Edgar Filing: CENTRAL HUDSON GAS & ELECTRIC CORP

form10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________

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


0-30512	CH Energy Group, Inc. (Incorporated in New York) 284 South Avenue Poughkeepsie, New York 12601-4839 (845) 452-2000	14-1804460


1-3268	Central Hudson Gas & Electric Corporation (Incorporated in New York) 284 South Avenue Poughkeepsie, New York 12601-4839 (845) 452-2000	14-0555980

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

Title of each class		Name of each exchange on which registered
CH Energy Group, Inc. Common Stock, $0.10 par value		New York Stock Exchange

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

Title of each class
Central Hudson Gas & Electric Corporation Cumulative Preferred Stock 4.50% Series 4.75% Series

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

CH Energy Group, Inc.	Yes þ		No o
Central Hudson Gas & Electric Corporation	Yes o		No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

CH Energy Group, Inc.	Yes o		No þ
Central Hudson Gas & Electric Corporation	Yes o		No þ

Indicate by check mark whether the Registrant (1) has 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

CH Energy Group, Inc.	Yes þ		No o
Central Hudson Gas & Electric Corporation	Yes þ		No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

CH Energy Group, Inc.	Yes þ		No o
Central Hudson Gas & Electric Corporation	Yes þ		No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrants is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

CH Energy Group, Inc.		Central Hudson Gas & Electric Corporation
Large Accelerated Filer þ		Large Accelerated Filer o
Accelerated Filer o		Accelerated Filer o
Non-Accelerated Filer o		Non-Accelerated Filer þ
Smaller Reporting Company o		Smaller Reporting Company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

CH Energy Group, Inc.	Yes o		No þ
Central Hudson Gas & Electric Corporation	Yes o		No þ

The aggregate market value of the voting and non-voting common equity of CH Energy Group held by non-affiliates as of February 1, 2011, was $780,278,742 based upon the price at which CH Energy Group’s Common Stock was last traded on that date, as reported on the New York Stock Exchange listing of composite transactions.

The aggregate market value of the voting and non-voting common equity of CH Energy Group held by non-affiliates as of June 30, 2010, the last business day of CH Energy Group’s most recently completed second fiscal quarter, was $620,909,078 computed by reference to the price at which CH Energy Group’s Common Stock was last traded on that date, as reported on the New York Stock Exchange listing of composite transactions.

The aggregate market value of the voting and non-voting common equity of Central Hudson held by non-affiliates as of June 30, 2010 was zero.

The number of shares outstanding of CH Energy Group’s Common Stock, as of February 1, 2011, was 15,687,148.

The number of shares outstanding of Central Hudson’s Common Stock, as of February 1, 2011, was 16,862,087. All such shares are owned by CH Energy Group.

CENTRAL HUDSON MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (I)(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (I)(2).

DOCUMENTS INCORPORATED BY REFERENCE

CH Energy Group’s definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on April 26, 2011, is incorporated by reference in Part III hereof. Information required by Part III hereof with respect to Central Hudson has been omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations or acronyms used herein.

CH Energy Group Companies and Investments
CHEC	Central Hudson Enterprises Corporation (the parent company of Griffith (not regulated by the PSC) and wholly owned subsidiary of CH Energy Group)
Cornhusker Holdings	Cornhusker Energy Lexington Holdings, LLC (a CHEC investment)
JB Wind	JB Wind Holdings, LLC (a CH-Community Wind investee company)

Regulators
NYS	New York State
PSC	NYS Public Service Commission
FERC	Federal Energy Regulatory Commission
DEC	NYS Department of Environmental Conservation

Terms Related to Business Operations Used By CH Energy Group
1993 PSC Policy	PSC’s 1993 Statement of Policy regarding pension and other post-employment benefits
2006 Rate Order	Order Establishing Rate Plan issued by the PSC to Central Hudson on July 24, 2006
2009 Rate Order	Order Establishing Rate Plan issued by the PSC to Central Hudson on June 22, 2009
2010 Rate Order	Order Establishing Rate Plan issued by the PSC to Central Hudson on June 18, 2010
Dth	Decatherms
Distributed Generation	An electrical generating facility located at a customer’s point of delivery which may be connected in parallel operation to the utility system
kWh	Kilowatt-hour(s)
Mcf	Thousand Cubic Feet
MGP	Manufactured Gas Plant
MW / MWh	Megawatt(s) / Megawatt-hour(s)
OPEB	Other Post-Employment Benefits
RDMs	Revenue Decoupling Mechanisms
Retirement Plan	Central Hudson’s Non-Contributory Defined Benefit Retirement Income Plan
ROE	Return on Equity
ROW	Right-of-Way

(i)

Settlement Agreement	Amended and Restated Settlement Agreement dated January 2, 1998, and thereafter amended, among Central Hudson, PSC Staff, and Certain Other Parties
Temporary State Assessment	New York State Temporary State Energy and Utility Service Conservation Assessment required to be collected from April 4, 2009 to March 31, 2014

Other
COSO	Committee of Sponsoring Organizations of the Treadway Commission
EITF	FASB Emerging Issues Task Force
Exchange Act	Securities Exchange Act of 1934
GAAP	Accounting Principles Generally Accepted in the United States of America
NYISO	New York Independent System Operator
NYSERDA	New York State Energy Research and Development Authority
Registrants	CH Energy Group and Central Hudson
SFAS	Statement of Financial Accounting Standards

(ii)

TABLE OF CONTENTS

PART I		PAGE
ITEM 1	BUSINESS	2
ITEM 1A	RISK FACTORS	13
ITEM 1B	UNRESOLVED STAFF COMMENTS	16
ITEM 2	PROPERTIES	16
ITEM 3	LEGAL PROCEEDINGS	19

PART II
ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	19
ITEM 6	SELECTED FINANCIAL DATA OF CH ENERGY GROUP AND ITS SUBSIDIARIES	23
ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	81
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	83
ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	185
ITEM 9A	CONTROLS AND PROCEDURES	185
ITEM 9B	OTHER INFORMATION	185

(iii)

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PART III
ITEM 10	DIRECTORS AND EXECUTIVE OFFICERS OF CH ENERGY GROUP	186
ITEM 11	EXECUTIVE COMPENSATION	187
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	187
ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	187
ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	188

PART IV
ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	188

(iv)

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PART I

FILING FORMAT

This 10-K Annual Report for the fiscal year ended December 31, 2010, is a combined report being filed by two different Registrants: CH Energy Group and Central Hudson. Any references in this 10-K Annual Report to CH Energy Group include all subsidiaries of CH Energy Group, including Central Hudson, except where the context clearly indicates otherwise. Central Hudson makes no representation as to the information contained in this 10-K Annual Report in relation to CH Energy Group and its subsidiaries other than Central Hudson. When this 10-K Annual Report is incorporated by reference into any filing with the SEC made by Central Hudson, the portions of this 10-K Annual Report that relate to CH Energy Group and its subsidiaries, other than Central Hudson, are not incorporated by reference therein.

CH Energy Group’s wholly owned subsidiaries include Central Hudson and CHEC. For additional information, see the sub-caption “CHEC and Its Subsidiaries and Investments” in Item 1 - ”Business” under the caption “Subsidiaries of CH Energy Group.”

FORWARD-LOOKING STATEMENTS

Statements included in this Annual Report on Form 10-K and any documents incorporated by reference which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Exchange Act. Forward-looking statements may be identified by words including “anticipates,” “intends,” “estimates,” “believes,” “projects,” “expects,” “plans,” “assumes,” “seeks,” and similar expressions. Forward-looking statements including, without limitation, those relating to CH Energy Group’s and Central Hudson’s future business prospects, revenues, proceeds, working capital, investment valuations, liquidity, income, and margins, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to several important factors, including those identified from time-to-time in the forward-looking statements. Those factors include, but are not limited to: deviations from normal seasonal weather and storm activity; fuel prices; plant capacity factors; energy supply and demand; potential future acquisitions; the ability of the Company to divest non-core assets at acceptable prices within expected time frames, legislative, regulatory, and competitive developments; interest rates; access to capital; market risks; electric and natural gas industry restructuring and cost recovery; the ability to obtain adequate and timely rate relief; changes in fuel supply or costs including future market prices for energy, capacity, and ancillary services; the success of strategies to satisfy electricity, natural gas, fuel oil, and propane requirements; the outcome of pending litigation and certain environmental matters, particularly the status of inactive hazardous waste disposal sites and waste site remediation requirements; and certain presently unknown or unforeseen factors, including, but not limited to, acts of terrorism. CH Energy Group and Central Hudson undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

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Given these uncertainties, undue reliance should not be placed on the forward-looking statements.

ITEM 1 - Business

CORPORATE STRUCTURE

CH Energy Group is the holding company parent corporation of two principal, wholly owned subsidiaries, Central Hudson and CHEC. Central Hudson is a regulated electric and natural gas subsidiary. CHEC, the parent company of CH Energy Group’s unregulated businesses and investments, has six wholly owned subsidiaries, Griffith Energy Service, Inc. (“Griffith”), CH-Auburn Energy, LLC (“CH-Auburn”), CH-Greentree, LLC (“CH-Greentree”), CH-Lyonsdale, LLC (“CH-Lyonsdale”), Lyonsdale Biomass, LLC (“Lyonsdale”) and CH Shirley Wind, LLC (“CH Shirley”). CHEC also has ownership interests in certain subsidiaries that are less than 100%. For more information, see sub-caption “CHEC and Its Subsidiaries and Investments” under caption “Subsidiaries of CH Energy Group.”

