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______________________________________March 31, 2009

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.	14-1804460
	(Incorporated in New York)
	284 South Avenue
	Poughkeepsie, New York 12601-4839
	(845) 452-2000

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

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

Yes x No o

Indicate by check mark whether CH Energy Group 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(17 CFR § 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether Central Hudson Gas & Electric Corporation 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(17 CFR § 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether CH Energy Group, Inc. 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):

Large Accelerated Filer oAccelerated Filer x

Non-Accelerated Filer o Smaller Reporting Company o

Indicate by check mark whether Central Hudson Gas & Electric Corporation 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):

Large Accelerated Filer oAccelerated Filer o

Non-Accelerated Filer x Smaller Reporting Company o

Indicate by check mark whether CH Energy Group, Inc. is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No x

Indicate by check mark whether Central Hudson Gas & Electric Corporation is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No x

As of the close of business on April 30, 2009, (i) CH Energy Group, Inc. had outstanding 15,785,199 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 MARCH 31, 2009

TABLE OF CONTENTS


		PAGE

	PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS (UNAUDITED)

CH ENERGY GROUP, INC.

	Consolidated Statement of Income – Three Months Ended March 31, 2009 and 2008	5

	Consolidated Statement of Comprehensive Income – Three Months Ended March 31, 2009 and 2008	6

	Consolidated Statement of Cash Flows – Three Months Ended March 31, 2009 and 2008	7

	Consolidated Balance Sheet – March 31, 2009, December 31, 2008 and March 31, 2008	8

	Consolidated Statement of Changes In Equity – Three Months Ended March 31, 2009 and 2008	10

CENTRAL HUDSON GAS & ELECTRIC CORPORATION

	Statement of Income – Three Months Ended March 31, 2009 and 2008	11

	Statement of Comprehensive Income – Three Months Ended March 31, 2009 and 2008	12

	Statement of Cash Flows – Three Months Ended March 31, 2009 and 2008	13

	Balance Sheet – March 31, 2009, December 31, 2008 and March 31, 2008	14

	Statement of Changes In Equity – Three Months Ended March 31, 2009 and 2008	16

Notes to Financial Statements (Unaudited)		17

TABLE OF CONTENTS


		PAGE


ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	53

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	88

ITEM 4	CONTROLS AND PROCEDURES	88

	PART II – OTHER INFORMATION

ITEM 1	LEGAL PROCEEDINGS	89

ITEM 1A	RISK FACTORS	89

ITEM 6	EXHIBITS	90

SIGNATURES		91

EXHIBIT INDEX		92

CERTIFICATIONS		95

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.

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS (UNAUDITED)

CH ENERGY GROUP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In Thousands, except per share amounts)


	Three Months Ended March 31,
	2009			2008

Operating Revenues
Electric	$	156,753		$	143,814
Natural gas		90,123			76,219
Competitive business subsidiaries:
Petroleum Products		120,578			178,566
Other		11,019			11,193

Total Operating Revenues		378,473			409,792

Operating Expenses
Operation:
Purchased electricity and fuel used in electric generation		91,751			84,334
Purchased natural gas		64,825			53,138
Purchased petroleum		86,271			150,858
Other expenses of operation - regulated activities		46,321			42,913
Other expenses of operation - competitive business subsidiaries		24,187			23,668
Depreciation and amortization		10,162			9,460
Taxes, other than income tax		10,143			9,463

Total Operating Expenses		333,660			373,834

Operating Income		44,813			35,958

Other Income and Deductions
Income from unconsolidated affiliates		230			269
Interest on regulatory assets and investment income		1,116			1,273
Reserve for note receivable		(1,299	)		—
Other - net		(709	)		441

Total Other Income		(662	)		1,983

Interest Charges
Interest on long-term debt		4,780			5,089
Interest on regulatory liabilities and other interest		1,507			1,288

Total Interest Charges		6,287			6,377

Income before income taxes, non-controlling interest and preferred dividends of subsidiary		37,864			31,564
Income Taxes		14,533			11,937

Net Income		23,331			19,627
Net (loss) income attributable to non-controlling interest:
Non-controlling interest in subsidiary		(32	)		84
Dividends declared on Preferred Stock of subsidiary		242			242

Net income attributable to CH Energy Group		23,121			19,301
Dividends declared on Common Stock		8,524			8,518

Change in Retained Earnings	$	14,597		$	10,783

Common Stock:
Average shares outstanding
Basic		15,771			15,762
Diluted		15,828			15,818
Amounts attributable to CH Energy Group common shareholders
Earnings per share
Basic	$	1.47		$	1.23
Diluted	$	1.46		$	1.22
Dividends Declared Per Share	$	0.54		$	0.54

The Notes to Financial Statements are an integral part hereof.

