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                                PSI ENERGY, INC.

                                       AND

                                FIFTH THIRD BANK,

                                     Trustee

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                          Fifth Supplemental Indenture
                          Dated as of December 15, 1998
                                       To
                                    Indenture
                          Dated as of November 15, 1996
              -----------------------------------------------------


                   6% Putable/Callable Notes Due December 14,
                    2016, Putable/Callable December 14, 2001


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NYDOCS01/573375 8


<PAGE>


     FIFTH  SUPPLEMENTAL  INDENTURE,  dated as of December 15, 1998 (this "Fifth
Supplemental Indenture"), between PSI Energy, Inc., a corporation duly organized
and  existing  under  the  laws of the  State  of  Indiana  (herein  called  the
"Company"),  having its principal  office at 1000 East Main Street,  Plainfield,
Indiana  46168,  and Fifth Third Bank, an Ohio banking  corporation,  as Trustee
(herein called the "Trustee")  under the Indenture dated as of November 15, 1996
between the Company and the Trustee (the "Original Indenture").

                             Recitals of the Company

     The Company has  executed  and  delivered  the  Original  Indenture  to the
Trustee  to  provide  for the  issuance  from  time  to  time  of its  unsecured
debentures,  notes or other evidences of indebtedness (the "Securities") , to be
issued in one or more series as in the Indenture provided.

     Pursuant to the terms of the  Original  Indenture,  the Company  desires to
provide for the  establishment  of a new series of its Securities to be known as
its 6% Putable/Callable Notes due December 14, 2016,  Putable/Callable  December
14, 2001 (herein called the "Notes"), in this Fifth Supplemental Indenture.

     All things  necessary  to make this Fifth  Supplemental  Indenture  a valid
agreement of the Company have been done.

     Now, Therefore, This Fifth Supplemental Indenture Witnesseth:

     For and in  consideration  of the premises and the purchase of the Notes by
the Holders  thereof,  it is mutually  agreed,  for the equal and  proportionate
benefit of all Holders of the Notes, as follows:

                                   ARTICLE ONE

                                  DEFINED TERMS

     Section 101. Defined Terms.  Except as otherwise expressly provided in this
Fifth  Supplemental  Indenture  or in the  form  of Note  or  otherwise  clearly
required by the context hereof or thereof,  all  capitalized  terms used and not
defined  herein  or in said  form of  Note  that  are  defined  in the  Original
Indenture  shall have the meanings  assigned to them in the Original  Indenture.
The Original  Indenture,  as supplemented  from time to time,  including by this
Fifth Supplemental Indenture,  is hereafter referred to as the "Indenture".  For
all purposes of this Fifth Supplemental Indenture:

     "Call  Price"  means a price equal to 100% of the  principal  amount of the
Notes.

     "Closing Date" means December 15, 1998.

     "Coupon Reset Date" means December 14, 2001.

     "Exchange  Notes"  means any  securities  of the Company  containing  terms
identical to the Notes  (except  that such  Exchange  Notes shall be  registered
under the  Securities  Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and the Indenture.

     "Exchange   Offer   Registration   Statement"   means  the  Exchange  Offer
Registration Statement as defined in the Registration Rights Agreement.

     "Institutional  Accredited  Investor"  means  an  institution  that  is  an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.

     "Market  Disruption  Event" means any of the  following  in the  reasonable
judgment of the Calculation Agent and the Company:  (i) a suspension or material
limitation in trading in securities  generally on the New York Stock Exchange or
the establishment of minimum prices on such exchange;  (ii) a general moratorium
on commercial  banking  activities  declared by either U.S.  federal or New York
State  authorities;  (iii) a material adverse change in the existing  financial,
political  or  economic  conditions  in the United  States;  (iv) an outbreak or
escalation of major hostilities  involving the United States, or the declaration
of a  national  emergency  or war  by  the  United  States;  or  (v) a  material
disruption of the U.S. government securities market, U.S. corporate bond market,
or U.S. federal wire system.

     "Non-U.S.  Person"  means a person who is not a U.S.  Person (as defined in
Regulation S).

     "Notes" means any of the securities,  as defined in the second paragraph of
the recitals hereof,  that are  authenticated and delivered under the Indenture.
For all  purposes of the  Indenture,  the term "Notes"  shall  include the Notes
initially  issued on the  Closing  Date,  any  Exchange  Notes to be issued  and
exchanged for any Notes pursuant to the  Registration  Rights  Agreement and the
Indenture and any other Notes issued after the Closing Date under the Indenture.
For purposes of the  Indenture,  all Notes shall vote  together as one series of
Notes under the Indenture.

     "Offering Memorandum" means the Offering Memorandum dated December 8, 1998,
offering the Notes for sale as provided therein.

     "Registration  Rights  Agreement" means the Registration  Rights Agreement,
dated  December  15, 1998,  between the Company and Warburg  Dillon Read LLC and
certain permitted assigns specified therein.

     "Registration  Statement" means the  Registration  Statement as defined and
described in the Registration Rights Agreement.

     "Regulation S" means Regulation S under the Securities Act.

     "Rule 144A" means Rule 144A under the Securities Act.

     "Shelf  Registration  Statement" means the Shelf Registration  Statement as
defined in the Registration Rights Agreement.


                                   ARTICLE TWO

                               TERMS OF THE NOTES

     Section  201.  Establishment  of the Notes.  There is hereby  authorized  a
series of Securities  designated the 6% Putable/Callable  Notes due December 14,
2016,  Putable/Callable December 14, 2001, limited in aggregate principal amount
to  $50,000,000  (except as provided in Section  301(2) of the  Indenture).  The
Notes shall be substantially in the form set forth in Exhibit A hereto and shall
include  substantially  the legends set forth on the face of the form of Note so
long as the Notes are Restricted Securities (as defined below).

     Section 202. Terms of the Notes. The Notes will be issued and maintained in
the form of registered Global Securities without coupons, registered in the name
of Cede & Co., as nominee of The Depository  Trust Company (the  "Depositary" or
"DTC") except (a) in the limited  circumstances  described in Section 305 of the
Original Indenture and (b) for Restricted  Securities  transferred in accordance
with Section 703 hereof,  and beneficial  interests therein may be acquired,  or
subsequently  transferred.  The  provisions  of  Section  305  of  the  Original
Indenture applicable to Global Securities shall apply to the Notes.

     The Stated Maturity of the Notes shall be December 14, 2016, and they shall
bear  interest at the rate of 6% per annum,  from  December 15, 1998 or from the
most  recent  Interest  Payment  Date to which  interest  has been  paid or duly
provided for, as the case may be, payable  semi-annually on June 14 and December
14,  commencing June 14, 1999 until the Coupon Reset Date,  whereupon (x) if the
Notes are purchased by the Callholder  (as defined  below)  pursuant to its Call
Option  (as  defined  below) on the  Coupon  Reset  Date,  the Notes  shall bear
interest  from the Coupon  Reset Date to their Final  Maturity  Date (as defined
below) at the Coupon Reset Rate (as defined below) determined in accordance with
the Coupon Reset Process described in Section 304 hereof,  payable semi-annually
on June 14 and December 14,  commencing on June 14, 2002, or (y) the Notes shall
be  redeemed  by the  Company  pursuant  to the  exercise  of the Put Option (as
defined below) by the Trustee on behalf of the Holders of the Notes.

     The  principal  of and interest on the Notes shall be payable at the office
or agency of the Trustee in the City of Cincinnati  maintained  for such purpose
and at any other office or agency  maintained  by the Company for such  purpose;
provided,  however, that at the option of the Company payment of interest may be
made by wire  transfer or by check mailed to the address of the Person  entitled
thereto as such address shall appear in the Security Register.

     The Notes shall not have the benefit of a sinking fund.

     The Notes shall not be superior in right of payment to, and shall rank pari
passu with, all other unsecured and unsubordinated Indebtedness of the Company.

     The Notes  shall be subject to  defeasance  at the option of the Company as
provided in Section 1302 of the Original  Indenture and they shall be subject to
an  assignable  Call Option and to a Put Option to be  exercised  under  certain
conditions  by the  Trustee  for and on behalf of the  Holders  as  provided  in
Article 3 hereof.

     Section 203.  Denominations.  The Notes shall be issued in denominations of
$100,000 or any integral multiple of $1,000.

     Section 204. Form. Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in registered
form,  substantially  in the  form set  forth in  Exhibit  A (the  "U.S.  Global
Notes"), registered in the name of the nominee of the Depositary, deposited with
the Trustee,  as custodian for the Depositary,  duly executed by the Company and
authenticated by the Trustee as hereinafter  provided.  The aggregate  principal
amount of the U.S.  Global Notes may from time to time be increased or decreased
by  adjustments  made  on the  records  of the  Trustee,  as  custodian  for the
Depositary or its nominee,  in  accordance  with the  instructions  given by the
Holder thereof, as hereinafter provided.