For a discussion of CH Energy Group’s and its subsidiaries’ capital structure and financing program, see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report under the sub-captions “Capital Structure” and “Financing Program” under the caption “Capital Resources and Liquidity.” For a discussion of short-term borrowing, capitalization, and long-term debt, see Note 7 - “Short-Term Borrowing Arrangements,” Note 8 - “Capitalization - Common and Preferred Stock,” and Note 9 - “Capitalization - Long-Term Debt,” respectively, to the financial statements contained in Item 8 - “Financial Statements and Supplementary Data” of this 10-K Annual Report (each Note being hereinafter called a “Note”). For information concerning revenues, certain expenses, earnings per share, and information regarding assets of Central Hudson’s regulated electric and regulated natural gas segments and of Griffith, see Note 13 - “Segments and Related Information.”

HOLDING COMPANY REGULATION

CH Energy Group is a “holding company” under Public Utility Holding Company Act of 2005 (“PUHCA 2005”) because of its ownership interests in Central Hudson and CHEC. CH Energy Group, however, is exempt from regulation as a holding company under PUHCA 2005, because it derives substantially all of its public utility company revenues from business conducted within a single state, the State of New York. CH Energy Group will retain this exemption until such time as it derives more than 13% of its public utility revenues from businesses conducted outside of the State of New York. At the present time, CH Energy Group cannot predict whether and when its circumstances may change such that it no longer qualifies for exemption from PUHCA 2005 or whether regulation under PUHCA 2005 would have a material impact on its financial condition or results of operations.

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SUBSIDIARIES OF CH ENERGY GROUP

Central Hudson

Central Hudson is a New York State natural gas and electric corporation formed in 1926. Central Hudson purchases, sells at wholesale, and distributes electricity and natural gas at retail in portions of New York State. Central Hudson also generates a small portion of its electricity requirements.

Central Hudson serves a territory extending about 85 miles along the Hudson River and about 25 to 40 miles east and west of the Hudson River. The southern end of the territory is about 25 miles north of New York City and the northern end is about 10 miles south of the City of Albany. The territory, comprising approximately 2,600 square miles, has a population estimated at 688,000. Electric service is available throughout the territory, and natural gas service is provided in and about the cities of Poughkeepsie, Beacon, Newburgh, and Kingston, New York, and in certain outlying and intervening territories. The number of Central Hudson employees at December 31, 2010, was 856.

Central Hudson’s territory reflects a diversified economy, including manufacturing industries, research firms, farms, governmental agencies, public and private institutions, resorts, and wholesale and retail trade operations.

Seasonality

Central Hudson’s delivery revenues have historically varied seasonally in response to weather. Sales of electricity are usually highest during the summer months, primarily due to the use of air-conditioning and other cooling equipment. Sales of natural gas are highest during the winter months, primarily due to space heating usage. Central Hudson’s rates are developed based on forecasts of monthly sales volumes, which reflect natural seasonality under normal weather conditions. Effective July 1, 2009 and continuing in the 2010 Rate Order through June 30, 2013, Central Hudson’s delivery rate structure includes revenue decoupling mechanisms (“RDMs”), which provide the ability to record revenues equal to those forecasted in the development of current rates for most of Central Hudson’s customers. As a result, fluctuations in actual sales volumes as compared to those under normal weather conditions, no longer have a significant impact on earnings. However, higher expenses incurred due to storm activity than the amount set in rates may impact the Company’s earnings. Central Hudson has the ability to request regulatory recovery of significant incremental costs incurred if certain criteria are met as defined by the PSC and, as such, any impact on earnings for higher storm expenses should be limited to non-material amounts, as long as the other criteria for deferred accounting were met.

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Competition

Central Hudson is a regulated utility with a legal obligation to deliver electricity and natural gas within its PSC-approved franchise territory. Central Hudson has no direct competitors in its electricity distribution business; indirect competitors include distributed generation systems, including net metered systems. To date, the primary source of competition is solar net metered systems, which are currently capped at 12 MW. Central Hudson was authorized by the PSC to defer lost revenues attributable to photovoltaic net metering through June 30, 2009, under an order issued in Case 07-E-0437 on October 19, 2007. Beginning July 1, 2009, Central Hudson no longer has the authorization to defer lost revenues attributable to photovoltaic net metering since the RDM provides similar protection. Central Hudson’s natural gas business competes with other fuels, especially fuel oil and propane.

The competitive marketplace continues to develop for electric and natural gas supply markets, and Central Hudson’s electric and natural gas customers may purchase energy and related services from other providers. Central Hudson’s rate making structure neutralizes any earnings impact of customers’ decisions to purchase electricity and natural gas from other providers.

Regulation

Central Hudson is subject to regulation by the PSC regarding, among other things, services rendered (including the rates charged), major transmission facility siting, accounting treatment of certain items, and issuance of securities. For certain restrictions imposed by the Settlement Agreement, see Note 2 - “Regulatory Matters.”

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

Central Hudson is not subject to the provisions of the Natural Gas Act. Central Hudson’s hydroelectric facilities are not required to be licensed under the Federal Power Act but are regulated by the DEC.

Central Hudson is subject to regulation by the North American Electric Reliability Corporation regarding its ownership, operation and use of bulk power system.

Rates

General: The electric and natural gas rates charged by Central Hudson applicable to service supplied to retail customers within New York State are regulated by the PSC. Costs of service, both for electric and gas delivery service and for electric and gas supply costs, are recovered from customers through PSC approved tariffs, subject to a standard of prudency. Both transmission rates and rates for electricity sold for resale which involve interstate commerce are regulated by FERC.

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The 2009 Rate Order provides for implementation of both Electric and Gas RDMs. RDMs are intended to minimize the earnings impact resulting from reduced energy consumption as energy efficiency programs are implemented by breaking the link between energy sales and utility revenues and/or profits. Central Hudson’s RDMs allow the Company to recognize electric delivery revenues and gas sales per customer at the levels approved in rates for most of Central Hudson’s electric and gas customer classes.

Central Hudson’s retail electricity rate structure consists of various service classifications covering delivery service and full service (which includes electricity supply) for residential, commercial, and industrial customers. Retail rates for delivery and supply are shown separately on retail bills to allow customers to see the costs associated with their commodity supply, and thus facilitate retail competition. During 2010, the average price of electricity for full service customers was 14.94 cents per kWh as compared to an average of 14.20 cents per kWh in 2009. The PSC has authorized Central Hudson to recover the costs of the electric commodity from customers, without earning a profit on the commodity costs. The average delivery price in 2010 was 5.26 cents per kWh and 4.44 cents per kWh in 2009. The increase in delivery price was primarily due to the implementation of new rates as part of the 2009 Rate Order and the 2010 Rate Order. The year over year increase related to the Rate Orders was approximately 0.51 cents per kWh. The additional increase is associated with updated surcharges to cover additional assessments from New York State agencies. The average delivery price in 2010 includes a surcharge of approximately 0.07 cents per kWh resulting from the Electric RDM.

Central Hudson’s retail natural gas rate structure consists of various service classifications covering transport, retail access service, and full service (which includes natural gas supply) for residential, commercial, and industrial customers. During 2010, the average price of natural gas for full-service customers was $14.86 per Mcf as compared to an average of $15.83 per Mcf in 2009. The PSC has authorized Central Hudson to recover the costs of the gas commodity from customers, without earning a profit on the commodity costs. The average delivery price for natural gas for retail and full service in 2010 was $6.67 per Mcf and $5.14 per Mcf in 2009. The increase in delivery price was primarily due to the implementation of new rates as part of the 2009 Rate Order and the 2010 Rate Order. The average delivery price in 2010 includes a surcharge of approximately $0.05 per Mcf resulting from the Gas RDM. The increase in the average delivery price was more than offset by the decrease in gas commodity costs.

For further information regarding the terms of the 2006 Rate Order, 2009 Rate Order and 2010 Rate Order under which Central Hudson operated during the current reporting period, see Note 2 - “Regulatory Matters” under the captions “2006 Rate Order”, “2009 Rate Order” and “2010 Rate Order.”

Cost Adjustment Clauses and RDMs: For information regarding Central Hudson’s electric and natural gas cost adjustment clauses and RDMs, see Note 1 - “Summary of Significant Accounting Policies” under the caption “Rates, Revenues and Cost Adjustment Clauses.”

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Capital Expenditures and Financing

For estimates of future capital expenditures for Central Hudson, see the sub-caption “Anticipated Sources and Uses of Cash” in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report under the caption “Capital Resources and Liquidity.”

Central Hudson’s Certificate of Incorporation and its various debt instruments do not contain any limitations upon the issuance of authorized, but unissued, Preferred Stock or unsecured short-term debt.

Central Hudson has in place certain credit facilities with financial covenants that limit the amount of indebtedness Central Hudson may incur. Additionally, Central Hudson’s ability to issue debt securities is limited by authority granted by the PSC. Central Hudson believes these limitations will not impair its ability to issue any or all of the debt described under the sub-caption “Financing Program” in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report under the caption “Capital Resources and Liquidity.”

Purchased Power and Generation Costs

For the year ended December 31, 2010, the sources and related costs of purchased electricity and electric generation for Central Hudson were as follows (In Thousands):

Sources of Energy	Aggregate Percentage of Energy Requirements			Costs in 2010
Purchased Electricity		98.2	%	$	245,933
Hydroelectric and Other		1.8	%		65
		100.0	%

Deferred Electricity Cost					118
Total				$	246,116

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Research and Development

Central Hudson is engaged in the conduct and support of research and development (“R&D”) activities, which are focused on the improvement of existing energy technologies and the development of new technologies, including renewable energy sources, for the delivery and use of energy. Central Hudson’s R&D expenditures were $3.1 million in 2010 and $3.9 million in both 2009 and 2008. These expenditures were for internal research programs and for contributions to research administered by NYSERDA, the Electric Power Research Institute, and other industry organizations. Recovery of expenditures for R&D is provided for in Central Hudson’s rates charged to customers for electric and natural gas delivery service with any differences between R&D expense and the rate allowances deferred for future recovery from or return to customers.

