Edgar Filing: CENTRAL HUDSON GAS & ELECTRIC CORP

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2012

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

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 registrants were 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 whether the registrant 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

As of the close of business on October 31, 2012 (i) CH Energy Group, Inc. had outstanding 14,948,216 shares of Common Stock ($0.10 per share par value) and (ii) all of the outstanding 16,862,087 shares of Common Stock ($5 per share par value) of Central Hudson Gas & Electric Corporation were held by CH Energy Group, Inc.

CENTRAL HUDSON GAS & ELECTRIC CORPORATION MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H)(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTIONS (H)(2)(a), (b) AND (c).

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2012

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1 – Financial Statements (Unaudited)

CH Energy Group, Inc.		PAGE
	Consolidated Statement of Income –
	Three and Nine Months Ended September 30, 2012 and 2011	1

	Consolidated Statement of Comprehensive Income –
	Three and Nine Months Ended September 30, 2012 and 2011	2

	Consolidated Statement of Cash Flows –
	Nine Months Ended September 30, 2012 and 2011	3

	Consolidated Balance Sheet –
	September 30, 2012, December 31, 2011 and September 30, 2011	5

	Consolidated Statement of Equity –
	Nine Months Ended September 30, 2012 and 2011	7

Central Hudson Gas & Electric Corporation
	Statement of Income –
	Three and Nine Months Ended September 30, 2012 and 2011	8

	Statement of Comprehensive Income –
	Three and Nine Months Ended September 30, 2012 and 2011	8

	Statement of Cash Flows –
	Nine Months Ended September 30, 2012 and 2011	9

	Balance Sheet –
	September 30, 2012, December 31, 2011 and September 30, 2011	10

	Statement of Equity –
	Nine Months Ended September 30, 2012 and 2011	12

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

	TABLE OF CONTENTS
		PAGE

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	55

ITEM 3	Quantitative and Qualitative Disclosure About Market Risk	87

ITEM 4	Controls and Procedures	87

PART II – OTHER INFORMATION

ITEM 1	Legal Proceedings	88

ITEM 1A	Risk Factors	88

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	89

ITEM 4	Mine Safety Disclosures	89

ITEM 6	Exhibits	89

SIGNATURES		90

EXHIBIT INDEX		91

_______________________________________________

FILING FORMAT

This Quarterly Report on Form 10-Q is a combined quarterly report being filed by two different registrants: CH Energy Group, Inc. ("CH Energy Group") and Central Hudson Gas & Electric Corporation ("Central Hudson"), a wholly owned subsidiary of CH Energy Group. Except where the content clearly indicates otherwise, any reference in this report to CH Energy Group includes all subsidiaries of CH Energy Group, including Central Hudson. Central Hudson makes no representation as to the information contained in this report in relation to CH Energy Group and its subsidiaries other than Central Hudson.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – Financial Statements (Unaudited)

CH ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(In Thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Operating Revenues
Electric	$	148,916		$	149,706		$	393,617		$	418,511
Natural gas		18,306			18,462			100,276			127,941
Competitive business subsidiaries:
Petroleum products		47,168			47,951			182,939			194,612
Other		4,680			4,636			13,880			13,730
Total Operating Revenues		219,070			220,755			690,712			754,794
Operating Expenses
Operation:
Purchased electricity and fuel used in electric generation		57,177			60,734			139,600			168,797
Purchased natural gas		5,873			6,337			37,977			63,425
Purchased petroleum		42,930			43,564			158,659			167,558
Other expenses of operation - regulated activities		56,015			55,480			174,737			181,460
Other expenses of operation - competitive business subsidiaries		10,519			10,986			34,307			34,841
Merger related costs		1,037			-			9,499			-
Depreciation and amortization		10,626			10,064			31,793			30,250
Taxes, other than income tax		12,776			11,760			38,372			36,687
Total Operating Expenses		196,953			198,925			624,944			683,018
Operating Income		22,117			21,830			65,768			71,776
Other Income and Deductions
Income from unconsolidated affiliates		(59	)		25			43			644
Interest on regulatory assets and other interest income		1,594			1,037			5,236			4,334
Impairment of investments		-			(3,582	)		-			(3,582	)
Regulatory adjustments for interest costs		326			319			976			1,032
Business development costs		(2	)		(529	)		(65	)		(1,027	)
Other - net		(402	)		340			(886	)		(550	)
Total Other Income		1,457			(2,390	)		5,304			851
Interest Charges
Interest on long-term debt		6,201			6,620			18,638			20,090
Penalty for early retirement of debt		-			2,982			-			2,982
Interest on regulatory liabilities and other interest		1,665			1,553			4,952			4,568
Total Interest Charges		7,866			11,155			23,590			27,640