         Notes  offered  and  sold  in  offshore  transactions  in  reliance  on
Regulation  S shall be  issued  initially  in the form of one or more  permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the  "Offshore  Global  Notes"),  registered  in the name of the nominee of the
Depositary,  deposited with the Trustee,  as custodian for the Depositary,  duly
executed  by the  Company  and  authenticated  by  the  Trustee  as  hereinafter
provided.  The aggregate  principal amount of the Offshore Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee,  as  custodian  for  the  Depositary  or its  nominee,  as  hereinafter
provided.
                 
     The U.S. Global Notes and the Offshore Global Notes are sometimes  referred
to herein as the "Global Notes."

     The definitive Notes shall be typed,  printed,  lithographed or engraved or
produced  by any  combination  of these  methods or may be produced in any other
manner permitted by the rules of any securities  exchange on which the Notes may
be listed,  all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.

                                  ARTICLE THREE

                              CALL AND PUT OPTIONS

     Section 301.  Call Option.  (a) The Company (or its  successors or assigns)
shall have the right to purchase  the Notes from the Holders on the Coupon Reset
Date,  in whole but not in part (the "Call  Option"),  in exchange for an amount
equal to the Call  Price.  The  Company,  as holder of the Call  Option,  or any
Person to whom the Call Option is assigned in  accordance  with  subsection  (d)
below, is referred to herein as the "Callholder".

     If the Callholder  exercises its rights under the Call Option in accordance
with Section 301(b) hereof, then

          (i) subject to Section 305, no later than 2:00 p.m., New York time, on
     the  Business  Day prior to the Coupon  Reset Date,  the  Callholder  shall
     deliver an amount  equal to the Call Price in U.S.  Dollars in  immediately
     available  funds to the Trustee for payment of the Call Price on the Coupon
     Reset Date;

          (ii) if the  Callholder is not the Company,  promptly upon delivery by
     the Callholder of the Call Price to the Trustee (and in no event later than
     2:00 p.m. on the Business Day prior to the Coupon Reset Date),  the Trustee
     shall notify the Company of such delivery of and receipt of the Call Price;
     and

          (iii) the  Holders of the Notes shall be required to deliver the Notes
     to the Callholder against payment therefor on the Coupon Reset Date.

If the Call Option has not been exercised, or in the event the Callholder is not
required  or fails to deliver  the Call Price to the Trustee at or prior to 2:00
p.m.,  New York time,  on the Business  Day prior to the Coupon Reset Date,  the
Trustee shall give notice of such occurrence to the Company.

     (b) The  Callholder  must,  in order to exercise  its rights under the Call
Option,  deliver irrevocable,  written notice (the "Call Notice") to the Company
(unless the Company shall be the  Callholder) and to the Trustee of its exercise
of the Call Option prior to 4:00 p.m., New York time, on the day that is fifteen
(15) calendar days prior to the Coupon Reset Date. The Call Notice shall contain
the requisite delivery details, including the identification of the Callholder's
Depositary  account.  The Trustee shall send a copy of the Call Notice to the to
the Holders of the Notes no later than the immediately  succeeding Business Day.
No Holder of Notes shall have any rights or claims  against the  Callholder as a
result of the Callholder electing to purchase or not purchase the Notes.

     (c) If the Callholder elects to exercise the Call Option, the obligation of
the  Callholder  to pay the Call Price and the  corresponding  obligation of the
Trustee to deliver the Notes to the Callholder  pursuant to exercise of the Call
Option is subject to the following  conditions  precedent  that,  after the Call
Notice is given:

          (i) (x) no Event of  Default  with  respect to the Notes or (y) no (A)
     event of default  with  respect to any senior  indebtedness  of the Company
     other  than the Notes (as such  event of  default  is defined in any notes,
     indenture,  credit  agreement,  or other similar document  relating to such
     senior  indebtedness) which shall have resulted in such senior indebtedness
     becoming,  or  becoming  capable  at such time of being  declared,  due and
     payable under such  document  before it would  otherwise  have been due and
     payable or (B) a default in making a payment on the due date thereof  under
     documents  relating  to senior  indebtedness  (after  giving  effect to any
     applicable notice requirement or grace period) shall have occurred;

          (ii) until 2:00 p.m.  New York time,  on the Business Day prior to the
     Coupon Reset Date, no Market Disruption Event shall have occurred;

          (iii) at least one Dealer (as  defined  below)  shall have  provided a
     timely Bid (as defined below) in the manner provided in Section 304 hereof;

          (iv) no legal  defeasance or covenant  defeasance  with respect to the
     Notes shall have occurred; and

          (v) none of the Notes shall have been purchased by the Company.

     The Call Option will  automatically  and immediately  terminate without any
further  action by the  Callholder,  Company or Trustee,  and the  Trustee  will
exercise the Put Option  pursuant to Section 302 on behalf of the Holders,  upon
the occurrence of any one or more of the following events:

          (i) at any time,  an Event of Default  with respect to the Notes under
     Section 501(1), (2), (5) or (6) of the Original Indenture;

          (ii) prior to 2:00 p.m. New York time on the Business Day prior to the
     Coupon Reset Date, a Market Disruption Event shall have occurred;

          (iii) after the Call Notice is given,  no Dealer shall have provided a
     timely Bid in the manner provided in Section 304 hereof; and

          (iv) at any time,  a legal  defeasance  or  covenant  defeasance  with
     respect to the Notes shall have occurred.

     The  Call  Option  will  immediately  terminate  upon the  election  of the
Callholder  following the occurrence of any one or more of the following  events
at any time:

          (i) an Event of Default with respect to the Notes under Section 501(4)
     or (7) of the Original Indenture;

          (ii) (A) an event of default with  respect to any senior  indebtedness
     of the Company other than the Notes (as such event of default is defined in
     any notes, indenture,  credit agreement, or other similar document relating
     to such  senior  indebtedness)  which  shall have  resulted  in such senior
     indebtedness  becoming, or becoming capable at such time of being declared,
     due and payable under such document before it would otherwise have been due
     and  payable or (B) a default  in making a payment on the due date  thereof
     under documents relating to senior indebtedness (after giving effect to any
     applicable notice requirement or grace period) shall have occurred;

          (iii) any or all of the Notes shall have been purchased or redeemed by
     the Company.

     The Company will promptly  notify the Trustee in writing of any termination
of the Call Option.

     (d) The Callholder may at any time assign its rights and obligations  under
the Call Option;  provided that (i) such rights and  obligations are assigned in
whole and not in part, and (ii) such assigning  Callholder  provides the Company
(unless the Company is a  participant  in the  assignment)  and the Trustee with
written notice of such assignment  contemporaneously with such assignment.  Upon
receipt of notice of  assignment,  the Trustee  shall treat the  assignee as the
Callholder for all purposes hereunder.  A Callholder may assign its rights under
the Call Option without notice to, or consent of, the Holders of the Notes.

     Section  302.  Put  Option.  (a) By its  purchase  of a Note,  each  Holder
irrevocably agrees that if either (i) the Call Option has not been exercised, or
(ii) the Callholder is not required,  as set forth in Section 301(c),  or fails,
to deliver  the Call  Price to the  Trustee  not later than 2:00 p.m.,  New York
time, on the Business Day prior to the Coupon Reset Date, the Trustee shall, for
and on behalf of the Holders of the Notes, have the right to require the Company
to purchase the Notes,  in whole but not in part,  on the Coupon Reset Date (the
"Put  Option")  at a purchase  price  equal to 100% of the  aggregate  principal
amount  thereof and accrued and unpaid  interest  thereon  (the "Put  Redemption
Price").  The Trustee  shall be required to exercise the Put Option,  for and on
behalf of the Holders, if the Call Option has not been exercised or in the event
the Callholder is not required or fails to deliver the Call Price to the Trustee
when due. If the Put Option is exercised,  the Trustee shall promptly thereafter
notify the Holders of the Notes that the Trustee, on behalf of the Holders,  has
exercised the Put Option.

     (b) If the Trustee exercises the Put Option, then the Company shall deliver
the Put  Redemption  Price to the Trustee by no later than 12:30 p.m.,  New York
time,  on the Coupon Reset Date,  and the Holders of the Notes shall be required
to deliver the Notes to the Company against payment therefor on the Coupon Reset
Date. No Holder of any Notes or any interest therein has the right to consent or
object to the Trustee's exercise of the Put Option.

     Section 303. Calculation Agent. (a) The Company shall appoint a calculation
agent with respect to the Notes (the "Calculation  Agent") which initially shall
be Warburg Dillon Read LLC, as  acknowledged  in the letter  attached  hereto as
Appendix A.