- 5 -

CH ENERGY GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(In Thousands)


	Three Months Ended March 31,
	2009		2008

Net Income	$	23,331	$	19,627

Other Comprehensive Income:

Fair value of cash flow hedges - FAS 133:

Unrealized gains - net of tax of ($1) and ($181)		1		273

Reclassification for gains realized in net income - net of tax of $0 and $465		—		(699	)

Net unrealized losses on investments held by equity method investees - net of tax of $0 and $186		—		(279	)


Other comprehensive income (loss)		1		(705	)


Comprehensive Income		23,332		18,922


Comprehensive income attributable to non-controlling interest		210		326


Comprehensive income attributable to CH Energy Group	$	23,122	$	18,596

The Notes to Financial Statements are an integral part hereof.

- 6 -

CH ENERGY GROUP CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In Thousands)


	Three Months Ended March 31,
	2009			2008

Operating Activities:
Net income	$	23,331		$	19,627
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		8,857			8,266
Amortization		1,305			1,194
Deferred income taxes - net		(12,932	)		3,524
Provision for uncollectibles		5,250			2,637
Distributed equity in earnings of unconsolidated affiliates		370			148
Pension expense		3,596			3,681
Other post-employment benefits (“OPEB”) expense		2,864			2,932
Regulatory liability - rate moderation		—			(3,068	)
Regulatory asset amortization		1,751			1,722
Gain on sale of property and plant		(38	)		—
Changes in operating assets and liabilities - net of business acquisitions:
Accounts receivable, unbilled revenues and other receivables		(18,241	)		(17,826	)
Fuel, materials and supplies		10,550			12,215
Special deposits and prepayments		(5,913	)		1,256
Accounts payable		(13,558	)		9,215
Accrued income taxes and interest		25,324			3,029
Customer advances		(12,860	)		(15,877	)
Pension plan contribution		(2,632	)		(131	)
OPEB contribution		—			(1,509	)
Regulatory asset - Manufactured gas plant (“MGP”) site remediations		(877	)		174
Deferred natural gas and electric costs		31,728			(7,598	)
Other - net		3,165			(283	)

Net cash provided by operating activities		51,040			23,328

Investing Activities:
Proceeds from sale of short-term investments		—			3,545
Proceeds from sale of property and plant		160			—
Additions to utility and other property and plant		(23,336	)		(17,673	)
Acquisitions made by competitive business subsidiaries		—			(9,217	)
Other - net		(5	)		45

Net cash used in investing activities		(23,181	)		(23,300	)

Financing Activities:
Redemption of long-term debt		(20,000	)		—
Borrowings of short-term debt - net		9,500			10,500
Dividends paid on Preferred Stock of subsidiary		(242	)		(242	)
Dividends paid on Common Stock		(8,523	)		(8,518	)
Debt issuance costs		(111	)		(3	)

Net cash (used in) provided by financing activities		(19,376	)		1,737

Net Change in Cash and Cash Equivalents		8,483			1,765
Cash and Cash Equivalents at Beginning of Period		19,825			11,313

Cash and Cash Equivalents at End of Period	$	28,308		$	13,078

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	6,434		$	7,347
Federal and state income tax paid	$	465		$	5,008
Additions to plant included in liabilities	$	3,812		$	2,290

The Notes to Financial Statements are an integral part hereof.