Other Central Hudson Matters

Labor Relations: Central Hudson has an agreement with Local 320 of the International Brotherhood of Electrical Workers for its approximate 533 unionized employees, representing construction and maintenance employees, customer service representatives, service workers, and clerical employees (excluding persons in managerial, professional, or supervisory positions). This agreement became effective on May 1, 2008, and remains effective through April 30, 2011. It provided for an average annual general wage increase of 4.0% and changes to fringe benefits.

CHEC and Its Subsidiaries and Investments

CHEC, a New York corporation, is a wholly owned subsidiary of CH Energy Group. Through its subsidiaries and investments, CHEC’s wholly owned subsidiary Griffith is engaged in the business of marketing petroleum products and related services to retail and wholesale customers. CHEC also provides service and maintenance of energy conservation measures and generation systems for private businesses, institutions, and government entities. CHEC also participates in cogeneration, wind generation, biomass energy projects, landfill gas projects and alternate fuel and energy production projects in New Jersey, New Hampshire, New York, Wisconsin and Pennsylvania, and a corn-ethanol plant in Nebraska. For further discussion of certain energy-related projects within other subsidiaries and investments, see Note 5 - “Acquisitions, Divestitures and Investments.”

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Griffith

Griffith is an energy services company engaged in fuel distribution, including heating oil, gasoline, diesel fuel, kerosene, and propane, and the installation and maintenance of heating, ventilating, and air conditioning equipment. During most of 2009, Griffith operated in Virginia, West Virginia, Maryland, Delaware, Pennsylvania, Rhode Island, Connecticut, Massachusetts, New York, New Jersey and Washington, D.C. On December 11, 2009, Griffith closed on the sale of operations within certain geographic locations, which included approximately 45,000 customers in Rhode Island, Connecticut, Massachusetts, New Jersey, Pennsylvania and New York. Since being acquired by CHEC in November 2000, Griffith acquired the assets of 45 regional fuel oil, propane, and related services companies. Of these acquisitions, 20 remain with Griffith following the 2009 divestiture. The number of Griffith employees at December 31, 2010 was 394.

Other Subsidiaries and Investments

CHEC's other subsidiaries and investments consist of the following:

CHEC Investment			Description
Lyonsdale			100% ownership in a wood-fired biomass electric generating plant
CH-Greentree			100% equity interest in a molecular gate used to remove nitrogen from landfill gas
CH-Auburn			100% equity interest in an electric generating plant that utilizes landfill gas to produce electricity
Cornhusker Holdings			12% equity interest plus subordinated debt investment in an operating corn-ethanol plant
CH-Community Wind			50% equity interest in a joint venture that owns 18% interest in two operating wind projects
CH Shirley Wind			100% ownership of CH Shirley Wind, which owns 90% controlling interest in Shirley Wind (Delaware), LLC ("Shirley Delaware"), which owns 100% interest in Shirley Wind, LLC ("Shirley Wind"), a 20 megawatt wind project
Other			Other renewable energy projects and partnerships and an energy sector venture capital fund

During the fourth quarter of 2010, the Board of Directors approved a shift in corporate strategy. As a result, Management has initiated plans to evaluate the market and potentially divest CHEC's renewable energy investments, subject to approval by the Board. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the caption "Executive Summary" for further discussion.

Seasonality

A substantial portion of CHEC’s revenues vary seasonally, as Griffith’s fuel oil deliveries are directly related to use for space heating and are highest during the winter months.

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Competition

CHEC and Griffith participate in competitive industries that are subject to different risks than those found in the businesses of the regulated utility, Central Hudson. As a competitor in the unregulated fuel distribution business, Griffith faces competition from other fuel distribution companies and from companies supplying other fuels for heating, such as natural gas and propane. For a discussion of Griffith’s operating revenues and operating income, see the caption “Results of Operations” in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report.

ENVIRONMENTAL QUALITY REGULATION

Central Hudson, Griffith, CH−Auburn, Lyonsdale and Shirley Wind are subject to regulation by federal, state, and local authorities with respect to the environmental effects of their operations. Environmental matters may expose Central Hudson, Griffith, CH−Auburn, Lyonsdale and Shirley Wind to potential liability, which, in certain instances, may be imposed without regard to fault or may be premised on historical activities that were lawful at the time they occurred.

Central Hudson, Griffith, CH−Auburn, Lyonsdale and Shirley Wind each monitor their activities in order to determine their impact on the environment and to comply with applicable environmental laws and regulations.

The principal environmental areas relevant to these companies (air, water and industrial and hazardous wastes, other) are described below. Unless otherwise noted, all required permits and certifications have been obtained by the applicable company. Management believes that each company was in material compliance with these permits and certifications during 2010, except as noted in “Note 12 – Commitments and Contingencies” under the caption “Environmental Matters” of this 10-K Annual Report.

Air Quality

The Clean Air Act Amendments of 1990 address attainment and maintenance of national air quality standards, including control of particulate emissions from fossil−fueled electric generating plants and emissions that affect “acid rain” and ozone. The impacted facilities are the Central Hudson South Cairo and Coxsackie, NY electric generating facilities, Lyonsdale’s electric generating plant and CH-Auburn. See Note12 − “Commitments and Contingencies” under the caption “Environmental Matters” regarding the investigation by the EPA into the compliance of a former major Central Hudson generating asset.

CH-Auburn has received a Notice of Violation of its air permit from the NYS DEC. CH-Auburn is currently working with the NYS DEC to resolve this issue. While resolving the issue, CH-Auburn will not run one of its three engine generators, but continues to meet its obligations under the Energy Services Agreement with the City of Auburn.

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Water Quality

The Clean Water Act established the basic framework for federal and state regulation of water pollution control and requires facilities that discharge waste or storm water into the waters of the United States to obtain permits. Central Hudson, Griffith and Lyonsdale have permits regulating pollutant discharges for relevant locations.

Industrial & Hazardous Substances and Wastes

Central Hudson, Griffith, CH−Auburn, Lyonsdale and Shirley Wind are subject to federal, state and local laws and regulations relating to the use, handling, storage, treatment, transportation, and disposal of industrial, hazardous, and toxic wastes. Currently, there are no permit or certification requirements for Griffith, CH−Auburn, Lyonsdale and/or Shirley Wind. See Note 12 − “Commitments and Contingencies” under the caption “Environmental Matters” for additional discussion regarding, among other things, Central Hudson’s former MGP facilities and Little Britain Road.

Environmental Expenditures

2010 actual and 2011 estimated expenditures attributable in whole or in substantial part to environmental considerations are detailed in the table below:

Central Hudson	Griffith	CH-Auburn	Lyonsdale
2010 - $16.8 million	2010 - $0.2 million	2010 - not material	2010 - not material
2011 - $2.0 million	2011 - $0.8 million	2011 - not material	2011 - not material

Central Hudson, Griffith, CH-Auburn, Lyonsdale and Shirley Wind are also subject to regulation with respect to other environmental matters, such as noise levels, shadow flicker, protection of vegetation and wildlife, and limitations on land use, and are in compliance with regulations in these areas.

Regarding environmental matters, except as described in Note 12 - “Commitments and Contingencies” under the caption “Environmental Matters,” neither CH Energy Group, Central Hudson, Griffith, CH-Auburn, Lyonsdale nor Shirley Wind are involved as defendants in any material litigation, administrative proceeding, or investigation and, to the best of their knowledge, no such matters are threatened against any of them.

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AVAILABLE INFORMATION

CH Energy Group and Central Hudson file annual, quarterly, and current reports and other information with the SEC. CH Energy Group also files proxy statements. The public may read and copy any of the documents each company files at the SEC’s Public Reference Room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. SEC filings are also available to the public from the SEC’s Internet website at www.sec.gov.

CH Energy Group and Central Hudson make available free of charge at www.CHEnergyGroup.com their annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC. CH Energy Group’s proxy statements, governance guidelines, Code of Business Conduct and Ethics, and the charters of its Audit, Compensation, Governance and Nominating, and Strategy and Finance Committees are also available at www.CHEnergyGroup.com. The governance guidelines, the Code of Business Conduct and Ethics, and the charters may also be obtained by writing to the Corporate Secretary, CH Energy Group, Inc., 284 South Avenue, Poughkeepsie, New York 12601-4839.

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EXECUTIVE OFFICERS OF CH ENERGY GROUP

All executive officers of CH Energy Group are elected or appointed annually by its Board of Directors. There are no family relationship among any of the executive officers of CH Energy Group. The names of the current executive officers of CH Energy Group, their positions held and business experience during the past five years, and ages (at December 31, 2010) are as follows:

Date Commenced

Executive Officers

Age

Current

and Prior Positions

CH Energy Group

Central Hudson

CHEC

Steven V. Lant

Chairman of the Board

Apr 2004

May 2004

Chief Executive Officer

Jul 2003

President

Jul 2003

Director

Feb 2002

Dec 1999

James P. Laurito(1)

President

Jan 2010

Executive Vice President

Nov 2009

Director

Nov 2009

Christopher M. Capone

President

Sep 2010

Executive Vice President

Jan 2007

Director

Mar 2005

Mar 2007

Chief Financial Officer

Sep 2003

Treasurer

Apr 2003

Jun 2001

Apr 2003

John E. Gould(2)

Executive Vice President and General Counsel

Oct 2009

Jan 2010

Secretary

Mar 2007

Jun 2007

Assistant Secretary

Nov 1999

Jan 2000

Denise D. VanBuren

Secretary

Dec 2009

Jan 2010

Vice President - Corporate Communications

Dec 2009

Jan 2010

Vice President - Public Affairs and Energy Efficiency

Aug 2007

Vice President - Corporate Communications and Community Relations

Nov 2000

Charles A. Freni, Jr.

