UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                    Washington, DC  20549
                          FORM 10-K
                              
     [ 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;
IRS Employer
File Number            Address; and Telephone Number
Identification No.
                              
  1-8946                   CILCORP Inc.             37-1169387
                  (An Illinois Corporation)
                300 Hamilton Blvd., Suite 300
                   Peoria, Illinois  61602
                       (309) 675-8810
                              
  1-2732             CENTRAL ILLINOIS LIGHT COMPANY     37-0211050
                        (An Illinois Corporation)
                          300 Liberty Street
                        Peoria, Illinois  61602
                           (309) 675-8810

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

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

CILCORP Inc. Common stock, no par value    New York and Chicago

CILCO Preferred Stock, Cumulative
   $100 par, 4 1/2% series                   New York
                              
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrants (1) have
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past
90 days.

                      Yes      X             No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's 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.  (X)

At March 11, 1997, the aggregate market value of the voting
stock of CILCORP Inc. (CILCORP) held by nonaffiliates was
approximately $522 million.  On that date, 13,610,680 common
shares (no par value) were outstanding.

At March 11, 1997, the aggregate market value of the voting
stock of Central Illinois Light Company (CILCO) held by
nonaffiliates was approximately $60 million.  The voting
stock of CILCO consists of its common and preferred stock.
On that date, 13,563,871 shares of CILCO's common stock, no
par value, were issued and outstanding and privately held,
beneficially and of record, by CILCORP Inc.

             DOCUMENTS INCORPORATED BY REFERENCE

CILCORP Inc.'s Proxy Statement dated March 10, 1997, in
connection with its Annual Meeting to be held on April 22,
1997, is incorporated into Part I and Part III hereof.

Central Illinois Light Company's Proxy Statement dated March
25, 1997, in connection with its Annual Meeting to be held
on April 22, 1997, is incorporated into Part I and Part III
hereof.

CILCORP Inc.'s Annual Report to Shareholders for the year
ended December 31, 1996 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations is
incorporated herein by reference into Part II Item 7.

CILCORP Inc.'s Annual Report to Shareholders for the year
ended December 31, 1996 -- Financial Statements, Notes to
the Financial Statements and Supplementary Data is
incorporated herein by reference into Part II Item 8.

                        CILCORP INC.
                             and
               Central Illinois Light Company
                1996 Form 10-K Annual Report

This combined Form 10-K is separately filed by CILCORP Inc.
and Central Illinois Light Company (CILCO).  Information herein relating
to each individual registrant is filed by such registrant on
its own behalf.  Accordingly, except for its subsidiaries,
CILCO makes no representation as to information relating to
any other subsidiary of CILCORP Inc.

                      Table of Contents



Page

Glossary                                                       5-6
                           Part I

Item 1.  Business
         The Company and its Subsidiaries                      7-9
         Business of CILCO                                      9
           Electric Service                                    9-10
           Gas Service                                        10-11
           Regulation                                         11-12
           Electric Fuel and Purchased Gas
                  Adjustment Clauses                           12
           Fuel Supply - Coal                                 12-13
           Natural Gas Supply                                  13
           Financing and Capital Expenditures Programs         14
           Environmental Matters                              14-15
           Significant Customer                                15
           Franchises                                          15
           Competition                                        15-16
           Employees                                           16
           Union Contracts                                     17
           Early Retirement Programs                           17
         Business of QST (Excluding ESE)                       17
           Energy Supply                                      17-18
           Competition                                         18
           Employees                                           18
         Business of ESE                                      18-20
           Customers                                           20
           Regulation of ESE's Clients                        20-22
           Regulation of ESE                                  22-23
           Competition                                         23
           Subcontractors                                      23
           Government Contracts                                23
           Patents and Trademark Protection                    23
           Potential Liabilities and Insurance                23-24
           Employees                                           25
         Other Businesses                                      25
           CIM                                                 25
           CVI                                                25-26
           Employees                                           26
Item 2.  Properties                                           27-28
Item 3.  Legal Proceedings                                     28
Item 4.  Submission of Matters to a Vote of Security
             Holders                                           29
         Executive Officers of the Registrant                 29-31
                              
                           Part II

Item 5.  Market for the Registrant's Common Equity
            and Related Stockholder Matters                    32
Item 6.  Selected Financial Data                               33
Item 7.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations        33
Item 8.  Index - Financial Statements, Supplementary Data
              and Exhibits                                     34
Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure             60
                              
                          Part III

Item 10. Directors and Executive Officers of the
            Registrants                                        60
Item 11. Executive Compensation                                61
Item 12. Security Ownership of Certain Beneficial
            Owners and Management                              61
Item 13. Certain Relationships and Related Transactions      61-62

                           Part IV

Item 14. Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K                              63-68

                    GLOSSARY OF TERMS
 
 
 When used herein, the following terms have the meanings
 indicated.
 
 AFUDC -- Allowance for Funds Used During Construction
 
 BTU -- British Thermal Unit.  The quantity of heat required
       to raise the temperature of one pound of water one
       degree Fahrenheit.
 
 BCF -- Billion cubic feet
 
 Caterpillar -- Caterpillar Inc., CILCO's largest industrial customer
 
 CECO -- CILCO Energy Corporation, a wholly-owned subsidiary of CILCO
 
 CEDCO -- CILCO Exploration and Development Company, a wholly-owned
          subsidiary of CILCO
 
 CERCLA -- Comprehensive Environmental Response, Compensation and
           Liability Act
 
 CESI -- CILCORP Energy Services Inc.
 
 CILCO -- Central Illinois Light Company
 
 CIM -- CILCORP Investment Management Inc.
 
 CIPS -- Central Illinois Public Service Company
 
 CLM -- CILCORP Lease Management Inc.
 
 Company -- CILCORP Inc. and subsidiaries
 
 Cooling Degree Day --The measure of the degree of warmer
                    than normal weather experienced, based
                    on the extent to which the average of
                    high and low temperatures for a day
                    falls above 65 degrees Fahrenheit
                    (annual degree days above historic
                    average indicate warmer than average
                    temperatures); the historic average
                    provided by U.S. Weather Bureau for 30-
                    year period.
 
 CVI -- CILCORP Ventures Inc.
 
 DSM -- Demand Side Management.  The process of helping customers
         control how they use energy resources.
 
 EPA -- Environmental Protection Agency (Federal)
 
 ESE -- Environmental Science & Engineering, Inc.
 
 FAC -- Fuel Adjustment Clause
 
 FASB -- Financial Accounting Standards Board
 
 FERC -- Federal Energy Regulatory Commission
 
 Heating Degree Day --The measure of the degree of colder
                    than normal  weather experienced, based
                    on the extent to which the average of
                    high and low temperatures for a day
                    falls below 65 degrees Fahrenheit
                    (annual degree days above historic
                    average indicates cooler than average
                    temperatures); the historic average
                    provided by U.S. Weather Bureau for 30-
                    year period.
 
 ICC -- Illinois Commerce Commission
 
 KW -- Kilowatt, a thousand watts
 
 KWH -- Kilowatt-hour, one thousand watts used for one hour
        (unit of work)
 
 LCP -- Least Cost Energy Plan, a long-term resource acquisition
        strategy that balances both supply and demand-side
       resource options designed to provide the best value
       at the least cost to customers.
 
 MAIN -- Mid-America Interconnected Network.  One of nine
         regions that make up the North American Electric
         Reliability Council.  Its  purpose  is to ensure the
         Midwest region will meet its load responsibility.
 
 MCF -- One thousand cubic feet
 
 MW -- Megawatt, a million watts
 
 MWG -- Midwest Grain Products, Inc.
 
 NEPA -- National Energy Policy Act.
 
 PGA -- Purchased Gas Adjustment
 
 QST -- QST Enterprises Inc.
 
 QST Com -- QST Communications Inc.
 
 QST Energy -- QST Energy Inc.
 
 QST Trading -- QST Energy Trading Inc.
 
 RCRA -- Resource Conservation and Recovery Act.
 
 SFAS -- Statement of Financial Accounting Standards
 
 Therm -- Unit of measurement for natural gas; a therm is
          equal to one hundred cubic feet (volume); a therm is also
          equal to 100,000 BTUs (energy).

                          PART I
Item 1.  Business

              THE COMPANY AND ITS SUBSIDIARIES
 
CILCORP Inc. (CILCORP or the Company) was incorporated as a
holding company in the state of Illinois in 1985.  The
financial condition and operating results of CILCORP
primarily reflect the operations of Central Illinois Light
Company (CILCO), the Company's principal business
subsidiary.  The Company's other core business subsidiary is
QST Enterprises Inc. (QST).  Formerly a CILCORP first-tier
subsidiary, Environmental Science & Engineering, Inc. (ESE)
became a subsidiary of QST effective October 29, 1996.  The
Company also has two other first-tier subsidiaries,  CILCORP
Investment Management Inc. (CIM) and CILCORP Ventures Inc.
(CVI), whose operations, combined with those of the holding
company itself (Holding Company), are collectively referred
to herein as Other Businesses.  CILCORP owns 100% of the
common stock of CILCO.  All of the other subsidiaries are
wholly-owned by CILCORP.

CILCO is engaged in the generation, transmission,
distribution and sale of electric energy in an area of
approximately 3,700 square miles in central and east-central
Illinois, and the purchase, distribution, transportation and
sale of natural gas in an area of approximately 4,500 square
miles in central and east-central Illinois.

CILCO has two wholly-owned subsidiaries, CILCO Exploration
and Development Company (CEDCO) and CILCO Energy Corporation
(CECO).  CEDCO was formed to engage in the exploration and
development of gas, oil, coal and other mineral resources.
CECO was formed to research and develop new sources of
energy, including the conversion of coal and other minerals
into gas.  The operations of these subsidiaries are not
currently significant.

QST, formed in December 1995, provides energy and energy-
related services to a broad spectrum of retail and wholesale
customers through its subsidiary, QST Energy Inc. (QST
Energy).  QST Energy has one wholly-owned subsidiary - QST
Energy Trading Inc. (QST Trading), which purchases and sells
energy on the wholesale market.  QST also provides fiber
optic and advanced Internet-based communication services and
products through another wholly-owned subsidiary, QST
Communications Inc. (QST Com) (formerly CILCORP FiberCom
Inc., a subsidiary of CVI).  Effective October 29, 1996, ESE
also became a wholly-owned subsidiary of QST.

ESE was formed in February 1990 to conduct the environmental
consulting and analytical services businesses acquired from
Hunter Environmental Services, Inc. (Hunter) during that
year.  ESE provides engineering and environmental
consulting, analysis and laboratory services to a variety of
governmental and private customers.  ESE, through certain
subsidiaries, also acquires or invests in environmentally
impaired property for remediation and resale.  ESE has six
wholly-owned active subsidiaries:  Keck Instruments, which
manufactures geophysical instruments used in environmental
applications; ESE Architectural Services, Inc., which
provides architectural services; National Professional
Casualty Co., which provides professional and pollution
liability insurance to ESE; ESE International Ltd., which
provides engineering and consulting services in foreign
countries; Environmental Staffing Solutions, Inc. which
provides temporary staffing services, and ESE Land
Corporation organized to purchase or invest in
environmentally impaired parcels of real estate for
remediation and resale. ESE Land Corporation has two wholly-
owned subsidiaries:  ESE Placentia Development Corporation
and Savannah Resources Corp.  ESE Land Corporation is a
member of North Shore at Mandalay Bay L.L.C., Palm City
Developers L.L.C., and ELC Makenai L.L.C., which were
organized to purchase an environmentally impaired parcel of
real estate for resale.  ESE is also a member of the DSE
Environmental L.L.C., organized to perform environmental and
remediation services.  In addition, ESE owns a minority
interest in ESE Ohio, Inc., which provides professional
engineering services in the State of Ohio.

CIM manages the Company's investment portfolio.  CIM holds
seven leveraged lease investments through three wholly-owned
subsidiaries: CILCORP Lease Management Inc. which was formed
in 1985, and CIM Leasing Inc. and CIM Air Leasing Inc.,
which were both formed in 1993.  CIM's other wholly-owned
subsidiary is CIM Energy Investments Inc., which was formed
in 1989 to invest in non-regulated, independent power
production facilities (see Other Businesses).  CIM also
directly owns limited partnership interests in affordable
housing portfolios.
 
CVI invests in ventures in energy, biotechnology, and health
care, and in economic development projects in Central
Illinois.  CVI has an 80% interest in the Agricultural
Research and Development Corporation and has one wholly-
owned subsidiary, CILCORP Energy Services, Inc. (CESI).
CESI was formed to pursue energy-related opportunities in
the non-regulated market.  CESI's primary businesses are the
sale of carbon monoxide detectors to utilities for resale to
their customers, the sale of outdoor lighting to commercial
businesses, and the sale of non-regulated energy services.
During 1996 CESI provided services to Caterpillar Inc. under
the alliance between CILCORP and Caterpillar Inc. (refer to
the caption "Competition" of Item 7. Management's Discussion
and Analysis of Financial Condition and Results of
Operations beginning on page 19 of CILCORP's 1996 Annual
Report to Shareholders which is incorporated herein by
reference).

The following table summarizes the relative contribution of
each business group to consolidated assets, revenue and net
income for the year ended December 31, 1996.
<TABLE>
<CAPTION>
                          Assets              Revenue     Net Income
                                                           (Loss)
                                          (In thousands)
<S>                     <C>                <C>            <C>
CILCO                   $1,036,169         $518,555       $41,940
QST (excluding ESE)         15,290           14,835        (3,998)
ESE                         79,202           86,497        (5,999)
Other Businesses           155,032            8,505        (4,000)
                        ----------         --------       -------
                        $1,285,693         $628,392       $27,943
                        ==========         ========       =======
</TABLE>
CILCORP is an intrastate exempt holding company under the
Public Utility Holding Company Act of 1935 (PUHCA).
Legislation dealing with the restructuring of the electric
utility industry, including repeal of PUHCA, has been
introduced in both Houses of Congress.  The Company cannot
predict whether or when any of these proposals might be
enacted, or the ultimate effect on the Company.

                      BUSINESS OF CILCO

CILCO was incorporated under the laws of Illinois in 1913.
CILCO's principal business is the generation, transmission,
distribution and sale of electric energy in an area of
approximately 3,700 square miles in central and east-central
Illinois, and the purchase, distribution, transportation and
sale of natural gas in an area of approximately 4,500 square
miles in central and east-central Illinois.
 
CILCO is continuing to experience, in varying degrees, the
impact of developments common to the electric and gas
utility industries.  These include increased competition in
wholesale markets and the prospect of competition in retail
markets, changes in regulation and legislation affecting
utilities, uncertainties as to the future demand for
electricity and natural gas, structural and competitive
changes in the markets for these commodities, the high cost
of compliance with environmental and safety laws and
regulations and uncertainties in regulatory and political
processes.  At the same time, CILCO has sought to provide
reliable service at reasonable rates for its customers and a
fair return for its investors.  Refer to the caption
"Competition" of Item 7.  Management's Discussion and
Analysis of Financial Condition and Results of Operations
beginning on page 19 of CILCORP's 1996 Annual Report to
Shareholders which is incorporated herein by reference.

ELECTRIC SERVICE

CILCO furnishes electric service to retail customers in 138
Illinois communities (including Peoria, East Peoria, Pekin,
Lincoln and Morton).  At December 31, 1996, CILCO had
approximately 192,000 retail electric customers.

In 1996, 62% of CILCO's total operating revenue was derived
from the sale of electricity.  Approximately 38% of electric
revenue resulted from residential sales, 31% from commercial
sales, 24% from industrial sales, 5% from sales for resale
and 2% from other sales.  Electric sales, particularly
residential and commercial sales during the summer months,
fluctuate based on weather conditions.

The electric operating revenues of CILCO were derived from
the following sources:
<TABLE>
<CAPTION>
                               1996       1995      1994
                                     (In thousands)
<S>                          <C>       <C>       <C>
Residential                  $121,668  $129,722  $120,314
Commercial                    100,944    99,992    95,932
Industrial                     79,065    87,491    86,804
Sales for resale               15,206     5,132     8,182
Street lighting                 1,283     1,132     1,058
Other revenue                   4,619     2,729       795
                             --------  --------  --------
 Total electric revenue      $322,785  $326,198  $313,085
                             ========  ========  ========
</TABLE>

CILCO owns and operates two coal-fired base load generating
plants, a natural gas-fired cogeneration plant, and two
natural gas combustion turbine-generators which are used for
peaking service. The 1996 system peak demand was 1,148 MW on
August 6, 1996.  The all-time system peak demand of 1,188 MW
was set on August 17, 1995.

The system peak demand for 1997 is estimated to be 1,198 MW
with a reserve margin of approximately 16.5%.  The system
peak demand estimate does not account for any load loss due
to CILCO's retail competition pilot programs (see
Competition).  The reserve margin takes into account 90 MW
of firm purchased power and 87 MW of interruptible
industrial load and other related Demand Side Management
(DSM) programs. CILCO's planned reserve margin complies with
planning reserve margin requirements established by the Mid-
America Interconnected Network (MAIN), of which CILCO is a
member.