Income before income taxes, non-controlling interest and preferred dividends of subsidiary		15,708			8,285			47,482			44,987
Income Taxes		6,548			3,478			21,345			16,998
Net Income from Continuing Operations		9,160			4,807			26,137			27,989

Discontinued Operations
Income from discontinued operations before tax		-			166			-			987
Gain from sale of discontinued operations		-			2,070			-			1,527
Income tax expense from discontinued operations		-			(1,527	)		-			(1,454	)
Net Income from Discontinued Operations		-			3,763			-			3,968

Net Income		9,160			8,570			26,137			31,957

Net Income attributable to non-controlling interest:
Dividends declared on Preferred Stock of subsidiary		103			242			521			727
Preferred Stock Redemption Premium		-			-			342			-
Net Income Attributable to CH Energy Group		9,057			8,328			25,274			31,230

Dividends declared on Common Stock		-			8,263			16,572			25,021
Change in Retained Earnings	$	9,057		$	65		$	8,702		$	6,209

The Notes to Financial Statements are an integral part hereof.

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CH ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME (CONT'D) (UNAUDITED)

(In Thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Common Stock:
Average shares outstanding - Basic		14,920		15,126		14,903		15,416
Average shares outstanding - Diluted		15,127		15,314		15,110		15,604

Income from continuing operations attributable to CH Energy Group common shareholders:
Earnings per share - Basic	$	0.61	$	0.30	$	1.70	$	1.77
Earnings per share - Diluted	$	0.60	$	0.30	$	1.67	$	1.75

Income from discontinued operations attributable to CH Energy Group common shareholders:
Earnings per share - Basic	$	-	$	0.25	$	-	$	0.26
Earnings per share - Diluted	$	-	$	0.24	$	-	$	0.25

Amounts attributable to CH Energy Group common shareholders:
Earnings per share - Basic	$	0.61	$	0.55	$	1.70	$	2.03
Earnings per share - Diluted	$	0.60	$	0.54	$	1.67	$	2.00
Dividends Declared per Share	$	-	$	0.54	$	1.11	$	1.64

CH ENERGY GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Net Income	$	9,160	$	8,570	$	26,137	$	31,957

Other Comprehensive Loss:
Net unrealized gains/(losses) on investments held by equity method investees - net of tax of ($56) and ($17) in 2012 and ($37) and ($10) in 2011, respectively		84		56		26		15

Other comprehensive income		84		56		26		15

Comprehensive Income		9,244		8,626		26,163		31,972

Comprehensive income attributable to non-controlling interest		103		242		863		727

Comprehensive income attributable to CH Energy Group	$	9,141	$	8,384	$	25,300	$	31,245

The Notes to Financial Statements are an integral part hereof.

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Table of Contents

CH ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Thousands)

