10-K in 
File No. 1-11377.)


  Exhibit
Designation                     Nature of Exhibit_______________

   10-x         #CG&E Savings Incentive Plan, amended, 
retroactively effective January 1, 1995.  (Exhibit 
to Cinergy's 1996 Form 10-K in File No. 1-11377.)

   10-y         *+Deferred Compensation Agreement between 
Jackson H. Randolph and Cinergy dated January 1, 
1992.  (Exhibit to CG&E's 1992 Form 10-K in File 
No. 1-1232.)

   10-z         *+Supplemental Executive Retirement Income Plan 
between CG&E and certain executive officers.  
(Exhibit to CG&E's 1988 Form 10-K in File No. 1-
1232.)

   10-aa        *+Amendment to Supplemental Executive Retirement 
Income Plan between CG&E and certain executive 
officers.  (Exhibit to CG&E's 1992 Form 10-K in 
File No 1-1232.)

   10-bb        *+Amended and Restated Supplemental Retirement 
Income Plan between CG&E and Jackson H. Randolph. 
(Exhibit to Cinergy's, 1995 Form 10-K in File No. 
1-11377.)

   10-cc        *+Amendment to Executive Severance Agreement 
between CG&E and certain executive officers. 
(Exhibit to CG&E's 1992 Form 10-K in File No. 1-
1232.)

   10-dd        *+Executive Severance Agreement between CG&E and 
certain executive officers.  (Exhibit to CG&E's 
1989 Form 10-K in File No. 1-1232.)
   
Cinergy

   10-ee        *+Cinergy Stock Option Plan, amended October 22, 
1996, effective November 1, 1996.  (Exhibit to 
Cinergy's September 30, 1996, Form 10-Q in File 
No. 1-11377.)

   10-ff        *+Cinergy Performance Shares Plan, amended 
October 22, 1996, effective November 1, 1996.  
(Exhibit to Cinergy's September 30, 1996, Form 10-
Q in File No. 1-11377.)

   10-gg         +Cinergy Annual Incentive Plan, amended January 
25, 1996, effective January 1, 1996.  


  Exhibit
Designation                     Nature of Exhibit_______________

   10-hh        *Cinergy Employee Stock Purchase and Savings 
Plan, adopted October 18, 1994, effective October 
24, 1994.  (Exhibit to Cinergy's Form S-8, filed 
October 19, 1994.)

   10-ii        *Amendment to Cinergy's Employee Stock Purchase 
and Savings Plan, adopted April 26, 1996.  
(Exhibit to Cinergy's June 30, 1996 Form 10-Q in 
File No. 1-11377.)

   10-jj        *Amendment to Cinergy's Employee Stock Purchase 
and Savings Plan, adopted October 22, 1996.  
(Exhibit to Cinergy's September 30, 1996, Form 10-
Q in File No. 1-11377.)

   10-kk        *+Cinergy Directors' Deferred Compensation Plan, 
adopted October 18, 1994, effective October 24, 
1994.  (Exhibit to Cinergy's Form S-8, filed 
October 19, 1994.)

   10-ll        *+Amendment to Cinergy's Directors' Deferred
                Compensation Plan, adopted October 22, 1996. 
                (Exhibit to Cinergy's September 30, 1996, Form
                10-Q in File No. 1-11377.)

   10-mm        *+Cinergy Retirement Plan for Directors, adopted 
October 18, 1994, effective October 24, 1994.  
(Exhibit to Cinergy's 1994 Form 10-K in File No. 
1-11377.)

   10-nn        *+Cinergy Executive Supplemental Life Insurance 
Program adopted October 18, 1994, effective 
October 24, 1994, consisting of Defined Benefit 
Deferred Compensation Agreement, Executive 
Supplemental Life Insurance Program Split Dollar 
Agreement I, and Executive Supplemental Life 
Insurance Program Split Dollar Agreement II.  
(Exhibit to Cinergy's 1994 Form 10-K in File No. 
1-11377.)