Studies conducted by CILCO indicate that it has sufficient
base load generating capacity and purchased capacity to
provide an adequate and reliable supply of electricity to
satisfy base load demand through the end of the century.  To
help meet anticipated increases in peak demand and maintain
adequate reserve margins, CILCO has entered into three
wholesale bulk power agreements to purchase capacity from
CIPS since 1990.  Each agreement was approved by the
Illinois Commerce Commission (ICC) as part of CILCO's
electric least cost energy plan filings. (see CILCO's Note
8, Item 8. Financial Statements and Supplementary Data for
further discussion of the purchase agreements with CIPS).

CILCO is interconnected with CIPS, Commonwealth Edison
Company, Illinois Power Company and the Springfield City
Water, Light and Power Department to provide for the
interchange of electric energy on an emergency and mutual
help basis.

GAS SERVICE

CILCO provides gas service to customers in 129 Illinois
communities (including Peoria, East Peoria, Pekin, Lincoln
and Springfield).  At December 31, 1996, CILCO had
approximately 199,000 gas customers, including 974
industrial, commercial and residential gas transportation
customers that purchase gas directly from suppliers for
transportation through CILCO's system.  For further
discussion of gas transportation, refer to the captions
"Competition" and "CILCO Gas Operations" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on pages 19 and 24 of
CILCORP's 1996 Annual Report to Shareholders, incorporated
herein by reference.

In 1996, 38% of CILCO's total operating revenue was derived
from the sale or transportation of natural gas.
Approximately 64% of gas revenue resulted from residential
sales, 23% from commercial sales, 3% from industrial sales,
4% from transportation and 6% from other sales.  Gas sales,
particularly residential and commercial sales during the
winter months, fluctuate based on weather conditions.

The gas operating revenues of CILCO were derived from the
following sources:
<TABLE>
<CAPTION>
                              1996       1995     1994
                                         (In thousands)
<S>                        <C>       <C  >     <C>
Residential                $125,869  $103,992  $ 99,567
Commercial                   44,695    32,792    32,563
Industrial                    5,670     3,165     4,219
Transportation of gas         8,388     8,927    10,124
Other revenue                11,148     2,670     1,812
                           --------  --------  --------
     Total gas revenue     $195,770  $151,546  $148,285
                           ========  ========  ========
</TABLE>

CILCO's all-time maximum daily send-out of 443,167 MCF
occurred on January 15, 1972.  The 1996 peak day send-out of
397,519 MCF occurred on February 2, 1996.  CILCO has been
able to meet all of its existing customer requirements
during the 1996-1997 heating season.  CILCO believes that
its present and planned supplies of gas will continue to be
sufficient to serve all of its existing customer
requirements during the 1997-1998 heating season.

REGULATION

CILCO is a public utility under the laws of the State of
Illinois and is subject to the jurisdiction of the ICC.  The
ICC has general power of supervision and regulation with
respect to services and facilities, rates and charges,
classification of accounts, valuations of property,
determination of depreciation rates, construction, contracts
with any affiliated interest, the issuance of stock and
evidences of indebtedness and various other matters.  With
respect to certain electric matters, CILCO is subject to
regulation by the FERC.  CILCO is exempt from the provisions
of the Natural Gas Act, but is affected by orders, rules and
regulations issued by the FERC with respect to certain gas
matters.  Refer to the caption "Competition" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 19 of CILCORP's
1996 Annual Report to Shareholders which is incorporated
herein by reference.

The Illinois statute governing public utilities requires the
ICC to review and adopt electric least-cost energy plans
(LCP) for public utilities.  In general, CILCO's LCP
consists of customer demand forecasts and the projected
resources that CILCO will rely upon to meet that demand.
The planning horizon is 20 years, and the LCP is reviewed by
the ICC every three years.  CILCO filed its most recent
electric LCP on June 30, 1995, and it was approved on May 8,
1996.  The ICC may not issue a certificate of convenience
and necessity for any new construction project unless the
ICC has determined that the proposed construction is
consistent with CILCO's most recently approved LCP, as
updated.  The law requires that the LCP incorporate
economical cogeneration, renewable resources and DSM
programs, to the fullest extent possible, as resources for
meeting the future energy service needs of CILCO's
customers.

CILCO's most recently filed LCP contains several existing
DSM programs including interruptible and standby generation
rates, residential heat pumps, commercial audits and the "In
Concert With The Environment" program.  The new plan also
includes four new DSM programs to help meet system load
growth anticipated over the planning period.  These include
new interruptible contracts, new standby generation
contracts, air conditioning cycling and targeted thermal
storage cooling programs.  Three new informational programs
are also proposed, including new construction efficiency,
motor efficiency and commercial lighting efficiency
programs.  Based on a preliminary assessment, electric DSM
programs are projected to reduce CILCO's peak demand by
137 MW over the twenty-year planning horizon. In 1996, the
total cost of the programs, excluding interruptible rates,
was approximately $306,000.

ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES

CILCO's tariffs provide for adjustments to its electric
rates through the fuel adjustment clause (FAC) to reflect
increases or decreases in the cost of fuel used in its
generating stations.  The transportation costs of coal are
not currently included in the FAC, and are normally
addressed in general ratemaking proceedings.  However, by
statute effective as of August 27, 1991, any Illinois
utility purchasing coal under any contract that was in
effect on August 27, 1991, shall, whenever the utility
requests but not later than the conclusion of the utility's
next general electric rate proceeding, begin recovering the
transportation costs of that coal through the utility's FAC.

CILCO's tariffs also provide for adjustments to its gas
rates through the purchased gas adjustment clause (PGA) to
reflect increases or decreases in the cost of natural gas
purchased for sale to customers.

FUEL SUPPLY - COAL

Substantially all of CILCO's electric generation capacity is
coal-fired, including 100% of its current base load
capacity.  Approximately 2.8 million tons of coal were
burned during 1996.  Existing coal contracts with suppliers
in central Illinois are expected to supply about 70% of the
1997 requirements.  Coal will be purchased on the spot
market during the year to meet remaining annual fuel
requirements.

During the years 1996, 1995 and 1994, the average cost per
ton of coal burned, including transportation, was $31.82,
$37.21 and $39.22, respectively.  The cost of coal burned
per million BTU's was $1.49, $1.66 and $1.71, respectively
(see Electric Fuel and Purchased Gas Adjustment Clauses).

During 1995, Illinois mid-sulfur coal was successfully test
burned at E. D. Edwards Station.  A two-year contract signed
with the supplier at the end of 1995 will reduce Edwards
Station's dependency on east Kentucky low-sulfur coal and
contribute to lower station fuel cost.

CILCO has a long-term contract with Freeman United Coal
Mining Company (Freeman) for the purchase of high-sulfur,
Illinois coal used predominantly at the Duck Creek Station.
The contract gives CILCO the flexibility to purchase between
500,000 and 1,000,000 tons annually.  Under the terms of the
contract, CILCO's obligation to purchase coal could be
extended through 2010; however, Freeman has the option of
terminating the contract after 1997.  The contract requires
CILCO to pay all variable coal production costs on tons
purchased and certain fixed costs not affected by the volume
purchased.  CILCO and Freeman conducted discussions in 1996
concerning coal cost reduction strategies in 1997.  Several
initiatives identified in those discussions will be pursued.
For a discussion of the agreement reached with Freeman
regarding the accounting for postretirement benefits costs,
refer to the caption "CILCO Electric Operations" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 22 of CILCORP's
1996 Annual Report to Shareholders which is incorporated
herein by reference.

NATURAL GAS SUPPLY

During 1996, CILCO continued to maintain a widely
diversified and flexible natural gas supply portfolio.  This
portfolio is structured around firm and interruptible gas
transportation service provided by five interconnecting
interstate pipeline suppliers and firm and interruptible gas
purchase arrangements of varying terms made directly with
approximately 40 gas suppliers.  Reliability was enhanced
through natural gas injections and withdrawals at CILCO's
two natural gas storage fields and contracted storage
facilities.  The supply and pipeline capacity portfolio
continues to provide reliable supplies at prevailing market
prices.  CILCO believes that its present and planned supply
of gas will continue to be sufficient to serve all of its
present and projected firm customer requirements at
prevailing market prices.

During 1996, CILCO purchased and delivered approximately
39,500,000 MCF of natural gas at a cost of approximately
$121.3 million, or an average cost of $3.07  per MCF.  The
average cost per MCF of natural gas purchased and delivered
was $2.14 in 1995 and $2.71 in 1994 (see Electric Fuel and
Purchased Gas Adjustment Clauses).

For a discussion of other gas issues, refer to the caption
"Gas Pipeline Supplier Transition Costs" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 22 of CILCORP's 1996
Annual Report to Shareholders which is incorporated herein
by reference.

FINANCING AND CAPITAL EXPENDITURES PROGRAMS

CILCO's ongoing capital expenditures program is designed to
maintain reliable electric and gas service and to meet the
anticipated demands of its customers.  Capital expenditures
for 1997 are estimated to be $53.2 million, including
pollution control expenditures of $5.8 million. Expenditures
include $24.8 million for the electric business,
$12.6 million for the gas business and $15.8 million for
general and miscellaneous purposes.  Electric expenditures
include $7.0 million for additions and modifications to
generating facilities and $17.8 million for transmission and
distribution system additions and improvements.  Gas
expenditures are primarily for necessary additions,
replacements and improvements to existing facilities.
Anticipated gas and electric capital expenditures for 1998-
2001 are $217.2 million.

CILCO expects to finance its 1997 capital expenditures with
funds provided by operating activities.  CILCO retired $16
million of first mortgage bonds due in February 1996.  CILCO
had $9.9 million of short-term commercial paper outstanding
at December 31, 1996, and expects to issue short-term
commercial paper throughout 1997.  At December 31, 1996,
CILCO had bank lines of credit aggregating $20 million, all
of which were unused, except in support of commercial paper
issuance.  CILCO expects the support of commercial paper
issuance to be the only use of these bank lines during 1997.
Refer to the caption "Capital Resources and Liquidity -
CILCO" of Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 18 of
CILCORP's 1996 Annual Report to Shareholders which is
incorporated herein by reference.

ENVIRONMENTAL MATTERS

Refer to the caption "Environmental Matters" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 21 of CILCORP's 1996
Annual Report to Shareholders which is  incorporated herein
by reference.

CILCO, through agreements with the U. S. Department of
Energy, has developed and implemented voluntary programs
pursuant to the Climate Change Action Plan goal of
limiting greenhouse gas emissions (primarily carbon
dioxide) to 1990 levels by the year 2000.  Commitments
made by CILCO will build upon current and planned energy
and environmental initiatives contained within its
Business Plan and will not materially impact CILCO's
financial results.  Failure of voluntary programs
undertaken by the utility industry could result in the
imposition of mandatory greenhouse gas reduction programs
which could have material impacts on the Company.  Past
legislative proposals have called for as much as a $30 per
ton tax on carbon dioxide, which could cost CILCO
approximately $166 million per year if enacted.

Many urban areas around the country face the major
challenge of achieving compliance with ozone air quality
standards.  Ozone is formed when volatile organic compound
(VOC) emissions and/or nitrogen oxide (NOx) emissions
photochemically react in the atmosphere.  Strategies for
reduction of ozone levels have targeted mobile, area and
stationary sources (including power plants) of VOCs and
NOx.

Under Title I of the Clean Air Act, states are required to
develop and implement State Implementation Plans (SIP) for
ozone compliance by 2007.  Where boundary area emissions
are contributing to the non-attainment areas, additional
VOC/NOx controls in attainment areas are being considered.
This matter is further complicated by the transport of
emissions across state boundaries and regions.  CILCO may
be targeted for additional NOx emission reductions of up
to 75% at its power plants pursuant to regional ozone
compliance programs, despite the fact that CILCO's plants
are in attainment areas.

CILCO is participating in ozone compliance strategy
activities at the national, regional, and state levels.
CILCO's position calls for (1) equitable consideration
among all VOC/NOx sources, (2) credit for past and planned
emission reductions and (3) cost-benefit/risk-benefit
support for control regulation.

Should additional NOx emission controls be mandated for
CILCO's power plants, new and costly control technology
retrofits would be required.  The exact costs for such
compliance cannot be determined at this time, and multiple
technologies might be necessary to meet extremely
stringent NOx levels.

CILCO is currently in the process of investigating potential
beneficial re-use for ash (a coal combustion by-product)
generated at both generating stations.  Recent legislation
in Illinois promotes the beneficial re-use of coal
combustion by-products.  Providing alternate uses for the
ash will allow CILCO to avoid potential costs associated
with the construction of additional facilities to store this
by-product.

SIGNIFICANT CUSTOMER

Caterpillar Inc. is CILCO's largest industrial customer.
Aggregate gas and electric revenues from sales to
Caterpillar were 7.5%, 8.6%, and 9.4% of CILCO's total
operating revenue for 1996, 1995 and 1994, respectively.
See CILCO's Consolidated Statements of Segments of Business
under Item 8. Financial Statements and Supplementary Data.

FRANCHISES

CILCO negotiates franchise agreements which authorize it to
provide utility services to the communities in its service
area.  The franchises are for various terms, usually 25 to
50 years.  Based on past experience, CILCO anticipates that
as franchises expire new franchises will be granted in the
normal course of business.

COMPETITION

CILCO, as a regulated public utility, has an obligation to
provide service to retail customers within its defined
service territory; thus, CILCO is not generally in
competition with other public utilities for retail electric
or gas customers in these areas.  However, electricity and
natural gas compete with other forms of energy available to
customers.  For example, within the City of Springfield,
CILCO's natural gas business competes with the City's
municipal electric system to provide customer energy needs.

In 1996, to lead the movement toward increased customer
choice, CILCO began Power Quest, which consists of two
electric pilot retail competition programs and a natural gas
pilot retail competition program.  The programs offer
greater choice to customers and provide the opportunity for
CILCO and certain of its electric and natural gas customers
to participate in a competitive business environment.
Management believes that increased consumer choice
throughout Illinois and the nation will expand CILCO's
business opportunities.

During 1996, CILCO transported gas purchased by residential,
commercial and industrial customers directly from producers
and marketers.  In 1996, approximately $8.4 million of
revenue was generated from transportation services provided
to 974 customers, which includes $87,000 of transportation
revenue from 795 residential transportation customers as a
result of the Power Quest gas residential pilot program.
Transportation arrangements have made it practical for
certain industrial customers to continue to use gas instead
of switching to alternate fuels.  The amount of gas
transported in the future will depend on a number of factors
including regulatory and legislative action, the relative
cost of gas available for purchase directly from producers
compared to the cost of gas provided by CILCO, the cost of
alternate fuels, and the feasibility of customers bypassing
the CILCO system.  Legislation passed in Illinois exempts
qualifying gas transportation customers, beginning
January 1, 1996, from paying gross receipts taxes on their
purchases of natural gas supply and interstate
transportation services from the local gas distribution
company.  This legislation allows CILCO to more effectively
compete with out-of-state gas marketing companies.

Refer to the captions "Competition", "CILCO Electric
Operations", and "CILCO Gas Operations" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on pages 19, 22 and 24
of CILCORP's 1996 Annual Report to Shareholders,
incorporated herein by reference, for additional discussion
of Power Quest, CILCO's introduction of a Consumer Freedom
to Choose Electricity Law to be considered by the Illinois
General Assembly in 1997, and a discussion of other
competitive trends which may affect CILCO's electric and gas
operations.

EMPLOYEES

The number of full-time and part-time employees at December
31, 1996,  was 1,321, excluding employees assigned to the
Holding Company, QST and Other Businesses.  These numbers
include 76 employees who retired January 1, 1997 (see
CILCO's Early Retirement Programs).  Of these, 208 power
plant employees were represented by Local 8 of the
International Brotherhood of Firemen and Oilers (IBF&O), and
460 gas and electric department employees were represented
by Local 51 of the International Brotherhood of Electrical
Workers (IBEW).

CILCO'S UNION CONTRACTS

A two-year IBEW contract and a three-year IBF&O contract
were both ratified effective July 1, 1995.  Both the IBEW
and the IBF&O contracts provide for annual 3% salary
increases during the contracts.

CILCO'S EARLY RETIREMENT PROGRAMS

As part of a continuing effort to better position itself for
competition in the energy services industry, in November
1996, CILCO offered Voluntary Early Retirement Programs to
eligible management and office and technical employees and
employees represented by the IBEW.  A total of 76 of the 210
eligible employees retired, effective January 1, 1997.  The
1996 programs resulted in an after-tax charge to earnings of
approximately $5.4 million.  As a result of the 1996
programs, management expects to realize annual after-tax
cost savings of approximately $2.6 million beginning in
1997.

In 1995, CILCO offered similar Voluntary Early Retirement
Programs to selected employees.  A total of 166 of the 257
eligible employees accepted the offer, resulting in an after-
tax charge of approximately $7.8 million in 1995.  As a
result of the 1995 programs, CILCO realized approximately
$3.4 million in annual after-tax cost savings in 1996.

               BUSINESS OF QST (EXCLUDING ESE)
                              
QST Enterprises Inc. was formed in December 1995 to
facilitate CILCORP's expansion into non-regulated energy and
related services businesses.  QST provides total energy
services -- buying, managing, and controlling energy -- for
customers who are able to choose their energy supplier.
QST provides a portfolio of non-regulated, energy-related
products and services.  QST also provides fiber optic and
advanced Internet-based communication services and products
in Central Illinois.