	Nine Months Ended September 30,
	2012			2011
Operating Activities:
Net income	$	26,137		$	31,957
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		28,302			28,614
Amortization		3,491			3,120
Deferred income taxes - net		24,055			15,061
Bad debt expense		4,996			6,049
Impairment of investments		-			3,582
Undistributed equity in earnings of unconsolidated affiliates		(42	)		(644	)
Pension expense		17,909			20,725
Other post-employment benefits ("OPEB") expense		5,210			5,203
Regulatory liability - rate moderation		(1,107	)		(7,849	)
Revenue decoupling mechanism recorded		(2,405	)		4,956
Regulatory asset amortization		3,535			3,524
Gain on sale of assets		(71	)		(897	)
Changes in operating assets and liabilities - net of business acquisitions:
Accounts receivable, unbilled revenues and other receivables		3,451			2,380
Fuel, materials and supplies		963			(843	)
Special deposits and prepayments		5,267			2,779
Income and other taxes		255			(1,773	)
Accounts payable		(5,020	)		(18,092	)
Accrued interest		2,211			1,566
Customer advances		5,440			(508	)
Pension plan contribution		(28,494	)		(32,536	)
OPEB contribution		(3,269	)		(1,184	)
Revenue decoupling mechanism (refunded) collected		141			2,388
Regulatory asset - storm deferral		(942	)		(3,441	)
Regulatory asset - manufactured gas plant ("MGP") site remediation		2,920			3,761
Regulatory asset - Temporary State Assessment		(3,568	)		(2,169	)
Deferred natural gas and electric costs		3,498			22,164
Other - net		19,713			6,895
Net cash provided by operating activities		112,576			94,788
Investing Activities:
Proceeds from federal grants		-			14,744
Proceeds from sale of assets		111			42,234
Additions to utility and other property and plant		(80,372	)		(61,755	)
Acquisitions made by competitive business subsidiaries		(550	)		(2,255	)
Other - net		(3,681	)		(3,022	)
Net cash used in investing activities		(84,492	)		(10,054	)
Financing Activities:
Redemption of long-term debt		(36,495	)		(20,464	)
Proceeds from issuance of long-term debt		48,000			33,400
(Repayments) borrowings of short-term debt - net		(6,500	)		5,000
Dividends paid on Common Stock		(24,841	)		(25,290	)
Redemption of Preferred Stock		(12,180	)		-
Dividends paid on Preferred Stock of subsidiary		(764	)		(727	)
Shares repurchased		(2,993	)		(48,612	)
Other - net		(593	)		(647	)
Net cash used in financing activities		(36,366	)		(57,340	)
Net Change in Cash and Cash Equivalents		(8,282	)		27,394
Cash and Cash Equivalents at Beginning of Period		15,281			29,420
Cash and Cash Equivalents at End of Period	$	6,999		$	56,814

The Notes to Financial Statements are an integral part hereof.

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

	Nine Months Ended September 30,
	2012		2011
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	16,866	$	22,276
Federal and state income taxes paid	$	118	$	1,037
Additions to plant included in liabilities	$	4,856	$	3,997
Merger related transaction costs in liabilities	$	956	$	-

The Notes to Financial Statements are an integral part hereof.

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CH ENERGY GROUP CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In Thousands)

	September 30,		December 31,		September 30,
	2012		2011		2011
ASSETS
Utility Plant
Electric	$	1,045,949	$	1,008,394	$	988,319
Natural gas		311,841		305,664		301,989
Common		157,878		147,286		142,201
Gross Utility Plant		1,515,668		1,461,344		1,432,509

Less: Accumulated depreciation		401,966		388,784		385,198
Net		1,113,702		1,072,560		1,047,311

Construction work in progress		67,415		58,847		63,996
Net Utility Plant		1,181,117		1,131,407		1,111,307

Non-Utility Property & Plant
Griffith non-utility property & plant		32,535		31,669		30,795
Other non-utility property & plant		524		524		6,181
Gross Non-Utility Property & Plant		33,059		32,193		36,976

Less: Accumulated depreciation - Griffith		22,896		22,006		21,656
Less: Accumulated depreciation - other		-		-		1,121
Net Non-Utility Property & Plant		10,163		10,187		14,199

Current Assets
Cash and cash equivalents		6,999		15,281		56,814
Accounts receivable from customers - net of allowance for doubtful accounts of $6.8 million, $7.0 million and $6.5 million, respectively		85,542		90,937		90,155
Accrued unbilled utility revenues		12,071		15,299		11,320
Other receivables		6,881		9,512		8,618
Fuel, materials and supplies		24,151		25,114		25,530
Regulatory assets		36,454		49,526		43,407
Income tax receivable		-		432		2,822
Fair value of derivative instruments		760		349		42
Unamortized debt expense		407		407		407
Special deposits and prepayments		16,588		21,795		19,836
Accumulated deferred income tax		987		5,895		12,956
Total Current Assets		190,840		234,547		271,907

Deferred Charges and Other Assets
Regulatory assets - pension plan		140,702		159,020		121,238
Regulatory assets - other		109,887		114,980		105,899
Fair value of derivative instruments		1,120		931		-
Goodwill		37,752		37,512		36,538
Other intangible assets - net		11,590		13,173		12,682
Unamortized debt expense		4,444		4,128		4,610
Investments in unconsolidated affiliates		2,427		2,777		3,043
Other investments		17,677		14,461		14,422
Other		5,468		6,989		6,175
Total Deferred Charges and Other Assets		331,067		353,971		304,607
Total Assets	$	1,713,187	$	1,730,112	$	1,702,020

The Notes to Financial Statements are an integral part hereof.