- 7 -

CH ENERGY GROUP CONSOLIDATED BALANCE SHEET

(In Thousands)


	March 31, 2009		December 31, 2008		March 31, 2008

	(UNAUDITED)				(UNAUDITED)
ASSETS
Utility Plant
Electric	$	875,292	$	862,465	$	824,584
Natural gas		267,985		263,874		255,028
Common		138,236		135,732		117,656

		1,281,513		1,262,071		1,197,268
Less: Accumulated depreciation		376,168		369,925		359,978

		905,345		892,146		837,290
Construction work in progress		54,833		53,778		60,650

Net Utility Plant		960,178		945,924		897,940

Non-Utility Property & Plant
Griffith non-utility property & plant		42,460		42,691		41,089
Other non-utility property & plant		15,736		15,345		12,988

		58,196		58,036		54,077
Less: Accumulated depreciation - Griffith		23,953		23,398		21,398
Less: Accumulated depreciation - other		2,424		2,212		1,579

Net Non-Utility Property & Plant		31,819		32,426		31,100

Current Assets
Cash and cash equivalents		28,308		19,825		13,078
Accounts receivable from customers - net of allowance for doubtful accounts; $8.8 million, $8.8 million and $5.4 million, respectively		147,253		131,727		155,714
Accrued unbilled utility revenues		11,863		12,657		11,433
Other receivables		7,402		7,914		5,739
Fuel, materials and supplies		26,035		36,585		21,511
Regulatory assets		31,779		60,502		41,404
Fair value of derivative instruments		—		—		1,100
Special deposits and prepayments		27,281		21,344		26,852
Accumulated deferred income tax		20,185		7,498		4,759

Total Current Assets		300,106		298,052		281,590

Deferred Charges and Other Assets
Regulatory assets - pension plan		194,880		197,934		47,480
Regulatory assets - OPEB		1,746		4,257		14,294
Regulatory assets - other		119,096		109,743		86,548
Goodwill		67,455		67,455		67,509
Other intangible assets - net		35,090		36,129		39,035
Unamortized debt expense		5,026		5,009		4,251
Investments in unconsolidated affiliates		9,277		9,711		11,613
Other investments		7,281		7,815		8,328
Other		14,964		15,728		16,531

Total Deferred Charges and Other Assets		454,815		453,781		295,589

Total Assets	$	1,746,918	$	1,730,183	$	1,506,219

The Notes to Financial Statements are an integral part hereof.

- 8 -

CH ENERGY GROUP CONSOLIDATED BALANCE SHEET (CONT’D)
(In Thousands)


	March 31, 2009			December 31, 2008			March 31, 2008

	(UNAUDITED)						(UNAUDITED)
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) 15,785,199 shares, 15,783,083shares, and 15,774,100 shares outstanding, respectively	$	1,686		$	1,686		$	1,686
Paid-in capital		350,797			350,873			350,739
Retained earnings		231,231			216,634			226,422
Treasury stock - 1,076,888 shares, 1,079,004 shares, and 1,087,987 shares, respectively		(45,271	)		(45,386	)		(45,716	)
Accumulated other comprehensive income		56			55			468
Capital stock expense		(328	)		(328	)		(328	)

Total CH Energy Group Common Shareholders’ Equity		538,171			523,534			533,271

Non-controlling interest in subsidiary		1,416			1,448			1,429
Preferred Stock of subsidiary		21,027			21,027			21,027

Total Equity		560,614			546,009			555,727

Long-term debt		413,895			413,894			383,892

Total Capitalization		974,509			959,903			939,619

Current Liabilities
Current maturities of long-term debt		—			20,000			20,000
Notes payable		45,000			35,500			53,000
Accounts payable		38,015			52,824			50,660
Accrued interest		4,650			5,899			4,312
Dividends payable		8,766			8,765			8,760
Accrued vacation and payroll		7,060			6,628			7,297
Customer advances		17,582			30,442			7,168
Customer deposits		8,389			8,445			8,249
Regulatory liabilities		4,565			4,275			7,078
Fair value of derivative instruments		20,514			15,759			—
Accrued environmental remediation costs		5,780			5,757			4,253
Accrued income taxes		27,014			441			5,678
Deferred revenues		6,919			8,827			6,385
Other		30,820			27,974			16,651

Total Current Liabilities		225,074			231,536			199,491

Deferred Credits and Other Liabilities
Regulatory liabilities - OPEB		—			—			1,839
Regulatory liabilities - other		134,599			130,893			113,105
Operating reserves		4,650			5,155			5,364
Accrued environmental remediation costs		22,251			21,796			14,639
Accrued OPEB costs		53,809			52,645			55,390
Accrued pension costs		162,494			161,674			12,035
Other		11,834			12,478			18,498

Total Deferred Credits and Other Liabilities		389,637			384,641			220,870

Accumulated Deferred Income Tax		157,698			154,103			146,239

Commitments and Contingencies
Total Capitalization and Liabilities	$	1,746,918		$	1,730,183		$	1,506,219

The Notes to Financial Statements are an integral part hereof.