Senior Vice President - Customer Services

Jan 2005

W. Randolph Groft

Executive Vice President

Jan 2003

Director

Jan 2003

Kimberly J. Wright(3)

Vice President - Accounting and Controller

May 2008

Controller

Oct 2006

(1)

From 2003 to November 2009, served as the President and Chief Executive Officer of New York State Electric and Gas Corporation and of Rochester Gas and Electric Corporation; both companies are gas and electric utilities.

(2)

Before October 2009, served as a partner of the law firm of Thompson Hine LLP.

(3)

From January 2005 to October 2006, served as Director - Utility Group Budgets and Forecasts of Northeast Utilities Service Company, a gas and electric utility company.

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ITEM 1A - Risk Factors

CENTRAL HUDSON’S RATES LIMIT ITS ABILITY TO RECOVER ITS COSTS FROM ITS CUSTOMERS

Description and Sources of Risk

Central Hudson’s retail rates are regulated by the PSC. Rates generally may not be changed during their respective terms. Therefore, rates cannot be modified for higher expenses than those assumed in the current rates, absent circumstances such as an increase in expenses that meet the PSC’s threshold requirements for filing for approval of deferral accounting. Central Hudson is operating under a three year rate order plan approved by the PSC effective July 1, 2010. The following could unfavorably impact Central Hudson’s financial results:

·	Higher expenses than reflected in current rates. Higher expenses could result from, among other things, increases in taxes and assessments, storm restoration expense, labor, health care benefits or other expense components.

·	Penalties imposed by the PSC for the failure to achieve performance metrics established in rate proceedings, or violation of PSC Orders.

·	Higher electric and natural gas capital project costs resulting from escalation of material and equipment prices, as well as potential delays in the siting and legislative and/or regulatory approval requirements associated with these projects.

·	A determination by the PSC that the cost to place a project in service is above a level which is deemed prudent.

Potential Impacts

Central Hudson could have lower earnings and/or reduced cash flows if cost management and/or regulatory relief are not sufficient to alleviate the impact of higher costs.

Additional Information

See Note 2 - “Regulatory Matters” of this 10-K Annual Report.

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UNUSUAL TEMPERATURES IN GRIFFITH’S SERVICE TERRITORIES MAY ADVERSELY IMPACT EARNINGS

Description and Sources of Risk

Griffith serves the Mid-Atlantic region of the United States. This area experiences seasonal fluctuations in temperature. A considerable portion of Griffith’s earnings is derived directly or indirectly from the weather-sensitive end uses of space heating and air conditioning. As a result, sales volumes fluctuate and vary from normal expected levels based on variations in weather from historically normal seasonal levels. Such variations could significantly reduce sales volumes.

Potential Impacts

Griffith could experience lower delivery volumes in periods of milder than normal weather, leading to lower earnings and reduced cash flows.

GRIFFITH’S ABILITY TO ATTRACT NEW CUSTOMERS, RETAIN EXISTING CUSTOMERS, MAINTAIN SALES VOLUMES, AND MAINTAIN MARGINS MAY ADVERSELY IMPACT EARNINGS

Description and Sources of Risk

Lower sales can occur for various reasons, including the following:

·	Changes in customers’ usage patterns driven by customer responses to product prices.

·	Economic conditions.

·	Energy efficiency programs, and/or

·	The loss of major customers, the loss of a large number of residential customers, or the addition of fewer new customers than expected.

Significant volatility in wholesale oil prices could negatively impact margins and/or cause current and/or prospective full service customers to reduce their usage and/or purchase fuel from discount distributors.

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Potential Impacts

Any one or more of the following could result from these events:

·	An adverse impact on Griffith’s ability to attract new full-service residential customers and retain existing full-service residential customers, resulting in lower earnings and reduced cash flows.

·	Further sales volume reductions, and/or compressed margins resulting in lower earnings and reduced cash flows.

·	Increased working capital requirements stemming from an increase in oil and/or propane prices.

These events could materially reduce Griffith’s contribution to CH Energy Group’s profitability and cash flow.

STORMS AND OTHER EVENTS BEYOND CENTRAL HUDSON’S AND GRIFFITH’S CONTROL MAY INTERFERE WITH THEIR OPERATIONS

Description and Sources of Risk

In order to conduct their businesses, (1) Central Hudson must have access to natural gas and electric supplies and be able to utilize its electric and natural gas infrastructure, and (2) Griffith needs access to petroleum supplies from storage facilities in its service territories. Central Hudson has designed its electric and natural gas systems to serve customers under various contingencies in accordance with good utility practice.

However, any one or more of the following could impact either or both of the companies’ ability to access supplies and/or utilize critical facilities:

·	Storms, natural disasters, wars, terrorist acts, failure of critical equipment and other catastrophic events occurring both within and outside Central Hudson’s and Griffith’s service territories.

·	Unfavorable developments in the world oil markets could impact Griffith.

·	Third-party facility owner or supplier financial distress.

·	Unfavorable governmental actions or judicial orders.

·	Bulk power system and gas transmission pipeline system capacity constraints could impact Central Hudson.

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Potential Impacts

The companies could experience service disruptions leading to lower earnings and/or reduced cash flows if the situation is not resolved in a timely manner or the financial impacts of restoration are not alleviated through insurance policies, regulated rate recovery for Central Hudson or higher sales prices for Griffith.

CENTRAL HUDSON IS SUBJECT TO RISKS RELATING TO ASBESTOS LITIGATION AND MANUFACTURED GAS PLANT FACILITIES

Description and Sources of Risk

Litigation has been commenced by third parties against Central Hudson arising from the use of asbestos at certain of its previously owned electric generating stations, and Central Hudson is involved in a number of matters arising from contamination at former MGP sites.

Potential Impacts

To the extent not covered by insurance or recovered through rates, remediation costs, court decisions and settlements resulting from any litigation could reduce earnings and cash flows.

Additional Information

See Note 12 - “Commitments and Contingencies” and in particular the sub-captions in Note 12 regarding “Asbestos Litigation” and “Former Manufactured Gas Plant Facilities” under the caption “Environmental Matters.”

ITEM 1B - Unresolved Staff Comments

None.

ITEM 2 - Properties

CH Energy Group has no significant properties other than those of Central Hudson and CHEC.

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CENTRAL HUDSON

Electric

Central Hudson owns hydroelectric and gas turbine generating facilities as described below.

Type of Electric Generating Plant	Year Placed in Service/Refurbished	MW(1) Net Capability
Hydroelectric (3 stations)	1920-1986	23.6
Gas turbine (2 stations)	1969-1970	47.8
Total		71.4

(1)	Reflects maximum one-hour net capability (winter rating as of December 31, 2010) of Central Hudson’s electric generating plants and therefore does not include firm purchases or sales.

Central Hudson owns substations having an aggregate transformer capacity of 5.0 million kilovolt amperes. Central Hudson’s electric transmission system consists of 629 pole miles of line. The electric distribution system consists of over 8,200 pole miles of overhead lines and over 1,400 trench miles of underground lines, as well as customer service lines and meters.

Electric Load and Capacity

Central Hudson’s maximum one-hour demand for electricity within its own territory for the year ended December 31, 2010, occurred on July 6, 2010, and amounted to 1,229 MW. In prior summer periods peak electric demand has reached 1,295 MW which occurred on August 2, 2006. Central Hudson’s maximum one-hour demand for electricity within its own territory for that part of the 2010-2011 winter capability period through January 18, 2011, occurred on December 14, 2010, and amounted to 891 MW.

Central Hudson owns minimal generating capacity and relies on purchased capacity and energy from third-party providers to meet the demands of its full service customers. For more information, see Note 12 - “Commitments and Contingencies.”

Natural Gas

Central Hudson’s natural gas system consists of 164 miles of transmission pipelines and 1,176 miles of distribution pipelines, as well as customer service lines and meters. For the year ended December 31, 2010, the total amount of natural gas purchased by Central Hudson from all sources was 11,793,624 Mcf. Central Hudson owns two propane-air mixing facilities for emergency and peak-shaving purposes, one located in Poughkeepsie, New York, and the other in Newburgh, New York. These facilities, in aggregate, are capable of supplying 8,000 Mcf per day with propane storage capability adequate to provide maximum facility output for up to six consecutive days.

The peak daily demand for natural gas of Central Hudson’s customers for the year ended December 31, 2010, and for that part of the 2010-2011 heating season through January 30, 2011, occurred on January 23, 2011, and amounted to 114,599 Mcf. In prior years, winter period daily peak demand has reached 125,496 Mcf which occurred on January 27, 2005. Central Hudson’s firm peak day natural gas capability in the 2010-2011 heating season was 142,992 Mcf, which excludes approximately 5,000 Mcf of transport customer deliveries.

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Other Central Hudson Matters

Central Hudson owns its corporate headquarters, which is located in Poughkeepsie, New York. Central Hudson’s electric generating plants and important property units are generally held by it in fee simple, except for certain ROW and a portion of the property used in connection with hydroelectric plants consisting of flowage or other riparian rights. Certain of the Central Hudson properties are subject to ROW and easements that do not interfere with Central Hudson’s operations. In the case of certain distribution lines, Central Hudson owns only a partial interest in the poles upon which its wires are installed and the remaining interest is owned by various telecommunications companies. In addition, certain electric and natural gas transmission facilities owned by others are used by Central Hudson under long-term contracts.

During the three-year period ended December 31, 2010, Central Hudson made gross property additions of $243.5 million and property retirements and adjustments of $38.7 million, resulting in a net increase (including construction work in progress) in gross utility plant of $204.8 million, or 16%.