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CH ENERGY GROUP CONSOLIDATED BALANCE SHEET (CONT'D) (UNAUDITED)
(In Thousands, except share amounts)

	September 30,			December 31,			September 30,
	2012			2011			2011
CAPITALIZATION AND LIABILITIES
Capitalization
CH Energy Group Common Shareholders' Equity
Common Stock (30,000,000 shares authorized: $0.10 par value; 16,862,087 shares issued) 14,947,899 shares, 14,894,964 shares and 14,885,037 shares outstanding, respectively	$	1,686		$	1,686		$	1,686
Paid-in capital		349,136			351,053			350,693
Retained earnings		251,093			242,391			236,551
Treasury stock - 1,914,188 shares, 1,967,123 shares and 1,977,050 shares, respectively		(90,417	)		(92,908	)		(93,210	)
Accumulated other comprehensive income		380			354			474
Capital stock expense		(166	)		(328	)		(328	)
Total Equity		511,712			502,248			495,866
Preferred Stock of subsidiary		9,027			21,027			21,027
Long-term debt		493,473			446,003			446,466
Total Capitalization		1,014,212			969,278			963,359
Current Liabilities
Current maturities of long-term debt		1,041			37,006			70,373
Notes payable		-			6,500			5,000
Accounts payable		34,094			43,904			47,915
Accrued interest		8,544			6,333			7,964
Dividends payable		-			8,511			8,505
Accrued vacation and payroll		7,208			6,702			6,956
Customer advances		27,967			22,527			18,801
Customer deposits		7,473			6,647			6,651
Regulatory liabilities		7,732			11,161			12,444
Fair value of derivative instruments		5,181			19,791			12,778
Accrued environmental remediation costs		10,130			6,652			5,227
Accrued income and other taxes		891			-			-
Deferred revenues		3,860			4,801			3,699
Other		19,466			17,905			14,565
Total Current Liabilities		133,587			198,440			220,878
Deferred Credits and Other Liabilities
Regulatory liabilities - OPEB		12,139			6,988			12,038
Regulatory liabilities - other		105,109			108,887			110,280
Operating reserves		3,633			3,383			3,414
Fair value of derivative instruments		154			-			3,193
Accrued environmental remediation costs		8,238			11,036			11,937
Accrued OPEB costs		51,700			53,055			46,426
Accrued pension costs		99,869			121,911			76,414
Tax reserve		1,988			3,172			9,668
Other		20,418			18,802			18,831
Total Deferred Credits and Other Liabilities		303,248			327,234			292,201
Accumulated Deferred Income Tax		262,140			235,160			225,582
Commitments and Contingencies
Total Capitalization and Liabilities	$	1,713,187		$	1,730,112		$	1,702,020

The Notes to Financial Statements are an integral part hereof.

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CH ENERGY GROUP CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED)

(In Thousands, except share amounts)

	CH Energy Group Common Shareholders
	Common Stock				Treasury Stock
	Shares Issued		Amount		Shares Repurchased			Amount			Paid-In Capital			Capital Stock Expense			Retained Earnings			Accumulated Other Comprehensive Income / (Loss)		Non-controlling Interest			Total Equity
Balance at December 31, 2010		16,862,087	$	1,686		(1,062,825	)	$	(44,887	)	$	350,360		$	(328	)	$	230,342		$	459	$	172		$	537,804
Comprehensive income:
Net income																		31,957								31,957
Dividends declared on Preferred Stock of subsidiary																		(727	)							(727	)
Change in fair value:
Investments																					15					15
Reclassification to liabilities held for sale																							(172	)		(172	)
Dividends declared on common stock																		(25,021	)							(25,021	)
Treasury shares activity - net						(914,225	)		(48,323	)		333														(47,990	)
Balance at September 30, 2011		16,862,087	$	1,686		(1,977,050	)	$	(93,210	)	$	350,693		$	(328	)	$	236,551		$	474	$	-		$	495,866