     (b) The  Calculation  Agent shall incur no liability for, or in respect of,
any action  taken,  omitted to be taken or  suffered  by it in such  capacity in
reliance  upon  any  certificate,   affidavit,   instruction,  notice,  request,
direction, order, statement or other paper, document or communication reasonably
believed by it to be genuine. Any order,  certificate,  affidavit,  instruction,
notice,  request,  direction,  statement or other communication from the Company
made or given by it and sent,  delivered  or directed to the  Calculation  Agent
under,  pursuant to, or as permitted by, any provision of the Indenture shall be
sufficient for purposes of the Indenture if such communication is in writing and
signed by any officer or attorney-in-fact of the Company.  The Calculation Agent
may consult  with  counsel  satisfactory  to it, and the advice of such  counsel
shall  constitute  full  and  complete  authorization  and  protection  of  such
Calculation  Agent  with  respect to any  action  taken,  omitted to be taken or
suffered by it  hereunder in good faith and in  accordance  with and in reliance
upon the advice of such counsel.

     (c) The Calculation Agent, in its individual  capacity,  may, as if it were
not the  Calculation  Agent,  (i) buy,  sell,  hold  and  deal in Notes  and may
exercise  any vote or join in any  action  which  any  Holder  of  Notes  may be
entitled  to  exercise  or  take  or  (ii)  engage  in any  financial  or  other
transaction with the Company or any of its Affiliates.

     (d) In acting in connection with the Notes, the Calculation  Agent shall be
obligated only to perform such duties as are specifically set forth herein,  and
no other duties or  obligations  on the part of the  Calculation  Agent,  in its
capacity  as such,  shall be  implied  by the  Indenture.  In  acting  under the
Indenture,  the  Calculation  Agent in its  capacity as such does not assume any
obligation  towards,  or any  relationship  of  agency  or trust for or with the
Holders of the Notes.

     (e) The Calculation Agent may resign at any time as Calculation Agent, such
resignation  to be effective ten Business Days after the delivery to the Company
and the Trustee of written notice of such resignation. In such case, the Company
shall appoint a successor Calculation Agent. In addition, the Company may at any
time remove the existing  Calculation Agent and appoint a successor  Calculation
Agent if  Reasonable  Cause  (as  defined  below)  exists at such time by giving
written notice to the existing  Calculation Agent and the Trustee and specifying
the date when the termination shall become effective.  "Reasonable  Cause" shall
mean the failure or inability of the existing  Calculation  Agent to perform any
obligations it may have hereunder for any reason.

     (f) Any successor  Calculation  Agent appointed by the Company  pursuant to
the  provisions of subsection  (e) shall execute and deliver to the  predecessor
Calculation  Agent,  the Company and the Trustee an  instrument  accepting  such
appointment  and thereupon the successor  Calculation  Agent shall,  without any
further act or instrument, become vested with all the rights, immunities, duties
and  obligations  of the  initial  Calculation  Agent,  with  like  effect as if
originally named as initial  Calculation  Agent  hereunder,  and the predecessor
Calculation  Agent shall  thereupon be obligated to deliver,  and the  successor
Calculation Agent shall be entitled to receive,  copies of any available records
maintained  by  the  predecessor   Calculation  Agent  in  connection  with  the
performance of its obligations  hereunder.  The Company shall notify the Trustee
in writing upon any such appointment.

     (g) The Company shall indemnify and hold harmless the Calculation Agent and
any  successor  thereof,  and its officers and  employees,  from and against all
actions, claims, damages, liabilities, losses and reasonable expenses (including
reasonable legal fees and reasonable  disbursements)  relating to or arising out
of actions or omissions of the  Calculation  Agent  hereunder,  except  actions,
claims, damages, liabilities, losses and expenses caused by the bad faith, gross
negligence  or wilful  misconduct  of the  Calculation  Agent or its officers or
employees.  This  subsection  shall survive the termination of the Indenture and
the payment in full of all obligations  under the Notes,  whether by redemption,
repayment or otherwise.

     (h)  Notwithstanding  any other  provision  of the  Indenture,  the parties
hereto  acknowledge  that the rights and  obligations of the  Calculation  Agent
hereunder  are those of the  Calculation  Agent and its  legal  successors.  Any
entity  into  which  the   Calculation   Agent  may  be  merged,   converted  or
consolidated,   or  any  entity   resulting  from  any  merger,   conversion  or
consolidation  to which the  Calculation  Agent may be a party, or any entity to
which the Calculation Agent may sell or otherwise  transfer all or substantially
all of  its  business,  shall,  to  the  extent  permitted  by  applicable  law,
automatically succeed the Calculation Agent.

     Section 304. Coupon Reset Process. If the Callholder has exercised the Call
Option, the Company and the Calculation Agent shall complete the following steps
(the "Coupon  Reset  Process") in order to determine  the interest rate ("Coupon
Reset Rate") to be paid on the Notes from,  and  including the Coupon Reset Date
to, but  excluding,  the Final  Maturity  Date,  provided  that the Coupon Reset
Process shall be discontinued  if, at any time prior to and including 2:00 p.m.,
New York time, on the Business Day prior to the Coupon Reset Date,  (i) an event
shall have occurred  following  which the  Callholder is not required to pay the
Call Price  pursuant to Section 301(c) hereof or (ii) the Call Option shall have
terminated  pursuant to Section 301(c) hereof.  The Company and the  Calculation
Agent shall use reasonable  efforts to cause the actions  described  below to be
completed in a timely manner.

          (i) The Company  shall  provide the  Calculation  Agent with a list (a
     "Dealer List"), no later than seven Business Days prior to the Coupon Reset
     Date,  containing  the names and  addresses of up to five  dealers,  one of
     which  shall be Warburg  Dillon  Read LLC or its  successor,  from which it
     desires the  Calculation  Agent to obtain the Bids for the  purchase of the
     Notes.

          (ii) Within one  Business  Day  following  receipt by the  Calculation
     Agent of the Dealer  List,  the  Calculation  Agent  shall  provide to each
     dealer  (a  "Dealer")  on  the  Dealer  List  (a) a copy  of  the  Offering
     Memorandum, (b) a copy of the form of the Notes, (c) a written request that
     each Dealer submit a Bid to the  Calculation  Agent at 12:00 noon, New York
     time (the "Bid  Deadline"),  on the third  Business Day prior to the Coupon
     Reset Date (the "Bid Date") and (d) an estimate of the  Purchase  Price (as
     defined  below)  (which  shall be stated  as a U.S.  Dollar  amount  and be
     calculated by the Calculation Agent in accordance with clause (iii) below).
     "Bid" means an irrevocable written offer given by a Dealer for the purchase
     of the  Securities  at the Purchase  Price,  such purchase to settle on the
     Coupon Reset Date,  and such Purchase  Price shall be quoted by such Dealer
     as a stated yield to maturity on the Notes (the "Yield to Maturity").

          (iii) The  purchase  price to be paid for the  Notes by a Dealer  (the
     "Purchase  Price") shall be equal to (x) the aggregate  principal amount of
     the Notes plus (y) a premium  (the  "Securities  Premium")  which  shall be
     equal to the excess, if any, on the Coupon Reset Date of (A) the discounted
     present  value to the Coupon  Reset  Date of a bond with a maturity  of the
     Final Maturity Date which has an interest rate of 6%, semi-annual  interest
     payments on each June 14 and December 14  commencing  June 14, 2002,  and a
     principal amount of $50,000,000, and which is discounted at a rate equal to
     the Treasury Rate over (B) $50,000,000.

     "Treasury  Rate"  means the per annum rate equal to the offer side yield to
maturity of the current  on-the-run  ten-year  United States  Treasury  Security
appearing on Telerate page 500, or any successor  page, at 11:00 a.m.,  New York
time, on the Bid Date (or such other date or time that may be agreed upon by the
Company and the Calculation  Agent) or, if such rate does not appear on Telerate
page 500, or any  successor  page, at such time or date,  the rate  appearing on
GovPx End-of-Day Pricing at 3:00 p.m., New York time, on the Bid Date.

          (iv)  Immediately  after  receiving  the  Bids  on the Bid  Date,  the
     Calculation  Agent shall  provide  written  notice to the Company,  setting
     forth (a) the names of each of the Dealers from whom the Calculation  Agent
     received  such Bids on the Bid  Date,  (b) the Bid  submitted  by each such
     Dealer  and (c)  the  Purchase  Price.  Except  as  provided  in the  first
     paragraph  of this  Section  304, on the day that Bids are  received by the
     Calculation  Agent,  the  Calculation  Agent shall  select the Bid with the
     lowest Yield to Maturity (the "Selected Bid") from the Bids received by the
     Bid  Deadline,  provided,  that at least one Bid is properly  received in a
     timely  manner,  and  establish  the Coupon Reset Rate (the  "Coupon  Reset
     Rate")  equal to the  interest  rate which would  amortize  the  Securities
     Premium fully over the remaining term of the Notes at the Yield to Maturity
     indicated by the Selected Bid; provided,  however,  that if any two or more
     of the lowest Bids submitted are equivalent,  the Company shall in its sole
     discretion  select any of such equivalent Bids (and such Bid selected shall
     be the Selected Bid).