CHEC

As of December 31, 2010, CHEC owned a 100% interest in Griffith, CH-Auburn, CH-Greentree, CH Shirley, CH-Lyonsdale and Lyonsdale. As of December 31, 2010, Griffith owned or leased several office, warehouse, and bulk petroleum storage facilities. These facilities are located in Delaware, Maryland, Virginia, and West Virginia. The bulk petroleum storage facilities have capacities from 60,000 gallons up to 760,000 gallons. Griffith leases its corporate headquarters, which is located in Columbia, Maryland. CH-Auburn owns a 3-megawatt, landfill gas fired, electric generating plant in Auburn, New York, on land leased from the City of Auburn, which began operations in 2010. CH-Greentree owns and operates a molecular gate installed in 2009 on leased land at the Greentree Landfill in Pennsylvania. CH Shirley indirectly owns a 90% interest in Shirley Wind, LLC, which leases sites in Glenmore, Wisconsin for the location of its eight 2.5-megawatt wind turbines that were constructed in 2010. Lyonsdale owns a 19-megawatt, wood fired, biomass electric generating plant, which began operations in 1992. The plant is located in Lyonsdale, New York.

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ITEM 3 - Legal Proceedings

For information about developments regarding certain legal proceedings, see Note 12 - “Commitments and Contingencies” of this 10-K Annual Report.

PART II

ITEM 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

For information regarding the market for CH Energy Group’s Common Stock and related stockholder matters, see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report under the caption “Capital Resources and Liquidity - Financing Program” and Note 8 - “Capitalization - Common and Preferred Stock.”

Under applicable statutes and their respective Certificates of Incorporation, CH Energy Group may pay dividends on its Common Stock and Central Hudson may pay dividends on its Common Stock and its Preferred Stock, in each case only out of surplus.

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The line graph set forth below provides a comparison of CH Energy Group’s cumulative total shareholder return on its Common Stock with the Standard and Poor’s 500 Index (“S&P 500”) and with the Edison Electric Institute Index (the “EEI Index”), which consists of the 58 U.S. shareholder-owned electric utilities. Total shareholder return is the sum of the dividends paid and the change in the market price of the stock.

			Indexed Returns
	Base Period		Years Ending
	Dec		Dec		Dec		Dec		Dec		Dec
Company / Index	2005		2006		2007		2008		2009		2010
CH Energy Group, Inc.	$	100	$	120.20	$	106.10	$	129.58	$	112.31	$	135.92
S&P 500 Index	$	100	$	115.79	$	122.16	$	76.96	$	97.33	$	111.99
EEI Index	$	100	$	120.76	$	140.75	$	104.29	$	115.46	$	123.58

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COMMON STOCK DIVIDENDS AND PRICE RANGES

CH Energy Group and its principal predecessors (including Central Hudson) have paid dividends on their respective Common Stock in each year commencing in 1903, and the Common Stock has been listed on the New York Stock Exchange since 1945. The closing price as of December 31, 2010 and 2009 was $48.89 and $42.52, respectively. The price ranges and the dividends paid for each quarterly period during the last two fiscal years are as follows:

	2010						2009
	High		Low		Dividend		High		Low		Dividend
1st Quarter	$	43.57	$	38.25	$	0.54	$	52.66	$	37.68	$	0.54
2nd Quarter		43.47		37.75		0.54		48.16		40.60		0.54
3rd Quarter		44.77		38.60		0.54		51.32		43.67		0.54
4th Quarter		50.33		43.72		0.54		45.57		39.54		0.54

In 2010, CH Energy Group maintained its quarterly dividend rate at $0.54 per share. CH Energy Group’s strategy targets stable and predictable earnings, with growth trend expectations of 5% or more per year off a base of $2.76 in 2009. If this trend of earnings per share growth is achieved and sustainable, it should facilitate increases in CH Energy Group’s annual dividend rate, subject to maintaining a target payout ratio in the range of 65% to 70%. In making future dividend decisions, CH Energy Group will evaluate all circumstances at the time of making such decisions, including business, financial, and regulatory considerations.

CH Energy Group’s ability to pay dividends is affected by the ability of its subsidiaries to pay dividends. The Federal Power Act limits the payment of dividends by Central Hudson to its retained earnings. More restrictive is the PSC’s limit on the dividends Central Hudson may pay to CH Energy Group which is 100% of the average annual income available for common stock, calculated on a two-year rolling average basis. Based on this calculation as of December 31, 2010, Central Hudson would be able to pay a maximum of $38.5 million in dividends to CH Energy Group without violating the restrictions by the PSC. Central Hudson’s dividend would be reduced to 75% of its average annual income in the event of a downgrade of its senior debt rating below “BBB+” by more than one rating agency if the stated reason for the downgrade is related to CH Energy Group or any of Central Hudson’s affiliates. Further restrictions are imposed for any downgrades below this level. During the year ended December 31, 2010, Central Hudson declared and paid dividends of $31.0 million to CH Energy Group. CH Energy Group’s other subsidiaries do not have express restrictions on their ability to pay dividends.

The number of registered holders of Common Stock of CH Energy Group as of December 31, 2010 was 14,472.

All of the outstanding Common Stock of Central Hudson and all of the outstanding Common Stock of CHEC are held by CH Energy Group.

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Beginning in the fourth quarter of 2010, CH Energy Group, using excess liquidity, began a stock repurchase program. For more information regarding CH Energy Group’s stock repurchase program, see the “Anticipated Sources and Uses of Cash” section of Item 7 - Management Discussion and Analysis.

The following table provides a summary of shares repurchased by CH Energy Group for the quarter ended December 31, 2010:

	Total Number of Shares Purchased(1)	Average Price Paid per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(3)
October 1-31, 2010	1,042	$	44.49	-	2,000,000
November 1-30, 2010	-	$	-	-	2,000,000
December 1-31, 2010	36,451	$	49.38	29,562	1,970,438
Total	37,493	$	49.24	29,562	1,970,438

(1)	Includes the repurchase of shares through the Company's authorized stock repurchase program as well as shares surrendered to CH Energy Group in satisfaction of tax withholdings on the vesting of restricted shares, stock options and a special grant of shares in December 2010.
(2)	Closing price of a share of CH Energy Group's common stock on the date the stock was surrendered to CH Energy Group (in the case of shares surrendered in satisfaction of tax withholdings) and the actual price paid (in the case of market purchases).
(3)	On July 31, 2007, the Board of Directors authorized the repurchase of up to 2,000,000 shares or approximately 13% of CH Energy Group's outstanding common stock on that date, from time to time, over the five year period ending July 31, 2012.

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ITEM 6 - Selected Financial Data of CH Energy Group and Its Subsidiaries

FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA(1)

(CH ENERGY GROUP)

(In Thousands, except per share data)

	2010		2009		2008		2007		2006
Operating Revenues
Electric - Delivery	$	312,323	$	270,285	$	236,333	$	228,270	$	205,287
Electric - Supply		250,816		265,885		371,828		388,569		298,621
Natural Gas - Delivery		81,606		66,916		59,897		55,326		49,629
Natural Gas - Supply		75,189		107,221		129,649		110,123		105,643
Competitive business subsidiaries		252,371		221,282		341,494		296,479		276,458
Total		972,305		931,589		1,139,201		1,078,767		935,638

Operating Income		97,905		80,399		70,952		75,659		76,552

Income from continuing operations		39,202		34,427		32,609		42,004		42,816
Income from discontinued operations, net of tax		-		9,851		3,545		1,481		268
Dividends declared on Preferred Stock of subsidiary		970		970		970		970		970
Net Income attributable to CH Energy Group		38,504		43,484		35,081		42,636		43,084
Dividends Declared on Common Stock		34,161		34,119		34,086		34,052		34,046
Change in Retained Earnings		4,343		9,365		995		8,584		9,038
Retained Earnings - beginning of year		225,999		216,634		215,639		207,055		198,017
Retained Earnings - end of year	$	230,342	$	225,999	$	216,634	$	215,639	$	207,055

Common Share Data:
Average shares outstanding - basic		15,785		15,775		15,768		15,762		15,762
Income from continuing operations - basic	$	2.44	$	2.13	$	2.00	$	2.61	$	2.71
Income from discontinued operations - basic	$	-	$	0.63	$	0.22	$	0.09	$	0.02
Net Income attributable to CH Energy Group - basic	$	2.44	$	2.76	$	2.22	$	2.70	$	2.73
Average shares outstanding - diluted		15,952		15,881		15,805		15,779		15,779
Income from continuing operations - diluted	$	2.41	$	2.12	$	2.00	$	2.61	$	2.71
Income from discontinued operations - diluted	$	-	$	0.62	$	0.22	$	0.09	$	0.02
Net Income attributable to CH Energy Group - diluted	$	2.41	$	2.74	$	2.22	$	2.70	$	2.73
Dividends declared per share	$	2.16	$	2.16	$	2.16	$	2.16	$	2.16
Book value per share (at year-end)	$	34.03	$	33.76	$	33.17	$	33.19	$	32.54

Total Assets (at year-end)	$	1,729,275	$	1,697,883	$	1,730,183	$	1,494,748	$	1,460,532
Long-term Debt (at year-end)(2)	$	502,959	$	463,897	$	413,894	$	403,892	$	337,889
Cumulative Preferred Stock (at year-end)	$	21,027	$	21,027	$	21,027	$	21,027	$	21,027
Total CH Energy Group Common Shareholders' Equity (at year-end)	$	537,632	$	533,502	$	523,534	$	523,148	$	512,862

(1)	This summary should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 - “Financial Statements and Supplementary Data” of this 10-K Annual Report.
(2)	Net of current maturities of long-term debt.

For additional information related to the impact of acquisitions and dispositions on the above, this summary should be read in conjunction with Item 7 - “Management Discussion and Analysis of Financial Condition and Results of Operations” of this 10-K Annual Report and Note 5 - “Acquisitions, Divestitures and Investments” of Item 8 - “Financial Statements and Supplementary Data” of this 10-K Annual Report.