The initial focus of QST has been to compete against energy
suppliers who participate in CILCO's Power Quest pilot
programs (refer to the caption "Competition" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 19 of CILCORP's 1996
Annual Report to Shareholders which is incorporated herein
by reference).  Power Quest provides a means for certain
customers to buy energy from suppliers other than CILCO.
QST will also compete against marketers to provide energy
and services to customers of utilities and other energy
providers which will offer, or be required to offer, similar
retail competition programs, and to sell energy to customers
who may already have the ability to choose their energy
supplier.  QST, through its subsidiary QST Energy Trading
Inc., also purchases and sells energy on a wholesale basis.
Its customers include marketers, utilities, and independent
power producers.  QST is also engaged in the development of
on-site electric generating facilities.

ENERGY SUPPLY

QST Energy Inc. and its wholly-owned subsidiary, QST Energy
Trading Inc., have entered into contracts and enabling
agreements with public utilities, independent electricity or
natural gas producers and transporters, and other marketers
to purchase electricity and natural gas to serve QST's
customers.  Contracts typically may be re-negotiated on an
annual basis.  Electricity is purchased on either a term
basis (which does not exceed one year) or a spot basis.  The
majority of QST's gas supply is currently purchased on a 30-
day spot basis.  QST has encountered no difficulties in
obtaining energy supplies to serve its customers.

COMPETITION

QST currently competes with utilities and marketers to
provide electricity to retail customers who may choose their
energy supplier, primarily as a result of retail competition
pilot programs offered by regulated utilities.  QST also
competes with other marketers and suppliers to sell natural
gas to wholesale and retail customers as those markets
become deregulated.  Currently, the market for natural gas
sales is highly competitive, particularly on the wholesale
level and in some areas of the country (including Illinois)
for large usage customers on the retail level.  Competition
in QST's electric energy business is currently a function of
the design of retail competition pilot programs  offered by
utilities.  Competition within both the electric and gas
segments of QST's business is expected to increase with the
deregulation of the U.S. energy industry (refer to the
caption "Competition" in Item 7.  Management's Discussion
and Analysis of Financial Condition and Results of
Operations beginning on page 19 of CILCORP's Annual Report
to Shareholders, incorporated herein by reference).

EMPLOYEES

At December 31, 1996, there were 38 full-time employees
assigned to QST.


                       BUSINESS OF ESE

ESE is an environmental consulting and engineering firm with
additional capabilities in laboratory analysis and equipment
manufacturing.  ESE, through its subsidiaries, also acquires
or invests in environmentally impaired property for
remediation and resale.  ESE's services are intended to
address the concern over the quality of the environment, the
numerous complex federal, state and local environmental
regulations and enforcement efforts in support of
environmental laws.  As such, ESE's business is affected by
the existence and enforcement of various federal and state
statutes and regulations dealing with the environment and
the use, control, disposal and clean-up of hazardous wastes
(see Regulation of ESE's Clients herein).  ESE provides a
full-service approach to business, industrial and
governmental clients, commencing with problem identification
and analysis, continuing through regulatory negotiation and
engineering, and concluding with the preparation and
implementation of a remediation plan or final design and
construction.

ESE has a wide range of clients in business, industry and
government, including federal agencies, local and state
governments, institutional, commercial and industrial firms
and professional service firms.  ESE employs environmental,
chemical, geotechnical, civil, mechanical, structural and
transportation engineers; geologists; hydrogeologists;
chemists; biologists; toxicologists; meteorologists;
industrial hygienists; architects; and surveyors.  ESE has a
nationwide network of offices with its corporate office in
Peoria, Illinois.  Presently, ESE has two major laboratories
located in Gainesville, Florida and Peoria, Illinois.

Through its wholly-owned subsidiary, ESE Land Corporation,
ESE acquires or invests in land that is environmentally
impaired, and remediates and then sells this property.  ESE
is currently evaluating the market for the sale of ESE Land
Corporation, its subsidiaries and partnership interests.

ESE provides services in the following areas:

Air Quality Services:  ESE provides ambient air monitoring,
source testing, permitting and licensing emissions
inventories; planning and compliance strategies; dispersion
modeling; data management; indoor air quality; and
engineering design/installation.

Analytical Services:  ESE provides comprehensive chemical
analysis, field sampling services, and interpretation for
environmental, wastewater and air pollution chemistry,
industrial hygiene and treatability studies.

Asbestos Management/Industrial Hygiene/Lead-Based Paint
Services:  ESE provides on-site consultation and facility
surveys to identify potential asbestos, industrial hygiene,
and lead-based paint problems.

Engineering Design:  ESE performs a variety of civil
engineering services including highway, street and bridge
planning and design, hydrological hydraulic studies and
drainage design, structural analysis and design foundation
engineering, computer-aided drafting and design services and
subdivision design and surveying.

Construction Management:  ESE provides turnkey design and
construction services and construction observation services
on transportation and site development projects and
infrastructure projects.

Environmental Assessment and Toxicology Services:  ESE
conducts field and laboratory studies involving chemical
migration and transport, aquatic toxicology and bioassay,
ecological and human health risk assessments, site selection
and certification, development of regional impact studies
and environmental impact statements.

Environmental Audit Service:   ESE performs operational
audits for clients in industry to verify an operating
facility's compliance status with regulatory requirements,
identifies potential liabilities associated with past waste
management practices and identifies methods for minimizing
future waste generation.  ESE also performs transactional
audits which focus on the transfer of potential liabilities
in real estate or business transactions.

Environmental Engineering Services:  ESE provides
environmental engineering services which include applied
research and development, water and waste characterization,
treatability and disposal studies, process and concept
design of treatment and disposal facilities, design of
drinking water treatment and distribution facilities, design
of wastewater/industrial waste treatment and collection
facilities, technical and economic feasibility evaluations,
contract operation and maintenance of water and wastewater
treatment facilities, pursuit of permit approval for water
and solid waste-oriented activities and design of solid
waste landfills and recycling facilities.

Hydrogeology:  ESE performs subsurface investigations and
evaluations for both geological and engineering studies.

Manufacture of Equipment:  Through its wholly-owned
subsidiary, Keck Instruments, Inc., ESE designs, assembles,
and markets instrumentation for measuring, monitoring,
detecting and sampling groundwater as well as instruments
for mineral exploration and detection, analysis and
subsurface mapping.

Remediation:  ESE develops, designs and implements
remediation plans at contaminated sites.

Storage Tank Management Service:  ESE provides services for
managing environmental issues related to underground and
above-ground storage tanks.

Surface Water Resources Service:  ESE offers
characterizations of the freshwater, estuarine, and oceanic
environments; environmental impact assessments; site
selection studies; licensing and permitting studies; field
surveys and monitoring; numerical/physical modeling;
technical analyses; and hydrologic and hydraulic engineering
services including stormwater drainage analysis, floodplain
management and receiving water quality evaluations.
 
Transportation Engineering:  ESE has sited, designed and
provided construction oversight for numerous transportation
systems, including highways and bridges, for state
transportation agencies and local governments.

CUSTOMERS

ESE sells its products and services to governmental agencies
and public and private companies.  Approximately 43% of
ESE's revenue for 1996 was generated by services performed
for federal, state and local governmental agencies compared
to 46% for 1995.  No single customer accounted for more than
5% of ESE's gross revenues for the years ended December 31,
1996 and 1995.

In 1996, approximately 80% of ESE's revenue was generated
from environmental consulting and engineering services, 15%
from laboratory services, 4% from land remediation and
resale and 1% from manufactured equipment sales.

REGULATION OF ESE'S CLIENTS

The level and nature of ESE's business activity is largely
dependent upon government statutes and regulations relating
to the environment.

Significant legislation includes the following:

Clean Air Act of 1970 (CAA):  Provisions of the CAA, as
amended in 1977 and 1990, authorize the EPA to set maximum
acceptable contaminant levels in the ambient air, to control
emissions of certain toxic materials, and to ensure
compliance with air quality standards.

Clean Water Act of 1972, as amended in 1987 (CWA):  CWA
requires every state to set water quality standards for each
significant body of water within its boundaries and to
ensure attainment and/or maintenance of those standards.
These standards and limitations are enforced in large part
under a nationwide permit program known as the National
Pollutant Discharge Elimination System (NPDES).  CWA's
reauthorization by Congress  is anticipated in 1997 or 1998.

Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (Superfund or CERCLA): CERCLA is the
most significant federal statute addressing practices
involving hazardous substances and imposing liability for
cleaning up contamination in soil and groundwater.  This
legislation has four basic provisions:  (i) creation of an
information gathering and analysis program which enables
federal and state governments to identify abandoned waste
sites and to set priorities for investigation and response;
(ii) granting of federal authority to respond to hazardous
waste emergencies and to clean up hazardous waste sites;
(iii) imposition of liability on persons responsible for
disposal of hazardous substances that may be released into
the environment; and (iv) creation of a federally managed
trust fund to pay for the cleanup of waste sites where a
"potentially responsible party" cannot be identified or
where a threat to the environment requires immediate
response.  The EPA and State regulatory authorities are
encouraging "voluntary" clean-up of contaminated sites
independent of CERCLA through state administered programs.
In October 1986, the Superfund Amendments and
Reauthorization Act (SARA) was passed as a five-year
extension of the Superfund program.  Title III of SARA, also
known as the Emergency Planning and Community Right-to-Know
Act of 1986, established a reporting and notification system
for companies dealing with hazardous chemicals.  The
Superfund program was reauthorized in 1990 and was extended
without change until September 30, 1994. CERCLA's
reauthorization is anticipated in 1997 or 1998.

Federal Insecticide, Fungicide and Rodenticide Act (FIFRA):
FIFRA regulates the use and manufacture of pesticides and
related chemicals.

National Environmental Policy Act of 1970 (NEPA):  NEPA
requires an analysis of the environmental impact of any
major federal action, including the issuance of federal
environmental permits for industrial facilities which may
significantly affect the quality of the environment.

National Pollutant Discharge Elimination System (NPDES)
Stormwater Permitting Regulations of 1990:  The intent of
these regulations, passed in November 1990, is to control
pollution from stormwater discharges associated with
industrial activity and municipal storm sewer systems.

Occupational Safety and Health Act of 1970 (OSHA):  Health
and safety at the workplace are regulated under OSHA.  OSHA
provides for permissible exposure levels for certain
hazardous substances, including asbestos, and also
establishes an enforcement mechanism for these and other
health and safety standards.

Resource Conservation and Recovery Act of 1976 (RCRA):
While Superfund seeks to remedy the damage caused by
inactive or abandoned waste sites, RCRA imposes
comprehensive regulation of the management of hazardous
waste at active facilities.  RCRA and the regulations
thereunder establish a comprehensive "cradle to grave"
regulatory program applicable to hazardous waste and impose
requirements for performance testing and recordkeeping for
any person generating, transporting, treating, storing, or
disposing of more than the specified minimum levels of
hazardous waste.  In November 1984, RCRA was amended by the
Hazardous and Solid Waste Amendments, which extend RCRA to
most industrial and commercial activities in the nation.  In
addition, RCRA requires that underground storage tanks be
identified and inspected, and those found to be leaking must
be cleaned up.  RCRA's reauthorization by Congress has been
postponed through 1997.  Legislative actions continue to
evolve through regulatory changes such as risk-based
corrective actions.

Safe Drinking Water Act, as amended in 1986 and 1996 (SDWA):
The SDWA affects numerous public water supplies.  Under this
Act, the EPA established and amended primary drinking water
standards applicable to public water supplies.

Toxic Substances Control Act of 1976 (TSCA):  TSCA
authorizes the EPA to gather information relating to the
risks posed by chemicals and to regulate the use and
disposal of asbestos and polychlorinated biphenyls.

State and Local Regulations:  In addition to federal
statutes and regulations, numerous state and local statutes
and regulations relating to environmental risks impose
additional environmental standards on ESE's customers.

REGULATION OF ESE

The environmental statutes and regulations described above
primarily affect ESE's clients, and thus have a significant
impact on the volume of ESE's business activity and specific
types of services that ESE provides to its clients.  These
environmental statutes and regulations also govern the
manner in which ESE performs services for its clients and
also effect the market and business operations of ESE Land
Corporation.  ESE must comply with specific worker
protection requirements and other health and safety
standards.  These standards include taking steps to limit
exposure to asbestos and chemical substances in the
workplace.  ESE also must comply with regulations pertaining
to the disposal of certain hazardous chemicals and
substances pursuant to guidelines established under federal
and state law.  Among those substances are chemicals used in
ESE's laboratory processes as well as materials removed from
the properties and facilities of its clients.  Disposal
costs for these materials, and legal compliance costs
generally for ESE, have risen steadily in recent years and
are expected to continue to increase.

Management believes that the degree of enforcement of
environmental regulations at the federal, state and local
level will continue to affect the levels of business of ESE
and its clients.

COMPETITION

The market for ESE's consulting services is highly
competitive, and ESE is subject to competition with respect
to all of the services it provides.  ESE competes primarily
on the basis of quality of service, expertise, and price.
ESE's competitors range from small local firms to major
national companies.  No single entity currently dominates
the environmental consulting and engineering services
marketplace.

SUBCONTRACTORS

Because of the nature of the projects in which ESE is
involved, ESE often subcontracts a portion of its projects
to other contractors in order to utilize their expertise,
equipment and experience in areas where ESE may lack the
ability to complete the entire project.  For example,
because ESE does not have the necessary equipment to perform
drilling services in all parts of the country, such work may
be subcontracted to local contractors.  In addition,
contracts which ESE has with federal, state and local
governmental agencies may require, as a matter of law, that
on a particular job ESE hire a certain percentage of
minority-owned subcontractors.

GOVERNMENT CONTRACTS

Many of ESE's contracts with governmental agencies are cost-
plus, based on a combination of labor cost, overhead cost
and allowable fee.  Overhead rates are estimated at the time
of contract negotiations.  Following the completion of a
contract, actual overhead is determined and the difference
is reimbursed to the government or paid to ESE within the
limits of the contract.  Although ESE enjoys a good working
relationship with the governmental agencies for which it
performs these services, these contracts may be subject to
renegotiation of profits or termination at the election of
the government agency.

PATENTS AND TRADEMARK PROTECTION

ESE has applied for or been assigned certain patents or
patent rights. ESE believes that its technical expertise,
field experience, understanding of regulatory requirements
and implementation of technological advances will continue
to provide opportunities for ideas to develop which may lead
to patents; however, research and development is not
currently significant to ESE's operations.

POTENTIAL LIABILITIES AND INSURANCE

ESE is exposed to risk of financial loss during its normal
course of business in a variety of ways typically associated
with an environmental and engineering consulting business,
including:  work-related injury or illness of employees or
third parties; damage to property in ESE's control during
the course of a project; damage to ESE's property; repair or
rectification costs resulting from failure to detect,
analyze, or measure pollutants, asbestos or other toxic
substances; repair or rectification costs due to faulty
design, workmanship, or liability resulting from ESE's
construction or design activities; failure to perform or
delay in project completion; and claims by third parties for
alleged pollution or contamination damage.  Also, ESE
assumes contingent liabilities arising out of its need to
exercise care in the selection and supervision of
subcontractors on various projects.  Since ESE derives
revenues from work involving hazardous materials, toxic
wastes and pollutants, potential losses may surface many
years after a project is completed.

These risks, along with enforcement of environmental
regulations and increasing public awareness regarding
environmental issues and responsibilities, make it mandatory
that ESE maintain a sound risk management and insurance
program.

ESE carries professional liability insurance which covers
design errors and omissions resulting from its typical
operations.  This policy is extended to include pollution
liability losses.  The current policy, effective April 1,
1996, has a limit of $8 million per claim ($10 million in
aggregate for the three year policy term), with the first $3
million of coverage provided by ESE's wholly-owned captive
insurance subsidiary, National Professional Casualty Co.
(Captive) and the next $5 million of coverage provided by a
non-affiliated company.  Captive is capitalized by the
combination of an ESE bank letter of credit and cash.
Captive does not transfer risk and is not reinsured; CILCORP
does not provide credit support to Captive.  The policies
cover activities in which ESE is typically involved.
Accordingly, in the event of a serious spill or loss
resulting from a design error or omission, ESE faces
potential liability for the self-insured retention portion
of a claim, as well as any amounts in excess of $8 million.
ESE's professional and pollution liability insurance
coverage has a standard term of one year.  ESE expects to
renew these policies annually in the normal course of
business.  The professional and pollution liability
insurance policies include standard industry exclusions for:
dishonesty, discrimination, warranties and guarantees,
punitive damages, intentional non-compliance with government
regulations or statutes, nuclear energy, war and bodily
injury from the specification, installation, transportation,
storage or disposal of asbestos.
 
ESE also carries insurance policies covering worker's
compensation, general liability and auto and property damage
claims.  The worker's compensation policy provides statutory
average limits.  It is a loss sensitive program under which
insurance premiums vary according to actual claims paid.
General liability and auto policies provide full insurance
coverage with minor deductible amounts. Also, performance
and payment bonds may be provided for specific projects if
required by clients.  To supplement its insurance policies,
ESE attempts with its clients to limit and/or transfer its
risk contractually.

ESE believes it operates in a safe manner and, as described
above,  purchases insurance to protect against loss and
maintain competitiveness in the marketplace; however, its
entire potential liability may not be covered by insurance.
Also, the total cost of a potential claim could exceed ESE's
policy limits.