          (v)  Immediately   after   calculating  the  Coupon  Reset  Rate,  the
     Calculation  Agent  shall  provide  written  notice to the  Company and the
     Trustee, setting forth such Coupon Reset Rate.

          (vi) The Company shall  thereafter  establish the Coupon Reset Rate as
     the new interest rate on the Notes, effective from and including the Coupon
     Reset Date to, but not  including,  the Final Maturity Date, by delivery to
     the Trustee on or before the Coupon Reset Date of an Officer's  Certificate
     setting forth such Coupon Reset Rate.

          (vii) The Callholder shall sell the Securities to the Dealer that made
     the  Selected  Bid at the  Purchase  Price,  such sale to be settled on the
     Coupon Reset Date in immediately available funds.

     Section  305.  The  Company  as  Callholder.  If the  Company  becomes  the
Callholder subsequent to an exercise of the Call Option, the Company, so long as
it shall be the Callholder,


     (a) shall have no obligation  (i) to initiate,  participate in or conclude,
as the case may be,  the Coupon  Reset  Process or (ii) to pay the Call Price by
2:00 p.m. on the Business Day prior to the Coupon Reset Date; and

     (b) if the Company does not pay the Call Price by 2:00 p.m. on the Business
Day prior to the Coupon Reset Date,  the Trustee  shall  exercise the Put Option
pursuant to Section 302 on behalf of the Holders.


     Section 306.  Third Party  Beneficiaries.  Each of the  Callholder  and the
Calculation  Agent shall be a third party  beneficiary  of the Indenture and may
enforce the obligations of the Company and of the Trustee  hereunder  running in
favor of the Callholder and the Calculation Agent, as applicable.
 

                                  ARTICLE FOUR

                                   REDEMPTION

     Subject  to the terms of  Article  Eleven of the  Original  Indenture,  the
Company shall have the right to redeem the Notes, in whole but not in part, from
time to time and at any time (such redemption, an "Optional Redemption", and the
date thereof, the "Optional Redemption Date") upon not less than 30 days' notice
to the holders, at a redemption price equal to the sum of (A) the greater of (i)
100% of the principal  amount of the Notes to be redeemed or (ii) the sum of the
present values of the Remaining  Scheduled  Payments  thereon  discounted to the
Optional  Redemption  Date  on a  semiannual  basis  (assuming  a  360-day  year
consisting  of twelve  30-day  months) at the Make Whole  Treasury  Rate plus 20
basis  points,  less  the  Applicable  Accrued  Interest  Amount  plus  (B)  the
Applicable Accrued Interest Amount.

     "Applicable  Accrued  Interest  Amount" means,  at the Optional  Redemption
Date, the amount of interest  accrued and unpaid from the prior interest payment
date to the  Optional  Redemption  Date on the  Notes  subject  to the  Optional
Redemption determined at the rate per annum shown in the title thereof, computed
on the basis of a 360-day year of twelve 30-day months.

     "Comparable  Treasury  Issue"  means the United  States  Treasury  security
selected by an Independent  Investment Banker as having a maturity that would be
utilized,  at the time of selection and in accordance  with customary  financial
practice,  in pricing new issues of  corporate  debt  securities  of  comparable
maturity  to the  remaining  term of the Notes to be  redeemed  pursuant  to the
Optional Redemption.  "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.

     "Comparable  Treasury Price" means, with respect to the Optional Redemption
Date, the average of the Reference  Treasury Dealer Quotations for such Optional
Redemption Date.

     "Reference  Treasury  Dealer"  means a primary U.S.  Government  securities
dealer in New York City.  "Reference  Treasury Dealer  Quotations"  means,  with
respect to each Reference  Treasury Dealer and any redemption date, the average,
as  determined  by the Trustee,  of the bid and asked prices for the  Comparable
Treasury Issue (expressed in each case as a percentage of its principal  amount)
quoted in writing to the Trustee by such Reference  Treasury Dealer at 5:00 p.m.
on the third Business Day preceding such redemption date.

     "Remaining Scheduled Payments" means, with respect to any Note, that amount
of interest that is unpaid and would but for the Optional  Redemption  accrue to
but excluding the Coupon Reset Date or, if the final  Optional  Redemption  Date
occurs on or after the Coupon  Reset Date,  the  Maturity  Date plus 100% of the
principal  amount  thereof  scheduled to be received on the Coupon Reset Date or
the Maturity Date, as the case may be.

     "Make Whole Treasury Rate" means,  with respect to the Optional  Redemption
Date (if any),  the rate per annum equal to the semiannual  equivalent  yield to
maturity of the Comparable  Treasury Issue,  assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal  amount) equal to the
Comparable Treasury Price for such Optional Redemption Date.


                                  ARTICLE FIVE

                             ORIGINAL ISSUE OF NOTES

     Section 501. Notes in the aggregate  principal amount of $50,000,000,  may,
upon  execution  of this  Fifth  Supplemental  Indenture,  or from  time to time
thereafter,  be  executed  by the  Company  and  delivered  to the  Trustee  for
authentication,  and the Trustee shall thereupon  authenticate  and deliver said
Notes upon a Company Order without any further action by the Company.



                                   ARTICLE SIX

                       PAYING AGENT AND SECURITY REGISTRAR

     Section  601.  Fifth  Third  Bank will be the  Paying  Agent  and  Security
Registrar for the Notes.



                                  ARTICLE SEVEN

                           Special Transfer Provisions

     Section 701. Legend on Restricted Securities.  Until the earlier of (a) the
date a Registration  Statement is declared  effective and (b) December 15, 2000,
any Note  including  any Note  issued in exchange  therefor or in lieu  thereof,
shall be deemed a "Restricted Security" and shall be subject to the restrictions
on  transfer  provided in the legends set forth on the face of the form of Note;
provided,  however,  that the term  "Restricted  Security" shall not include any
Securities as to which  restrictions  have been  terminated  in accordance  with
Section 703 hereof. All Notes shall bear the applicable legends set forth on the
face of the form of Note.  Except as  provided  in Section  305 of the  Original
Indenture  and Section 703 hereof,  the Trustee  shall not issue any  unlegended
Notes until it has received an Officers'  Certificate from the Company directing
it to do so.

     Section 702.  Book-Entry  Provisions for Global Notes.  (a) The U.S. Global
Notes and Offshore Global Notes initially shall (i) be registered in the name of
the Depositary for such Global Notes or the nominee of such Depositary,  (ii) be
delivered to the Trustee as custodian for such Depositary and (iii) bear legends
as set forth in Section 701.
 
     Members of, or participants in, the Depositary ("Agent Members") shall have
no rights  under this  Indenture  with  respect to any Global Note held on their
behalf by the Depositary,  or the Trustee as its custodian, or under such Global
Note,  and the  Depositary  may be treated by the  Company,  the Trustee and any
agent of the  Company or the Trustee as the  absolute  owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the  Company,  the  Trustee or any agent of the Company or the  Trustee,
from giving effect to any written  certification,  proxy or other  authorization
furnished by the  Depositary or impair,  as between the Depositary and its Agent
Members,  the  operation of customary  practices  governing  the exercise of the
rights of a holder of any Note.

     (b) Transfers of a Global Note shall be limited to transfers of such Global
Note in whole,  but not in part,  to the  Depositary,  its  successors  or their
respective  nominees.  Interests  of  beneficial  owners in Global  Notes may be
transferred  in accordance  with the rules and  procedures of the Depositary and
the  provisions  of  Section  703.  In  addition,  certificated  Notes  shall be
transferred to all beneficial owners in exchange for their beneficial  interests
in the U.S.  Global Notes or the Offshore  Global Notes,  as the case may be, if
(i) the  Depositary  notifies  the  Company  that it is  unwilling  or unable to
continue as Depositary for the U.S.  Global Notes or the Offshore  Global Notes,
as the case may be, and a successor  depositary  is not appointed by the Company
within 90 days of such  notice,  (ii) an Event of Default  has  occurred  and is
continuing and the Registrar has received a request from the Depositary or (iii)
in accordance with the rules and procedures of the Depositary and the provisions
of Section 703.

     (c) Any beneficial  interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of an interest in another Global Note
will,  upon transfer,  cease to be an interest in such Global Note and become an
interest in such other Global Note and, accordingly,  will thereafter be subject
to all  transfer  restrictions,  if any,  and  other  procedures  applicable  to
beneficial interests in such other Global Note for as long as it remains such an
interest.