- 9 -

CH ENERGY GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
(In Thousands, except share and per share amounts)


	CH Energy Group Common Shareholders

	Common Stock $0.10 par value; 30,000,000 shares authorized				Treasury Stock

	Shares Issued		Amount		Shares Repurchased			Amount			Paid-In Capital			Capital Stock Expense			Retained Earnings			Accumulated Other Comprehensive Income / (Loss)			Non- controlling Interest			Preferred Stock of Subsidiary			Total Equity

Balance at January 1, 2008		16,862,087	$	1,686		(1,100,087	)	$	(46,252	)	$	351,230		$	(328	)	$	215,639		$	1,173		$	1,345		$	21,027		$	545,520
Comprehensive income:
Net income																		19,301						84			242			19,627
Change in fair value:
Derivative instruments																					273									273
Investments																					(699	)								(699	)
Reclassification adjustments for losses recognized in net income																					(279	)								(279	)
Dividends declared:
On Preferred Stock of subsidiary																											(242	)		(242	)
On Common Stock ($2.16 per share)																		(8,518	)											(8,518	)
Treasury shares issued						12,100			536			(491	)																	45

Balance at March 31, 2008		16,862,087	$	1,686		(1,087,987	)	$	(45,716	)	$	350,739		$	(328	)	$	226,422		$	468		$	1,429		$	21,027		$	555,727


Balance at January 1, 2009		16,862,087	$	1,686		(1,079,004	)	$	(45,386	)	$	350,873		$	(328	)	$	216,634		$	55		$	1,448		$	21,027		$	546,009
Comprehensive income:
Net income																		23,121						(32	)		242			23,331
Change in fair value:
Derivative instruments																					1									1
Investments																														—
Reclassification adjustments for losses recognized in net income																														—
Dividends declared:
On Preferred Stock of subsidiary																											(242	)		(242	)
On Common Stock ($2.16 per share)																		(8,524	)											(8,524	)
Treasury shares issued						2,116			115			(76	)																	39

Balance at March 31, 2009		16,862,087	$	1,686		(1,076,888	)	$	(45,271	)	$	350,797		$	(328	)	$	231,231		$	56		$	1,416		$	21,027		$	560,614

The Notes to Financial Statements are an integral part hereof.

- 10 -

CENTRAL HUDSON STATEMENT OF INCOME (UNAUDITED)
(In Thousands)


	Three Months Ended March 31,
	2009			2008

Operating Revenues
Electric	$	156,753		$	143,814
Natural gas		90,123			76,219

Total Operating Revenues		246,876			220,033


Operating Expenses
Operation:
Purchased electricity and fuel used in electric generation		90,523			82,606
Purchased natural gas		64,825			53,138
Other expenses of operation		46,321			42,913
Depreciation and amortization		8,009			7,364
Taxes, other than income tax		9,967			9,302

Total Operating Expenses		219,645			195,323


Operating Income		27,231			24,710


Other Income and Deductions
Interest on regulatory assets and other interest income		746			892
Other - net		(360	)		596

Total Other Income		386			1,488


Interest Charges
Interest on other long-term debt		4,780			5,089
Interest on regulatory liabilities and other interest		1,438			1,100

Total Interest Charges		6,218			6,189


Income Before Income Taxes		21,399			20,009

Income Taxes		8,806			8,262


Net Income		12,593			11,747

Dividends Declared on Cumulative Preferred Stock		242			242


Income Available for Common Stock	$	12,351		$	11,505

The Notes to Financial Statements are an integral part hereof.

- 11 -

CENTRAL HUDSON STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(In Thousands)


	Three Months Ended March 31,
	2009		2008

Net Income	$	12,593	$	11,747
Other Comprehensive Income		—		—


Comprehensive Income	$	12,593	$	11,747

The Notes to Financial Statements are an integral part hereof.