   10-oo        *+Split Dollar Insurance Agreement, effective as 
of May 1, 1993, between Cinergy and Jackson H. 
Randolph.  (Exhibit to Cinergy's 1994 Form 10-K in 
File No. 1-11377.)

   10-pp        *+Cinergy's 1996 Long-Term Incentive 
Compensation Plan, adopted April 26, 1996.  
(Exhibit to Cinergy's Schedule 14A Definitive 
Proxy Statement filed March 13, 1996, in File No. 
1-11377.)

  Exhibit
Designation                     Nature of Exhibit_______________

   10-qq        *+Amendment to Cinergy's 1996 Long-Term 
Incentive Compensation Plan, adopted October 22, 
1996, (Exhibit to Cinergy's September 30, 1996, 
Form 10-Q in File No. 1-11377.)

   10-rr         +Cinergy's 401(k)Excess Plan, adopted 
                  December 17, 1996.

   10-ss         +Cinergy's Nonqualified Deferred Incentive
                  Compensation Plan, adopted December 17, 
                  1996.

Cinergy

   21            Subsidiaries of Cinergy 

Cinergy, CG&E, PSI, and ULH&P

   23            Consent of Independent Public Accountants.

   24            Power of Attorney.

   27            Financial Data Schedules (included in 
electronic submission only).

+  Management contract, compensation plan or arrangement required to be filed
   as an exhibit pursuant to Item 14(c) of Form 10-K.





<TABLE>
<CAPTION>

CINERGY CORP.
                                              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                 Col. A                        Col. B             Col. C                      Col. D            Col. E _ 
                                                                Additions                   Deductions      
                                                                                     For Purposes
                                             Balance at                  Charged       For Which              Balance at
                                             Beginning     Charged to    to Other    Reserves Were             Close of
              Description                    of Period       Income      Accounts      Created        Other     Period _
                                                                           (in thousands)
<S>                                          <C>           <C>          <C>           <C>           <C>        <C>
Accumulated Provisions Deducted from
 Applicable Assets

  Allowance for Doubtful Accounts

    1996                                      $94 409       $22 341      $ 9 503       $115 635      $  -       $10 618   

    1995                                      $90 547       $33 921      $(8 489)      $ 21 570      $  -       $94 409 1/

    1994                                      $93 735       $31 145      $15 010       $ 49 343      $  -       $90 547 2/











<FN>
  1/  Includes $84,049 for the WVPA Marble Hill receivable.  See Note 12(e) of the "Notes to Financial Statements" in 
      "Item 8.  Financial Statements and Supplementary Data."
  2/  Includes $80,832 for the WVPA Marble Hill receivable.  See Note 12(e) of the "Notes to Financial Statements" in 
      "Item 8.  Financial Statements and Supplementary Data."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                              THE CINCINNATI GAS AND ELECTRIC COMPANY
                                          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                            FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                 Col. A                        Col. B             Col. C                      Col. D              Col. E _
                                                                 Additions                  Deductions      
                                                                                     For Purposes
                                             Balance at                  Charged       For Which               Balance at
                                             Beginning     Charged to    to Other    Reserves Were              Close of
              Description                    of Period       Income      Accounts      Created        Other      Period _ 
                                                                           (in thousands)
<S>                                          <C>           <C>          <C>            <C>          <C>         <C>
Accumulated Provisions Deducted from
 Applicable Assets

  Allowance for Doubtful Accounts

    1996                                      $9 615        $17 297      $ 6 669        $24 403      $  -        $9 178

    1995                                      $8 999        $27 623      $(8 496)       $18 511      $  -        $9 615

    1994                                      $14 906       $25 598      $15 010        $46 515      $  -        $8 999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

PSI ENERGY, INC.
	SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
	FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                 Col. A                       Col. B             Col. C                      Col. D              Col. E 
                                                               Additions      _            Deductions _ _
                                                                                    For Purposes
                                            Balance at                  Charged       For Which               Balance at
                                            Beginning     Charged to    to Other    Reserves Were              Close of
              Description                   of Period       Income      Accounts      Created        Other      Period _ 
                                                                           (in thousands)
<S>                                         <C>             <C>         <C>           <C>          <C>        <C>
Accumulated Provisions Deducted from
 Applicable Assets