Balance at December 31, 2011		16,862,087	$	1,686		(1,967,123	)	$	(92,908	)	$	351,053		$	(328	)	$	242,391		$	354	$	-		$	502,248
Comprehensive income:
Net income																		26,137								26,137
Preferred Stock Redemption															162			(342	)							(180	)
Dividends declared on Preferred Stock of subsidiary																		(521	)							(521	)
Change in fair value:
Investments																					26					26
Dividends declared on common stock																		(16,572	)							(16,572	)
Treasury shares activity - net						52,935			2,491			(1,917	)													574
Balance at September 30, 2012		16,862,087	$	1,686		(1,914,188	)	$	(90,417	)	$	349,136		$	(166	)	$	251,093		$	380	$	-		$	511,712

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON STATEMENT OF INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011
Operating Revenues
Electric	$	148,916		$	149,706	$	393,617		$	418,511
Natural gas		18,306			18,462		100,276			127,941
Total Operating Revenues		167,222			168,168		493,893			546,452

Operating Expenses
Operation:
Purchased electricity and fuel used in electric generation		57,177			60,734		139,600			168,797
Purchased natural gas		5,873			6,337		37,977			63,425
Other expenses of operation		56,015			55,480		174,737			181,460
Depreciation and amortization		9,466			8,909		28,336			26,790
Taxes, other than income tax		12,701			11,644		38,034			36,303
Total Operating Expenses		141,232			143,104		418,684			476,775

Operating Income		25,990			25,064		75,209			69,677

Other Income and Deductions
Interest on regulatory assets and other interest income		1,581			1,023		5,197			4,310
Regulatory adjustments for interest costs		326			319		976			1,032
Other - net		(313	)		513		(697	)		(300	)
Total Other Income		1,594			1,855		5,476			5,042

Interest Charges
Interest on long-term debt		5,719			5,872		17,177			17,668
Interest on regulatory liabilities and other interest		1,666			1,529		4,898			4,517
Total Interest Charges		7,385			7,401		22,075			22,185

Income Before Income Taxes		20,199			19,518		58,610			52,534

Income Taxes		7,840			7,853		22,847			20,858

Net Income		12,359			11,665		35,763			31,676

Preferred Stock Redemption Premium		-			-		342			-
Dividends Declared on Cumulative Preferred Stock		103			242		521			727

Income Available for Common Stock	$	12,256		$	11,423	$	34,900		$	30,949

CENTRAL HUDSON STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Net Income	$	12,359	$	11,665	$	35,763	$	31,676
Other Comprehensive Income		-		-		-		-
Comprehensive Income	$	12,359	$	11,665	$	35,763	$	31,676

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON STATEMENT OF CASH FLOWS (UNAUDITED)
(In Thousands)

	Nine Months Ended September 30,
	2012			2011
Operating Activities:
Net income	$	35,763		$	31,676
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		26,728			25,463
Amortization		1,608			1,328
Deferred income taxes - net		24,096			19,975
Bad debt expense		4,501			5,075
Pension expense		17,909			20,725
OPEB expense		5,210			5,203
Regulatory liability - rate moderation		(1,107	)		(7,849	)
Revenue decoupling mechanism recorded		(2,405	)		4,956
Regulatory asset amortization		3,535			3,524
Changes in operating assets and liabilities - net:
Accounts receivable, unbilled revenues and other receivables		(2,468	)		1,690
Fuel, materials and supplies		866			(2,550	)
Special deposits and prepayments		5,583			1,563
Income and other taxes		(339	)		(682	)
Accounts payable		(4,220	)		(10,420	)
Accrued interest		1,730			1,346
Customer advances		985			(3,597	)
Pension plan contribution		(28,494	)		(32,536	)
OPEB contribution		(3,269	)		(1,184	)
Revenue decoupling mechanism collected		141			2,388
Regulatory asset - storm deferral		(942	)		(3,441	)
Regulatory asset - MGP site remediation		2,920			3,761
Regulatory asset - Temporary State Assessment		(3,568	)		(2,169	)
Deferred natural gas and electric costs		3,498			22,164
Other - net		17,293			10,658
Net cash provided by operating activities		105,554			97,067

Investing Activities:
Additions to utility plant		(78,792	)		(57,434	)
Other - net		(4,058	)		(3,705	)
Net cash used in investing activities		(82,850	)		(61,139	)