     (d) In  connection  with  any  transfer  of a  portion  of  the  beneficial
interests in a Global Note to  beneficial  owners  pursuant to paragraph  (b) of
this Section 702, the Security  Registrar shall reflect on its books and records
the date and a decrease in the principal amount of such Global Note in an amount
equal to the principal amount of the beneficial  interest in such Global Note to
be  transferred,   and  the  Company  shall  execute,   and  the  Trustee  shall
authenticate and deliver, one or more certificated Notes, as the case may be, of
like tenor and amount.

     (e) In  connection  with  the  transfer  of the  U.S.  Global  Notes or the
Offshore Global Notes, in whole, to beneficial  owners pursuant to paragraph (b)
of this Section 702, the U.S. Global Notes or Offshore Global Notes, as the case
may be, shall be deemed to be surrendered to the Trustee for  cancellation,  and
the Company shall execute,  and the Trustee shall  authenticate and deliver,  to
each  beneficial  owner  identified  by  the  Depositary  in  exchange  for  its
beneficial  interest in the U.S.  Global Notes or Offshore  Global Notes, as the
case may be,  an equal  aggregate  principal  amount  of  certificated  Notes of
authorized denominations.

     (f) Any certificated Note delivered in exchange for an interest in the U.S.
Global Notes  pursuant to  paragraph  (b), (d) or (e) of this Section 702 shall,
except as otherwise  provided by Section 601, bear the legend regarding transfer
restrictions.

     (g) The registered  holder of a Global Note may grant proxies and otherwise
authorize  any  person,  including  Agent  Members  and  persons  that  may hold
interests  through Agent Members,  to take any action which a Holder is entitled
to take under this Indenture or the Notes.

     Section 703. (a) Transfers to QIBs.  The following  provisions  shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a qualified institutional buyer as defined in Rule 144A
(a "QIB"):

          (i)  the  Security  Registrar  shall  register  the  transfer  if such
     transfer  is being made by a proposed  transferor  who has  checked the box
     provided  for on the form of Note  stating,  or has  otherwise  advised the
     Company and the Security Registrar in writing,  that the sale has been made
     in  compliance  with the  provisions  of Rule 144A to a transferee  who has
     signed the certification  provided for on the form of Note stating,  or has
     otherwise advised the Company and the Security  Registrar in writing,  that
     it is purchasing the Note for its own account or an account with respect to
     which it  exercises  sole  investment  discretion  and that it and any such
     account  is a QIB within  the  meaning of Rule 144A,  and is aware that the
     sale to it is being made in  reliance  on Rule 144A,  and is aware that the
     sale to it is being made in reliance on Rule 144A and acknowledges  that it
     has received  such  information  regarding  the Company as it has requested
     pursuant to Rule 144A or has determined not to request such information and
     that it is  aware  that  the  transferor  is  relying  upon  its  foregoing
     representations in order to claim the exemption from registration  provided
     by Rule 144A; and

          (ii) if the proposed transferee is an Agent Member and the Notes to be
     transferred  consist of  certificated  Notes which after transfer are to be
     evidenced  by an  interest  in the  Global  Security,  upon  receipt by the
     Security   Registrar  of   instructions   given  in  accordance   with  the
     Depositary's  and  the  Security  Registrar's   procedures,   the  Security
     Registrar  shall  reflect on its books and records the date and an increase
     in the  principal  amount of the Global  Security in an amount equal to the
     principal  amount  of the  certificated  Notes to be  transferred,  and the
     Trustee shall cancel the certificated Notes so transferred.

     (b) Transfers to Non-QIB Institutional  Accredited Investors. The following
provisions shall apply with respect to the registration of any proposed transfer
of a Note  constituting a Restricted  Security to any  Institutional  Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):

          (i) The Security Registrar shall register the transfer of any Note, if
     the proposed  transferee  has  delivered to the  Security  Registrar  (A) a
     certificate  substantially  in the form of Appendix C hereto and (B) if the
     aggregate  principal  amount of the Notes  being  transferred  is less than
     $100,000,  an  opinion  of  counsel  acceptable  to the  Company  that such
     transfer is in compliance with the Securities Act.

          (ii)  If  the  proposed  transferor  is  an  Agent  Member  holding  a
     beneficial  interest in the Global  Security,  upon receipt by the Security
     Registrar of (x) the documents, if any, required by paragraph (i) above and
     (y) instructions given in accordance with the Depositary's and the Security
     Registrar's  procedures,  the Security Registrar shall reflect on its books
     and records the date and a decrease in the  principal  amount of the Global
     Security  in an amount  equal to the  principal  amount  of the  beneficial
     interest in the Global  Security to be  transferred,  and the Company shall
     execute,  and the  Trustee  shall  authenticate  and  deliver,  one or more
     certificated Notes of like tenor and amount.

     (c)  Transfers of Interests in the Offshore  Global  Notes.  The  following
provisions  shall apply with  respect to any  transfer of  interests in Offshore
Global Notes:

          (i) prior to the removal of the Legend from the Offshore  Global Notes
     pursuant to Section 701, the  Security  Registrar  shall refuse to register
     such transfer unless such transfer complies with this Section 703, and

          (ii) after such removal,  the Security  Registrar  shall  register the
     transfer of any such Note without requiring any additional certification.

     (d) Transfers to Non-U.S.  Persons at Any Time.  The  following  provisions
shall apply with respect to any transfer of a Note to a Non-U.S. Person:

          (i) The Security Registrar shall register any proposed transfer to any
     Non-U.S. Person if the Note to be transferred is an interest in U.S. Global
     Notes, upon receipt of a certificate  substantially in the form of Appendix
     D hereto from the proposed transferor.

          (ii) (a) If the  proposed  transferor  is an Agent  Member  holding  a
     beneficial  interest in the U.S. Global Notes, upon receipt by the Security
     Registrar of (x) the documents,  if any, required by paragraph (ii) and (y)
     instructions  in  accordance  with  the   Depositary's   and  the  Security
     Registrar's  procedures,  the Security Registrar shall reflect on its books
     and  records the date and a decrease  in the  principal  amount of the U.S.
     Global Notes in an amount equal to the principal  amount of the  beneficial
     interest  in the  U.S.  Global  Notes  to be  transferred,  and  (b) if the
     proposed  transferee  is an Agent  Member,  upon  receipt  by the  Security
     Registrar of instructions given in accordance with the Depositary's and the
     Security  Registrar's  procedures,  the Security Registrar shall reflect on
     its books and records the date and an increase in the  principal  amount of
     the Offshore Global Notes in an amount equal to the principal amount of the
     U.S.  Physical  Notes or the U.S.  Global Notes,  as the case may be, to be
     transferred, and the Trustee shall cancel the Certificated Note, if any, so
     transferred or decrease the amount of the U.S. Global Notes.

     Section 704. General. By its acceptance of any Note bearing the legends set
forth on the face of the form of Note,  each Holder of such a Note  acknowledges
the restrictions on transfer of such Note set forth in the Indenture and in such
legends  and agrees  that it will  transfer  such Note only as  provided  in the
Indenture.

     The Security  Registrar  shall  retain,  in  accordance  with its customary
procedures,  copies of all  letters,  notices and other  written  communications
received  pursuant to this  Section  704.  The  Company  shall have the right to
inspect  and  make  copies  of  all  such  letters,  notices  or  other  written
communications  at any  reasonable  time upon the giving of  reasonable  written
notice to the Security Registrar.


                                  ARTICLE EIGHT

                             SUPPLEMENTAL INDENTURES

     Section  801.  The  Company  and the  Trustee  shall  not  enter  into  any
supplemental  indenture  pursuant  to  Sections  901  and  902 of  the  Original
Indenture that would modify,  amend or eliminate any provision of the Notes that
materially  adversely  affects the interest of the Callholder  without the prior
written consent of the Callholder.


                                  ARTICLE NINE

                                SUNDRY PROVISIONS

     Section  901. No exchange of Notes for Exchange  Notes  pursuant to Section
305 of the Original  Indenture shall occur until a Registration  Statement shall
have been  declared  effective  by the  Commission  and that any Notes  that are
exchanged for Exchange Notes shall be canceled by the Trustee.

     Section  902.  The  Original  Indenture,  as  supplemented  by  this  Fifth
Supplemental  Indenture,  is in all respects  ratified and  confirmed,  and this
Fifth Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided.




         --------------------------------------------------------------


     This  instrument  may be  executed in any number of  counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
shall together constitute but one and the same instrument.


     In Witness Whereof,  the parties hereto have caused this Fifth Supplemental
Indenture to be duly executed as of the day and year first above written.

                                                   PSI ENERGY, INC.