EMPLOYEES

At December 31, 1996, ESE employed 734 full-time, part-time
and on-call employees, many of whom have advanced degrees in
a variety of technical disciplines.  ESE believes its
relations with its employees are good.  No ESE employees are
represented by a labor union.

                      OTHER BUSINESSES

CIM

The investment portfolio of CIM at December 31, 1996, and
December 31, 1995, is shown in the following table:
<TABLE>
<CAPTION>
Type of Investment
At December 31                         1996        1995
                                         (In thousands)
<S>                                 <C>             <C>
Investment in leveraged leases      $133,030        $127,140
Cash and temporary cash                                     
   investments                            53             124
Investment in Energy Investors Fund      129           1,591
Investment in affordable                                    
   housing funds                      17,172           1,500
Other                                     35              67
                                    --------        --------
   Total                            $150,419        $130,422
                                    ========        ========
</TABLE>

At December 31, 1996, CIM held equity investments in seven
leveraged leases through its wholly-owned subsidiaries,
CILCORP Lease Management Inc. (CLM), CIM Air Leasing Inc.
and CIM Leasing Inc.  According to the terms of some of the
lease agreements, under certain circumstances, subsidiaries
of CIM may be obligated to incur additional non-recourse
debt to finance the cost of certain alterations, additions,
or improvements required by the lessee.

CIM, through its wholly-owned subsidiary CIM Energy
Investments Inc., has a net investment of $129,000 in the
Energy Investors Fund, L.P.(Fund), representing a 3.1%
interest in the Fund at December 31, 1996.  CIM's 1996
operating results include a $1.3 million pre-tax loss
resulting from the write-down of this investment.  The Fund
invests in non-regulated, non-utility facilities for the
production of electricity or thermal energy.  The equity
method of accounting is used for this investment.

CIM is a limited partner in seven affordable housing
portfolios.  The ownership interests in these partnerships
range from 3% to 10% at December 31, 1996.  The equity
method of accounting is used for these  investments.

CVI

CVI's net investment in CESI, its wholly-owned subsidiary,
is approximately $330,000.  CESI's primary business is the
sale of carbon monoxide detectors to utilities for resale to
their customers and the sale of outdoor lighting services to
commercial businesses.  In addition, during 1996 costs
related to providing additional value-added services to
Caterpillar in connection with CILCO's Power Quest programs
were reflected in CESI's operating results (refer to the
caption "Competition" of Item 7.  Management's Discussion
and Analysis of Financial Condition and Results of
Operations beginning on page 19 of CILCORP's 1996 Annual
Report to Shareholders which is incorporated herein by
reference).

EMPLOYEES

At December 31, 1996, there were 28 full-time employees
assigned to CILCORP, CVI and CIM.

Item 2. Properties

                            CILCO
                              
CILCO owns and operates two steam-electric generating
plants, a cogeneration plant and two combustion turbine-
generators.  These facilities had an available summer
capability of 1,152 MW in 1996.  The two combustion turbine
generators have a summer rating of 30 MW (15 MW each) and
are used during peak periods.  They typically operate less
than 100 hours per year.  The cogeneration plant, which
became operational during 1995, produces steam for MWG and
also generates electricity for distribution to CILCO's
customers.  This turbine-generator has an available summer
capability of 16 MW.

The major generating facilities of CILCO (representing 96.0%
of CILCO's available summer generating capability projected
for 1997), all of which are fueled with coal, are as
follows:
<TABLE>
<CAPTION>
                                                Available
                                                 Summer
                                               Capability
                                                  (MW)
Station & Unit              Installed          Actual 1996
<S>                            <C>                 <C>
Duck Creek                                          
   Unit 1                      1976                366
E. D. Edwards                                       
   Unit 1                      1960                117
   Unit 2                      1968                262
   Unit 3                      1972                361
</TABLE>

CILCO's transmission system includes approximately 285
circuit miles operating at 138,000 volts, 48 circuit miles
operating at 345,000 volts and 14 principal substations with
an installed capacity of 3,364,200 kilovolt-amperes.

The electric distribution system includes approximately
6,214 miles of overhead pole and tower lines and 2,008 miles
of underground distribution cables.  The distribution system
also includes 105 substations with an installed capacity of
2,007,860 kilovolt-amperes.

The gas system includes approximately 3,540 miles of
transmission and distribution mains.

CILCO has an underground gas storage facility located about
ten miles southwest of Peoria near Glasford, Illinois.  The
facility has a present recoverable capacity of approximately
4.5 BCF.  An additional storage facility near Lincoln,
Illinois, has a present recoverable capacity of
approximately 5.2 BCF.
                              
                             ESE

ESE owns approximately 53 acres of land in Gainesville,
Florida, containing 118,000 square feet of offices,
laboratory and other space. In Peoria, Illinois, ESE owns
approximately 27,000 square feet of offices, laboratory and
other space and leases approximately 21,000 square feet of
additional space for offices.  ESE and its subsidiaries
lease additional facilities for offices, laboratories and
warehouse space in 30 cities throughout the United States.
ESE believes its facilities are suitable and adequate for
its current businesses and does not expect to make any
material acquisitions of real property in the near future,
other than the purchases of land for remediation and resale
through its subsidiaries.  Refer to the caption "Capital
Resources and Liquidity - ESE" of Item 7.  Management's
Discussion and Analysis of Financial Condition and Results
of Operation on page 18 of CILCORP's 1996 Annual Report to
shareholders which is incorporated herein by reference.

Item 3.  Legal Proceedings

Reference is made to the captions "Environmental Matters"
and "Gas Pipeline Supplier Transition Costs" of Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations of CILCORP's 1996 Annual Report to
Shareholders incorporated herein by reference, for certain
pending legal proceedings and/or proceedings known to be
contemplated by governmental authorities.  Reference is also
made to Note 9 - Rate Matters, included herein.  Pursuant to
CILCO's By-Laws, CILCO has advanced legal and other expenses
actually and reasonably incurred by employees, and former
employees, in connection with the investigation of CILCO's
Springfield gas operations described in Note 9 - Rate
Matters.

In July 1996, a United States District Court judge entered
an order summarily dismissing a lawsuit filed against CILCO
seeking damages related to alleged coal tar contamination
from a gas manufacturing plant which was owned but never
operated by CILCO.  This decision which was on the grounds
that the applicable statute of limitations had expired has
been appealed.  For a further discussion of gas
manufacturing plant sites refer to the caption
"Environmental Matters" of Item 7.  Management's Discussion
and Analysis of Financial Condition and Results of
Operations on page 21 of CILCORP's 1996 Annual Report to
Shareholders which is incorporated herein by reference.
Management cannot currently determine the outcome of this
litigation, but does not believe it will have a material
adverse impact on CILCO's financial position or results of
operations.
                              
The Company and its subsidiaries are subject to certain
claims and lawsuits in connection with work performed in the
ordinary course of their businesses.  Except as otherwise
disclosed or referred to in this section, in the opinion of
management, all such claims currently pending either will
not result in a material adverse effect on the financial
position and results of operations of the Company or are
adequately covered by: (i) insurance;  (ii) contractual or
statutory indemnification, or (iii) reserves for potential
losses.

Item 4.  Submission of Matters to a Vote of Security Holders
                              
                           CILCORP
                              
There were no matters submitted to a vote of security
holders during the fourth quarter of 1996.

                            CILCO

There were no matters submitted to a vote of security
holders during the fourth quarter of 1996.
<TABLE>
<CAPTION>
                Executive Officers of CILCORP

                 Age at    Positions Held During       Initial
    Name         3/31/97    Past Five Years          Effective Date(1)
<S>               <C>  <C>                       <C>
R. O. Viets       53   President and Chief
                         Executive Officer       February 1, 1988

W. M. Shay (2)    44   Executive Vice President  November 4, 1996

J. G. Sahn        50   Vice President, General   March 1, 1994
                         Counsel and Secretary
                       Vice President
                         and General Counsel     February 1, 1989

A.R. St.Clair (3) 40   Vice  President and
                         Chief Personnel Officer June 1, 1996

M. D. Austin      38   Treasurer and
                         Assistant Secretary     April 25, 1995
                       Director - Corporate
                         Investments             April 1, 1990

T.D. Hutchinson(4)42   Controller                January 20, 1997

<FN>
 Notes:
(1) The term of each executive officer extends to the
    organization meeting of CILCORP's Board of Directors
    following the next annual election of Directors.

(2) W. M. Shay served as President and Chief Operating
    Officer of QST Enterprises Inc. from January 29, 1996
    to November 4, 1996.  Previously, he was Group
    President of CILCO from April 1, 1995 to January 29,
    1996 and Vice President of CILCO from January 1, 1993
    to April 4, 1995.  He was Vice President of CILCORP
    from August 15, 1988 to January 1, 1993.

(3) A. R. St. Clair resigned as Vice President and Chief
    Personnel Officer, effective March 31, 1997.

(4) T. D. Hutchinson served as Controller from February 1,
    1988, until April 1, 1995, when he became CILCO
    Director - Competitive Strategy.  Mr. Hutchinson later
    served as Director of Planning and Administration for
    QST Enterprises Inc.  J. L. Barnett served as
    Controller from April 1, 1995 to January 20, 1997.
</TABLE>
<TABLE>
<CAPTION>
                 Executive Officers of CILCO
 
                         Age as of  Positions Held During    Initial
  Name                     3/31/97    Past Five Years(1)   Effective Date(2)
<S>                          <C>    <C>                       <C>
R. O. Viets (3)              53     Chairman of the       
                                     Board and Chief       
                                     Executive Officer        April 1, 1995
                                             
J. F. Vergon (4)             49     President and Chief   
                                     Operating Officer        January 29, 1996
                                    Group President,      
                                     Gas Operations           April 1, 1995
                                    Vice President            October 1, 1986
                                             
M. J. Bowling (5)            50     Vice President            April 1, 1995
                                             
S. A. Cisel (5)              43     Vice President            April 1, 1995
                                             
T. S. Romanowski (5)         47     Vice President            October 1, 1986
                                             
T. K. Severson (5)           50     Vice President            August 12, 1996
                                             
W. R. Dodds                  42     Treasurer and Manager         
                                     of Treasury Department   October 1, 1990
                                             
T. D. Hutchinson (6)         42     Controller and Manager of       
                                     Accounting               January 1, 1997
                                             
J. G. Sahn (7)               50     Secretary                 March 1, 1993
<FN>
Notes:
(1) The officers listed have been employed by CILCO in
    executive or management positions for the past five
    years except for Mr. Viets, Mr. Hutchinson, Mr. Sahn and
    Mr. Severson.

(2) The term of each executive officer extends to the
    organization meeting of CILCO's Board of Directors
    following the next annual election of Directors.

(3) Mr. Viets previously served as Chairman of the Board
    from February 1, 1988 to April 23, 1991.  He also serves
    as President and Chief Executive Officer of CILCO's
    parent, CILCORP Inc., a position he has held since
    February 1, 1988.

(4) J. F. Vergon became Group President of Gas Operations on
    April 1, 1995 and was elected President and Chief
    Operating Officer of CILCO on January 29, 1996.  He also
    serves as Chairman of the Board of CILCORP Investment
    Management Inc.

(5) M. J. Bowling, S. A. Cisel, T. S. Romanowski and T. K.
    Severson head Distribution; Rates, Regulation and
    Legislation; Finance; and Human Resources, respectively.
    T. S. Romanowski also serves as CILCO's Chief Financial
    Officer.  R. J. Sprowls, a former Vice President,
    resigned January 29, 1996 to become Assistant to the
    President and Chief Executive Officer of CILCORP.
    Effective August 19, 1996, Mr. Sprowls is Vice President
    of QST Enterprises Inc., a subsidiary of CILCORP.  S. R.
    Corwell, also a former Vice President, resigned
    September 1, 1996 to become Vice President of QST Energy
    Inc., a subsidiary of QST Enterprises Inc.

(6) R. L. Beetschen retired from CILCO January 1, 1997.  He
    was replaced by T. D. Hutchinson as Controller and
    Manager of Accounting.  Mr. Hutchinson is also
    Controller of CILCORP, effective January 20, 1997,
    having previously served as CILCORP Controller from
    February 1, 1988 to April 1, 1995.  He served as CILCO
    Director-Competitive Strategy from May 1, 1995 to
    December 31, 1995 and as Director of Planning and
    Administration of QST Enterprises Inc. from January 1,
    1996 to January 1, 1997.

(7) Mr. Sahn also serves as Vice President and General
    Counsel of CILCORP Inc., a position he has held since
    February 1, 1989.   He was elected to the additional
    positions of Secretary and Assistant Treasurer of
    CILCORP effective March 1, 1994.
</TABLE>

                          PART II

Item 5.  Market for the Registrant's Common Equity and
         Related Stockholder Matters

                          CILCORP

The Company's common stock is listed on the New York and
Chicago Stock Exchanges (ticker symbol CER).  At December
31, 1996, there were 12,770 holders of record of the
Company's common stock.  The following table sets forth, for
the periods indicated, the dividends per share of common
stock and the high and low prices of the common stock as
reported in New York Stock Exchange Composite Transactions.
<TABLE>
<CAPTION>
                                         Quarter
 1995                  First       Second       Third    Fourth
<S>                   <C>          <C>          <C>      <C>
Price Range                                       
High                  $37          $37 7/8      $38      $44 3/4
Low                   $31 7/8      $35 3/8      $34      $37 1/2
                                                  
Dividends Paid        $  .615      $  .615      $  .615  $  .615
                                                  
1996                                              
Price Range                                       
High                  $45 1/8      $44 1/8      $43 1/2  $39 5/8
Low                   $40 1/2      $40 7/8      $39 1/2  $35 1/2
                                                  
Dividends Paid        $  .615      $  .615      $  .615  $  .615
                                                  
<FN>
The number of common shareholders of record as of March 11,
1997, was 12,522.
</TABLE>
                           CILCO

CILCO's common stock is not traded on any market.  As of
March 11, 1997, 13,563,871 shares of CILCO's Common Stock,
no par value, were issued, and outstanding and privately
held, beneficially and of record, by CILCORP Inc.

CILCO's requirement for retained earnings before common
stock dividends may be paid is described in Note 5 of
CILCO's Notes to the Consolidated Financial Statements
contained in Item 8. Financial Statements and Supplementary
Data.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Years Ended December 31

                        1996        1995        1994        1993     1992
                               (In thousands except per share amounts)
<S>                    <C>        <C>         <C>          <C>        <C>
Revenue                $ 628,392   $614,740    $605,139     $584,511   $581,225
                                                                  
Net income                                                        
available for common                                                         
  stockholders            27,943     38,582      32,586       33,583     32,097
Earnings per share          2.07       2.93        2.50         2.60       2.48
Total assets           1,285,693  1,279,303   1,238,384    1,198,440  1,184,916
Long-term debt           320,666    344,113     326,695      325,711    307,628
Dividends declared                                                         
  per common share          2.46       2.46        2.46         2.46       2.46
</TABLE>

<TABLE>
Central Illinois Light Company
Selected Financial Data
<CAPTION>
For the Years Ended December 31
                          1996        1995     1994        1993      1992
                                         (In thousands)
<S>                   <C>         <C>       <C>         <C>       <C>
Revenue                $518,555    $477,744  $461,370    $453,878  $433,739
                                                                 
Net income                                                       
available  for                                                   
common stockholders      41,940      39,099    29,507      33,635    31,195
Total assets          1,036,169   1,063,223 1,019,109     988,325   965,691
Long-term debt          278,439     298,397   278,359     278,321   257,361
Ratio of earnings                                                
to fixed charges            3.4         3.3       3.0         3.2       3.1
</TABLE>

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

The information under the heading Management's Discussion
and Analysis of Financial Condition and Results of
Operations on pages 16 through 27 of CILCORP's 1996 Annual
Report to Shareholders is incorporated herein by reference.

Item 8.:  Financial Statements and Supplementary Data

The financial statements on pages 29 through 44 and
Management's Report to the Stockholders of CILCORP Inc. on
page 28 of CILCORP's 1996 Annual Report to Shareholders
are incorporated herein by reference.

Index to Financial Statements:
                           CILCORP

                                                  Page

Report of Independent Public Accountants on
  Schedules                                        35

                                 CILCO
Management's Report                                36
Report of Independent Public Accountants           37
Consolidated Statements of Income                  38
Consolidated Balance Sheets                      39-40
Consolidated Statements of Cash Flows            41-42
Statements of Segments of Business               43-44
Consolidated Statements of Retained Earnings       45
Notes to Consolidated Financial Statements       46-60
<PAGE>
    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES


To CILCORP Inc.:

We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in CILCORP Inc.'s Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued
our report thereon dated January 27, 1997.  Our audits were
made for the purpose of forming an opinion on those
statements taken as a whole.  The financial statement
schedules listed in Item 14(a)2 are the responsibility of
the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's
rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a
whole.




                                    ARTHUR ANDERSEN LLP

Chicago, Illinois
January 27, 1997

<PAGE>
                     MANAGEMENT'S REPORT

The accompanying financial statements and notes for CILCO
and its consolidated subsidiaries have been prepared by
management in accordance with generally accepted accounting
principles.  Estimates and judgments used in developing
these statements are the responsibility of management.
Financial data presented throughout this report is
consistent with these statements.