  Allowance for Doubtful Accounts

    1996                                     $84 517         $5 041      $2 834        $91 123      $  -       $ 1 269   

    1995                                     $81 272         $6 100      $    7        $ 2 862      $  -       $84 517 1/

    1994                                     $78 567         $5 495      $  -          $ 2 790      $  -       $81 272 2/










<FN>


  1/  Includes $84,049 for the WVPA Marble Hill receivable.  See Note 12(e) of the "Notes to Financial Statements" in "Item 
8.  Financial Statements and Supplementary Data."
  2/  Includes $80,832 for the WVPA Marble Hill receivable.  See Note 12(e) of the "Notes to Financial Statements" in "Item 
8.  Financial Statements and Supplementary Data."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
	THE UNION LIGHT, HEAT AND POWER COMPANY
	SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
	FOR THE YEAR ENDED DECEMBER 31, 1996

                 Col. A                        Col. B             Col. C                      Col. D              Col. E  
                                                                 Additions                  Deductions      
                                                                                     For Purposes
                                             Balance at                  Charged       For Which               Balance at
                                             Beginning     Charged to    to Other    Reserves Were              Close of
              Description                    of Period       Income      Accounts      Created        Other      Period _ 
                                                                           (in thousands)
<S>                                          <C>           <C>          <C>            <C>          <C>         <C>
Accumulated Provisions Deducted from
 Applicable Assets

  Allowance for Doubtful Accounts

    1996                                      $1 035        $1 862       $1 577         $3 450       $  -        $1 024 

    1995                                      $  457        $3 010       $  -           $2 432       $  -        $1 035 

    1994                                      $1 609        $2 502       $   11         $3 665       $  -        $  457 
</TABLE>



SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, Cinergy Corp., The Cincinnati Gas & Electric Company, 
PSI Energy, Inc., and The Union Light, Heat and Power Company have each duly 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.

                                                  CINERGY CORP.
                                     THE CINCINNATI GAS & ELECTRIC COMPANY
                                                 PSI ENERGY, INC.
                                    THE UNION LIGHT, HEAT AND POWER COMPANY
                                                  Registrants

Dated:  March 27, 1997

                                    By          James E. Rogers
                                                 Vice Chairman

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of 
the Registrants and in the capacities and on the dates indicated.

       Signature                       Title                     Date
Cinergy, CG&E, PSI, and ULH&P
  Jackson H. Randolph          Chairman

Cinergy
  Neil A. Armstrong            Director
  Phillip R. Cox               Director
  Kenneth M. Duberstein        Director
  George C. Juilfs             Director
  Melvin Perelman              Director
  Thomas E. Petry              Director
  John J. Schiff, Jr.          Director
  Philip R. Sharp              Director
  Dudley S. Taft               Director
  Oliver W. Waddell            Director

Cinergy and PSI
  James K. Baker               Director
  Michael G. Browning          Director
  John A. Hillenbrand II       Director
  Van P. Smith                 Director

CG&E and ULH&P
  William J. Grealis           President and Director

PSI
  John M. Mutz                 President and Director

ULH&P
  Cheryl M. Foley              Vice President, General Counsel,
                                   Secretary, and Director
  Larry E. Thomas              Group Vice President and Director
 

Cinergy, CG&E, PSI, and ULH&P


   James E. Rogers               Vice Chairman, Chief        March 27, 1997
  Attorney-in-fact for all     Executive Officer, and Director
   the foregoing persons            President of Cinergy
                                (Principal Executive Officer)


  J. Wayne Leonard            Group Vice President and       March 27, 1997
                                  Chief Financial Officer 
                                     Director of ULH&P
                               (Principal Financial Officer)


 Charles J. Winger                   Comptroller             March 27, 1997
                              (Principal Accounting Officer)