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FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA(1)

(CENTRAL HUDSON)

(In Thousands)

	2010		2009		2008		2007		2006
Operating Revenues
Electric - Delivery	$	317,023	$	275,167	$	242,334	$	233,033	$	208,284
Electric - Supply		246,116		261,003		365,827		383,806		295,624
Natural Gas - Delivery		81,606		66,916		59,897		55,326		49,629
Natural Gas - Supply		75,189		107,221		129,649		110,123		105,643
Total		719,934		710,307		797,707		782,288		659,180

Operating Income		95,310		76,338		67,344		71,406		70,956

Net Income		46,118		32,776		27,238		33,436		34,871

Dividends Declared on Cumulative Preferred Stock		970		970		970		970		970

Income Available for Common Stock		45,148		31,806		26,268		32,466		33,901
Dividends Declared to Parent - CH Energy Group		31,000		-		-		8,500		8,500
Change in Retained Earnings		14,148		31,806		26,268		23,966		25,401
Retained Earnings - beginning of year		150,750		118,944		92,676		68,710		43,309
Retained Earnings - end of year	$	164,898	$	150,750	$	118,944	$	92,676	$	68,710

Total Assets (at year-end)	$	1,539,074	$	1,485,600	$	1,492,196	$	1,252,694	$	1,215,823
Long-term Debt (at year-end)(2)	$	453,900	$	413,897	$	413,894	$	403,892	$	337,889
Cumulative Preferred Stock (at year-end)	$	21,027	$	21,027	$	21,027	$	21,027	$	21,027
Total Equity (at year-end)	$	444,228	$	430,080	$	373,274	$	347,006	$	323,040

(1)	This summary should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 - “Financial Statements and Supplementary Data” of this 10-K Annual Report.
(2)	Net of current maturities of long-term debt.

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ITEM 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations are intended to help the reader understand CH Energy Group and Central Hudson.

Please note that the Executive Summary (below) is provided as a supplement to, and should be read together with, the remainder of this Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Consolidated Financial Statements, including the Notes thereto, and the other information included in this 10-K Annual Report.

EXECUTIVE SUMMARY

Business Overview

CH Energy Group is a holding company with four business units:

Business Segments:
	(1)	Central Hudson’s regulated electric utility business;
	(2)	Central Hudson’s regulated natural gas utility business;
	(3)	Griffith’s fuel distribution business;

Other Businesses and Investments:
	(4)	CHEC’s renewable energy investments and the holding company’s activities, which consist primarily of financing its subsidiaries.

CH Energy Group’s objective is to deliver value to its shareholders through current income, in the form of quarterly dividend payments, and through share price appreciation that is expected to result from earnings growth over the long term. In 2010, Management completed an update to its strategic plan. The updated plan reflects a shift in our strategy that we believe will achieve greater shareholder value with less risk. CH Energy Group has determined that its greatest strengths are in the operation and growth of its energy distribution businesses, and henceforth it will focus its time and resources on Central Hudson and Griffith. Business development efforts in renewable energy have been discontinued and CH Energy Group is evaluating options to divest existing renewable energy investments in a manner that maximizes shareholder value. This shift in corporate strategy is further described below.

CH Energy Group’s mission is to provide electricity, natural gas, petroleum and related services to an expanding customer base in a safe, reliable, courteous and affordable manner; to produce growing financial returns for shareholders; to foster a culture that encourages employees to reach their full potential; and to be a good corporate citizen.

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CH Energy Group’s strategy is to provide an attractive risk adjusted return to its shareholders by investing primarily in Central Hudson’s utility transmission and distribution systems while maintaining a strong focus on risk management, including limiting commodity risk, effectively managing regulatory affairs, and maintaining a strong financial profile. CH Energy Group also intends to increase earnings by expanding Griffith’s service offerings and customer base while maintaining strong cost controls. CH Energy Group’s strategy targets stable and predictable earnings, with growth trend expectations of 5% or more per year off a base of $2.76 in 2009. If this trend of earnings per share growth is achieved and sustainable, it should facilitate increases in CH Energy Group’s annual dividend rate, subject to maintaining a target payout ratio in the range of 65% to 70%.

CH Energy Group Assets at December 31, 2010, by Business Unit

Contributions by respective business units to operating revenues and net income for the years ended December 31, 2010 and 2009 are located in the Results of Operations section of this Management Discussion and Analysis.

Central Hudson

Central Hudson’s earnings are derived primarily from the revenue it generates from delivering energy to approximately 300,000 electric customers and 75,000 natural gas customers. The delivery rates Central Hudson charges its customers are set by the PSC and are designed to recover the cost of providing safe and reliable service to Central Hudson’s customers while providing the opportunity to earn a fair and reasonable return on the capital invested by shareholders.

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Central Hudson’s strategy is to provide exceptional value to its customers by:

-	practicing continuous improvement in everything we do;

-	investing in transmission and infrastructure to enhance reliability, improve customer satisfaction and reduce risk;

-	moderating cost pressures that increase customer bill levels and variability; and

-	advocating on behalf of customers and other stakeholders.

Central Hudson has strong competencies in safe and efficient utility operations, financial management, risk management and regulatory affairs which will facilitate the achievement of its strategy. In 2010, Central Hudson expanded its current cost management and innovation programs by launching a company-wide initiative utilizing Lean Six Sigma techniques, which is a data driven approach to improving business processes, reducing cost, and improving service quality.

During the second half of 2009 and throughout 2010, Central Hudson continued to demonstrate improved financial results under rate orders that better align revenue recovery with operating costs and capital expenditure levels. The current three-year rate plan, which commenced on July 1, 2010, is expected to reduce uncertainty and risk and support investment in Central Hudson’s infrastructure to improve the quality of service to customers. Management believes this rate plan demonstrates a constructive relationship with New York State regulators and the willingness of regulators to enable Central Hudson to earn stable, predictable returns while providing reliable, high quality service and fulfilling state energy policy objectives.

Earnings growth is primarily expected to come from increases in utility plant reflected in rate base and also in part from effective cost management. Central Hudson invests significant capital on an annual basis to attach new customers to our system and to replace aging infrastructure and to maintain and improve service quality and reliability. Over the long term, increased investment levels to expand Central Hudson's natural gas and electric transmission are also possible.

The key risks Management sees in achieving this strategy are the regulatory environment, cost management and the economy in Central Hudson’s service territory.

Central Hudson’s ability to meet its financial objectives is largely dependent on the consistency of the PSC ratemaking practices. Risks related to these practices include reduced allowed returns on equity and/or reduced probabilities of achieving allowed returns, an inability to recover the costs of doing business, declining support for strong capital structures and credit ratings, changes in deferral accounting that increase volatility of earnings and/or defer cash recovery of our costs, elimination of RDMs and changes in the mechanisms currently in place for recovery of our commodity purchases. Additionally, lower interest rates could lead to a decrease in the authorized ROE in a future rate proceeding. Management believes Central Hudson’s commitments to providing safe and reliable service, customer satisfaction, operational excellence and promoting positive customer and regulatory relations are important for supportive regulatory relationships and obtaining full cost recovery and competitive returns for shareholders.

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Another risk is the ability to effectively manage costs, which is a key component of Central Hudson’s strategy. The continued roll out of the Lean Six Sigma initiative which began in 2010 will play a critical role managing the costs of doing business in a sustainable manner as well as continuous improvement in the services provided to customers.

The third risk – the economy in Central Hudson’s service territory affects the ability to collect receivables and the growth of utility rate base and earnings through a direct relationship to customer additions and peak demand growth. Management believes the economy in Central Hudson’s service territory has good long-term growth prospects, but unexpected prolonged downturns could inhibit its ability to meet long term business objectives.

Additional information regarding the 2010 Rate Order is discussed within the “Regulatory Matters – PSC Proceedings” section.

Griffith

Griffith provides fuel distribution products and services to approximately 57,000 customers in Delaware, Washington, D.C., Maryland, Pennsylvania, Virginia and West Virginia. Griffith’s revenues, cash flows, and earnings are derived from the sale and delivery of heating oil, gasoline, diesel fuel, kerosene, and propane and from the installation and maintenance of heating, ventilating, and air conditioning (“HVAC”) equipment. For a breakdown of Griffith’s gross profit by product and service line for the years ended December 31, 2010 and 2009, see the chart in the Results of Operations under the caption – “Griffith.”

Griffith’s strategy is to provide premium service to customers and to increase its profitability by:

-	practicing continuous improvement in everything we do;

-	growing through selective tuck-in acquisitions; and

-	expanding its service offerings.

Griffith has a strong regional brand that Management believes stands for quality, reliability, and value. Griffith intends to continue its marketing efforts and focus on customer satisfaction, which Management believes will result in minimal customer attrition. With reduced commodity-related volatility of earnings and cash flows following the 2009 divestiture of non-core divisions in the Northeast region, Management has focused its attention on improving the profitability of operations and providing service in the Mid-Atlantic region. This region has a relatively strong and stable economy with a population of current and prospective customers that value quality service at a fair price. In recent years, Management has successfully implemented effective cost management efforts, which have offset inflationary cost pressures.

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In 2010, Management resumed seeking selective “tuck-in” acquisitions, which are expected to be funded from internally generated cash. This growth strategy focuses on acquiring and retaining customers in geographic areas that overlap Griffith’s existing operations. Griffith acquired one fuel distribution and service company in 2010 and acquired two additional companies subsequent to year-end. Management expects to generate additional earnings and cash flow as a result of the expansion of its HVAC business. These growth strategies are not expected to result in the growth of CH Energy Group’s total invested capital in Griffith.