- 12 -

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


	Three Months Ended March 31,
	2009			2008

Operating Activities:
Net Income	$	12,593		$	11,747
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		7,743			7,177
Amortization		266			187
Deferred income taxes - net		(13,344	)		2,457
Provision for uncollectibles		2,885			1,820
Pension expense		3,596			3,681
OPEB expense		2,864			2,932
Regulatory liability - rate moderation		—			(3,068	)
Regulatory asset amortization		1,751			1,722
Changes in operating assets and liabilities - net:
Accounts receivable, unbilled revenues and other receivables		(17,834	)		3,148
Fuel, materials and supplies		11,491			9,410
Special deposits and prepayments		(4,273	)		2,164
Accounts payable		(12,178	)		10,973
Accrued income taxes and interest		21,475			2,145
Customer advances		(5,419	)		(9,904	)
Pension plan contribution		(2,632	)		(131	)
OPEB contribution		—			(1,509	)
Regulatory asset - MGP site remediations		(877	)		174
Deferred natural gas and electric costs		31,728			(7,598	)
Other - net		2,382			228

Net cash provided by operating activities		42,217			37,755

Investing Activities:
Additions to utility plant		(22,699	)		(17,137	)
Other - net		(79	)		46

Net cash used in investing activities		(22,778	)		(17,091	)

Financing Activities:
Redemption of long-term debt		(20,000	)		—
Borrowings (Repayments) of short-term debt - net		14,500			(20,500	)
Dividends paid on cumulative Preferred Stock		(242	)		(242	)
Debt issuance costs		(112	)		(2	)

Net cash used in financing activities		(5,854	)		(20,744	)

Net Change in Cash and Cash Equivalents		13,585			(80	)
Cash and Cash Equivalents - Beginning of Period		2,455			3,592

Cash and Cash Equivalents - End of Period	$	16,040		$	3,512

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	6,365		$	7,231
Federal and state income tax paid	$	—		$	1,946
Plant additions in liabilities	$	3,812		$	2,290

The Notes to Financial Statements are an integral part hereof.

- 13 -

CENTRAL HUDSON BALANCE SHEET
(In Thousands)


	March 31, 2009		December 31, 2008		March 31, 2008

	(UNAUDITED)				(UNAUDITED)
ASSETS
Utility Plant
Electric	$	875,292	$	862,465	$	824,584
Natural gas		267,985		263,874		255,028
Common		138,236		135,732		117,656

		1,281,513		1,262,071		1,197,268

Less: Accumulated depreciation		376,168		369,925		359,978

		905,345		892,146		837,290

Construction work in progress		54,833		53,778		60,650

Net Utility Plant		960,178		945,924		897,940


Non-Utility Property and Plant		438		445		444
Less: Accumulated depreciation		33		32		30

Net Non-Utility Property and Plant		405		413		414


Current Assets
Cash and cash equivalents		16,040		2,455		3,512
Accounts receivable from customers - net of allowance for doubtful accounts; $4.5 million, $4.0 million and $3.1 million, respectively		102,058		85,352		77,757
Accrued unbilled utility revenues		11,863		12,657		11,433
Other receivables		2,414		3,447		1,985
Fuel, materials and supplies - at average cost		19,624		31,115		14,860
Regulatory assets		31,779		60,502		41,404
Fair value of derivative instruments		—		—		591
Special deposits and prepayments		22,870		18,573		22,317
Accumulated deferred income tax		17,350		4,685		3,756

Total Current Assets		223,998		218,786		177,615


Deferred Charges and Other Assets
Regulatory assets - pension plan		194,880		197,934		47,480
Regulatory assets - OPEB		1,746		4,257		14,294
Regulatory assets - other		119,096		109,743		86,548
Unamortized debt expense		5,026		5,009		4,251
Other investments		7,173		7,697		8,284
Other		2,398		2,433		4,065

Total Deferred Charges and Other Assets		330,319		327,073		164,922


Total Assets	$	1,514,900	$	1,492,196	$	1,240,891

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON BALANCE SHEET (CONT’D)
(In Thousands)


	March 31, 2009			December 31, 2008			March 31, 2008

	(UNAUDITED)						(UNAUDITED)
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stock, 30,000,000 shares authorized; 16,862,087 shares issued and outstanding, $5 par value	$	84,311		$	84,311		$	84,311
Paid-in capital		174,980			174,980			174,980
Retained earnings		131,295			118,944			104,181
Capital stock expense		(4,961	)		(4,961	)		(4,961	)
Cumulative Preferred Stock not subject to mandatory redemption		21,027			21,027			21,027