Financing Activities:
Redemption of long-term debt		(36,000	)		-
Proceeds from issuance of long-term debt		48,000			33,400
Borrowings of short-term debt - net		(1,500	)		-
Redemption of Preferred Stock		(12,180	)		-
Dividends paid to parent - CH Energy Group		(22,000	)		(33,000	)
Dividends paid on cumulative Preferred Stock		(764	)		(727	)
Other - net		(622	)		(647	)
Net cash used in financing activities		(25,066	)		(974	)

Net Change in Cash and Cash Equivalents		(2,362	)		34,954
Cash and Cash Equivalents - Beginning of Period		2,521			9,622
Cash and Cash Equivalents - End of Period	$	159		$	44,576

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	15,795		$	17,036
Federal and state income taxes paid	$	-		$	-
Additions to plant included in liabilities	$	4,856		$	3,997
Regulatory asset - storm deferral costs in liabilities	$	-		$	9,396

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON BALANCE SHEET (UNAUDITED)
(In Thousands)

	September 30,		December 31,		September 30,
	2012		2011		2011
ASSETS
Utility Plant
Electric	$	1,045,949	$	1,008,394	$	988,319
Natural gas		311,841		305,664		301,989
Common		157,878		147,286		142,201
Gross Utility Plant		1,515,668		1,461,344		1,432,509

Less: Accumulated depreciation		401,966		388,784		385,198
Net		1,113,702		1,072,560		1,047,311

Construction work in progress		67,415		58,847		63,996
Net Utility Plant		1,181,117		1,131,407		1,111,307

Non-Utility Property and Plant		524		524		681
Less: Accumulated depreciation		-		-		36
Net Non-Utility Property and Plant		524		524		645

Current Assets
Cash and cash equivalents		159		2,521		44,576
Accounts receivable from customers - net of allowance for doubtful accounts of $5.1 million, $5.2 million and $5.2 million, respectively		62,225		61,610		66,859
Accrued unbilled utility revenues		12,071		15,299		11,320
Other receivables		3,075		5,301		4,679
Fuel, materials and supplies - at average cost		20,171		21,037		22,577
Regulatory assets		36,454		49,526		43,407
Fair value of derivative instruments		711		320		-
Unamortized debt expense		407		407		407
Special deposits and prepayments		12,735		18,258		15,697
Accumulated deferred income tax		-		-		6,593
Total Current Assets		148,008		174,279		216,115

Deferred Charges and Other Assets
Regulatory assets - pension plan		140,702		159,020		121,238
Regulatory assets - other		109,887		114,980		105,899
Fair value of derivative instruments		1,120		931		-
Unamortized debt expense		4,444		4,128		4,610
Other investments		17,205		14,047		14,008
Other		2,274		3,065		2,217
Total Deferred Charges and Other Assets		275,632		296,171		247,972

Total Assets	$	1,605,281	$	1,602,381	$	1,576,039

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON BALANCE SHEET (CONT'D) (UNAUDITED)
(In Thousands, except share amounts)

	September 30,			December 31,			September 30,
	2012			2011			2011
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stock (30,000,000 shares authorized: $5 par value; 16,862,087 shares issued and outstanding)	$	84,311		$	84,311		$	84,311
Paid-in capital		199,980			199,980			199,980
Retained earnings		178,865			165,965			162,847
Capital stock expense		(4,799	)		(4,961	)		(4,961	)
Total Equity		458,357			445,295			442,177

Cumulative Preferred Stock not subject to mandatory redemption		9,027			21,027			21,027

Long-term debt		465,950			417,950			417,903
Total Capitalization		933,334			884,272			881,107

Current Liabilities
Current maturities of long-term debt		-			36,000			69,400
Notes payable		-			1,500			-
Accounts payable		26,721			35,731			42,229
Accrued interest		7,913			6,183			7,313
Dividends payable - Preferred Stock		-			242			242
Accrued vacation and payroll		5,786			5,556			5,568
Customer advances		15,589			14,604			10,157
Customer deposits		7,408			6,582			6,587
Regulatory liabilities		7,732			11,161			12,444
Fair value of derivative instruments		5,181			19,791			12,778
Accrued environmental remediation costs		9,675			6,117			4,552
Accrued income and other taxes		2,003			1,274			1,184
Accumulated deferred income tax		5,373			156			-
Other		17,285			14,855			11,481
Total Current Liabilities		110,666			159,752			183,935