Management sees two key risks associated with this strategy. The primary factor that could prevent Griffith from achieving earnings growth is a sustained, significant increase in wholesale oil prices, which could reduce residential sales volumes, put downward pressure on margins and increase bad debt expense. While Management believes that margin expansion would still be possible in this environment as competitors would be forced to increase their prices to cover their costs, Management expects that this result would lag the increase in commodity prices. Secondarily, weakness in the economy of the Mid-Atlantic region could limit Griffith’s ability to expand margins since customers’ willingness and ability to pay are typically tied to income levels and unemployment rates. Management believes that the economy in Griffith’s service territory is relatively strong and stable with a large pool of current and prospective customers that value quality service at a fair price, and is thereby supportive of Griffith’s strategy.

Other Businesses and Investments

As noted earlier, CH Energy Group has decided to discontinue investing in the renewable energy industry through CHEC for the following reasons:

-	Management believes that CH Energy Group lacks competitive advantage and sufficiently strong internal core competencies in this market;

-	Management’s experience in this market indicates that it is difficult to earn an appropriate rate of return without employing higher debt leverage than is consistent with CH Energy Group’s credit quality objectives; and

-	The earnings profile of renewable energy projects does not support CH Energy Group’s current strategy and near term financial objective to increase the dividend because the returns typically start low and increases over time.

CH Energy Group has evaluated CHEC’s current renewable energy investments and has initiated plans to actively market some of these investments, specifically Lyonsdale and Shirley Wind. Management will continue to evaluate the market for the remaining investments in 2011. With regard to biomass investments, Management does not believe such assets possess earnings and cash flow characteristics that are consistent with the updated strategy and is seeking to sell the assets in the near term. With regard to CHEC’s investment in wind and landfill gas energy, Management feels that these investments reflect acceptable earnings and cash flow characteristics, however Management has determined it will no longer seek to build a business in these areas as they are no longer aligned with the Company’s strategy. Management believes greater shareholder value can be created by opportunistically divesting these assets. However, if attractive terms of sale are not available in the near-term, holding existing investments in wind and landfill gas is not expected to require significant management oversight or further capital investment. Proceeds from the sale of any of these investments are expected to be used primarily for the repurchase of common stock and repayment of debt associated with these assets.

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For further discussions relating to the impact of the change in strategy on the Company’s renewable energy investments, see Critical Accounting Policies under the caption “Accounting for Long-lived Assets”, Note 5 – “Acquisitions, Divestitures and Other Investments” and Note 15 – “Other Fair Value Measurements” of this 10-K Annual Report.

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EARNINGS PER SHARE AND OVERVIEW OF YEAR-TO-DATE RESULTS

The following discussion and analyses include explanations of significant changes in revenues and expenses between the year ended December 31, 2010, and 2009, and the year ended December 31, 2009, and 2008 for Central Hudson’s regulated electric and natural gas businesses, Griffith, and the Other Businesses and Investments.

The discussions and tables below present the change in earnings of CH Energy Group’s business units in terms of earnings for each share of CH Energy Group’s Common Stock. Management believes that expressing the results in terms of the impact on shares of CH Energy Group is useful to investors because it shows the relative contribution of the various business units to CH Energy Group’s earnings. This information is considered a non-GAAP financial measure and not an alternative to earnings per share determined on a consolidated basis, which is the most directly comparable GAAP measure. Additionally, Management believes that the disclosure of Significant Events within each business unit provides investors with the context around the Company's results that is important in enabling them to ascertain the likelihood that past performance is indicative of future performance. A reconciliation of each business unit’s earnings per share to CH Energy Group’s earnings per share, determined on a consolidated basis, is included in the table below.

Earnings

Earnings per share (basic and diluted) of CH Energy Group’s Common Stock are computed on the basis of the average number of common shares outstanding (basic and diluted) during the subject year. The number of average shares outstanding of CH Energy Group Common Stock, the earnings per share, and the rate of return earned on average common equity, which is net income as a percentage of a monthly average of common equity, are as follows (Shares In Thousands):

	2010			2009			2008
Average shares outstanding:
Basic		15,785			15,775			15,768
Diluted		15,952			15,881			15,805

Earnings per share from continuing operations:
Basic	$	2.44		$	2.13		$	2.00
Diluted	$	2.41		$	2.12		$	2.00

Earnings per share from discontinued operations:
Basic	$	-		$	0.63		$	0.22
Diluted	$	-		$	0.62		$	0.22

Earnings per share:
Basic	$	2.44		$	2.76		$	2.22
Diluted	$	2.41		$	2.74		$	2.22

Return earned on average common equity		7.4	%		8.6	%		6.6	%

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2010 AS COMPARED TO 2009

CH Energy Group Consolidated

Earnings per Share (Basic)

	Year Ended December 31,
	2010			2009			Change
Central Hudson - Electric	$	2.10		$	1.60		$	0.50
Central Hudson - Natural Gas		0.76			0.42			0.34
Griffith		0.11			0.76			(0.65	)
Other Businesses and Investments		(0.53	)		(0.02	)		(0.51	)
Total CH Energy Group Consolidated Earnings, as reported	$	2.44		$	2.76		$	(0.32	)

Significant Events:
Central Hudson	$	0.14		$	0.26		$	(0.12	)
Griffith		-			0.63			(0.63	)
Other Businesses and Investments		(0.41	)		(0.06	)		(0.35	)
Total CH Energy Group Consolidated Earnings (non-GAAP)	$	2.71		$	1.93		$	0.78

Earnings for CH Energy Group totaled $2.44 per share in 2010, a decrease of $0.32 per share from the same period in 2009. The decrease in year-over-year earnings per share were driven primarily by the $0.34 2009 gain and $0.23 of discontinued operations from the Griffith divestiture and the 2010 impairments in two renewable energy investments, partially reduced by increased delivery rates at Central Hudson.

Details by business unit were as follows:

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Central Hudson

Earnings per Share (Basic)

	Year Ended December 31,
	2010		2009		Change
Central Hudson - Electric	$	2.10	$	1.60	$	0.50
Central Hudson - Natural Gas		0.76		0.42		0.34
Total Central Hudson Earnings	$	2.86	$	2.02	$	0.84

Significant Events:
Uncollectible deferral	$	0.14	$	0.13	$	0.01
Weather impact on sales		-		0.13		(0.13	)
	$	2.72	$	1.76	$	0.96

					Change
Delivery revenue					$	1.22
Lower uncollectible reserves						0.15
Higher trimming costs						(0.06	)
Higher storm restoration expense(1)						(0.13	)
Higher depreciation						(0.11	)
Higher property and other taxes						(0.17	)
Other						0.06
					$	0.96

(1)

Excludes incremental costs incurred associated with the severe storms that occurred in late February 2010, which have been deferred for future recovery from customers.

Earnings from Central Hudson's electric and natural gas operations increased in the year ended December 31, 2010 compared to 2009 primarily due to the increases in electric and natural gas delivery rates, including the RDM, which became effective July 1, 2009 and 2010. These increases provided revenues that better align with Central Hudson's costs of providing safe and reliable service to customers and provide an opportunity to earn an appropriate return for shareholders. Higher operating expenses partially offset the favorable impacts of delivery rate increases. The net increase in year-over-year results includes the impact of lower earnings during the first six months of 2009 resulting from the sales shortfall under the expiring 2006 Rate Order.

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Griffith

Earnings per Share (Basic)

	Year Ended December 31,
	2010		2009		Change
Griffith - Fuel Distribution Earnings	$	0.11	$	0.76	$	(0.65	)

Significant Events:
Discontinued operations	$	-	$	0.23	$	(0.23	)
Gain on sale of Northeast operations(1)		-		0.40		(0.40	)
	$	0.11	$	0.13	$	(0.02	)

					Change
Margin on petroleum sales and services					$	0.01
Weather impact on sales (including hedging)						(0.04	)
Weather-normalized sales (including conservation)						(0.05	)
Lower operating expenses						0.06
Lower uncollectible accounts						0.04
Other						(0.04	)
					$	(0.02	)

(1)

See additional taxes owed by the holding company within Other Businesses & Investments.

Griffith’s earnings decreased for the year ended December 31, 2010 compared to the same period in 2009. This decrease was primarily attributable to the sale of operations in certain geographic locations at the end of 2009. The gain recorded as a result of the sale and the decreased customer base resulted in a decrease in 2010 earnings as compared to 2009. Unfavorable impacts of weather and continued customer conservation also contributed to the decreased earnings, but were offset by lower operating expenses resulting from cost reductions implemented by Management to align its cost structure to its smaller size following the partial divestiture. Lower uncollectible accounts also favorably impacted 2010's results.

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Other Businesses and Investments

Earnings per Share (Basic)

	Year Ended December 31,
	2010			2009			Change
Other Businesses & Investments Earnings	$	(0.53	)	$	(0.02	)	$	(0.51	)

Significant Events:
Ethanol investment impairment	$	(0.44	)	$	-		$	(0.44	)
Biomass investment impairment		(0.08	)		-			(0.08	)
Lower income taxes		0.11			-			0.11
Holding company's income taxes on Griffith sale		-			(0.06	)		0.06
	$	(0.12	)	$	0.04		$	(0.16	)

							Change
Renewable Energy Investments							$	(0.11	)
Holding company interest expense								(0.05	)
							$	(0.16	)

The earnings activity of CH Energy Group (the holding company) and CHEC’s partnerships and other investments decreased in the year ended December 31, 2010 compared to the same period in 2009 primarily due to 2010 impairment charges for CHEC's ethanol and biomass investments. The expiration of production tax credits related to CHEC’s biomass investment on December 31, 2009 and a repair to the plant's steam turbine also negatively impacted earnings. CHEC's earnings from its ethanol investment were also lower in 2010 due to lower crush margins and lower prices for one of the byproducts of the production process. These decreases were partially reduced by a favorable change to the effective tax rate of the consolidated entity resulting in overall lower tax expense. The additional taxes in 2009 related to Griffith's partial divestiture.