Total Equity		406,652			394,301			379,538

Long-term debt		413,895			413,894			383,892

Total Capitalization		820,547			808,195			763,430

Current Liabilities
Current maturities of long-term debt		—			20,000			20,000
Notes payable		40,000			25,500			22,000
Accounts payable		29,484			42,913			37,310
Accrued interest		4,644			5,895			4,242
Dividends payable - Preferred Stock		242			242			242
Accrued vacation and payroll		4,672			4,896			5,213
Customer advances		4,155			9,574			938
Customer deposits		8,269			8,317			8,114
Regulatory liabilities		4,565			4,275			7,078
Fair value of derivative instruments		20,516			15,759			—
Accrued environmental remediation costs		5,609			5,563			4,005
Accrued income taxes		22,812			87			7,318
Other		21,328			21,284			9,609

Total Current Liabilities		166,296			164,305			126,069

Deferred Credits and Other Liabilities
Regulatory liabilities - OPEB		—			—			1,839
Regulatory liabilities - other		134,599			130,893			113,105
Operating reserves		3,594			3,898			4,391
Accrued environmental remediation costs		21,084			20,621			13,312
Accrued OPEB costs		53,809			52,645			55,390
Accrued pension costs		162,494			161,674			12,035
Other		11,243			11,891			18,084

Total Deferred Credits and Other Liabilities		386,823			381,622			218,156

Accumulated Deferred Income Tax		141,234			138,074			133,236

Commitments and Contingencies
Total Capitalization and Liabilities	$	1,514,900		$	1,492,196		$	1,240,891

The Notes to Financial Statements are an integral part hereof.

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CENTRAL HUDSON STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
(In Thousands, except share and per share amounts)


	Central Hudson Common Shareholders

	Common Stock $5.00 par value; 30,000,000 shares authorized


					Treasury Stock											Accumulated Other Comprehensive Income / (Loss)
											Capital Stock Expense							Cumulative Preferred Stock
	Shares Issued				Shares Repurchased				Paid-In Capital					Retained Earnings							Total Equity
	Shares Issued		Amount		Shares Repurchased		Amount		Paid-In Capital					Retained Earnings							Total Equity

Balance at January 1, 2008		16,862,087	$	84,311		—	$	—	$	174,980	$	(4,961	)	$	92,676	$	—	$	21,027		$	368,033
Net income															11,505				242			11,747
Dividends declared:
On cumulative Preferred Stock																			(242	)		(242	)

Balance at March 31, 2008		16,862,087	$	84,311		—	$	—	$	174,980	$	(4,961	)	$	104,181	$	—	$	21,027		$	379,538


Balance at January 1, 2009		16,862,087	$	84,311		—	$	—	$	174,980	$	(4,961	)	$	118,944	$	—	$	21,027		$	394,301
Net income															12,351				242			12,593
Dividends declared:
On cumulative Preferred Stock																			(242	)		(242	)

Balance at March 31, 2009		16,862,087	$	84,311		—	$	—	$	174,980	$	(4,961	)	$	131,295	$	—	$	21,027		$	406,652

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’s wholly owned subsidiaries, Griffith Energy Services, Inc. (“Griffith”), CH-Auburn Energy, LLC (“CH-Auburn”) and CHEC’s Lyonsdale Biomass, LLC (“Lyonsdale”), are consolidated in the Consolidated Financial Statements of CH Energy Group. The non-controlling interest shown on CH Energy Group’s Consolidated Financial Statements represents the minority owner’s proportionate share of the income and equity of Lyonsdale. Inter-company balances and transactions have been eliminated in consolidation.

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 the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 71, Accounting for the Effects of Certain Types of Regulation (“SFAS 71”). For additional information regarding regulatory accounting see Note 2 – “Regulatory Matters”.

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 condensed, unaudited, quarterly Financial Statements do not contain the detail or 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, 2008 (the “Corporations’ 10-K Annual Report”).

CH Energy Group’s and Central Hudson’s balance sheets as of March 31, 2008 are not required to be included in this Quarterly Report on Form 10-Q; however, these balance sheets are included for supplemental analysis purposes.

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Reclassification

Certain amounts in the 2008 Financial Statements have been reclassified to conform to the 2009 presentation.