Deferred Credits and Other Liabilities
Regulatory liabilities - OPEB		12,139			6,988			12,038
Regulatory liabilities - other		105,109			108,887			110,280
Operating reserves		2,444			2,120			2,235
Fair value of derivative instruments		154			-			3,193
Accrued environmental remediation costs		7,174			9,726			10,483
Accrued OPEB costs		51,700			53,055			46,426
Accrued pension costs		99,869			121,911			76,414
Tax reserve		1,988			3,172			9,668
Other		19,466			17,955			17,884
Total Deferred Credits and Other Liabilities		300,043			323,814			288,621

Accumulated Deferred Income Tax		261,238			234,543			222,376

Commitments and Contingencies

Total Capitalization and Liabilities	$	1,605,281		$	1,602,381		$	1,576,039

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON STATEMENT OF EQUITY (UNAUDITED)

(In Thousands, except share amounts)

	Central Hudson Common Shareholders
	Common Stock				Treasury Stock
	Shares Issued		Amount		Shares Repurchased		Amount		Paid-In Capital		Capital Stock Expense			Retained Earnings			Accumulated Other Comprehensive Income / (Loss)		Total Equity
Balance at December 31, 2010		16,862,087	$	84,311		-	$	-	$	199,980	$	(4,961	)	$	164,898		$	-	$	444,228
Net income															31,676					31,676
Dividends declared:
On cumulative Preferred Stock															(727	)				(727	)
On Common Stock to parent - CH Energy Group															(33,000	)				(33,000	)
Balance at September 30, 2011		16,862,087	$	84,311		-	$	-	$	199,980	$	(4,961	)	$	162,847		$	-	$	442,177

Balance at December 31, 2011		16,862,087	$	84,311		-	$	-	$	199,980	$	(4,961	)	$	165,965		$	-	$	445,295
Net income															35,763					35,763
Preferred Stock Redemption												162			(342	)				(180	)
Dividends declared:
On cumulative Preferred Stock															(521	)				(521	)
On Common Stock to parent - CH Energy Group															(22,000	)				(22,000	)
Balance at September 30, 2012		16,862,087	$	84,311		-	$	-	$	199,980	$	(4,799	)	$	178,865		$	-	$	458,357

The Notes to Financial Statements are an integral part hereof.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Summary of Significant Accounting Policies

Basis of Presentation

This Quarterly Report on Form 10-Q is a combined report of CH Energy Group, Inc. ("CH Energy Group") and its regulated electric and natural gas subsidiary, Central Hudson Gas & Electric Corporation ("Central Hudson"). The Notes to the Consolidated Financial Statements apply to both CH Energy Group and Central Hudson. CH Energy Group's Consolidated Financial Statements include the accounts of CH Energy Group and its wholly owned subsidiaries, which include Central Hudson and CH Energy Group's non-utility subsidiary, Central Hudson Enterprises Corporation ("CHEC"). Operating results of CHEC include its wholly owned subsidiary, Griffith Energy Services, Inc. ("Griffith"). Discontinued operations on CH Energy Group's Consolidated Statements of Income include the operating results of CHEC's subsidiaries which were sold in 2011, including Lyonsdale Biomass, LLC ("Lyonsdale"), Shirley Wind, LLC ("Shirley Wind"), CH-Auburn, LLC ("CH-Auburn") and CH-Greentree, LLC ("CH-Greentree"). Intercompany balances and transactions have been eliminated in consolidation. See Note 5 – "Acquisitions, Divestitures and Investments" for further information.

The Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which for regulated public utilities, includes specific accounting guidance for regulated operations. For additional information regarding regulatory accounting, see Note 2 – "Regulatory Matters."

Pending Acquisition by Fortis Inc.

On February 21, 2012, CH Energy Group announced that it had entered into an agreement and plan of merger under which it agreed, subject to shareholder approval and the approval of applicable regulatory authorities, to be acquired by Fortis Inc. ("Fortis") for $65 per share of common stock in cash. On June 19, 2012, shareholders of CH Energy Group approved the proposed acquisition of the Company by Fortis. On July 3, 2012, the Federal Energy Regulatory Commission approved the acquisition of CH Energy Group by Fortis. On July 17, 2012, the Committee on Foreign Investment in the United States approved the acquisition of CH Energy Group by Fortis. On October 2, 2012, the Federal Trade Commission permitted the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the acquisition of the Company by Fortis to expire. The transaction remains subject to review by the New York State Public Service Commission ("PSC"). On April 20, 2012 Fortis and Central Hudson jointly filed a petition requesting approval of the proposed transaction under Section 70 of the Public Service Law. Pursuant to a procedure schedule established by the Administrative Law Judges, the PSC Staff and other parties to the proceeding filed testimony and comments on October 12, 2012. Management continues to believe that PSC approval will be obtained and the transaction will close during the first quarter of 2013.