CILCO maintains a system of internal accounting controls
which management believes is adequate to provide reasonable
assurance as to the integrity of accounting records and the
protection of assets.  Such controls include established
policies and procedures, a program of internal audit and the
careful selection and training of qualified personnel.

The financial statements have been audited by CILCO's
independent public accountants, Arthur Andersen LLP.  Their
audit was conducted in accordance with generally accepted
auditing standards and included an assessment of selected
internal accounting controls only to determine the scope of
their audit procedures.  The report of the independent
public accountants is contained in this Form 10-K annual
report.

The Audit Committee of the CILCORP Inc. Board of Directors,
consisting solely of outside directors, meets periodically
with the independent public accountants, internal auditors
and management to review accounting, auditing, internal
accounting control and financial reporting matters.  The
independent public accountants have direct access to the
Audit Committee.  The Audit Committee meets separately with
the independent public accountants.




                                    J. F. Vergon
                                    President and Chief
                                      Operating Officer




                                    T. S. Romanowski
                                    Vice President and Chief
                                      Financial Officer




                                    T. D. Hutchinson
                                    Controller and Manager
                                      of Accounting

<PAGE>
        REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Central Illinois Light Company:

We have audited the accompanying consolidated balance sheets
of Central Illinois Light Company (an Illinois corporation)
and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, cash flows,
segments of business, and retained earnings for each of the
three years in the period ended December 31, 1996.  These
financial statements and the schedule referred to below are
the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial
statements and schedule 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 Central Illinois Light Company and subsidiaries
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
financial statement schedule  listed in Item 14(a)2 is
presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of
the basic financial statements.  This financial statement
schedule has  been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.



                                     ARTHUR ANDERSEN LLP
Chicago, Illinois
January 27, 1997
<TABLE>
               Central Illinois Light Company
              Consolidated Statements of Income
<CAPTION>
For the Years Ended December 31                     1996        1995      1994
                                                           (In thousands)
<S>                                                <C>       <C>       <C>
Operating Revenues:                                         
Electric                                           $322,785  $326,198  $313,085
Gas                                                 195,770   151,546   148,285
                                                   --------  --------  --------
     Total Operating Revenues                       518,555   477,744   461,370
                                                   --------  --------  --------
Operating Expenses:                                         
Cost of Fuel                                         90,715    94,235    97,184
Cost of Gas                                         108,286    68,948    78,696
Purchased Power                                      10,907    12,353     9,433
Other Operation Expenses                             94,273    94,519    81,143
Maintenance                                          25,061    31,037    28,174
Depreciation and Amortization                        59,664    56,765    54,349
Income Taxes                                         26,548    23,267    21,489
State and Local Taxes on Revenue                     22,004    20,867    20,450
Other Taxes                                          11,419    12,205    11,945
                                                    -------   -------   -------
     Total Operating Expenses                       448,877   414,196   402,863
                                                    -------   -------   -------
Operating Income                                     69,678    63,548    58,507
                                                    -------   -------   -------
Other Income and Deductions:                                
Cost of Equity Funds Capitalized                         36        97       530
CILCO-owned Life Insurance, Net                        (678)     (623)     (667)
Disallowed Plant Cost                                   --        --     (7,523)
Income Tax Reduction for Disallowed Plant Cost          --        --      2,982
Other, Net                                              200     2,581    (1,051)
                                                    -------   -------   -------
     Total Other Income and (Deductions)               (442)    2,055    (5,729)
                                                    -------   -------   -------
Income Before Interest Expenses                      69,236    65,603    52,778
                                                    -------   -------   -------
Interest Expenses:                                          
Interest on Long-term Debt                           21,012    20,242    19,221
Cost of Borrowed Funds Capitalized                      (54)     (417)     (510)
Other                                                 3,150     3,380     1,580
                                                    -------   -------   -------
     Total Interest Expenses                         24,108    23,205    20,291
                                                    -------   -------   -------
Net Income                                           45,128    42,398    32,487
                                                    -------   -------   -------
Dividends on Preferred Stock                          3,188     3,299     2,980
                                                    -------   -------   -------
Net Income Available for Common Stock             $  41,940  $ 39,099  $ 29,507 
                                                    =======   =======   =======
<FN>
The accompanying Notes to the Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
               Central Illinois Light Company
                 Consolidated Balance Sheets
                           Assets
<CAPTION>
As of December 31                                    1996            1995
                                                    (In thousands)
<S>                                               <C>             <C>
Utility Plant, At Original Cost:                             
  Electric                                        $1,186,110      $1,142,945
  Gas                                                393,246         379,985
                                                   ---------       ---------
                                                   1,579,356       1,522,930
  Less - Accumulated Provision for Depreciation      724,398         682,574
                                                   ---------       ---------
                                                     854,958         840,356
Construction Work in Progress                         15,092          44,749
Plant Acquisition Adjustments, Net of                        
  Amortization                                         1,930           2,642
                                                   ---------       ---------
    Total Utility Plant                              871,980         887,747
                                                   ---------       ---------
Other Property and Investments:                              
Cash Surrender Value of Company-owned                        
Life Insurance (Net of Related Policy                      
Loans of $37,948 in 1996 and $33,211 in 1995)          2,128           1,924
Other                                                  1,553           1,623
                                                   ---------       ---------
    Total Other Property and Investments               3,681           3,547
                                                   ---------       ---------
Current Assets:                                              
Cash and Temporary Cash Investments                    1,662          16,556
Receivables, Less Reserves of $1,000 and $650         43,604          42,312
Accrued Unbilled Revenue                              30,879          28,891
Fuel, at Average Cost                                  7,643          11,596
Materials and Supplies, at Average Cost               15,126          16,541
Gas in Underground Storage, at Average Cost           24,222          13,592
Prepaid Taxes                                          1,183           7,978
Other                                                  9,668          10,300
                                                   ---------       ---------
    Total Current Assets                             133,987         147,766
                                                   ---------       ---------
Deferred Debits:                                             
Unamortized Loss on Reacquired Debt                    5,572           6,029
Unamortized Debt Expense                               2,198           2,374
Prepaid Pension Cost                                     496             536
Other                                                 18,255          15,224
                                                   ---------       ---------
    Total Deferred Debits                             26,521          24,163
                                                   ---------       ---------
Total Assets                                      $1,036,169      $1,063,223
                                                  ==========      ==========
<FN>
The accompanying Notes to the Consolidated Financial
Statements are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
               Central Illinois Light Company
                 Consolidated Balance Sheets
               Capitalization and Liabilities
<CAPTION>
As of December 31                                  1996               1995
                                                       (In thousands)
<S>                                              <C>               <C>
Capitalization:                                               
Common Shareholder's Equity:                                  
  Common Stock, No Par Value; Authorized                      
  20,000,000 Shares; Outstanding                              
  13,563,871 Shares                              $  185,661        $  185,661
  Retained Earnings                                 136,629           140,814
                                                  ---------         ---------
     Total Common Shareholder's Equity              322,290           326,475
Preferred Stock Without Mandatory Redemption         44,120            44,120
Preferred Stock With Mandatory Redemption            22,000            22,000
Long-term Debt                                      278,439           298,397
                                                  ---------         ---------
     Total Capitalization                           666,849           690,992
                                                  ---------         ---------
Current Liabilities:                                          
Current Maturities of Long-Term Debt                 20,000            16,000
Notes Payable                                         9,900            24,600
Accounts Payable                                     46,126            40,483
Accrued Taxes                                         7,013             5,917
Accrued Interest                                      9,761             8,508
PGA Over-Recoveries                                     601             1,987
Level Payment Plan                                    2,737             1,870
Other                                                 5,831             6,418
                                                  ---------         ---------
     Total Current Liabilities                      101,969           105,783
                                                  ---------         ---------
Deferred Liabilities and Credits:                             
Accumulated Deferred Income Taxes                   135,251           144,378
Regulatory Liability                                 68,565            62,714
Investment Tax Credits                               22,801            24,485
Capital Lease Obligation                              2,621             3,025
Other                                                38,113            31,846
                                                  ---------         ---------
     Total Deferred Liabilities and Credits         267,351           266,448
                                                  ---------         ---------
Total Capitalization and Liabilities             $1,036,169        $1,063,223
                                                 ==========        ==========
<FN>
The accompanying Notes to the Consolidated Financial
Statements are an integral part of these balance sheets.
</TABLE>

<PAGE>
<TABLE>
               Central Illinois Light Company
            Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31                     1996       1995       1994
                                                           (In thousands)
<S>                                               <C>        <C>        <C>
Cash Flows from Operating Activities:                      
Net Income Before Preferred Dividends             $ 45,128   $ 42,398  $ 32,487
Adjustments to Reconcile Net Income to                     
Net Cash Provided by Operating Activities:
  Disallowed Plant Costs                               --        --       7,522
  Income Tax Reduction for Disallowed                      
    Plant Costs                                        --        --      (2,982)
  Depreciation and Amortization                     60,376     57,478    55,062
  Deferred Taxes, Investment Tax Credits                   
    and Regulatory Liability, Net                   (4,960)    (6,454)   (2,006)
  (Increase) Decrease in Accounts Receivable        (1,292)   (11,769)    3,654
  (Increase) Decrease in Fuel, Materials and                              
    Supplies, and Gas in Underground Storage        (5,262)     7,251       565
  (Increase) Decrease in Unbilled Revenue           (1,988)    (6,551)    2,771
  Increase (Decrease) in Accounts Payable            5,643     (7,053)    6,565
  Increase (Decrease) in Accrued Taxes                      
    and Interest                                     2,349       (439)      867
  Capital Lease Payments                               645        590       478
  (Increase)Decrease in Other Current Assets         7,427     (8,958)      193
  Increase(Decrease) in Other Current                      
    Liabilities                                     (1,106)    (2,831)    1,192
  (Increase)Decrease in Other Non-Current                         
    Assets                                            (273)    13,792    (1,631)
  Increase in Other Non-Current Liabilities          5,129      3,424     2,319
                                                   --------   -------    -------
    Net Cash Provided by Operating Activities      111,816     80,878   107,056
                                                   --------   -------   -------
Cash Flows from Investing Activities:                      
  Capital Expenditures                             (43,525)   (69,412)  (90,873)
  Cost of Equity Funds Capitalized                     (36)       (97)     (530)
  Other                                             (2,495)    (8,462)   (7,308)
                                                   --------    -------  --------
    Net Cash Used in Investing Activities          (46,056)   (77,971)  (98,711)
                                                   --------    -------  --------
Cash Flows from Financing Activities:                      
  Common Dividends Paid                            (46,121)   (20,056)  (16,027)
  Preferred Dividends Paid                          (3,188)    (3,299)   (2,980)
  Long-Term Debt Issued                                --      35,765       175
  Long-Term Debt Retired                           (16,000)       --        --
  Payments on Capital Lease Obligation                (645)      (590)     (478)
  Increase (Decrease) in Short-Term Borrowings     (14,700)     1,200    11,000
                                                   --------    -------   -------
    Net Cash Provided from (Used in)                       
      Financing Activities                         (80,654)    13,020    (8,310)
                                                   --------   --------   -------
Net Increase(Decrease) in Cash and                         
Temporary Cash Investments                         (14,894)    15,927        35
Cash and Temporary Cash Investments at                     
Beginning  of Year                                  16,556        629       594
                                                   --------    -------   --------
Cash and Temporary Cash Investments at                     
  December 31                                     $  1,662   $ 16,556    $  629
                                                  =========  ========    ========
Supplemental Disclosures of Cash Flow                      
Information:
Cash Paid During the Period for:                           
  Interest (Net of Cost of Borrowed Funds                    
      Capitalized)                                $ 23,475  $ 22,145     $20,809
                                                           
  Income Taxes                                      22,079    35,954      24,155
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>

<PAGE>
<TABLE>
               Central Illinois Light Company
             Statements of Segments of Business
<CAPTION>
Operating Information
For the Years Ended December 31     1996          1995          1994
                                            (In thousands)
 <S>                               <C>           <C>           <C>
Utility Segment:
Electric Operations                                        
Revenue                            $322,785      $326,198      $313,085
Expenses                            270,672       277,429       263,462
                                   --------      --------      --------
Operating Income                     52,113        48,769        49,623
Income Taxes                         19,576        17,975        19,925
                                   --------      --------      --------
Operating Income Before                                    
  Income Taxes                     $ 71,689      $ 66,744      $ 69,548
                                   ========      ========      ========
Depreciation and                                           
  Amortization                     $ 42,530      $ 40,665      $ 39,130
Capital Expenditures               $ 28,032      $ 45,466      $ 66,537
                                                           
Gas Operations                                             
Revenue                            $195,770      $151,546      $148,285
Expenses                            178,205       136,767       139,401
                                   --------      --------      --------
Operating Income                     17,565        14,779         8,884
Income Taxes                          6,972         5,292         1,564
                                   --------      --------      --------
Operating Income Before                                    
 Income Taxes                      $ 24,537      $ 20,071      $ 10,448
                                   ========      ========      ========
Depreciation and                                           
 Amortization                      $ 17,134      $ 16,100      $ 15,219
Capital Expenditures               $ 15,529      $ 24,043      $ 24,867
</TABLE>
<TABLE>
<CAPTION>
Major Customer for the Years Ended December 31
                             1996             1995              1994
<S>                   <C>       <C>      <C>       <C>      <C>       <C>
Caterpillar Inc.                                               
Electric Revenue      $37,724   11.7%    $40,109   12.3%    $41,422   13.2%
Gas Revenue             1,053     .5%      1,022     .7%      1,719    1.2%
                       ------   -----     ------   ----     -------   ----
     Total            $38,777    7.5%    $41,131    8.6%    $43,141    9.4%
                      =======   =====    =======   =====    =======    ====
</TABLE>
<TABLE>
<CAPTION>
Utility Identifiable Assets as of December 31
                                     1996          1995          1994
<S>                             <C>            <C>             <C>
Electric                        $  721,468     $  735,463      $  718,431
Gas                                292,925        273,428         260,070
Other Utility Assets*               21,776         54,332          40,608
                                ----------     ----------      ----------
     Total Utility Assets       $1,036,169     $1,063,223      $1,019,109
                                ==========     ==========      ==========
<FN>
*Other investments, miscellaneous accounts receivable,
prepaid assets, deferred pension costs and unamortized debt, discount and
expense.

The accompanying Notes to Financial Statements are an
integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
               Central Illinois Light Company
        Consolidated Statements of Retained Earnings

<CAPTION>
For the Years Ended December 31            1996          1995          1994
                                                     (In thousands)
<S>                                       <C>          <C>            <C>
Balance Beginning of Year                 $140,814     $122,125       $108,645
Add                                                        
Net Income                                  45,128       42,398         32,487
                                          --------     --------       --------
        Total                             $185,942     $164,523       $141,132
                                          --------     --------       --------
Deduct                                                     
Cash Dividends Declared                                    
  Preferred Stock                                          
    $100 Par Value                                         
      4 1/2% Series                            501          501            501
      4.64% Series                             371          371            371
      5.85% Series                           1,287        1,287          1,287
    Auction Rate Series (rate at                           
     December 31, 1996 was 3.936%)           1,029        1,140            821
  Common Stock, No Par Value                46,121       20,056         16,027
                                          --------      -------         -------
        Total Dividends Declared            49,309       23,355         19,007
                                          --------      -------         -------
  Additional Minimum Liability for                            
    Non-Qualified Pension Plan at                             
    December 31, 1996 and 1995, net of             
    $3 and $233 taxes, respectively              4          354            -- 
                                           -------      -------         -------
                                            49,313       23,709         19,007
                                           -------      -------         -------
Balance End of Year                       $136,629     $140,814       $122,125
                                          ========     ========       ========
<FN>
The accompanying Notes to the Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<PAGE>
               CENTRAL ILLINOIS LIGHT COMPANY
        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of CILCO include the
accounts of CILCO and its subsidiaries, CILCO Exploration
and Development Company and CILCO Energy Corporation.
CILCO is a subsidiary of CILCORP Inc.  Prior year amounts
have been reclassified on a basis consistent with the 1996
presentation.

The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
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.

REGULATION

CILCO is a public utility subject to regulation by the
Illinois Commerce Commission and the Federal Energy
Regulatory Commission with respect to accounting matters,
and maintains its accounts in accordance with the Uniform
System of Accounts prescribed by these agencies.

As a regulated public utility, CILCO is subject to the
provisions of Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS71).  Regulatory increases and decreases,
respectively, of assets and liabilities represent probable
future increases and decreases, respectively, of revenues
to CILCO resulting from the ratemaking action of
regulatory agencies.  Regulatory liabilities, consisting
of deferred tax items, are approximately $68.6 million and
$62.7 million at December 31, 1996 and 1995, respectively
(see Note 2).  At December 31, 1996, and 1995, the
regulatory assets included on the Consolidated Balance
Sheets were as follows:
<TABLE>
<CAPTION>
                                            1996       1995
                                            (In thousands)
<S>                                         <C>        <C>
Included in prepayments and other:                          
    Fuel and gas cost adjustments           $ 9,658    $ 5,444
    Coal tar remediation cost -                             
      estimated current                       1,071      1,500
    Gas transition costs                      1,022      2,268
                                            -------    -------
          Current costs included in                         
            prepayments and other            11,751      9,212
                                            -------    -------
Included in other assets:                                   
    Coal tar remediation cost, net of                       
      recoveries                              2,839      4,222
    Regulatory tax asset                      4,777      3,232
    Gas transition costs                        --       1,656
    Deferred gas costs                        4,330      3,207
    Unamortized loss on reacquired debt       5,572      6,029
                                            -------    -------
      Future costs included in other assets  17,518     18,346
                                            -------    -------
              Total regulatory assets       $29,269    $27,558
                                            =======    =======
</TABLE>

If a portion of CILCO's operations becomes no longer
subject to the provisions of SFAS 71, a write-off of
related regulatory assets and liabilities would be
required, unless some form of transition cost recovery
continues through rates established and collected for
CILCO's remaining regulated operations.  In addition,
CILCO would be required to determine any impairment to the
costs recorded for deregulated plant and inventory assets.

UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS

Electric and gas revenues include service provided but
unbilled at year end.  Substantially all electric rates
and gas system sales rates of CILCO include a fuel
adjustment clause and a purchased gas adjustment clause,
respectively.  These clauses provide for the recovery of
changes in electric fuel costs, excluding coal
transportation, and changes in the cost of gas on a
current basis in billings to customers.  CILCO adjusts the
cost of fuel and cost of gas to recognize over or under
recoveries of allowable costs.  The cumulative effects are
deferred on the Balance Sheets as a current asset or
current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to
customers.

CONCENTRATION OF CREDIT RISK

CILCO, as a public utility, must provide service to
customers within its defined service territory and may not
discontinue service to residential customers when certain
weather conditions exist.  CILCO continually reviews
customers' creditworthiness and requests deposits or
refunds deposits based on that review.  At December 31,
1996, CILCO had net receivables of $43.6 million, of which
approximately $9.2 million was due from its major
industrial customers.

TRANSACTIONS WITH AFFILIATES

CILCO, which is a subsidiary of CILCORP, incurs certain
corporate expenses such as legal, shareholder and
accounting fees on behalf of CILCORP and its other
subsidiaries.  These expenses are billed monthly to
CILCORP and its other subsidiaries based on specific
identification of costs except for shareholder-related
costs which are based on the relative equity percentages
of CILCORP and its subsidiary corporations.  A return on
CILCO assets used by CILCORP and its other subsidiaries is
also calculated and billed monthly.   Total billings to
CILCORP and its other subsidiaries amounted to $5.4
million, $1.7 million and $2.4 million in 1996, 1995 and
1994, respectively.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)

The allowance, representing the cost of equity and
borrowed funds used to finance construction, is
capitalized as a component of the cost of utility plant.
The amount of the allowance varies depending on the rate
used and the size and length of the construction program.
The Uniform System of Accounts defines AFUDC, a non-cash
item, as the net cost for the period of construction of
borrowed funds used for construction purposes and a
reasonable rate upon other funds when so used.  On the
income statement, the cost of borrowed funds capitalized
is reported as a reduction of total interest expense and
the cost of equity funds capitalized is reported as other
income.  In accordance with the FERC formula, the
composite AFUDC rates used in 1996, 1995  and 1994 were
7.8%, 6.7% and 8.0%, respectively.

DEPRECIATION AND MAINTENANCE

Provisions for depreciation of utility property for
financial reporting purposes are based on straight-line
composite rates.  The annual provisions for utility plant
depreciation, expressed as a percentage of average
depreciable utility property, were 3.8% and 4.6% for
electric and gas, respectively, for each of the last three
years.  Utility maintenance and repair costs are charged
directly to expense.  Renewals of units of property are
charged to the utility plant account, and the original
cost of depreciable property replaced or retired, together
with the removal cost less salvage, is charged to the
accumulated provision for depreciation.

INCOME TAXES

CILCO follows a policy of comprehensive interperiod income
tax allocation.  Investment tax credits related to utility
property have been deferred and are being amortized over
the estimated useful lives of the related property.
CILCORP and its subsidiaries file a consolidated federal
income tax return.  Income taxes are allocated to the
individual companies based on their respective taxable
income or loss.

CONSOLIDATED STATEMENTS OF CASH FLOWS

CILCO considers all highly liquid debt instruments
purchased with a remaining maturity of three months or
less to be cash equivalents for purposes of the
Consolidated Statements of Cash Flows.

CILCO-OWNED LIFE INSURANCE POLICIES

The following amounts related to CILCO-owned life
insurance contracts, issued by one major insurance
company, are recorded on the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
                                            1996           1995
                                               (In thousands)
<S>                                          <C>          <C>
Cash surrender value of contracts            $ 40,076     $ 35,135
Borrowings against contracts                  (37,948)     (33,211)
                                             ---------    ---------
  Net investment                             $  2,128     $  1,924
                                             =========    =========
</TABLE>

Interest expense related to borrowings against CILCO-owned
life insurance, included in CILCO-owned Life Insurance,
Net on the Consolidated Statements of Income, was $2.7
million, $2.3 million and $2 million for 1996, 1995 and
1994, respectively.

NOTE 2 - INCOME TAXES

CILCO uses the liability method to account for income
taxes.  Under the liability method, deferred income taxes
are recognized at currently enacted income tax rates to
reflect the tax effect of temporary differences between
the financial reporting basis and the tax basis of assets
and liabilities.  Temporary differences occur because the
income tax law either requires or permits certain items to
be reported on CILCO's income tax return in a different
year than they are reported in the financial statements.
CILCO has recorded a regulatory asset and liability to
account for the effect of expected future regulatory
actions related to unamortized investment tax credits,
income tax liabilities initially recorded at tax rates in
excess of current rates, the equity component of Allowance
for Funds Used During Construction and other items for
which deferred taxes had not previously been provided.
The temporary differences related to the consolidated
deferred income tax asset and liability at December 31,
1996, December 31, 1995 and December 31, 1994, were as
follows:
<TABLE>
<CAPTION>

December 31                             1996          1995        1994
                                                (In thousands)
<S>                                   <C>            <C>         <C>
Deferred tax assets:
   Regulatory tax liabilities         $ 68,565       $ 62,714    $ 61,742
   Other                                14,967         13,086      11,560
                                      --------       --------     --------
Total deferred tax assets               83,532         75,800      73,302
                                      --------       --------     --------
                                                       
Deferred tax liabilities:                              
   Property, including allowance                                
      for funds used during 
      construction                     211,517        213,187      212,308
   Regulatory tax assets                 4,777          3,232        1,745
   Other                                 2,489          3,759       11,105
                                      --------       --------     --------
Total deferred tax liabilities         218,783        220,178      225,158
                                      --------       --------      --------
Net accumulated deferred                               
   income tax liability               $135,251       $144,378     $151,856
                                      ========       ========     ========
</TABLE>

The following table reconciles the change in the
accumulated deferred income tax liability to the deferred
income tax expense included in the income statement for
the period:
<TABLE>
<CAPTION>

December 31                             1996          1995
                                           (In thousands)
<S>                                   <C>            <C>
Net change in deferred                   
  income tax liability                $ (9,127)      $ (7,478)
Change in tax effects of                 
  income tax related regulatory                                  
  assets and liabilities                 4,306           (515)
Equity adjustment related to             
  early retirement programs                  3            233
                                       --------      --------
Deferred income tax benefit              
  for this period                     $ (4,818)      $ (7,760)
                                      =========      =========
</TABLE>

Income tax expenses were as follows:
<TABLE>
<CAPTION>
Years Ended December 31             1996          1995          1994
                                            (In thousands)
<S>                               <C>             <C>          <C>
Current income taxes
Federal                           $27,260         $26,712      $18,912
State                               5,504           5,780        4,165
                                  -------         -------      -------
  Total operating current                               
    taxes                          32,764          32,492       23,077
                                  -------         -------      -------
Deferred operating                               
income  taxes, net
Depreciation and                                 
  amortization                     (3,937)         (3,642)      (1,905)
Repair allowance                     (197)          1,917          648
Borrowed component of AFUDC           136             396         (249)
Capitalized overhead costs           (750)           (893)        (794)
Removal costs                       4,832           2,130        2,176
Gas take-or-pay settlements          (706)           (751)      (1,244)
Gas storage field                     405             861          408
Taxable salvage                       351             654        1,229
Environmental remediation                                    
  costs                              (642)            642          253
Pension expense                    (1,726)         (6,673)        (145)
Other                              (2,298)         (2,173)        (273)
                                   -------         -------      -------
   Total operating deferred                              
     income taxes, net             (4,532)         (7,532)         104
                                   -------         -------      -------
Investment tax credit                            
  amortization                     (1,684)         (1,693)      (1,693)
                                   -------         -------      -------
   Total operating                               
      income taxes                 26,548          23,267       21,488
                                  --------         -------      -------

Income tax reduction                             
for disallowed plant costs            156             168       (2,982)
Other net                          (2,622)           (902)      (1,339)
                                  --------         -------      -------
   Total income taxes             $24,082         $22,533      $17,167
                                  =======         =======      =======
<FN>
Total deferred income taxes, net, includes deferred state
income taxes of $(113,000), $533,000 and $752,000 for
1996, 1995 and 1994, respectively.
</TABLE>
The following table represents a reconciliation of the
effective tax rate with the statutory federal income tax
rate.
<TABLE>
<CAPTION>
                                           1996        1995     1994
<S>                                       <C>         <C>       <C>
Statutory federal income tax rate         35.0%       35.0%     35.0%
                                          =====       =====     =====
Equity component of AFUDC not                             
  subject to taxation                      --          (.1)      (.4)
Depreciation differences for which                        
  deferred taxes have not been provided   (2.2)       (2.0)     (1.4)
Amortization of investment tax credit     (2.6)       (2.7)     (3.6)
CILCO-owned life insurance                (1.1)       (1.0)     (1.0) 
State income taxes                         5.0         5.8       6.0    
Civil fine                                 --           --        .7
Preferred dividends and other                             
permanent differences                      2.0         2.0       2.4
Other differences                           .5         (.4)      (.9)
                                         -----       -----      ----
   Total                                   1.6         1.6       1.8    
                                         -----       -----      ----
Effective income tax rate                 36.6%       36.6%     36.8%
                                         -----       -----      ----
</TABLE>

NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS

POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE

CILCO has recorded a liability of approximately $1.4 million
and $.9 million at December 31, 1996 and 1995, respectively,
for benefits other than pensions or health care provided to
former or inactive employees.

PENSION BENEFITS

Substantially all of CILCO's full-time employees, including
those assigned to the Holding Company, are covered by
trusteed, non-contributory defined benefit pension plans.
Benefits under these qualified plans reflect the employee's
years of service, age at retirement and maximum total
compensation for any consecutive sixty-month period prior to
retirement.  CILCO also has an unfunded nonqualified plan for
certain employees.

Pension costs for the past three years were charged as
follows:
<TABLE>
<CAPTION>
                                          1996         1995       1994
                                                  (In thousands)
<S>                                      <C>          <C>        <C>
Operating expenses                       $ 9,700      $15,528    $2,637
Utility plant and other                      922          994     1,017
                                         -------       ------     ------
  Net pension costs                      $10,622      $16,522    $3,654
                                         =======      =======    =======
</TABLE>

Provisions for pension expense reflect the use of the
projected unit credit actuarial cost method.  At December
31, 1996 and 1995, CILCO recognized an additional minimum
liability on the Balance Sheets for the plan in which the
accumulated benefit obligation exceeds the fair value of
plan assets.

The components of net periodic pension costs follow:
<TABLE>
<CAPTION>
                                                    1996             1995
                                                        (In thousands)
<S>                                              <C>             <C>
                                                      
Cost of pension benefits earned by employees     $  4,998        $  4,654
Interest cost on projected benefit obligation      16,666          15,188
Actual return on plan assets                      (34,173)        (50,816)
Net amortization and deferral                      15,213          34,437
Special termination benefits                        7,918          13,059
                                                 --------        --------
Net pension costs                                $ 10,622        $ 16,522
                                                 ========        ========
</TABLE>

During 1996 and 1995, CILCO recognized $7.9 million and
$13.1 million, respectively, of net pension costs 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."  These amounts represented the costs
associated with additional benefits extended in connection
with voluntary early retirement programs.

Information on the funded status of plans in which assets
exceed accumulated benefits follows:
<TABLE>
<CAPTION>

Actuarial present value of benefit obligation:         1996          1995
                                                         (In  thousands)
<S>                                                 <C>             <C>
Vested benefits - employees' rights to receive               
     benefits no longer contingent upon   
     continued employment                           $(191,301)      $(171,422) 
   Non-vested benefits - employees' rights to                   
     receive benefits contingent upon      
     continued employment                             (11,293)        (15,266) 
                                                     --------        --------
   Accumulated benefit obligation                    (202,594)       (186,688)
Provision for future pay increases                    (30,224)        (47,058)
                                                     --------        --------
Projected benefit obligation                         (232,818)       (233,746)
Pension assets at fair market value                   254,824         232,560
                                                     --------        --------
Projected benefit obligation (greater)                
less than plan assets                                  22,006          (1,186)
Unrecognized transition asset                          (5,787)         (6,675)
Unrecognized prior service cost                         8,006           9,034
Unrecognized net gain                                 (33,488)         (3,338)
                                                      -------         --------
   Pension liability recorded on Balance Sheets      $ (9,263)       $ (2,165)
                                                     ========        ========
</TABLE>

Information on the funded status of the plan in which
accumulated benefits exceed assets follows:
<TABLE>
<CAPTION>

Actuarial present value of benefit obligation:         1996            1995
                                                           (In thousands)
<S>                                                 <C>             <C>
Vested benefits - employees' rights to                
   receive benefits no longer contingent                                               
   upon continued employment                        $ (1,938)       $ (1,792)
 Non-vested benefits - employees' rights to                  
   receive benefits contingent upon continued                                             
   employment                                           (169)           (132)
                                                     --------        --------
   Accumulated benefit obligation                     (2,107)         (1,924)
Provision for future pay increases                      (515)           (765)
                                                     --------        --------
Projected benefit obligation                          (2,622)         (2,689)
Pension assets at fair market value                      --              --
                                                     --------        --------
Projected benefit obligation greater than             
  plan assets                                         (2,622)         (2,689)
Unrecognized prior service cost                          495             536
Unrecognized net loss                                  1,111           1,352
Additional minimum liability                          (1,091)         (1,123)
                                                     --------        --------
   Pension liability recorded on Balance Sheets     $ (2,107)       $ (1,924)
                                                    =========       =========
</TABLE>

<TABLE>
<CAPTION>
Significant assumptions used for calculations:        1996      1995
<S>                                                 <C>       <C>
Discount rate                                       7.75%     7.25%
Expected rate of salary increase                    4.50%     4.50%
Expected long-term rate of return                   8.50%     8.50%
</TABLE>

POSTRETIREMENT HEALTH CARE BENEFITS

Provisions for postretirement benefits expenses are
determined under the accrual method of accounting.

Substantially all of CILCO's full-time employees,
including those assigned to the Holding Company, are
currently covered by a trusteed, non-contributory defined
benefit postretirement health care plan.  The plan pays
stated percentages of most necessary medical expenses
incurred by retirees, after subtracting payments by
Medicare or other providers and after a stated deductible
has been met.  Participants become eligible for the
benefits if they retire from CILCO after reaching age 55
with 10 or more years of service.

Postretirement health care benefit costs were charged as
follows:
<TABLE>
<CAPTION>

                                            1996      1995       1994
(In thousands)
<S>                                        <C>        <C>        <C>
Operating expenses                         $5,096     $5,108     $5,253
Utility plant and other                     1,883      1,882      1,913
                                           ------     ------     ------
  Net postretirement health                                 
    care benefit costs                     $6,979     $6,990     $7,166
                                           ======     ======     ======
</TABLE>

Information on the plans' funded status follows:
<TABLE>
<CAPTION>

                                                 1996           1995
                                                   (In thousands)
<S>                                            <C>            <C>
Components of net postretirement health care
  benefit costs:
     Service cost - benefits attributed                  
       to service during the period             $ 1,429        $ 1,302
     Actual return on plan assets                (4,290)        (5,936)
     Interest cost on accumulated              
       postretirement health care              
       benefit obligation                         4,545          4,795
     Amortization of transition                
       obligation over 18.6 years                 2,858          2,858
     Other net amortization and                
       deferral                                   1,441          3,971
     Special termination benefits                   996            --
                                                -------        -------
     Net postretirement health                 
       care benefit costs                       $ 6,979        $ 6,990
                                                =======        =======
  Actuarial present value of                   
    accumulated postretirement
  health care benefit obligation:
     Retirees                                  $(41,287)      $(36,646)
     Other fully eligible participants           (3,904)       (12,668)
     Other active participants                  (18,079)       (22,003)
                                                -------        -------
     Accumulated postretirement                
       health care benefit obligation           (63,270)       (71,317)
  Plan assets at fair value                      39,601         33,157
                                                -------        -------
  Accumulated health care benefit              
    obligation greater than plan assets         (23,669)       (38,160)
     Unrecognized actuarial gain                (13,447)          (814)
     Unrecognized transition obligation          36,013         38,871
                                                -------         -------
  Postretirement health care benefit                  
     liability recorded on Balance Sheets      $ (1,103)       $  (103)
                                                =======         =======
</TABLE>

For measurement purposes, the annual health care cost
trend rate averaged 7.2% for 1996; the rate was assumed to
decrease gradually to 5.7% for 2025 and remain at that
level thereafter.