Effective January 1, 2009, Central Hudson adopted SFAS No. 160 – Noncontrolling Interest in Consolidated Financial Statements. In accordance with this standard, CH Energy Group modified the presentation of minority interest or non-controlling interest in the prior periods presented for CH Energy Group’s Consolidated Statement of Income, Consolidated Statement of Cash Flow and Consolidated Balance Sheet. For more information, see Note 3 – “New Accounting Standards and Other FASB Projects”.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows and the Balance Sheet, CH Energy Group and Central Hudson consider temporary cash investments with a maturity (when purchased) of three months or less, to be cash equivalents.

Revenue Recognition

CH Energy Group’s deferred revenue balances as of March 31, 2009, December 31, 2008 and March 31, 2008 were $6.9 million, $8.8 million and $6.4 million, respectively. The deferred revenue balance will be recognized in competitive business subsidiaries’ operating revenues over the 12-month term of the respective customer contract.

As required by the New York State Public Service Commission (“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).

Fuel, Materials and Supplies

Fuel, materials and supplies for CH Energy Group are valued using the following accounting methods:


Company		Valuation Method

Central Hudson		Average cost
Griffith		FIFO
Lyonsdale		Weighted average cost

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

CH Energy Group


	March 31, 2009		December 31, 2008		March 31, 2008

Natural gas	$	11,016	$	22,684	$	6,304
Petroleum products and propane		2,696		2,782		4,036
Fuel used in electric generation		720		586		516
Materials and supplies		11,603		10,533		10,655

Total	$	26,035	$	36,585	$	21,511


Central Hudson
	March 31, 2009		December 31, 2008		March 31, 2008

Natural gas	$	11,016	$	22,684	$	6,304
Petroleum products and propane		531		550		539
Fuel used in electric generation		334		343		367
Materials and supplies		7,743		7,538		7,650

Total	$	19,624	$	31,115	$	14,860

Depreciation and Amortization

For financial statement purposes, Central Hudson’s depreciation provisions are computed on the straight-line method using rates based on studies of the estimated useful lives and estimated net salvage value of properties. The anticipated costs of removing assets upon retirement are provided for over the life of those assets as a component of depreciation expense. This depreciation method is consistent with industry practice and the applicable depreciation rates have been approved by the PSC.

SFAS No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”), 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. In accordance with SFAS 71, Central Hudson continues to accrue for the future cost of removal for its rate-regulated natural gas and electric utility assets. In accordance with SFAS 143, Central Hudson has classified $48.2 million, $47.6 million, and $48.7 million of net cost of removal as regulatory liabilities as of March 31, 2009, December 31, 2008, and March 31, 2008, respectively.

For financial statement purposes, both Griffith and Lyonsdale have depreciation provisions that are computed on the straight-line method using depreciation rates based on the estimated useful lives of depreciable property and equipment. Expenditures for major renewals and betterments, which extend the useful lives of property and equipment, are capitalized. Expenditures for maintenance and repairs are charged to expense when incurred. Retirements, sales, and disposals of assets are recorded by

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removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in earnings.

Amortization of intangibles (other than goodwill) is computed on the straight-line method over the assets’ expected useful lives. See Note 6 – “Goodwill and Other Intangible Assets” for further discussion.

Earnings Per Share

In the calculation of earnings per share (basic and diluted) of CH Energy Group’s common stock (“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 was 56,878 shares and 56,278 shares for the three months ended March 31, 2009 and 2008, respectively. Certain stock options are 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 for some of the periods presented. Excluded from the calculation were options for 18,420 shares for the three months ended March 31, 2009, and 39,980 shares for the three months ended March 31, 2008. For additional information regarding stock options and performance shares, see Note 11 – “Equity-Based Compensation.”

Equity-Based Compensation

CH Energy Group has an equity-based employee compensation plan that is described in Note 11 – “Equity-Based Compensation.”

Parental Guarantees

CH Energy Group and CHEC have issued guarantees in conjunction with certain commodity and derivative contracts that provide financial or performance assurance to third parties on behalf of a subsidiary. The guarantees are entered into primarily to support or enhance the creditworthiness otherwise attributed to a subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish the relevant subsidiary’s intended commercial purposes.