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2009 AS COMPARED TO 2008

CH Energy Group Consolidated

Earnings per Share (Basic)

	Year Ended December 31,
	2009			2008		Change
Central Hudson - Electric	$	1.60		$	1.33	$	0.27
Central Hudson - Natural Gas		0.42			0.34		0.08
Griffith		0.76			0.26		0.50
Other Businesses and Investments		(0.02	)		0.29		(0.31	)
	$	2.76		$	2.22	$	0.54

Earnings for CH Energy Group totaled $2.76 per share in 2009, versus $2.22 per share in 2008, an increase of $0.54 per share. The 2009 earnings reflect a recovery from somewhat depressed levels in 2008. Central Hudson’s new rate plan approved by the PSC, which took effect July 1, 2009, corrected a misalignment of costs and revenues. Additionally, Griffith completed a successful partial divestiture in the fourth quarter of 2009 and implemented continued operational efficiencies and cost reductions in its continuing operations.

Detail by business unit were as follows:

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Central Hudson

Earnings per Share (Basic)

	Year Ended December 31,
	2009		2008		Change
Central Hudson - Electric	$	1.60	$	1.33	$	0.27
Central Hudson - Natural Gas		0.42		0.34		0.08
Total Central Hudson Earnings	$	2.02	$	1.67	$	0.35

Earnings from Central Hudson's electric and natural gas operations increased $0.35 per share in 2009 compared to 2008. Central Hudson's contribution to earnings per share was $2.02 per share, an increase of $0.35 per share over the $1.67 per share posted in 2008. The improvement is due primarily to improved cost recovery though delivery rates, though higher uncollectible accounts, depreciation, property taxes and other expenses offset much of the increased revenue. The absence of major storms and the resulting expense of restoring service to electric customers contributed $0.09 per share to year-over-year performance.

A summary of the year-over-year variances includes the following:

	Change
Uncollectible deferral - approved	$	0.02
Uncollectible deferral - pending approval		0.11
Cable attachment rents in 2008		(0.03	)
Rate increases		0.66
Revenue decoupling mechanisms		0.22
Weather normalized sales		(0.17	)
Weather impact on sales (including hedging)		(0.04	)
Higher uncollectible accounts		(0.18	)
Higher depreciation		(0.15	)
Higher property and other taxes		(0.07	)
Higher interest expense and carrying charges		(0.07	)
Higher tree trimming and other distribution maintenance		(0.06	)
Lower storm restoration expense		0.09
Other		0.02
	$	0.35

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Griffith

Earnings per Share (Basic)

	Year Ended December 31,
	2009		2008		Change
Griffith - Fuel Distribution Earnings	$	0.76	$	0.26	$	0.50

Griffith’s earnings increased $0.50 per share in 2009 compared to 2008. Griffith contributed $0.76 to earnings per share in 2009 as compared to $0.26 per share in 2008. This increase was primarily attributable to the sale of operations in certain geographic locations. Customer conservation continued to have a negative impact on sales, but was offset by the favorable impacts of weather and continued operational cost reductions implemented by Management.

A summary of the year-over-year variances includes the following:

	Change
Gain on the sale of Northeast operations(1)	$	0.40
Discontinued operations		(0.04	)
Margin on petroleum sales and services		0.02
Weather normalized sales (including conservation)		(0.21	)
Weather impact on sales (including hedging)		0.11
Operating expenses		0.11
Lower uncollectible accounts		0.04
Other		0.07
	$	0.50

(1) See additional taxes owed by the holding company within Other Businesses & Investments

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Other Businesses and Investments

Earnings per Share (Basic)

	Year Ended December 31,
	2009			2008		Change
Other Businesses & Investments Earnings	$	(0.02	)	$	0.29	$	(0.31	)

CH Energy Group (the holding company) and CHEC’s partnerships and other investments resulted in a loss of ($0.02) per share in 2009, a decrease of ($0.31) per share from 2008. Interest expense on the debt issued at the holding company in 2009 to finance CH Energy Group’s unregulated businesses reduced earnings by ($0.07) per share. Income taxes on the gain from the Griffith sale lowered earnings by ($0.06) per share. Additionally, the write-off of the Buckeye investment lowered 2009 earnings by ($0.05) per share.

A summary of the year-over-year variances includes the following:

	Change
Holding company's income taxes on Griffith sale	$	(0.06	)
Buckeye investment		(0.05	)
Lyonsdale investment		(0.03	)
Holding company interest expense		(0.07	)
Higher other taxes		(0.02	)
Higher costs associated with pursuing future investments		(0.03	)
Other operating assets and investments		(0.03	)
Other		(0.02	)
	$	(0.31	)

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RESULTS OF OPERATIONS

A breakdown by business unit of CH Energy Group's operating revenues (net of divestitures) and net income for the year ended December 31, 2010 and 2009 are illustrated below (Dollars in Thousands):

	Year Ended December 31, 2010									Year Ended December 31, 2009
Business Unit	Operating Revenues				Net Income (loss)					Operating Revenues				Net Income (loss)
Electric(1)	$	563,139	58	%	$	33,125		86	%	$	536,170	57	%	$	25,217		58	%
Gas(1)		156,795	16	%		12,023		31	%		174,137	19	%		6,589		15	%
Total Central Hudson		719,934	74	%		45,148		117	%		710,307	76	%		31,806		73	%
Griffith(1) (2)		240,174	25	%		1,774		5	%		211,229	23	%		11,975		28	%
Other Businesses and Investments		12,197	1	%		(8,418	)	(22	)%		10,053	1	%		(297	)	(1	)%
Total CH Energy Group	$	972,305	100	%	$	38,504		100	%	$	931,589	100	%	$	43,484		100	%

(1)

A portion of the revenues above represent amounts collected from customers for the recovery of purchased electric and natural gas costs at Central Hudson and the cost of purchased petroleum products at Griffith and therefore have no material impact on net income. A breakout of these components is as follows:

Electric 2010: 26% cost recovery revenues + 32% other revenues = 58%

Electric 2009: 28% cost recovery revenues + 29% other revenues = 57%

Natural gas 2010: 8% cost recovery revenues + 8% other revenues = 16%

Natural gas 2009: 12% cost recovery revenues + 7% other revenues = 19%

Griffith 2010: 19% commodity costs + 6% other revenues = 25%

Griffith 2009: 21% commodity costs + 2% other revenues = 23%

(2)

Griffith net income for the year ended December 31, 2009 includes income from discontinued operations of $9,851.

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Central Hudson

The following discussions and analyses include explanations of significant changes in operating revenues, operating expenses, volumes delivered, other income, interest charges, and income taxes between the years ended December 31, 2010 and 2009, and December 31, 2009 and 2008 for Central Hudson’s regulated electric and natural gas businesses.

Income Statement Variances

(Dollars In Thousands)

	Year Ended December 31,				Increase/(Decrease) in
	2010		2009		Amount			Percent
Operating Revenues	$	719,934	$	710,307	$	9,627		1.4	%

Operating Expenses:
Purchased electricity, fuel and natural gas		321,305		368,224		(46,919	)	(12.7	) %
Depreciation and amortization		33,815		32,094		1,721		5.4	%
Other operating expenses		269,504		233,651		35,853		15.3	%
Total Operating Expenses		624,624		633,969		(9,345	)	(1.5	) %
Operating Income		95,310		76,338		18,972		24.9	%
Other Income, net		3,282		2,465		817		33.1	%
Interest Charges		25,848		24,885		963		3.9	%
Income before income taxes		72,744		53,918		18,826		34.9	%
Income Taxes		26,626		21,142		5,484		25.9	%
Net income	$	46,118	$	32,776	$	13,342		40.7	%


	Year Ended December 31,				Increase/(Decrease) in
	2009		2008		Amount			Percent
Operating Revenues	$	710,307	$	797,707	$	(87,400	)	(11.0	) %

Operating Expenses:
Purchased electricity, fuel and natural gas		368,224		495,476		(127,252	)	(25.7	) %
Depreciation and amortization		32,094		29,812		2,282		7.7	%
Other operating expenses		233,651		205,075		28,576		13.9	%
Total Operating Expenses		633,969		730,363		(96,394	)	(13.2	) %
Operating Income		76,338		67,344		8,994		13.4	%
Other Income, net		2,465		4,593		(2,128	)	(46.3	) %
Interest Charges		24,885		25,426		(541	)	(2.1	) %
Income before income taxes		53,918		46,511		7,407		15.9	%
Income Taxes		21,142		19,273		1,869		9.7	%
Net income	$	32,776	$	27,238	$	5,538		20.3	%

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Delivery Volumes

Delivery volumes for Central Hudson vary in response to weather conditions and customer behavior. Electric deliveries peak in the summer and deliveries of natural gas used for heating purposes peak in the winter. Delivery volumes also vary as customers respond to the price of the particular energy product and changes in local economic conditions.

The following chart reflects the change in the level of electric and natural gas deliveries for Central Hudson in 2010, compared to 2009, and in 2009, compared to 2008. Deliveries of electricity and natural gas to residential and commercial customers have historically contributed the most to Central Hudson's earnings. Industrial sales and interruptible sales have a negligible impact on earnings. Effective July 1, 2009 and continuing in the 2010 Rate Order, Central Hudson’s delivery rate structure includes a RDM which provides the ability to record revenues equal to those forecasted in the development of current rates for most of Central Hudson’s customers. As a result, fluctuations in actual delivery volumes no longer have a significant impact on Central Hudson’s earnings.

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Electric Deliveries

(In Gigawatt-Hours)

Actual Deliveries

Weather Normalized Deliveries(1)

Year Ended

December 31,

Variation in

December 31,

Variation in

2010

2009