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Unaudited Financial Statements

The accompanying Consolidated Financial Statements of CH Energy Group and Financial Statements of Central Hudson are unaudited but, in the opinion of management, reflect adjustments (which include normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These unaudited quarterly Financial Statements do not contain all footnote disclosures concerning accounting policies and other matters which would be included in annual Financial Statements and, accordingly, should be read in conjunction with the audited Financial Statements (including the Notes thereto) included in the combined CH Energy Group/Central Hudson Annual Report on Form 10-K for the year ended December 31, 2011 (the "Corporations' 10-K Annual Report").

CH Energy Group's and Central Hudson's balance sheets as of September 30, 2011 are not required to be included in this Quarterly Report on Form 10-Q; however, these balance sheets are included for supplemental analysis purposes.

Reclassification

Certain amounts in the 2011 Financial Statements have been reclassified to conform to the 2012 presentation. For more information regarding reclassification of discontinued operations, see Note 5 – "Acquisition, Divestitures and Investments."

Revenue Recognition

CH Energy Group's deferred revenue balances as of September 30, 2012, December 31, 2011 and September 30, 2011 were $3.9 million, $4.8 million and $3.7 million, respectively. The deferred revenue balance will be recognized in CH Energy Group's operating revenues over the 12-month term of the respective customer contract.

As required by the PSC, Central Hudson records gross receipts tax revenues and expenses on a gross income statement presentation basis (i.e., included in both revenue and expenses). Sales and use taxes for both Central Hudson and Griffith are accounted for on a net basis (excluded from revenue).

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Fuel, Materials & Supplies

The following is a summary of CH Energy Group's and Central Hudson's inventories (In Thousands):

	CH Energy Group						Central Hudson
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
	2012		2011		2011		2012		2011		2011
Natural gas	$	8,889	$	11,711	$	13,106	$	8,889	$	11,711	$	13,106
Petroleum products and propane		2,882		3,422		2,177		-		494		494
Fuel used in electric generation		286		285		287		286		285		287
Materials and Supplies		12,094		9,696		9,960		10,996		8,547		8,690
Total	$	24,151	$	25,114	$	25,530	$	20,171	$	21,037	$	22,577

Depreciation and Amortization

Current accounting guidance related to asset retirements precludes the recognition of expected future retirement obligations as a component of depreciation expense or accumulated depreciation. Central Hudson, however, is required to use depreciation methods and rates approved by the PSC under regulatory accounting. These depreciation rates include a charge for the cost of future removal and retirement of fixed assets. In accordance with current accounting guidance for regulated operations, Central Hudson continues to accrue for the future cost of removal for its rate-regulated natural gas and electric utility assets. In accordance with current accounting guidance related to asset retirements, Central Hudson has classified $53.0 million, $52.6 million, and $52.6 million of cost of removal as regulatory liabilities as of September 30, 2012, December 31, 2011, and September 30, 2011, respectively. This liability represents the portion of the cost of removal charge in excess of the amount reported as an Asset Retirement Obligation under GAAP.

See Note 6 - "Goodwill and Other Intangible Assets" for further discussion of amortization of intangibles (other than goodwill).

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Earnings Per Share

In the calculation of earnings per share (basic and diluted) of CH Energy Group's Common Stock, earnings for CH Energy Group are reduced by the Preferred Stock dividends of Central Hudson.

The average dilutive effect of CH Energy Group's stock options, performance shares and restricted shares are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Shares		207,160		188,177		207,160		187,931

Certain stock options can be excluded from the calculation of diluted earnings per share because the exercise prices of those options were greater than the average market price per share of Common Stock. There were no options excluded during the three and nine months ended September 30, 2012 or 2011.

Parental Guarantees

CH Energy Group and CHEC have issued guarantees to counterparties to assure the payment, when due, of certain obligations incurred by CH Energy Group subsidiaries, in physical and financial transactions.

		September 30, 2012
Transaction Description