                                                   By /S/ WILLIAM L. SHEAFER
                                                        William L. Sheafer
                                                   Vice President and Treasurer



                                                     FIFTH THIRD BANK

                                                              as Trustee


                                                     By /S/ KERRY R. BYRNE
                                                              Kerry R. Byrne
                                                              Vice President





NYDOCS01/573375 8
<PAGE>




                                                                      EXHIBIT A


                             (FORM OF FACE OF NOTE)

No. R-1                                                             $50,000,000

CUSIP No. 693627AG6

                                PSI ENERGY, INC.


                6% PUTABLE/CALLABLE NOTES DUE DECEMBER 14, 2016,
                       PUTABLE/CALLABLE DECEMBER 14, 2001


[Each Global Security, whether or not an Exchange Note, shall bear the following
legend: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY,  A NEW YORK  CORPORATION  ("DTC") TO ISSUER OR ITS
AGENT FOR  REGISTRATION  OF TRANSFER,  EXCHANGE,  OR PAYMENT AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

          [Unless and until a Note is exchanged  for an Exchange Note or sold in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, Notes shall bear the following legend: THE NOTES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT")
OR  ANY  STATE  SECURITIES   LAWS.   NEITHER  THIS  NOTE  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

         THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE  HEREOF AGREES TO OFFER, SELL
OR OTHERWISE  TRANSFER  SUCH NOTE,  PRIOR TO THE DATE (THE  "RESALE  RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE  COMPANY OR ANY  AFFILIATE  OF THE COMPANY
WAS THE OWNER OF THIS NOTE (OR ANY  PREDECESSOR  OF SUCH NOTE),  ONLY (A) TO THE
COMPANY OR ANY  SUBSIDIARY  THEREOF,  (B) PURSUANT TO A  REGISTRATION  STATEMENT
WHICH HAS BEEN DECLARED  EFFECTIVE  UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE  NOTES  ARE  ELIGIBLE  FOR  RESALE  PURSUANT  TO RULE  144A,  TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE  SECURITIES  ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED  INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE  THE  UNITED  STATES  WITHIN  THE  MEANING  OF  REGULATION  S UNDER  THE
SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,  CERTIFICATION AND/OR
OTHER INFORMATION  SATISFACTORY TO THE TRUSTEE AND THE COMPANY,  OR (E) PURSUANT
TO  ANOTHER  AVAILABLE  EXEMPTION  FROM  THE  REGISTRATION  REQUIREMENTS  OF THE
SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,  CERTIFICATION AND/OR
OTHER INFORMATION  SATISFACTORY TO THE TRUSTEE AND THE COMPANY SUBJECT,  IN EACH
OF THE FOREGOING  CASES,  TO A CERTIFICATE  OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS NOTE BEING  COMPLETED AND DELIVERED BY THE  TRANSFEROR TO
THE  TRUSTEE.  THIS LEGEND WILL BE REMOVED  UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.]

         PSI ENERGY,  INC., a corporation  duly organized and existing under the
laws of the State of Indiana  (herein called the "Company",  which term includes
any  successor  Person under the  Indenture  hereafter  referred  to), for value
received,  hereby  promises  to  pay  to   _______________________________,   or
registered  assigns,  the  principal  sum of Fifty  Million  and No/100  Dollars
($50,000,000)  on December 14, 2016,  and to pay interest  thereon from December
15, 1998 or from the most recent  Interest  Payment  Date to which  interest has
been paid or duly provided for, semi-annually on December 14 and June 14 in each
year, commencing June 14, 1999, at the rate of 6% per annum, until the principal
hereof is paid or made  available  for  payment.  The  interest so payable,  and
punctually  paid or duly  provided  for, on any Interest  Payment Date will,  as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more  Predecessor  Securities)  is registered at the close of business on
the Regular  Record Date for such  interest,  which  shall be the  Business  Day
preceding such Interest  Payment Date. Any such interest not so punctually  paid
or duly  provided for will  forthwith  cease to be payable to the Holder on such
Regular  Record  Date and may  either be paid to the  Person in whose  name this
Security (or one or more  Predecessor  Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted  Interest to
be fixed by the Trustee,  notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special  Record  Date,  or be
paid  at any  time  in  any  other  lawful  manner  not  inconsistent  with  the
requirements  of any securities  exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange,  all as
more fully provided in the Indenture.

         Payment of the principal of (and premium,  if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City of Cincinnati, in such coin or currency of the United States
of America as at the time of payment is legal  tender for  payment of public and
private debts;  provided,  however, that at the option of the Company payment of
interest  may be made by wire  transfer or by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.

         Any payment on this Security due on any day which is not a Business Day
in the City of New York  need  not be made on such  day,  but may be made on the
next  succeeding  Business  Day with the same force and effect as if made on the
due date and no interest  shall  accrue for the period from and after such date,
unless such payment is a payment at maturity or upon  redemption,  in which case
interest shall accrue thereon at the stated rate for such additional days.

         Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof,  including those describing the Call Option and the
Put Option, which further provisions shall for all purposes have the same effect
as if set forth at this place.

         Unless the  certificate of  authentication  hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

         IN WITNESS  WHEREOF,  the Company has caused this instrument to be duly
executed.

                                                PSI ENERGY, INC.



                                                By_____________________________


CERTIFICATE OF AUTHENTICATION

Dated:

                  This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

                                                FIFTH THIRD BANK,
                                                    as Trustee


                                                By_____________________________
                                                       Authorized Signatory





<PAGE>




                            (FORM OF REVERSE OF NOTE)


     This  Security  is one of a duly  authorized  issue  of  securities  of the
Company  (herein  called the  "Securities")  , issued and to be issued in one or
more series under an Indenture, dated as of November 15, 1996 as supplemented by
the fifth supplement to the Indenture dated December 15, 1998 (herein called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument,  as  supplemented),  between the  Company  and Fifth Third Bank,  as
Trustee (herein called the "Trustee",  which term includes any successor trustee
under the  Indenture),  and  reference  is hereby  made to the  Indenture  for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company,  the Trustee and the Holders of the Securities and of
the terms  upon  which the  Securities  are,  and are to be,  authenticated  and
delivered.  This  Security is one of the series  designated  on the face hereof,
limited in aggregate principal amount to $50,000,000.

     The  Securities  will not be subject to any sinking fund.  The terms of the
Securities include those stated in the Indenture.  The Securities of this series
are  subject to all such terms and  Holders  (including  the Holder  hereof) are
referred to the Indenture for a statement of those terms. Capitalized terms used
but not defined  herein shall have the respective  meanings  assigned to them in
the Indenture.

Interest Rate, Interest Payment Dates and Maturity Date.

     The Securities will bear interest, payable on each Interest Payment Date to
holders of record on the fifteenth  calendar day (whether or not a Business Day)
immediately preceding such Interest Payment Date, at 6% per annum until December
14, 2001 (the "Coupon Reset Date"),  whereupon (x) if all of the  Securities are
purchased  on such  date by the  Callholder  pursuant  to its Call  Option,  the
Securities  shall bear interest from and including the Coupon Reset Date to, but
excluding,  December  14, 2016 (the "Final  Maturity  Date") at the Coupon Reset
Rate  determined  in accordance  with the Coupon Reset Process  described in the
Indenture,  or (y) the Securities  shall be redeemed by the Company  pursuant to
the  exercise  of the Put Option by the  Trustee on behalf of the Holders of the
Securities.

     If (a) the  Exchange  Offer  Registration  Statement  is not filed with the
Commission  on or prior to the 120th  calendar day following the Closing Date or
(b) the Exchange Offer  Registration  Statement is not declared  effective on or
prior to the  180th  calendar  day  following  the  Closing  Date or (c) a Shelf
Registration  Statement is not declared  effective when required,  in accordance
with the terms of the  Registration  Rights  Agreement  dated  December 15, 1998
between  the  Company and  Warburg  Dillon  Read LLC (the  "Registration  Rights
Agreement"),  the annual  interest rate borne by the Notes shall be increased by
0.25% from the rate shown above  accruing  from such dates  specified in clauses
(a),  (b) or (c)  above.  Upon the  filing of the  Exchange  Offer  Registration
Statement, the effectiveness of the Exchange Offer Registration Statement or the
effectiveness  of a Shelf  Registration  Statement,  as the  case  may be,  such
additional  interest  will  cease to  accrue  from the  date of such  filing  or
effectiveness,  as the case may be; provided,  however, that, if, after the date
such additional interest ceases to accrue, a different event specified in clause
(a), (b) or (c) above occurs,  additional  interest may again commence  accruing
pursuant to the foregoing provisions. The Holder of this Note is entitled to the
benefits of such Registration Rights Agreement.