Increasing the assumed health care cost trend rate by 1%
in each year would increase the accumulated postretirement
benefit obligation at December 31, 1996, by $2.4 million
and the aggregate of the service and interest cost
components of net postretirement health care cost for 1996
by $211,000.  The discount rate used in determining the
accumulated postretirement benefit obligation at December
31, 1996, was 7.75% and at December 31, 1995, was 7.25%.
The weighted average expected return on assets net of
taxes was 8.1%, where taxes are assumed to decrease return
by 0.4%.

NOTE 4 - SHORT-TERM DEBT

CILCO had arrangements for bank lines of credit totaling
$20.0 million at December 31, 1996, all of which were
unused.  These lines of credit were maintained by
commitment fees of 1/20 of 1% per annum in lieu of
balances.  These bank lines of credit support CILCO's
issuance of commercial paper.  Short-term borrowings
consisted of commercial paper totaling $9.9 million and
$24.6 million at December 31, 1996 and 1995, respectively.

NOTE 5 - RETAINED EARNINGS

CILCO's Articles of Incorporation provide that no
dividends shall be paid on the common stock if, at the
time of declaration, the balance of retained earnings does
not equal at least two times the annual dividend
requirement on all outstanding shares of preferred stock.
The amount of retained earnings so required at December
31, 1996, was $6.3 million.

NOTE 6 - PREFERRED STOCK
<TABLE>
<CAPTION>
At December 31                                     1996            1995
                                                     (In thousands)
<S>                                                <C>            <C>
Preferred stock, cumulative
$100 par value, authorized 1,500,000 shares
   Without mandatory redemption                                      
   4.50% series - 111,264 shares                   $11,126        $11,126
   4.64% series - 79,940 shares                      7,994          7,994
Class A, no par value, authorized                                   
  3,500,000 shares                                        
   Flexible auction rate -       
    250,000 shares(a)                               25,000         25,000
   With mandatory redemption                              
   5.85% series - 220,000                           22,000         22,000
                                                   -------        -------
        Total preferred stock                      $66,120        $66,120
                                                   =======        =======
<FN>
(a)  Dividend rates at December 31, 1996 and 1995, were
3.936% and 4.400%, respectively.
</TABLE>
All classes of preferred stock are entitled to receive
cumulative dividends and rank equally as to dividends and
assets, according to their respective terms.

The total annual dividend requirement for preferred stock
outstanding at December 31, 1996, is $3.1 million, assuming a
continuation of the auction dividend rate at December 31,
1996, for the flexible auction rate series.

PREFERRED STOCK WITHOUT MANDATORY REDEMPTION

The call provisions of preferred stock redeemable at CILCO's
option outstanding at December 31, 1996, are as follows:
<TABLE>
<CAPTION>

Series      Callable Price Per Share (plus accrued dividends)
<S>                                 <C>
4.50%                               $110
4.64%                               $102
Flexible auction rate               $100
</TABLE>

PREFERRED STOCK WITH MANDATORY REDEMPTION

CILCO's 5.85% Class A preferred stock may be redeemed in 2003
at $100 per share.  A mandatory redemption fund must be
established on July 1, 2003.  The fund will provide for the
redemption of 11,000 shares for $1.1 million on July 1 of
each year through July 1, 2007.  On July 1, 2008, the
remaining 165,000 shares will be retired for $16.5 million.

PREFERENCE STOCK, CUMULATIVE

No Par Value, Authorized 2,000,000 shares, of which none have
been issued.

NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>

At December 31                                      1996        1995
                                                    (In thousands)
<S>                                             <C>          <C>
First Mortgage Bonds
   5 1/2% series due 1997                       $     --     $ 20,000
   7 1/2% series due 2007                         50,000       50,000
   8 1/5% series due 2022                         65,000       65,000
Medium-Term Notes                                          
   5.7% series due 1998                           10,650       10,650
   6.4% series due 2000                           30,000       30,000
   6.82% series due 2003                          25,350       25,350
   6.13% series due 2005                          16,000       16,000
   7.8% series due 2023                           10,000       10,000
   7.73% series due 2025                          20,000       20,000
Pollution Control Refunding Bonds                          
   6.5% series F due 2010                          5,000        5,000
   6.2% series G due 2012                          1,000        1,000
   6.5% series E due 2018                         14,200       14,200
   5.9% series H due 2023                         32,000       32,000
                                                --------     --------
                                                 279,200      299,200
Unamortized premium and discount                           
on   long-term debt, net                            (761)        (803)
                                                --------     --------
     Total CILCO long-term debt                 $278,439     $298,397
                                                ========     ========
</TABLE>

CILCO's first mortgage bonds are secured by a lien on
substantially all of its property and franchises.
Unamortized borrowing expense, premium and discount on
outstanding long-term debt are being amortized over the
lives of the respective issues.

Scheduled maturities of long-term debt for 1998 and 2000
are $10.6 million and $30 million, respectively.  There
are no scheduled maturities of long-term debt for 1999 or
2001.  The 1997 maturities of long-term borrowings have
been classified as current liabilities.

NOTE 8 - COMMITMENTS & CONTINGENCIES

CILCO's 1997 capital expenditures for utility plant are
estimated to be $53.2 million, in connection with which
CILCO has normal and customary purchase commitments at
December 31, 1996.

CILCO's policy is to act as a self-insurer for certain
insurable risks resulting from employee health and life
insurance programs.

In August 1990, CILCO entered into a firm, wholesale power
purchase agreement with Central Illinois Public Service
Company (CIPS).  This agreement provides for a minimum
contract delivery rate from CIPS of 80 megawatts (MW) of
capacity through May 1997, then increasing to 90 MW until
the contract expires in 1998.

In March 1995, CILCO and CIPS renegotiated a limited-term
power agreement reached in November 1992.  This agreement,
which now expires in May 2009, provides for CILCO to
purchase 150 MW of CIPS' capacity from June 1998 through May
2002, and 50 MW from June 2002 through May 2009.  This
renegotiated agreement was subject to the ICC's final
approval of CILCO's 1995 electric least cost energy plan,
which was granted on May 8, 1996.

For a discussion of former gas manufacturing sites, refer
to the caption "Environmental Matters" of Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 21 of
CILCORP's 1996 Annual Report which is incorporated herein
by reference.

NOTE 9 - RATE MATTERS

In December 1994, the Illinois Commerce Commission (ICC)
issued a rate order designed to grant CILCO a $10.6
million, or 6.7% annual increase in gas base rate
revenues.  The new rates, designed to yield an 11.82%
return on common equity and a 9.24% return on rate base,
were effective in December 1994.

In mid-1992, after a significant number of leaks were
detected in CILCO's Springfield cast iron gas distribution
system, CILCO began a detailed examination of its
Springfield gas distribution system and related operating
practices and procedures.  CILCO thereafter began an
aggressive program to renew its Springfield gas cast iron
main system.  This project was completed in November 1995.

As a part of the 1994 rate order, the ICC disallowed
approximately $7.5 million of CILCO's $24 million
investment in the Springfield cast iron main renewal
project.  To reflect the disallowance, CILCO recorded a
pre-tax charge of approximately $7.5 million ($4.5 million
after-tax) against 1994 earnings.

In September 1994, CILCO entered into a federal court
civil consent decree with the U.S. Department of Justice
(DOJ) which concluded investigations by the DOJ and U.S.
Department of Transportation (DOT) of CILCO's Springfield
gas operations.  As a part of the settlement with the DOJ,
CILCO accepted adjustments recommended by the ICC staff
which resulted in a net disallowance from CILCO's gas rate
base of approximately $4.5 million of the cost of the
Springfield cast iron main renewal project.  This charge
is part of the $7.5 million disallowance included in the
December 1994 rate order.  In addition to the rate base
disallowance, CILCO agreed to pay an $844,000 civil fine
to the United States and agreed to reimburse the ICC, the
DOT and the DOJ $156,000 for the costs of their
investigations.  CILCO also agreed to underwrite the
reasonable expense of an outside expert, selected by the
ICC, to examine CILCO's gas operations manuals and systems
to ensure they are in compliance with all applicable
statutes and regulations.  The audit was completed in
October 1995 at a total cost of $356,000.

NOTE 10 - LEASES

CILCO leases certain equipment, buildings and other
facilities under capital and operating leases.  Minimum
future rental payments under non-cancelable capital and
operating leases having remaining terms in excess of one
year as of December 31, 1996, are $16.2 million in total.
Payments due during the years ending December 31, 1997,
through December 31, 2001, are $4.6 million, $4.4 million,
$3.2 million, $1.7 million and $1.1 million, respectively.

NOTE 11 - DISCLOSURES ABOUT DERIVATIVE FINANCIAL
INSTRUMENTS

During 1996 and 1995, CILCO utilized NYMEX (New York
Mercantile Exchange) futures contracts to hedge
approximately 19% and 3%, respectively, of owned natural
gas storage.  The purpose of the program is to provide a
higher level of natural gas price stability for CILCO's
natural gas customers and reduce the cost of natural gas
injected into CILCO-owned storage fields.  The program
includes investments in derivative financial instruments
such as futures, options and swap agreements.  CILCO does
not trade these financial instruments and accounts for
them as hedges under SFAS No. 80, "Accounting for Futures
Contracts."  Any gains or losses from these financial
instruments are reflected as adjustments to Gas in
Underground Storage on the balance sheets.  As natural gas
is withdrawn from storage, gains or losses are passed to
customers through the purchased gas adjustment clause,
which is included in Gas Purchased for Resale on the
income statement.

NOTE 12 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly operating results are unaudited,
but, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for a
fair presentation of CILCO's operating results for the
periods indicated.  The results of operations for each of
the fiscal quarters are not necessarily comparable to, or
indicative of, the results of an entire year due to the
seasonal nature of CILCO's business.
<TABLE>
<CAPTION>

For the Three Months Ended  March 31      June 30   September 30     December 31
                                            (In thousands)
<S>                         <C>         <C>         <C>             <C>
1996                                                            
Operating revenue           $154,731    $108,434    $114,864        $140,526
Operating income              20,192      12,188      22,489          14,809
Net income                    13,918       6,310      16,234           8,666

1995
Operating revenue           $133,227    $100,512    $122,035        $121,970
Operating income              17,883      13,019      26,127           6,519
Net income                    12,082       7,074      20,106           3,136
</TABLE>


Item 9.  Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

                          CILCORP

Not applicable.
                           CILCO

Not applicable.

                          PART III

Item 10.  Directors and Executive Officers of the Registrant

                          CILCORP

The information required by Item 10 relating to directors is
set forth in the Company's definitive proxy statement for
its 1997 Annual Meeting of Stockholders filed with the
Commission pursuant to Regulation 14A.  Such information is
incorporated herein by reference to the material appearing
under the caption "Election of Directors" of such proxy
statement.  Information required by Item 10 relating to
executive officers of the Company is set forth under a
separate caption in Part I hereof.

                           CILCO

The information required by Item 10 relating to directors is
set forth in CILCO's definitive proxy statement for its 1997
Annual Meeting of Stockholders filed with the Commission
pursuant to Regulation 14A.  Such information is
incorporated herein by reference to the material appearing
under the caption "Election of Directors" of such proxy
statement.  Information required by Item 10 relating to
executive officers of CILCO is set forth under a separate
caption in Part I hereof.

Item 11.  Executive Compensation

                           CILCORP

The Company has filed with the Commission a definitive proxy
statement pursuant to Regulation 14A.  The information
required by Item 11 is incorporated herein by reference to
the material appearing under the caption "Executive
Compensation" of such proxy statement.

                            CILCO

CILCO has filed with the Commission a definitive proxy
statement pursuant to Regulation 14A.  The information
required by Item 11 is incorporated herein by reference to
the material appearing under the caption "Executive
Compensation" of such proxy statement.

Item 12.  Security Ownership of Certain Beneficial Owners
and Management
                           CILCORP

The Company has filed with the Commission a definitive proxy
statement pursuant to Regulation 14A.  The information
required by Item 12 is incorporated herein by reference to
the material appearing under the caption "Voting Securities
and Principal Holders" of such proxy statement.
                              
                            CILCO

CILCO has filed with the Commission a definitive proxy
statement pursuant to Regulation 14A.  The information
required by Item 12 is incorporated herein by reference to
the material appearing under the caption "Voting Securities
and Principal Holders" of such proxy statement.

Item 13.  Certain Relationships and Related Transactions

                           CILCORP

CILCORP Inc. (CILCORP or Company), a holding company, is the
parent of its direct subsidiaries Central Illinois Light
Company (CILCO), CILCORP Investment Management Inc. (CIM),
CILCORP Ventures Inc. (CVI), and QST Enterprises Inc. (QST).
Formerly a CILCORP first-tier subsidiary, Environmental
Science & Engineering, Inc. (ESE) became a subsidiary of QST
effective October 29, 1996.  In the course of business, the
Company carries on certain relations with affiliated
companies such as shared facilities, utilization of
employees and other business transactions.  Central Illinois
Light Company is reimbursed at cost by the Company and the
other subsidiaries for any services it provides.

ESE and the Holding Company entered into an agreement to
consolidate ESE's outstanding debt.  Under this agreement,
ESE can draw on a $15 million revolving line of credit which
expires May 2, 1998.  At December 31, 1996, ESE had no
borrowings from CILCORP under this agreement.  ESE also
borrowed $20 million from the Holding Company on a term
credit basis with the principal due May 2, 1998.

At December 31, 1996, CILCORP guaranteed $3 million of
outstanding debt of CILCORP Lease Management Inc.  CILCORP
receives a fee for the guarantee.

CIM has guaranteed the performance of CIM Leasing Inc. and
CIM Air Leasing Inc. with respect to certain obligations
arising from the leveraged lease investments held by these
subsidiaries.

CILCORP has been authorized by the Board of Directors to
guarantee up to $10 million of obligations incurred by QST
Enterprises Inc. (QST).  In turn, QST has been authorized to
guarantee up to $10 million of obligations incurred by its
subsidiary, QST Energy Inc., and its subsidiary QST Energy
Trading Inc.  Through February 28, 1997, CILCORP has
guaranteed $3.9 million of QST obligations, and QST has
guaranteed $2.5 million of QST Trading Inc. obligations.
                              
                            CILCO

One member of the Board of Directors of CILCORP Inc. is also
a member of the Board of Directors of CILCO.  The Chairman
and Chief Executive Officer of CILCO is also the President
and Chief Executive Officer of CILCORP and the secretary of
CILCO is also Vice President, General Counsel and Secretary
of CILCORP Inc.


                          PART IV

Item 14.  Exhibits, Financial Statement Schedules, and
Reports on Form 8-K

                          CILCORP
                                                     Page in
                                                  Annual Report to
                                                  Stockholders
(a)  1. Financial Statements

       The following statements are included in
       Exhibit 13 of this filing and are incorporated
       herein by reference from CILCORP Inc.'s 1996
       Annual Report:

       Management's Report                             28

       Report of Independent Public Accountants        28

       Consolidated Statements of Income for the three
         years ended December 31, 1996                 29

       Consolidated Balance Sheets as of
         December 31, 1996, and December 31, 1995    30-31

       Consolidated Statements of Segments of Business for
         the three years ended December 31, 1996     32-33

       Consolidated Statements of Cash Flows for the three
         years ended December 31, 1996                 34

       Consolidated Statements of Common Stockholders'
         Equity for the three years ended
         December 31, 1996                             35

       Notes to the Consolidated Financial Statements 36-44

(a) 2. Financial Statement Schedules

       The following schedules are included herein:
                                                    Page No.
                                                   Form 10-K
                                                   ---------
       Schedule II - Valuation and Qualifying Accounts
                       and Reserves                    69

       Schedule XIII -Investment in Leveraged Leases at
                       December 31, 1996               71

       Other schedules are omitted because of the absence of
       conditions under which they are required or because the
       required information is given in the financial statements or
       notes thereto.

(a) 3.   Exhibits

  *(3)   Articles of Incorporation (Designated in Form 10-K
         for the year ended December 31, 1991, File No. 1-8946, as Exhibit 3)).

  *(3)a  By-laws as amended effective April 25, 1995. [Designated in Form 10-K
         for the year ended December 31, 1995, File No. 1-8946,
         as Exhibit (3)a]

***(4)  Instruments defining the rights of security holders,
        including indentures

 *(10)  CILCO Executive Deferral Plan.  As amended through
        January 29, 1996.  (Designated in Form 10-K for the year ended
        December 31, 1995, File No. 1-8946, as Exhibit (10)).

 *(10)a CILCO Executive Deferral Plan II.  As amended
        January 29, 1996 (Designated in Form 10-K for the year ended
        December 31, 1995, File No. 1-8946, as Exhibit (10)a).

*(10)b CILCORP Economic Value Added Incentive Compensation
       Plan (Adopted February 29, 1989 & Revised January 29, 1991 and January
       30, 1996.)  [Designated in Form 10-K for the year ended
       December 31, 1995.  File No. 1-8946, as Exhibit 10(b)]

*(10)c CILCORP Compensation Protection Plan. (Adopted June
       28, 1994.) [Designated in Form 10-K for the year ended
       December 31, 1994, File No. 1-8946, as Exhibit 10(c)]

*(10)d CILCO Benefit Replacement Plan (Designated in Form 10-K
       for the year ended December 31, 1991, File No. 1-8946, as Exhibit
       (10)e).