The guarantees described above have been issued to counterparties to assure the payment, when due, of certain obligations incurred by CH Energy Group subsidiaries in physical and financial transactions related to heating oil, propane, other petroleum products, and weather and commodity hedges. At March 31, 2009, the aggregate amount of subsidiary obligations covered by these guarantees was $9.2 million. Where liabilities exist under the commodity-related contracts subject to these guarantees, these liabilities are included in CH Energy Group’s Consolidated Balance Sheet.

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Other Guarantees

Central Hudson has a reimbursement obligation with respect to a $6.8 million standby letter of credit issued by a financial institution to support a real estate transaction that is expected to close in mid-2009. No premium has been received or is receivable by Central Hudson in connection with this letter of credit. This uncollateralized letter of credit was issued February 29, 2008 and expires September 30, 2009. The maximum potential amount of future payments Central Hudson could be required to make under this reimbursement obligation is $6.8 million. As of March 31, 2009, no events or circumstances had arisen that would require Central Hudson to perform under this reimbursement obligation, and the carrying amount of the liability was zero.

Product Warranties

Griffith offers a multi-year warranty on heating system installations and has recorded liabilities for the estimated costs of fulfilling its obligations under these warranties. CH Energy Group’s approximate aggregate potential liability for product warranties at March 31, 2009 and 2008 was not material. CH Energy Group’s liabilities for these product warranties were determined by accruing the present value of future estimated warranty expense based on the number and type of contracts outstanding and historical costs for these contracts.

FASB Interpretation Number (FIN) 46R – Consolidation of Variable Interest Entities

CH Energy Group and its subsidiaries do not have any interests in special purpose entities and do not have material affiliations with any variable interest entities that require consolidation under the provisions of FIN 46R.

Fair Value Measurements

CH Energy Group adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”) on January 1, 2008. The guidance in SFAS 157 establishes a framework for measuring fair value in GAAP, improves consistency and comparability in reporting fair value, and expands disclosures regarding fair value measurements.

SFAS 157 establishes a fair value hierarchy to prioritize the inputs used in valuation techniques based on observable and unobservable data, but not the valuation techniques themselves. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or a liability. Classification of inputs is determined based on the lowest level input that is significant to the overall valuation. The fair value hierarchy prioritizes the inputs to valuation techniques into the three categories described below.

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§	Level 1 Inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

§	Level 2 Inputs: Directly or indirectly observable (market-based) information. This includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

§	Level 3 Inputs: Unobservable inputs for the asset or liability for which there is either no market data, or for which asset and liability values are not correlated with market value.

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On March 31, 2009, CH Energy Group reported one major category of assets and liabilities at fair value; derivative contracts. Derivative contracts are measured on a recurring basis. The fair value of CH Energy Group’s reportable assets and liabilities at March 31, 2009, December 31, 2008 and March 31, 2008 by category and hierarchy level follows (In Thousands):


Asset or Liability Category	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

As of March 31, 2009
Liabilities
Derivative Contracts:
Central Hudson - Electric	$	(17,506	)	$	—		$	—	$	(17,506	)
Central Hudson - Natural Gas		(3,010	)		(3,010	)		—		—
Griffith Oil - Heating Oil		2			2			—		—

Total Liabilities	$	(20,514	)	$	(3,008	)	$	—	$	(17,506	)


As of December 31, 2008
Liabilities
Derivative Contracts:
Central Hudson - Electric	$	(5,538	)	$	—		$	—	$	(5,538	)
Central Hudson - Natural Gas		(10,221	)		(10,221	)		—		—

Total Liabilities	$	(15,759	)	$	(10,221	)	$	—	$	(5,538	)


As of March 31, 2008
Assets
Derivative Contracts:
Central Hudson - Electric	$	612		$	—		$	—	$	612
Griffith - Heating Oil		509			509			—		—

Total Assets	$	1,121		$	509		$	—	$	612


Liabilities
Derivative Contracts:
Central Hudson - Electric	$	(21	)	$	—		$	—	$	(21	)

Total Liabilities	$	(21	)	$	—		$	—	$	(21	)

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The table listed below provides a reconciliation of the beginning and ending net balances for assets and liabilities measured at fair value and classified as Level 3 in the fair value hierarchy (In Thousands):


	Three Months Ended
	March 31, 2009			March 31, 2008

Balance at Beginning of Period	$	(5,538	)	$