Call Option; Put Option

     The Callholder may call the Securities (the "Call Option") by notifying the
Trustee by 4:00 p.m.,  New York time,  on the day that is fifteen  calendar days
prior to the Coupon Reset Date of its  intention  to purchase  all, but not less
than all, of the Securities at a price equal to 100% of the principal  amount of
the  Securities  on the Coupon  Reset  Date.  If the Call Option  terminates  in
accordance with the terms of the Indenture, then the Trustee is obliged, without
further  action by any  holder  of  Securities  or any  owner of any  beneficial
interest  therein,  to exercise on behalf of such Holders their right to require
the  Company  to  repurchase  the  Securities  at a price  equal  to 100% of the
principal amount of the Securities on the Coupon Reset Date (the "Put Option").

Optional Redemption

     The Securities of this series are subject to optional redemption,  in whole
but not in  part,  from  time to  time  and at any  time  (such  redemption,  an
"Optional  Redemption",  and the date thereof,  the "Optional  Redemption Date")
upon not less than 30 days' notice to the holders,  at a redemption  price equal
to the  sum of (A)  the  greater  of (i)  100% of the  principal  amount  of the
Securities  of this series to be redeemed or (ii) the sum of the present  values
of  the  Remaining   Scheduled  Payments  thereon  discounted  to  the  Optional
Redemption  Date on a semiannual  basis  (assuming a 360-day year  consisting of
twelve 30-day months) at the Make Whole Treasury Rate plus 20 basis points, less
the Applicable  Accrued Interest Amount plus (B) the Applicable Accrued Interest
Amount.

     "Applicable  Accrued  Interest  Amount" means,  at the Optional  Redemption
Date, the amount of interest  accrued and unpaid from the prior interest payment
date to the Optional Redemption Date on the Securities of this series subject to
the  Optional  Redemption  determined  at the rate per annum  shown in the title
thereof, computed on the basis of a 360-day year of twelve 30-day months.

     "Comparable  Treasury  Issue"  means the United  States  Treasury  security
selected by an Independent  Investment Banker as having a maturity that would be
utilized,  at the time of selection and in accordance  with customary  financial
practice,  in pricing new issues of  corporate  debt  securities  of  comparable
maturity to the remaining  term of the  Securities of this series to be redeemed
pursuant to the Optional Redemption.  "Independent  Investment Banker" means one
of the Reference  Treasury Dealers  appointed by the Trustee after  consultation
with the Company.

     "Comparable  Treasury Price" means, with respect to the Optional Redemption
Date, the average of the Reference  Treasury Dealer Quotations for such Optional
Redemption Date.

     "Make Whole Treasury Rate" means,  with respect to the Optional  Redemption
Date (if any),  the rate per annum equal to the semiannual  equivalent  yield to
maturity of the Comparable  Treasury Issue,  assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal  amount) equal to the
Comparable Treasury Price for such Optional Redemption Date.

     "Reference  Treasury  Dealer"  means a primary U.S.  Government  securities
dealer in New York City.  "Reference  Treasury Dealer  Quotations"  means,  with
respect to each Reference  Treasury Dealer and any redemption date, the average,
as  determined  by the Trustee,  of the bid and asked prices for the  Comparable
Treasury Issue (expressed in each case as a percentage of its principal  amount)
quoted in writing to the Trustee by such Reference  Treasury Dealer at 5:00 p.m.
on the third Business Day preceding such redemption date.

     "Remaining  Scheduled  Payments"  means,  with respect to any Securities of
this  series,  that  amount of  interest  that is  unpaid  and would but for the
Optional  Redemption  accrue to but  excluding  the Coupon Reset Date or, if the
final  Optional  Redemption  Date occurs on or after the Coupon Reset Date,  the
Maturity Date plus 100% of the principal amount thereof scheduled to be received
on the Coupon Reset Date or the Maturity Date, as the case may be.

     [INCLUDE IF  SECURITY IS A GLOBAL  SECURITY -- In the event of a deposit or
withdrawal  of an interest in this  Security,  including an exchange,  transfer,
repurchase  or  conversion  of this  Security  in part  only,  the  Trustee,  as
custodian of the Depositary,  shall make an adjustment on its records to reflect
such deposit or withdrawal in  accordance  with the rules and  procedures of the
Depositary.]

     [INCLUDE  IF  SECURITY  IS A  RESTRICTED  SECURITY  --  Subject  to certain
limitations  in the  Indenture,  at any time when the  Company is not subject to
Section 13 or 15(d) of the U.S.  Securities  Exchange  Act of 1934,  as amended,
upon the request of a Holder of a Restricted Security, the Company will promptly
furnish or cause to be furnished  Rule 144A  Information  (as defined  below) to
such Holder of Restricted Securities,  or to a prospective purchaser of any such
security  designated  by any such  Holder,  to the  extent  required  to  permit
compliance by any such Holder with Rule 144A under the  Securities  Act of 1933,
as  amended  (the  "Securities  Act").  "Rule  144A  Information"  shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto).]

Discharge and Defeasance

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness of this Security upon compliance with certain  conditions set forth
in the Indenture.

Events of Default

     If an Event of Default  with  respect to  Securities  of this series  shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

Amendments to Indenture; Waiver of Defaults

     The Indenture  permits,  with certain  exceptions as therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal  amount of the  Securities  at
the time outstanding of each series to be affected.  The Indenture also contains
provisions  permitting  the  Holders of a majority  in  principal  amount of the
Securities of each series at the time  outstanding,  on behalf of the Holders of
all Securities of such series,  to waive  compliance by the Company with certain
provisions of the  Indenture  and certain past defaults  under the Indenture and
their  consequences.  Any such consent or waiver by the Holder of this  Security
shall be conclusive  and binding upon such Holder and upon all future Holders of
this  Security  and of any  Security  issued upon the  registration  of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the  Indenture,  the Holder
of this  Security  shall not have the right to  institute  any  proceeding  with
respect to the Indenture or for the  appointment of a receiver or trustee or for
any other remedy thereunder,  unless such Holder shall have previously given the
Trustee  written  notice of a  continuing  Event of Default  with respect to the
Securities of this series,  the Holders of not less than 35% in principal amount
of the Securities of this series at the time outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee  reasonably  satisfactory  indemnity,
and the  Trustee  shall not have  received  from the  Holders of a  majority  in
principal  amount  of  Securities  of this  series  at the  time  outstanding  a
direction inconsistent with such request, and shall have failed to institute any
such proceeding,  for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this  Security for the  enforcement  of any payment of  principal  hereof or any
premium  or  interest  hereon on or after  the  respective  due dates  expressed
herein.

Obligations Unconditional

     No reference  herein to the  Indenture and no provision of this Security or
of the Indenture  shall alter or impair the obligation of the Company,  which is
absolute and unconditional, to pay the principal of and any premium and interest
on this  Security  at the  times,  place  and rate and in the coin or  currency,
herein prescribed.

Transfer and Exchange

     As provided in the Indenture and subject to certain limitations therein set
forth,  the transfer of this Security is registrable  in the Security  Register,
upon  surrender of this Security for  registration  of transfer at the office or
agency of the  Company in any place where the  principal  of and any premium and
interest on this  Security are payable,  duly endorsed by, or  accompanied  by a
written  instrument  of  transfer  in form  satisfactory  to the Company and the
Security  Registrar  duly  executed by, the Holder  hereof or his attorney  duly
authorized in writing,  and thereupon one or more new  Securities of this series
and of like  tenor,  of  authorized  denominations  and for the  same  aggregate
principal amount, will be issued to the designated transferee or transferees.

     The Securities of this series are issuable only in registered  form without
coupons in  denominations  of $100,000 and any  integral  multiple  thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

     No service  charge shall be made for any such  registration  of transfer or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this  Security is  registered  as the owner  hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

CUSIP Number

     Pursuant  to a  recommendation  promulgated  by the  Committee  on  Uniform
Security Identification  Procedures, the Company has caused a CUSIP number to be
printed  on  this  Security  as  a  convenience   to  the  Holder   hereof.   No
representation  is made as to the  accuracy of such number and  reliance  may be
placed only on the other identifying information printed hereon.

Governing Law

     The  Indenture  and this  Security  shall be governed by and  construed  in
accordance with the laws of the State of New York.





<PAGE>




                                 ASSIGNMENT FORM


                  If you want to assign  this  Security,  fill in the form below
and have your signature guaranteed:

                  I or we assign and transfer this Security to:

 -------------------------------------------------------------------------------
Print or type name, address and zip code and social security or tax ID number of
assignee)

                  and irrevocably  appoint  ___________________________________,
agent to  transfer  this  Security  on the books of the  Company.  The agent may
substitute another to act for him.