*(10)e CILCORP Deferred Compensation Stock Plan (Designated
       in Form 10-K for the   year ended December 31, 1991,
       File No. 1-8946, as Exhibit (10)f).

 (10)f CILCORP Shareholder Return Incentive Compensation
       Plan (as amended effective January 28, 1997).

 (12)  Computation of Ratio of Earnings to Combined Fixed
       Charges and Preferred Stock Dividends
                                                   Page No.
                                                  Form 10-K
                                                  ----------
 (13)   Annual Report to Security Holders              76

 (24)   Consent of Arthur Andersen LLP                 77

 (25)   Power of Attorney

 (27)   CILCORP Inc. Consolidated Financial Data Schedule

(b) 3.   Reports on Form 8-K

          A Form 8-K was filed on October 29, 1996 to
          disclose the authorization and declaration of a
          dividend distribution of one right for each
          outstanding share of common stock, subject to the
          terms and conditions of a certain Rights Agreement
          dated October 29, 1996.

          A Form 8-K was filed on November 25, 1996 to disclose
          the announcement by CILCO of a voluntary early
          retirement incentive plan.
* These exhibits have been previously filed with the
Securities and Exchange Commission (SEC) as exhibits to registration
statements or to other filings of CILCORP or CILCO with the
SEC and are  incorporated herein as exhibits by reference.
The file number and exhibit number of each such
exhibit (where applicable) are stated in the description
of such exhibit.

***Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of
Regulation S-K, the Company has not filed as an exhibit to
this Form 10-K any instrument with respect to long-term debt
as the total amount of securities authorized thereunder does
not exceed 10 percent of the total assets of the Company and
its subsidiaries on a consolidated basis, but hereby
agrees to furnish to the SEC on request any such
instruments.
                            CILCO

                                                        Page No.
                                                       Form 10-K
                                                      ----------
(a)  1.   Financial Statements
          The following are included herein:

          Management's Report                              36

          Report of Independent Public Accountants         37

          Consolidated Statements of Income for the three
           years ended December 31, 1996                   38

          Consolidated Balance Sheets as of December 31,
           1996 and December 31, 1995                     39-40

          Consolidated Statements of Cash Flows for the
           three years ended December 31, 1996            41-42

          Consolidated Statements of Segments of Business
           for the three years ended December 31, 1996    43-44

          Consolidated Statements of Retained Earnings for
           the three years ended December 31, 1996         45

          Notes to the Consolidated Financial Statements  46-60

(a)  2.   Financial Statement Schedules
          The following schedule is included herein:

          Schedule II - Valuation and Qualifying Accounts
                         and Reserves for the three years
                         ended December 31, 1996           70

Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements or
notes thereto.

(a)3.     Exhibits

 *(3)     Articles of Incorporation. As amended July 26, 1993.

  (3)a    Bylaws.  As amended effective April 23, 1996.

 *(4)     Indenture of Mortgage and Deed of Trust between Illinois Power
          Company and Bankers Trust Company, as Trustee, dated as of
          April 1, 1933, Supplemental Indenture between the same parties
          dated as of June 30, 1933, Supplemental Indenture
          between the Company and Bankers Trust Company, as
          Trustee, dated as of July 1, 1933 and Supplemental
          Indenture between the same parties dated as of
          January 1, 1935, securing First Mortgage Bonds, and
          indentures supplemental to the foregoing through
          November 1, 1994.  (Designated in Registration No.
          2-1937 as Exhibit B-1, in Registration No. 2-2093
          as Exhibit B-1(a), in Form 8-K for April 1940, File
          No. 1-2732-2, as Exhibit A, in Form 8-K for
          December 1949, File No. 1-2732-2, as Exhibit A, in
          Form 8-K for December 1951, File No. 1-2732, as
          Exhibit A, in Form 8-K for July 1957, File No. 1-
          2732, as Exhibit A, in Form 8-K for July 1958, File
          No. 1-2732, as Exhibit A, in Form 8-K for March
          1960, File No. 1-2732, as Exhibit A, in Form 8-K
          for September 1961, File No. 1-2732, as Exhibit B,
          in Form 8-K for March 1963, File No. 1-2732, as
          Exhibit A, in Form 8-K for February 1966, File No.
          1-2732, as Exhibit A, in Form 8-K for March 1967,
          File No. 1-2732, as Exhibit A, in Form 8-K for
          August 1970, File No. 1-2732, as Exhibit A, in Form
          8-K for September 1971, File No. 1-2732, as Exhibit
          A, in Form 8-K for September 1972, File No. 1-2732,
          as Exhibit A, in Form 8-K for April 1974, File No.
          1-2732, as Exhibit 2(b), in Form 8-K for June 1974,
          File No. 1-2732, as Exhibit A, in Form 8-K for
          March 1975, File No. 1-2732, as Exhibit A, in Form
          8-K for May 1976, File No. 1-2732, as Exhibit A, in
          Form 10-Q for the quarter ended June 30, 1978, File
          No. 1-2732, as Exhibit 2, in Form 10-K for the year
          ended December 31, 1982, File No. 1-2732, as
          Exhibit (4)(b), in Form 8-K dated January 30, 1992,
          File No. 1-2732, as Exhibit (4) in Form 8-K dated
          January 29, 1993, File No. 1-2732, as Exhibit (4)
          and in Form 8-K dated December 2, 1994, File No. 1-
          2732, as Exhibit (4).)

 *(4)a    Supplemental Indenture dated November 1, 1994.
          (Designated in Form 8-K dated November 1,
          1994, File No. 1-2732, as Exhibit (4).)

 *(10)    CILCO Executive Deferral Plan.  As
          amended January 29, 1996.  (Designated in Form 10-K
          for the year ended December 31, 1995, File No. 1-
          2732, as Exhibit (10).)

 *(10)a   CILCO Executive Deferral Plan II.  As amended January 29, 1996.
          (Designated in Form 10-K for the year ended December 31, 1995,
          File No. 1-2732, as Exhibit (10)a.)

 *(10)b   CILCO Compensation Protection Plan.
          (Designated in Form 10-K for the year ended December 31, 1990,
          File No. 1-2732, as Exhibit (10)c.)

 *(10)c   CILCO Deferred Compensation Stock Plan.  (Designated in Form 10-K
          for the year ended December 31, 1990, File No. 1-2732, as Exhibit
          (10)d.)

 *(10)d   CILCO Economic Value Added Incentive Compensation Plan
          (adopted January 29, 1991 and revised January 29, 1996).
          (Designated in Form 10-K for the year ended December 31, 1995,
          File No. 1-2732, as Exhibit (10)d.)

 *(10)e   Benefit Replacement Plan. (Designated in Form 10-K for the year
          ended December 31, 1991, File No. 1-2732, as Exhibit (10)f.)

  (10)f   Shareholder Return Incentive Compensation Plan (as amended
          effective January 28, 1997)

  (12)    Computation of Ratio of Earnings to Fixed Charges

  (27)    Central Illinois Light Company Financial Data Schedule

(b) 3.
          Reports on Form 8-K

          A Form 8-K was filed on November 25, 1996 to disclose
          the announcement of a voluntary early retirement incentive plan.














*These exhibits have been previously filed with the
Securities and Exchange Commission (SEC) as exhibits to
registration statements or to other filings of CILCO with
the SEC and are incorporated herein as exhibits by
reference.  The file number and exhibit number of each such
exhibit (where applicable) are stated in the description of
such exhibit.
<PAGE>
<TABLE>
SCHEDULE II
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1996, 1995 and 1994
(Thousands of dollars)
<CAPTION>
Column A                         Column B      Column C        Column D    Column E
                                               Additions
                                Balance at   Charged   Charged              Balance at
                                Beginning       to     to Other             End of
      Description               of Period     Income   Accounts Deductions  Period
<S>                             <C>         <C>         <C>    <C>         <C>
Year ended December 31, 1996                                          
  Accumulated Provisions                                           
     Deducted from Assets -
     Doubtful Accounts          $2,223      $3,464       --     $3,087     $2,600
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                             
     Injuries and Damages        2,550       1,328       --      2,497      1,381
                                                                   
Year ended December 31, 1995                                            
  Accumulated Provisions                                           
     Deducted from Assets -                                           
     Doubtful Accounts          $2,291      $2,216       --     $2,284     $2,223
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                             
     Injuries and Damages        2,600       1,279       --      1,329      2,550 
                                                                   
Year ended December 31, 1994                                            
  Accumulated Provisions                                           
     Deducted from Assets -                                           
     Doubtful Accounts          $2,255      $2,617       --     $2,581     $2,291
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                            
     Injuries and Damages        2,321       1,027       --        748      2,600
                                                                   
</TABLE>


<PAGE>
<TABLE>

SCHEDULE II
               CENTRAL ILLINOIS LIGHT COMPANY
       Valuation and Qualifying Accounts and Reserves
        Years Ended December 31, 1996, 1995 and 1994
                   (Thousands of dollars)
<CAPTION>
Column A                         Column B      Column C         Column D    Column E
                                               Additions
                                Balance at  Charged    Charged              Balance at
                                Beginning     to     to Other                End of
      Description               of Period   Income   Accounts  Deductions  Period
<S>                               <C>        <C>       <C>     <C>         <C>
Year ended December 31, 1996                                           
  Accumulated Provisions                                           
     Deducted from Assets -                                          
     Doubtful Accounts            $  650     $2,832    --       $2,482     $1,000
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                            
     Injuries and Damages          2,550      1,328    --        2,497      1,381
                                                                   
Year ended December 31, 1995                                           
  Accumulated Provisions                                           
     Deducted from Assets -                                         
     Doubtful Accounts            $  600     $1,299    --       $1,249     $  650
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                            
     Injuries and Damages          2,600      1,279    --        1,329      2,550
                                                                   
Year ended December 31, 1994                                           
  Accumulated Provisions                                           
     Deducted from Assets -                                         
     Doubtful Accounts            $  585     $1,494    --       $1,479     $  600
                                                                   
  Accumulated Provisions                                           
     Not Deducted from Assets -                                            
     Injuries and Damages          2,321      1,027    --          748      2,600
                                                                   
</TABLE>
<PAGE>
<TABLE>
SCHEDULE XIII
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
<CAPTION>
Year Ended December 31, 1996
(Thousands of dollars)
                                            Cost        Amount
Leveraged leases                          of each     carried on
                                          lease(A)   BalanceSheet(B)
<S>                                        <C>         <C>
Office buildings                           $23,130     $ 53,308
Warehouses                                  11,746       19,894
Mining equipment                            10,244       17,943
Generating station                          14,957       22,312
Passenger railway equipment                  3,805        5,340
Cargo aircraft                               9,583       14,233
                                           --------    --------
     Totals                                $73,465     $133,030
                                           ========    ========
<FN>
(A)  This value is the original cost of the leveraged lease
     net of original nonrecourse debt.

(B)  The amount carried on the balance sheet includes
     current rents receivable and estimated residual value, net of
     unearned and deferred income and nonrecourse debt.
</TABLE>
<PAGE>
                           SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   CILCORP INC.

March 18, 1997                By
                                   R. O. Viets
                                   President and Chief
                                     Executive Officer

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 registrant and in the capacities
and on the dates indicated.

          Signature                Title                Date

(i) and (ii) Principal executive officer, director and
principal financial officer:



  R. O. Viets                 President, Chief     March 18, 1997
                                Executive Officer
                                and Director

(iii) Controller



  T. D. Hutchinson            Controller           March 18, 1997

 (iv)  A majority of the Directors
     (including the director named above):

M. Alexis*                    Director             March 18, 1997
J. R. Brazil*                 Director             March 18, 1997
W. Bunn III*                  Director             March 18, 1997
J. D. Caulder*                Director             March 18, 1997
H. J. Holland*                Director             March 18, 1997
H. S. Peacock*                Director             March 18, 1997
K. E. Smith*                  Director             March 18, 1997
R. M. Ullman*                 Director             March 18, 1997
M. M. Yeomans*                Director             March 18, 1997


  R. O. Viets                 Director             March 18, 1997

 *By

        R. O. Viets
      Attorney-in-fact
<PAGE>
                         SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                 CENTRAL ILLINOIS LIGHT COMPANY


March 18, 1997                   By
                                       J. F. Vergon
                                       President and Chief
                                        Operating Officer

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 registrant and in the capacities and on the
dates indicated.

          Signature                Title                  Date

(i) Principal executive officer and director:



J. F. Vergon                 President and Chief         March 18, 1997
                               Operating Officer
                               and Director

(ii) Principal financial officer and director:



T. S. Romanowski             Vice President              March 18, 1997

(iii) Controller



T. D. Hutchinson             Controller and              March 18, 1997
                               Manager of Accounting

 (iv)  A majority of the Directors
        (including the directors named above):



T. S. Romanowski              Director                   March 18, 1997



J. F. Vergon                  Director                   March 18, 1997



R. O. Viets                   Director                   March 18, 1997

<PAGE>
<TABLE>
EXHIBIT (12)
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Twelve Months Ended                  1996      1995     1994     1993      1992
                                   (Thousands of Dollars)
<S>                                 <C>       <C>      <C>      <C>        <C>
Earnings, as Defined:                                              
  Net Income                        $27,943   $38,582  $32,586  $33,583    $32,097
  Income Taxes                       14,505    23,274   18,180   18,069     20,810
  Interest                           29,068    29,861   26,341   27,363     29,205
  Interest Portion of Rentals         2,844     1,905    1,864    2,447        415
  Preferred Dividends                 3,188     3,299    2,980    4,043      4,441
                                    -------    ------   ------   ------    -------
     Total Earnings, as Defined     $77,548   $96,921  $81,951  $85,505    $86,968
                                    =======    ======   ======   ======    =======
Fixed Charges, as Defined:                                         
  Interest Expense                  $26,337   $27,512  $24,313  $25,929    $28,275
  Interest Expense on COLI            2,731     2,349    2,028    1,434        930
  Interest Portion of Rentals         2,844     1,905    1,864    2,447        415
  Tax Effected Preferred                                           
     Dividends                        5,284     5,468    4,939    6,701      7,249
                                    -------    ------   ------   ------    -------
  Total Fixed Charges, as                                          
     Defined                        $37,196   $37,234  $33,144  $36,511    $36,869
                                    =======    ======   ======   ======    =======
Ratio of Earnings to Fixed                                         
  Charges                               2.1       2.6      2.5      2.3        2.4
                                        ===       ===      ===      ===        ===
</TABLE>
<PAGE>
<TABLE>

EXHIBIT (12)
               CENTRAL ILLINOIS LIGHT COMPANY
              Computation of Ratio of Earnings
                      to Fixed Charges
<CAPTION>
Twelve Months Ended                1996     1995     1994     1993     1992
                                          (Thousands of Dollars)
<S>                              <C>       <C>      <C>       <C>      <C>
Earnings, as Defined:                                            
 Net Income                      $45,128   $42,398  $32,487   $37,678  $35,636
 Income Taxes                     24,082    22,534   17,168    20,368   17,723
 Fixed Charges, as Below          28,504    27,876   24,693    26,335   25,130
                                  ------    ------   ------    ------   ------
   Total Earnings, as Defined    $97,714   $92,808  $74,348   $84,381  $78,489
                                  ======    ======   ======    ======   ======
Fixed Charges, as Defined:                                       
 Interest on COLI                $ 2,731   $ 2,349  $ 2,028   $ 1,434  $   930
 Interest on Short-term Debt         149       744      292       592      180
 Interest on Long-term Debt       21,012    20,242   19,221    19,753   20,747
 Amortization of Debt Discount                                           
  & Expense, Premium and                                       
  Reacquired Loss                    681       669      665       624      410
 Miscellaneous Interest                                          
    Expense                        2,320     1,967      623     1,485    2,448
 Interest Portion of Rentals       1,611     1,905    1,864     2,447      415
                                  ------    ------   ------    ------    -----
    Total Fixed Charges, as                                         
        Defined                  $28,504   $27,876   24,693   $26,335  $25,130
                                  ======    ======   ======    ======   ======
Ratio of Earnings to Fixed                                       
  Charges                            3.4       3.3      3.0       3.2      3.1
                                     ===       ===      ===       ===      ===
</TABLE>
                           NOTICE

This copy of CILCORP Inc.'s and Central Illinois Light
Company's Form 10-K does not include our 1996 Consolidated
Annual Report.  If you have not received our 1996
Consolidated Annual Report and would like one, please let us
know.




Telephone:
 In Peoria 675-8808
 Elsewhere in Illinois 1-800-322-3569
 Outside Illinois 1-800-622-5514
 TDD 1-309-675-8892

Or you can write to us at:
 Investor Relations Department
 CILCORP Inc.
 300 Hamilton Blvd.
 Suite 300
  Peoria, IL  61602-1238
<PAGE>
EXHIBIT 24

          CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference of our reports, dated January 27,
1997, included herein or incorporated by reference in this Form
10-K, into CILCORP Inc.'s previously filed Registration
Statements File No. 33-45318, 33-51315 and 33-51241.






                        ARTHUR ANDERSEN LLP



Chicago, Illinois
March 18, 1997