                  Date:_____________              Signed:_______________________

     (Sign exactly as your name appears on the other side of this Security)

                 Signature Guarantee: _________________________

     In  connection  with any transfer of this Security  occurring  prior to the
earlier of (a) the date a  Registration  Statement is declared  effective or (b)
December 15, 2000, the undersigned confirms that it has not utilized any general
solicitation  or general  advertising  in connection  with the transfer and that
this Security is being transferred:

                                   [Check One]

     (1) |_| to the Company or a subsidiary thereof; or

     (2) |_| pursuant to and in compliance  with Rule 144A under the  Securities
     Act; or

     (3) |_| outside the United States to a "foreign  person" in compliance with
     Rule 904 of Regulation S under the Securities Act; or

     (4) |_| pursuant to the exemption  from  registration  provided by Rule 144
     under the Securities Act; or

     (5) |_|  pursuant  to another  available  exemption  from the  registration
     requirements of the Securities Act.

     Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities  evidenced by this certificate in the name of any Person other
than the  registered  Holder  thereof;  provided  that if box (3), (4) or (5) is
checked, the Company may require,  prior to registering any such transfer of the
Securities,  in  its  sole  discretion,  such  legal  opinions,   certifications
(including  an  investment  letter  in the  case of box (3) or  (4))  and  other
information as the Company may reasonably  request to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.

     If  none of the  foregoing  boxes  is  checked,  the  Trustee  or  Security
Registrar  shall not be obligated to register  this  Security in the name of any
Person other than the Holder hereof unless and until the  conditions to any such
transfer of registration  set forth herein and in Article 6 of the  Supplemental
Indenture shall have been satisfied.

                  Date:___________    Signed:___________________________________
                                             (Sign exactly as your name appears
                                             on the other side of this Security)

                  Signature Guarantee:___________________________

                  TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

     The undersigned represents and warrants that it is purchasing this Security
for its own  account  or an account  with  respect  to which it  exercises  sole
investment  discretion  and  that  it  and  any  such  account  is a  "qualified
institutional  buyer" within the meaning of Rule 144A under the  Securities  Act
and is aware  that the sale to it is being  made in  reliance  on Rule  144A and
acknowledges that it has received such information  regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such  information  and that it is aware that the  transferor is relying upon the
undersigned's  foregoing  representations  in order to claim the exemption  from
registration provided by Rule 144A.

                  Date:_____________  Signed:___________________________________






<PAGE>



                                                                      APPENDIX A

                                                           December 15, 1998

                                 Acknowledgment


PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana  46168

Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio  45263

Ladies and Gentlemen:

     Reference  is made to the  Indenture  dated as of  November  15,  1996,  as
supplemented by the Fifth Supplemental Indenture (the "Supplemental  Indenture")
dated as of December 15, 1998 (as  supplemented,  the  "Indenture")  between PSI
Energy,  Inc.,  an Indiana  corporation,  and Fifth Third Bank,  an Ohio banking
corporation,  as  Trustee,  in  connection  with  the  offering  of  $50,000,000
aggregate principal amount of 6%  Putable/Callable  Notes due December 14, 2016,
Putable/Callable  December  14,  2001.  Capitalized  terms used but not  defined
herein shall have the meaning given to such terms in the Indenture.

     The undersigned  hereby  acknowledges its obligations as Calculation  Agent
under  Article 3 of the  Supplemental  Indenture.  The  acknowledgment  shall be
binding upon any Persons who are successors to the Calculation Agent.

                                        Very truly yours,

                                        Warburg Dillon Read LLC


                                        By:_________________________
                                           Name:
                                           Title:


                                        By:_________________________
                                           Name:
                                           Title:



NYDOCS01/573375 8


<PAGE>



                                                                      APPENDIX B


                Form of Put Notice to be Delivered by the Trustee
                 to the Company Upon Exercise of the Put Option


PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana  46168

Attention:  Treasurer

         Fifth  Third  Bank,  as  Trustee  for PSI  Energy,  Inc.'s  $50,000,000
aggregate principal amount of 6%  Putable/Callable  Notes due December 14, 2016,
Putable/Callable  December 14,  2001,  issued  under the  Indenture  dated as of
November 15, 1996, as  supplemented  by the Fifth  Supplemental  Indenture  (the
"Supplemental  Indenture")  dated as of December 15, 1998 hereby gives notice of
exercise of the Put Option (as defined in the Supplemental  Indenture)  pursuant
to Section 302 of the Supplemental Indenture.

                                                     Fifth Third Bank


                                                     -------------------------
                                                     Authorized Officer










NYDOCS01/573375 8


<PAGE>



                                                                      APPENDIX C

                            Form of Certificate to Be
                          Delivered in Connection with
                    Transfers to Non-QIB Accredited Investors

                                                                             


Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio  45263
Attention: Corporate Trust Department

                      Re: PSI Energy, Inc. (the "Company")
         6% Putable/Callabale Notes due December 14, 2016 (the "Notes")

Dear Sirs:

     In connection with our proposed purchase of $  _________________  aggregate
principal amount of the Notes, we confirm that: 

     1. We understand  that any  subsequent  transfer of the Notes is subject to
certain  restrictions  and  conditions  set forth in the  Indenture  dated as of
November 15, 1996, as supplemented by the Fifth Supplemental  Indenture dated as
of December 15, 1998 (as  supplemented,  the "Indenture")  relating to the Notes
and the  undersigned  agrees  to be  bound  by,  and not to  resell,  pledge  or
otherwise  transfer the Notes except in compliance  with such  restrictions  and
conditions and the Securities Act of 1933, amended (the "Securities Act").

     2. We  understand  that  the  offer  and  sale of the  Notes  have not been
registered  under the  Securities  Act, and that the Notes may not be offered or
sold except as permitted in the following sentence.  We agree, on our own behalf
and on behalf of any  accounts  for which we are acting as  hereinafter  stated,
that if we should  sell any Notes  within the time  period  referred  to in Rule
144(k)  of the  Securities  Act,  we will do so only (A) to the  Company  or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified  institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has  furnished  on its  behalf  by a U.S.  broker-dealer)  to you and to the
Company a signed  letter  substantially  in the form of this letter and, if such
transfer  is in respect of an  aggregate  of less than  $100,000,  an opinion of
counsel  acceptable to the Company that such transfer is in compliance  with the
Securities  Act, (D) outside the United  States in  accordance  with Rule 904 of
Regulation  S under the  Securities  Act,  (E)  pursuant to the  exemption  from
registration provided by Rule 144 under the Securities Act (if available) or (F)
pursuant to an effective registration statement under the Securities Act, and we
further  agree to provide to any  person  purchasing  any of the Notes from us a
notice  advising  such  purchaser  that resales of the Notes are  restricted  as
stated herein.

     3. We  understand  that,  on any proposed  resale of any Notes,  we will be
required to furnish to you and the Company such  certifications,  legal opinions
and other  information as you and the Company may reasonably  require to confirm
that the proposed  sale complies  with the  foregoing  restrictions.  We further
understand  that the Notes  purchased by us will bear a legend to the  foregoing
effect.

     4.  We are an  institutional  "accredited  investor"  (as  defined  in Rule
501(a)(1),  (2), (3) or (7) of Regulation D under the  Securities  Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating  the merits and risks of our  investment in the Notes,  and we and
any accounts for which we are acting are each able to bear the economic  risk of
our or its investment.

     5. We are  acquiring  the Notes  purchased by us for our own account or for
one or more accounts (each of which is an institutional  "accredited  investor")
as to each of which we exercise sole investment discretion.

     You and  the  Company  are  entitled  to  rely  upon  this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.

                                                  Very truly yours,
                                                  [Name of Transferee]


                                                  By:                           
                                                     Authorized Signature







<PAGE>


                                                                      APPENDIX D


                     Form of Certificate to Be Delivered in
               Connection with Transfers Pursuant to Regulation S
                                                                           

Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio  45263
Attention: Corporate Trust Department

                      Re: PSI Energy, Inc. (the "Company")
          6% Putable/Callable Notes due December 14, 2016 (the "Notes")


Dear Sirs:

     In  connection  with our  proposed  sale of  U.S.$______________  aggregate
principal  amount of the  Notes,  we  confirm  that such sale has been  effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that: 

     (1) the offer of the Notes was not made to a person in the United States;

     (2) at the time the buy order was  originated,  the  transferee was outside
the United States or we and any person acting on our behalf reasonably  believed
that the transferee was outside the United States;

     (3) no directed  selling  efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and

     (4)  the  transaction  is not  part  of a  plan  or  scheme  to  evade  the
registration requirements of the U.S. Securities Act of 1933.

     You and  the  Company  are  entitled  to  rely  upon  this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.  Terms used in this  certificate have the
meanings set forth in Regulation S.

                                                  Very truly yours,

                                                  [Name of Transferor]

                                                  By:                        
                                                      Authorized Signature

NYDOCS01/573375 8